The Enigma of David Harvey

13 09 2012

Barry Biddulph reviews David Harvey’s The Enigma of Capital (2011, Profile Books, £8.99).

David Harvey is something of an enigma.  He wants to place Marx’s vision of Capitalism centre stage, yet he finds Keynes more relevant than Marx for a solution to Capitalist slumps.  He agrees with Keynes’s diagnosis of the causes of the Great Depression of the 1930s, as a problem of insufficiency of effective demand.  Moreover, Harvey states that today’s Great Recession “has placed the development of consumer and rising effective demand at the centre of the sustainability of contemporary Capitalism in ways that Marx for one would have found hard to recognise” . (1)  The relevance of Marx for Harvey is that Neo Liberalism has turned the clock back to pre Keynesian economics.

Following Keynes, Harvey regards inadequate effective demand as Capitalism’s fundamental problem.  This is why, in his preamble, he declares that  his book is about Capital flow : Capital as the life blood of the way we live.  This is an enigma. Marx  describes Capital as a vampire. In contrast, Harvey’s focus is in the market place, where Capital supplies ‘our daily bread, as well as our houses, cars, mobile phones, shirts, shoes and all other goods we to support our daily life ‘.  (2)  This is a rather mysterious emphasis, almost as if Capitalism is producing commodities directly for human need.  Harvey argues that consumption is integral to Capitalism’s dynamic.  He seems to assume that the aim of the economy is the utilization of resources to produce goods for consumption. The common sense view, to use Andrew Kliman’s phrase that “businesses ultimately have to sell stuff to people”. (3)  But in the words of Marx, “It is the rate of profit that is the driving force in capitalist production and nothing is produced save what can be produced at a profit”.  (4)

According to Harvey, “there has been a serious underlying problem, particularly since the crisis of 1973-82, about how to absorb greater and greater  amounts of capital surplus in the production of goods and services”. (5)  This is Harvey’s underconsumpionist mantra :  surplus capacity looking for customers.  This is the point where Paul Sweezy meets Keynes to supplement Marx or in Harvey’s words, where Keynes and Marx overlap.  This is the core underconsumptionist assumption,  that there is a fundamental structural problem of capitalist production : the capacity to produce grows more rapidly than its output.  It’s a more serious problem for Harvey, than say, any notion of a tendency for a falling rate of profit.  Indeed, Harvey does not think Marx’s theory of a tendency for the rate of profit to fall, in Capitalism, works : “unfortunately the argument is incomplete and problematic-there is no definite reason why the ratio C/V should increase in the way Marx says it should”.  (6) This is the claim Marx was logically inconsistent, which Paul Sweezy and others have made.  However,  Harvey makes no reference to the ongoing debate on this issue or deal with the points made in defence of Marx’s logic by such thinkers as  Kliman.  Is it  inconsistency,   or misinterpretation ?

While Harvey locates the fundamental problem as a market based lack of incentive to invest, Marx situated the underlying problem in the crisis prone character of capitalist production. The development of productivity in Capitalism expresses a growing use of machinery, technology, means of production, in relation to the number of workers whose labour power is the source of surplus value.  As Marx put it : “with the progressive decline in the variable (labour power) capital in relation to the constant capital (technology), this tendency leads to a rising organic composition of the total capital, and a direct result of this is that the rate surplus value, with the level of exploitation of labour remaining the same or even rising is expressed in a steady fall in the general rate of profit”. (7)  Harvey dismisses all this as an unreasonable assumption.  In Harvey’s opinion, technical innovation is capital and means of production saving as it is labour-saving.  Marx’s counteracting tendencies to the tendency of the rate of profit to fall, increasing exploitation, cheaper raw materials, foreign trade and the rate turnover of capital, simply leave the tendency without real credibility . Again there is no attempt to discuss the defence of Marx’s inner law of capitalism which underlies crisis without necessarily directly causing  crisis.

