Abstract
Contemporary mainstream economics, in both its Keynesian and New Classicalist perspectives, failed to predict not only the eruption of the recent economic crisis circa 2007-08, but also the historically weak and uneven recovery of the global economy, 2008-12. The article argues the basic reason for the failure is a deficient conceptual apparatus that fails to account for the role of credit, debt, asset prices, the growing weight of speculative investment, and financial variables in general. Leaving this theme for subsequent further development, the article maintains that a similar conceptual deficiency has prevented Marxist economists in recent years from adequately understanding and predicting the continuing global economic crisis. By focusing primarily on Marx's triad of production of value concepts (rate of exploitation, organic composition of capital, and falling rate of profit) as the core conceptual apparatus for explaining the crisis, Marxist economists have been unable to adequately account for the destabilizing role of finance capital in the 21st century. Financial instability is viewed as a second derivative of real economic instability—the latter represented and measured quantitatively by the tendency of the overall rate of profit to fall. The disruptive impact of finance capital on the realization of value, the full circuit of capital, and capital accumulation is largely de-emphasized. In contrast, the article argues that changes in global financial structure, financial institutions, and financial markets in 21st-century global Capitalism have rendered Marx's 19th-century view of money, credit and banking insufficient. Marxist economic analysis thus needs to develop a more complete conceptual apparatus, beyond the production of value conceptual “triad” and addressing more directly the realization of value processes, if it is to more adequately account for the disruptive role of finance capital in the 21st century. Only by so doing can Marxist analysis de-emphasize its excessive and misdirected reliance on the falling rate of profit as the key predictive variable for understanding the current crisis of Capital. Suggestions for a new conceptual apparatus focusing on value realization, the full circuit of Capital, and thus finance capital, are offered.
Highlights
Conceptual apparatus focusing on value realization, the full circuit of Capital, and finance capital, are offered
Its analysis today may be expressed in terms of a major dichotomy: those who adhere to a classical Marxist production of value approach, summarized in terms of the “falling rate of profit (FROP)” and a primary focus on the M-C phase of Marx’s full circuit of capital concept (M-C-M′) on the one hand; and, on the other, those who focus on the realization of value, emphasize the C-M′ phase, and acknowledge that forms of exchange value can and do play a central role in the disruption of the full circuit of capital (M-C-M′) by generating significant disproportionalities that disrupt the accumulation of capital process in general
A second segment of this article will address the “falling rate of profit” (FROP) dominant wing of contemporary Marxist economic analysis, explaining why the focus on the falling rate of profit represents an insufficient conceptual apparatus for understanding the nature of the current crisis—given the inability of FROP to comprehend the unique role of finance capital in the 21st century and its greater relative weight in recent decades in developing, precipitating, and determining the trajectory of the continuing crisis of global capitalism
Summary
Wages represent both value content and market price, which may exceed or fall below that part of the wage that is equal to value. If wage is a price—i.e. a price for the value of labor power— forms of wage reclamation after value is produced represent capitalist forms of price manipulation in the sphere of exchange that result in the expansion of total profits in the circulation phase of capital (C-M′) that is not accounted for by FROP theory. Fetish forms of capital do not represent value from the production of commodities using labor power paid for by nominal wage at the time of production It is not even value reclaimed by capitalists from workers after wages are paid, in future time t+1 and after—i.e. what Sweezy and Baran referred to as “profits by deduction”. It means that analysis must focus not on profits but on the variable of investment—differentiating between forms of real capital investment (in structures, equipment, etc.) and forms of investment in financial securities and financial assets
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