The TSSI school has completely capitulated to the value-form school

by Jehu

In a surprisingly abrupt about face, it looks like the TSSI school has capitulated to the value-form school of Michael Heinrich and company on all the important points of controversy between the two schools.

Of course, the TSSI school is the least ethical of all Marxist schools, because they want to drop Marx while pretending to defend him. The value-form school at least has enough principles to admit they think Marx was wrong, but not the TSSI school. Expect the TSSI school to continue pretending they uphold an orthodox interpretation of Marx’s labor theory of value.

In any case, we now have it in black and white, courtesy of Michael Roberts, who, in his review of Fred Moseley new book, Consistent, realistic, verifiable, argues that Marx labor theory of value basically examines the capitalist mode of production, “[from] the capitalist point of view, [where] money advanced must lead to more money, or forget it.”

I have no words to describe my reaction to this statement.

Michael Roberts reading of Fred Moseley

Roberts goes on to summarize Moseley as follows: Marxist theory of value applies to capitalism, a mode of production for the sale of commodities on the market, not previous modes of social organization. In the capitalist mode of production, the market decides whether the labour time expended on production of commodities is ‘socially necessary’.

Capitalism is a money-making, profit-making mode of production, where money enters the equation from the very beginning. The circuit of capital does not start with labor time values, which then have to be converted into money prices, it starts with money prices. Marx’s value theory thus begins with money prices, not labor time values.

The Marxist theory of value is a macro-monetary theory in which there is a single system, wherein money is advanced in order to make more money over the money initially paid out in wages to the workforce and inputs in the form of means of production. Labor theory does not start with a certain value of labour time or a certain amount of physical units of workers and technology, and finish with that; it starts with money and finishes with money, just as the capitalist does.

Money is thus the only form of value that we see; a point Roberts emphasizes with this statement:

“As Moseley shows, so thoroughly and clearly, Marx’s value theory means that the total amount of money in an economy (excluding the impact of inflation and short-term fluctuations) matches the total amount of value (‘socially necessary’, ‘abstract’ labour, as measured in time). Total prices of production are equal to total value and total money profits in this one-world economy are equal to total surplus value (in labour time). Value explains money; surplus value explains profit.”

Ignoring the depreciation of state issued fiat currency

Make no mistake about it: the TSSI (including Roberts, Moseley and Kliman) school has thrown in the towel and conceded to Michael Heinrich, David Harvey and the value form school on all points of controversy between the two schools. The TSSI school won’t openly admit this, but this is effectively what Roberts has stated.

Let’s begin with this statement by Roberts:

“Marx’s value theory means that the total amount of money in an economy (excluding the impact of inflation and short-term fluctuations) matches the total amount of value”

If we exclude inflation we exclude the fact the ‘money’ used in exchange since 1971 doesn’t have value and does not express the value of commodities. How are you going to exclude inflation of price if you have not demonstrated that inflation of prices can be ignored? To give an analogy: If we exclude murder, suicide, illness, accidents and old age, people live forever.

The whole point of Marx’s theory of money is that commodity money prices don’t inflate; and the purchasing power of commodity money does not depreciate as has the dollar during the period since 1971. If prices are inflating, this suggests the ‘money’ in which those prices are denominated are not money as defined by Marx’s theory; depreciation of purchasing power is characteristic, not of money, but a state issued token of money.

Now, how are you going to exclude inflation from your analysis when inflation is the critical empirical indication that what we use as money ain’t money? Not only is the dollar not money, it does not even behave like money.

Further, it is extremely important to determine whether the dollar is money or not, because Roberts says Moseley emphasizes the circuit of capital begins and ends with money. In fact, the circuit of capital today begins and end with dollars (or some other floating state-issued inconvertible fiat currency). If capital begins with dollars and ends with more dollars, but this increased sum of dollars will buy less labor power than the initial sum of dollars, the real mass of capital in circulation has contracted.

While capital is the production of surplus value, in our example above there no surplus value has been produced; the absolute mass of dollars in circulation has increased, but it is necessary to prove the mass of values has increased. If the actual mass of value circulating as capital has not increased, there is no production of surplus value even if the dollars representing this mass of value has increased.

Can Marxists prove any surplus value is produced today?

Marxists theorists like Roberts and Moseley want to overlook this small problem, but it is critical to our analysis. The fact is neither Roberts nor Moseley can demonstrate that there is any production of surplus value taking place today. Certainly we can prove that huge paper dollar profits are being made, but do these paper profits represent actual surplus values or are they fictions?

Now, if no surplus value is actually being produced, this implies the rate of profit is essentially equal to the rate of inflation.

In other words, M’ minus M = fiat paper profits = inflation.

This would further suggest that the capitalist state is subsidizing the profits of the capitalists by deliberately depreciating the purchasing power of its currency. Inflation is, in other words, a weapon employed by the fascist state to reduce the real subsistence of the working class. Again, inflation cannot simply be ignored in our analysis; it is the monetary expression of a war waged by one class against the other.

