“Schrödinger’s Capital”: How Michael Heinrich deliberately twisted Marx’s Grundrisse argument
NOTE 21: The collapse of production on the basis of exchange value
In my previous note, I argued the exchange value paid out as currency wages since the collapse of Bretton Woods in 1971 has been zero. My assertion is based on the consensus among scholars within both the value-form and MELT schools. This consensus among Marxist scholars assumes that, since 1971 and the collapse of the Bretton Woods agreement, the money we use to purchase commodities has no value of its own.
However, although both the MELT school and the value-form school generally agree the dollar does not represent any exchange value after 1971, both schools deny this change has any material impact on labor theory analysis.
Both the value-form school’s argument and the MELT school’s argument that nothing changed after 1971 should, in all honesty, require empirical evidence prices behave the same irrespective of the labor content of money. Yet neither school has ever once produced any evidence for this view. Despite the fact neither school has ever shown prices behave the same even if the labor content of the object serving as money is zero, this, it seems, has no effect on the discussion, for the simple reason that, surprisingly, no Marxist has ever demanded empirical proof from either school of their claims. You really have to wonder how Marxists can see one of the fundamental assumptions of their theory simply dismissed out of hand and not demand empirical proof.
The value-form school and the collapse of Bretton Woods
The argument of the MELT school is obviously flawed and can be dismissed entirely, since, despite its claim to be a mostly orthodox post-1971 restatement of Marx’s theory, it proposes that the values of commodities can be expressed in a valueless inconvertible state-issued fiat currency. However, this argument violates one of the most fundamental assumptions of Marx’s theory that the value of any commodity can only be expressed as exchange value — requiring a universal equivalent with value of its own.
The value-form school, however, presents a tougher problem since it argues money never expressed the labor values of commodities, but simply provided commodities a universally recognized dimension for comparison of otherwise incommensurable use values. Even if I disagree with the value-form school that this has always been true, there is no doubt they are at least correct to argue that since 1971 the dollar does not and cannot express the values of commodities. The currency we use in exchanges may have once represented some definite quantity of value in circulation, but this is no longer true. And without value of its own, money cannot express the values of commodities for which it is exchanged.
The value-form argument requires a different tack, focusing not on the value of the currency itself, but on the fact Marx’s argument predicts post-1971 fiat currency.
As Heinrich shows, the dollar after 1971 obviously does not express the value of labor power and cannot express this value precisely because it has no value of its own. To be sure, commodities are not directly exchanged for one another in our economy; in the case of all transactions, one commodity is exchanged for the fiat currency and the fiat currency is later used to purchase another commodity. Thus the currency is necessary condition for the working out of the law of value.
The worker, Heinrich notes, is not directly paid a basket of goods as her wages. She is now paid in the form of some currency that does not and cannot express the value of her labor power. And what is true for labor power must be true for all other commodities: the currency used in their purchases does not express their values as well. Since, per Marx, the value of any commodity cannot be expressed except in the form of exchange value, the use of a valueless currency as money means equivalents are never being exchanged. Instead, under a fiat currency regime the values of all commodities are expressed as zero.
Thus, sticking strictly to the assumptions of labor theory of value, post-1971 fiat currency ensures that every commodity is now sold for an exchange value equal to zero, no matter its paper currency price.
Let us now turn to Heinrich’s description of Marx’s explanation of the capitalist valorization process.
Marx’s argument on capitalist valorization
According to Heinrich:
“There are two acts of exchange, where each taken for itself adheres to the laws of the exchange of equivalents, but which are separated by an act of production (P). Within this act of production, exploitation occurs; the labourer creates a greater value than he obtains, he expends more labour-time than is necessary for his own reproduction. However, since this process of production is also the process of consumption of the commodities purchased by the capitalist, the process of value-creation occurring there has nothing to do with the exchange between labourer and capitalist: exploitation and the exchange of equivalents do not contradict each other.”
The problem with this argument is that once a valueless, inconvertible, fiat currency regime is introduced the assumption that m-c or c’-m’ involves an exchange of equivalents can no longer be maintained. Production continues to take place, of course, but there is no way this production takes place on the basis of exchange value as Marx assumed.
Which is to say, at least since 1971, we have encountered the collapse of production on the basis of exchange value Marx predicted in the Grundrisse.
However, in 2013, in a truly hilarious, poorly reasoned paper published by Monthly Review, Crisis Theory, the Law of the Tendency of the Profit Rate to Fall, and Marx’s Studies in the 1870s, despite essentially arguing production on the basis of exchange value does not take place and never has, Heinrich has also argued Marx was wrong in his prediction that production on the basis of exchanged would collapse. In this hilarious essay, Heinrich has to maintain production on the basis of exchange value doesn’t exist, while at the same time denying Marx was right in his prediction that mode of production would collapse.
And Heinrich sets out to accomplish this proof in a rather bizarre way: by fundamentally altering Marx’s argument. The argument Heinrich makes is simple: Marx was wrong to predict labor time would cease to be the measure of use values.
Although Heinrich initially suggests Marx was unclear on his categories in the Grundrisse, this objection is a mere distraction. In fact, no matter Marx’s categories, the value-form school thinks labor time is not, and has never been, the measure of use value. But, true to form, Heinrich cannot simply come out and directly say this; instead, he has to accuse Marx of being unclear on his argument.
