Getting past semantics with Adam

by Jehu

Adam Buick left another very interesting reply to my last post.

In it, he expresses some confusion regarding my reaction to his opinion that Marx’s prediction of a breakdown of production based on exchange value was a thought experiment and not actually a prediction:

“I don’t know why people are getting hot under the collar over the term “thought experiment”. It is not the theory of the tendency of the rate of profit to fall nor the theory (fact) that most commodities tend to become cheaper and cheaper that is this. It’s continuing these trends to their logical conclusion that is. I don’t think Marx expected, let alone predicted, the rate of profit to actually fall to zero or for commodities to be produced so cheaply as to have a zero price. For him, these were just tendencies.

Both Adam Smith and David Ricardo thought that capital accumulation would eventually come to a stop due to a falling profits. Ricardo explained this in terms of conditions outside the system (exhaustion of fertile land). Marx set out to explain this tendency as intrinsic to the system.

In any event, we are nowhere near the state of affairs where the long-term rate of profit is even approaching zero. It’s the same with the price of commodities. Nearly all commodities still require some significant labour-time input (from start to finish) and so are nowhere near becoming price-less.

The theory that capitalism was saved from collapse in the 1930s by the replacement of fiat money for commodity-money is a different issue. I would tend to think that this happened because a currency convertible [on] demand into gold (or silver) at a set rate was no longer necessary. Also, some form of link to gold (via the dollar) did of course survive until 1971.

Listen, Adam, I am going to try to state this as simply as possible, because I don’t know if I have it all right. Marx was a shit-load smarter than me — and, as far as I can tell, every frigging Marxist who came after him for that matter. But he left us some important pointers to his thinking in Capital, volume 3.

I haven’t yet discovered a tenth of the connections the guy left behind, but I am working on it.


First, as indicated in the fragment, Marx thought capital would reduce labor time to the point where the rate of profit fell to zero. I think this is incontestable, since he essentially repeats this same argument in volume three as I quoted in my last post:

“The rate of profit does not sink because the labourer is exploited any less, but because generally less labour is employed in proportion to the employed capital.”

Now, whatever you think of this prediction is of no concern to me. What matters is that Marx made it. However, since we are not going to come to any agreement on the thought experiment thingy, for the purposes of this discussion I am going to accept your argument that this was just a thought experiment, not a prediction. I still object to your view that breakdown, etc. is impossible, but I will let that go for the duration in order to get at the heart of the issue.

So, what does Marx suggest happens next in this so-called “thought experiment”?

“With that, production based on exchange value breaks down…”

You have to admit that this is a very odd statement for Marx to make. Why doesn’t he just say capitalism collapses when the rate of profit falls to zero? Most interpretation of the fragment say this is exactly what Marx is saying, but I disagree vociferously. Marx was very exact in his definition of capitalism and re-emphasized his own very precise definition of capitalism at numerous points in Capital.

Like this one in chapter 15 of volume three:

“The purpose of capitalist production, however, is self-expansion of capital, i.e., appropriation of surplus-labour, production of surplus-value, of profit.”

Or this one also drawn from chapter, just a few paragraphs further down:

“And the capitalist process of production consists essentially of the production of surplus-value, represented in the surplus-product or that aliquot portion of the produced commodities materialising unpaid labour. It must never be forgotten that the production of this surplus-value — and the reconversion of a portion of it into capital, or the accumulation, forms an integrate part of this production of surplus-value — is the immediate purpose and compelling motive of capitalist production.

Marx defines capital this way multiple times in just this one chapter. And at no point does he define capitalism simply as “production based on exchange value”. Nevertheless, in the fragment, Marx deliberately employs that expression to describe what happens when the rate of profit falls to zero. Even as a thought experiment, Marx did not think the reduction of direct labor in production led immediately to the outright collapse of production of surplus-value, i.e., to the collapse of capitalism itself, but only to the collapse of the production based on exchange value.

Okay, but production of what?

Production of surplus-value, of course. Expressed completely, Marx’s statement in the fragment could be formulated this way:

Production (of surplus-value) based on exchange value breaks down

It is not capitalism itself that breaks down; rather, to restate it as Marx might, the appropriation of surplus-labour, production of surplus-value, of profit based on exchange value breaks down.

(NOTE: As an aside, I would point out that sloppily defining capitalism as “production based on exchange value”, is essentially the same thing as defining capitalism as the “free market” — a definition bourgeois ideologues love to promote. The term simply equates, in abstract economic terms, capital with bourgeois private property, the latter which we already know comes to an end when the profit rate falls to zero. That definition has proven to be theoretically and practically problematic for so many reasons today.)