According to Roberts there are not two states of capitalism; rather, Marx analyzes capitalism at two levels of abstraction. What is the difference between two levels of abstraction and two states of capitalism? As Roberts fully knows, value is created during production, while money is exchange value — the phenomenal expression of the value of the commodity, not its actual value. Whether you want to call this two different states or two different levels of abstraction is not my concern. The price of a commodity is clearly not its value, although it is determined by that value.

Marx argues the exact opposite of Roberts: value must make a leap into price; value must become price — a transition that is not given. There is no law in labor theory of value akin to Say’s Law that says the production of a value creates its own realized price. At the same time, surplus value is not profit — this too requires a leap from one to the other. There is a real risk for the capitalist that the surplus value he squeezed from the worker may not be realized as profit.

The system of prices is the phenomenal expression of the production of values, but prices do not equal values. This is already true for individual production prices of commodities — everyone knows this. What Marxists (both in the value-form school and TSSI school) want to ignore is that eventually it also has to be true for all prices taken together. Eventually the prices of all commodities taken together cannot equal the values of the commodities.

Marx calls this point in the development of mode of production the breakdown of production based on exchange value. What can this breakdown possibly mean, except that the system of exchange values (prices) is now incompatible with the production of values? The breakdown of production on the basis of exchange value is impossible unless there are two incompatible states of capitalism.

What Moseley’s nonsense comes down to is this: Marxists of all stripes are trying to prove production based on exchange value does not breakdown or collapse. According to Marxists, capitalism is, in theory at least, an eternal mode of production that necessarily requires an exogenous force (a proletarian revolution) to bring it down.

Value production creates its own exchange value demand?

By beginning with exchange and not production, Marxists hope to smuggle Say’s Law into labor theory in order to produce a model of capitalism that may periodically experience crises, but does not collapse.

According to Roberts reading of Moseley, capital begins with money not labor time so it does not need to convert labor time into prices:

“Moseley shows that Marx’s analysis is based on a realistic view of capitalism. The circuit and motion of capital starts with money and finishes with money. It does not start with value (labour time) or with physical things (labour and means of production) and end with value or things. So it does not need value or things to be converted or transformed into money. There are not two ‘states of capitalism’ (one with values and one with money or prices). Marx’s view is a single-state system. So there is no ‘mistake’ or logical contradiction in Marx’s explanation of the transformation of values into prices. The so-called transformation problem of values into prices and money does not exist.”

This is quite possibly the dumbest argument on the transformation problem I have ever read. Of course, Moseley is correct on how the process appears to the capitalist, but we still have to explain the money with which capital begins, right? The existence of the money that the capitalist uses to buy labor power and other inputs presupposes value exists before the rise of capital, unless some other explanation is offered, like, for instance, the bizarre argument of the value-form theorist Chris Arthur, who argues the use of money in exchange itself creates our notion of value, i.e., a notion of exchangeability.

Again, in Marx’s labor theory, money (and exchange value generally) is only the phenomenal manifestation of value. If you cannot explain where the money of the capitalist came from, you cannot then explain how this money eventually becomes capital. It is like trying to explain the beginning of human beings without evolutionary theory.

Try as they like, post-war Marxists have to explain how prices arise from values and how money arises from exchange value. This problem cannot be evaded simply by arguing capital itself starts with money. Moreover, contrary to Moseley argument (as described by Roberts), Engels explicitly cites Marx’s argument that value is historically prior to prices.

“[The] values of commodities [are] not only theoretically but also historically antecedent (prius) to the prices of production.”

This is what I mean by the unethical behavior of the TSSI school: they purport to defend Marx theoretically while denying him in practice. Now instead of addressing the real conundrum posed by the transformation problem, they are trying to tell us that value does not need to be converted into price, because capital begins with prices.

The logical consistency of the transformation problem

And they make this silly argument because of one salient point emphasized by Roberts: Marx could not have been making the argument that values equal prices, because, as the TSSI school now admits for his argument to be logically consistent it must lead to the opposite conclusion: “if you start with ‘inputs’ of labour and means of production measured in values” values no longer equal prices of production.”

In other words, the TSSI school either has to admit the transformation problem proves the value of capitalistically produced commodities are incompatible with their prices of production, or the value-form school is correct and labor values do not exist. Thus, logically, Marx had to have been making the opposite argument: There is a contradiction laying at the heart of the mode of production that capitalism could not overcome.

Another way to put this: If you trying to make the case that capitalism last forever, the transformation problem says you are wrong. Either one of two things must happen: prices and the profit rate falls to zero or society experiences secular inflation. Which outcome prevails is a matter of historical factors and cannot be determined in advance. Marx, therefore, could not predict the outcome of the event, but he could predict the event itself.

He called the point in the development of the capitalist mode of production where labor value and price must become incompatible the breakdown of production based on exchange value.