According to Heinrich, in the Grundrisse Marx wrongly asserts a direct connection between crises and revolution. However, here is Marx’s complete statement as provided by Heinrich himself:
“As soon as labour in its immediate form has ceased to be the great source of wealth, labour time ceases and must cease to be its measure and therefore exchange value [must cease to be the measure] of use value. The surplus labour of the masses has ceased to be the condition for the development of general wealth, just as the non-labour of the few has ceased to be the condition for the development of the general powers of the human head. As a result, production based upon exchange value collapses.”
Marx’s argument in the Grundrisse thus goes like this: As the productivity of labor increases and machines account for the greater part of the production of use values, human labor time must cease to be the measure of these use values.
The argument Marx makes is not difficult to grasp (indeed, Keynes later makes much the same argument in 1930): production of use values by machines adds no new value to the newly produced use values, because, in labor theory, human labor is the only source of value. If we trace the process of rising productivity out to its ultimate end, this implies that in a completely automated production process no labor would be employed in production at all. If no labor is employed in production, no value is produced during the production of use values. Thus, at a certain point in the development of the productive forces, exchange value as the basis of production must collapse.
Heinrich’s response to Marx’s argument is a classic non sequitur: Marx’s hope for revolution triggered by a crisis never erupted in the crisis of 1857:
“The crisis of 1857–1858 was over quickly. It did not lead, economically or politically, to the shaking up of conditions that Marx had hoped for: the capitalist economy emerged strengthened from the crisis, and revolutionary movements did not arise anywhere. This experience was integrated into Marx’s theoretical development: after 1857–1858, Marx no longer argued in terms of a theory of final economic collapse, and he no longer made out a direct connection between crisis and revolution.”
How Heinrich deliberately twisted Marx’s argument
Whether Heinrich’s argument here is correct or not is beside the point. Instead, I want you to notice several things about Heinrich’s argument that are quite bizarre.
First, in the above quote cited by Heinrich Marx never speaks of a revolution, but only of a collapse of production on the basis of exchange value.
Why is this?
Because (obviously) the collapse of production on the basis of exchange value has no direct connection to revolution. Any political event like a revolution is contingent on the actual circumstances. In his prediction in the Grundrisse, Marx is not concerned with contingent events but with the inevitable ones determined by the inherent contradictions of the capitalist mode of production. In Marx’s analysis of the capitalist mode of production, the collapse of production on the basis of exchange value was inevitable. Whether this collapse actually led to a revolution was merely contingent.
Second, as bizarre as this might seem, another term you will not find in this passage is the one Heinrich refers to again and again, “crisis”. In his short essay, (amounting to about 6000 words), Heinrich mentions the word crisis almost 60 times. Marx, however, never mentions this word even once in the passage cited by Heinrich. Instead, Marx discusses the collapse of production on the basis of exchange value.
Why does Marx mention “collapse” and not “crisis”?
Because in Marx’s theory, “crises are always but momentary and forcible solutions of the existing contradictions. They are violent eruptions which for a time restore the disturbed equilibrium.” (See Capital, volume 3.) A collapse of a mode of production is not a crisis, i.e., it is not a momentary, forcible solution of capitalistic contradictions; rather, it is the final resolution (dissolution) of a contradiction inherent in the capitalist mode of production.
Third, although Heinrich states otherwise, in the direct quote from Marx that he cites, surprisingly Marx never says capitalist production collapses. His exact words are, “production based upon exchange value collapses.” To be absolutely precise on this point, Marx predicts that eventually exchange value can no longer be the measure of use value.
Now, I might be wrong, but it seems to me exchange value requires a commodity money, because, under the assumptions of labor theory cited above, a commodity money is the only way in which the values of commodities can be expressed. A state issued, valueless, inconvertible fiat currency such as the one we use as money today cannot express the values of commodities.
In other words, since at least 1971, exchange value has not been the measure of use values, just as Marx predicted!
Why did Heinrich deliberately twist Marx’s argument?
Why does Heinrich reformulate Marx’s original argument from a prediction that production on the basis of exchange value collapses, into a prediction of the collapse of capitalism? The collapse of production on the basis of exchange value directs our attention to an event involving money and exchange value. If Marx had been discussing the collapse of capitalist production, he would be directing our attention to the production of surplus value, i.e., production for profit.
While commodity production necessarily implies exchange and exchange value, the production of surplus value is not necessarily affected by the collapse of production on the basis of exchange value. To understand why this might be true, recall Heinrich’s own description of Marx’s argument on capitalist valorization cited above:
“There are two acts of exchange, where each taken for itself adheres to the laws of the exchange of equivalents, but which are separated by an act of production (P). Within this act of production, exploitation occurs; the labourer creates a greater value than he obtains, he expends more labour-time than is necessary for his own reproduction.”
If I understand Heinrich’s argument here, the production of surplus value has nothing directly to do with the exchange of equivalents. As Heinrich puts it, “exploitation and the exchange of equivalents do not contradict each other.” This argument seems to imply the exchange of equivalents, (m-c and c’-m’), can collapse, without the production (P) being affected.
If Heinrich’s reading of Marx’s theory is accurate, it makes all the difference in the world whether Marx predicted the collapse of capital, i.e., the production of surplus value (P), or simply the collapse of the exchange of equivalents, i.e., m-c and c’-m’.