Now, what does the collapse of the production of surplus-value based on exchange value mean?

In your previous reply, and as evidence for your argument that breakdown was just a thought experiment, you cited Marx’s discussion of counteracting influences to the law of the falling rate of profit which act to convert the law into a tendency:

“… Marx was well aware that in practice there were countervailing tendencies.”

You may be surprised to find, I agree with you on this argument. As Marx explained in chapter 14, were it not for counteracting influences the progressive reduction of direct labor in production would lead not to the collapse of production based on exchange value, but to the outright collapse of capitalism. However, outright collapse of capitalism does not happen, because of the countervailing influences he lists.

The second, and, in his opinion, one of the most important counteracting influences on Marx’s list that tends to artificially keep the rate of profit above zero is the depression of wages below the value of labor power. Henryk Grossman restates Marx’s conclusion in his 1929 essay on the Law of the Accumulation and Breakdown:

“I have shown that even if all conditions of proportionality are maintained and accumulation occurs within the limits imposed by population, the further preservation of these limits is objectively impossible. The system of production described in Bauer’s own scheme has to breakdown or the conditions specified for the system have to be violated. Beyond a definite point of time the system cannot survive at the postulated rate of surplus value of 100 per cent. There is a growing shortage of surplus value and, under the given conditions, a continuous overaccumulation. the only alternative is to violate the conditions postulated. Wages have to be cut in order to push the rate of surplus value even higher. This cut in wages would not be a purely temporary phenomenon that vanishes once equilibrium is re-established; it will have to be continuous. After year 36 either wages have to be cut continually and periodically or a reserve army must come into being.” (my emphasis)

Based on Grossman’s reading of Marx’s theory above we could restate Marx’s “thought experiment” in the fragment this way:

Production (of surplus-value) based on (the assumption that labor power is purchased at its) exchange value breaks down

It should be self-evident that, once the rate of profit falls to zero, continuous depression of wages below the value of labor power could only be sustained if real wages, denominated in state issued currency, were forcibly maintained below the value of labor power.

If we were a bourgeois economist like — say — Keynes, we would be doing our own little “thought experiment” to imagine how the state could continually inflate away the purchasing power of currency wages to boost the rate of profit, which turns out to be the central idea of his General Theory:

“… it would be impracticable [for the working class] to resist every reduction of real wages, due to a change in the purchasing-power of money which affects all workers alike; and in fact reductions of real wages arising in this way are not, as a rule, resisted unless they proceed to an extreme degree.”

Critical to Keynes’ strategy of continually depressing wages below the value of labor power in order to artificially raise the rate of profit was replacing commodity money (“… already a barbarous relic.”) with a debased currency issued and managed directly by the state. By debasing the currency this way, wages denominated in the state-issued currency would no longer symbolically represent some definite, fixed quantum of value. The currency could be continually devalued by the state and, through this underhanded mechanism, the wages of the working class could be continually reduced as a matter of state policy.

To add insult to injury, bourgeois politicians and the corrupt leaders of the working class could even sell this monetary class war on the economic position of the working class back to the working class as a measure necessary to ensure “full employment.”


Now, to bring this full circle, I am going to demonstrate what is a troubling aspect of this discussion with those who have already decided Marx was wrong in his prediction (oops, sorry — thought experiment) that capitalism was headed toward a breakdown of production based on exchange value. People like yourself have no problem completely explaining away your prior positions as if it never existed, as you are likely going to do just about starting now.

In your response to my post, quoted above, you say:

“It is not the theory of the tendency of the rate of profit to fall nor the theory (fact) that most commodities tend to become cheaper and cheaper that is [in dispute]. It’s continuing these trends to their logical conclusion that is [disputed].”

Adam, do me a favor:

Name just one living person you know who, in their entire lifetime, have seen commodities “become cheaper and cheaper”.

I know that, according to the labor theory of value, we expect that over some period of time, as the productivity of social labor increases and less direct labor is employed in production, the value embodied in commodities should fall and the prices of these commodities should decline, but I bet you can’t name a single living person who has ever witnessed this alleged cheapening of commodities.

Be honest, now. Is this your experience or the experience of anyone you know? Is it not your experience that the prices of commodities are constantly increasing and have been constantly increasing for at least the last 90 years? And why? Has the productivity of social labor been falling for the last 90 years? How do you explain the fact that the prices of commodities continually rise when productivity is also rising?

Is it just possible that if the currency price of labor power no longer expresses the value of labor power, currency prices generally no longer express the values of any commodity? And if prices no longer express the values of commodities, is this not the literal definition of the collapse of exchange value?

Have we not reached the point where, as Marx put it, “exchange value [must cease to be the measure] of use value.”