Harvey’s differences with Marx then, are rather dismissive, and tend to be at the simple level of assertion, or an expression of scepticism, rather than a theoretical alternative to Marx’s critique of political economy.  There is obviously the influence of Paul Sweezy and the Monthly Review tradition. Harvey reproduces, uncritically, Foster and Magdoff,  2009 , (Monthly Review writers) presentation of Government statistics to show workers share of national income in the USA has fallen from 52% of GDP in 1960 down to 46% GDP 2007.  This graph ( P. 13) has been challenged by Andrew Kliman (2012).  Kliman argues that the chart does not show the full social wage-health care, pensions and so on- accruing to workers. Therefore, it is misleading : the share of the national income has not fallen; “it is higher than it was in 1960, and it has been stable since 1970″.  (8)  This does cast doubt on Harvey’s empirical claim that the scale of wage repression in the  Neo Liberal  period has led to a crisis of effective demand.  In any case, theoretically, limited consumption has not held back productive capacity  in the way he suggests.  Marx’s schemas of reproduction in Capital Vol 2 demonstrated that the irrational essence of capitalism is a production for the sake of production.  But,  Harvey   resorts  to something outside pure capitalist accumulation. Suburban consumerism, helps solve problems of growth.

But underneath Harvey’s view of a lack of effective demand is his feeling that Capital is too powerful and labour to weak in a form of Capitalism in  which Finance Capital is dominant.  Indeed, he is sceptical about the central role of the working class in their offices and factories.  He sees the Marxist emphasis on the workplace dynamic of capital-labour as misplaced.  He tends to portray the proletariat in dated terms of simply factory workers, rather than the collective labourer which would include routine white-collar workers.  So he argues against a straw comrade when he writes : “this fixation on factory workers as the locus of true class consciousness and revolutionary struggle has always been too limited if not misguided”. (9)  This is not so much a polemic against a crude Marxist view, but a view of social movements in the city, the streets the bars and elsewhere as a more modern focus to  undermine capitalism.  His “dream would be a grand alliance of the deprived and dispossed everywhere”. (10)  This is his struggle against dispossession, which is just as central as any idea of fighting back against surplus value abstraction.  He even compares the loss of the common land, during  the enclosures, which helped establish Capitalism, with the loss public influence on nationalised utilities and the public sector during Neo Liberalism. This expresses a nostalgia for the golden period of European Social Democracy, when in his opinion, finance capital did not determine state policy.  So despite the radical rhetoric of dispossession, he looks to the state , to pursue China’s “full-blooded Keynesian way”.

The lesson of the 1930’s great depression, for Harvey, is that governments should stimulate effective demand by deficit spending.  Governments influenced by Neo Liberal policies have failed to break out of stagnation or deepened the recession, not out of economic necessity, but out of political choice.  This is also the Keynesian view of the Trade Union Bureaucracy in Britain.  According to Harvey the actions of governments in Europe are a symptom of deficit paranoia.  “Austerity in both Greece and Ireland  has blocked a recovery, made their debt situation worse, and pointed the way to a downward spiral of austerity.  Yet as Paul Mattick points out, “the New Deal fiscal stimulus did not work, it only arrested decline”. (11).  There were ten million unemployed in the USA in 1938.  Capitalism was rescued by arms production and war.  In 1939 output in the USA was back to1929.  The vast destruction of capital and capital values during the second world war solved the crisis, not deficit spending.  In so far as Keynesianism was a short-term success, it helped integrate workers into acceptance of capitalism, as it did after the war. The Keynesian view is flawed as the crisis is not located in the structure of capitalist relations of production.  As Skidelsky, a leading Keynesian concedes : “the sequence of boom and bust was the fruit of uncertainty not greed or structure”. (12)

At best, any Keynesian stimulus will only be a short-term fix, which will probably lead to an even greater crisis.  To give critical support to a Keynesian state deficit budget would discredit a Marxist alternative and open the door to the right and undermine the workers struggle at the grass-roots.  As Tom Kemp put it : “only a general devaluation or destruction of capital, the destruction of productive forces, provides again the conditions for renewed accumulation”.(13)  In a fundamental sense, Value production is indifferent to use- value : there is no direct social connection between production and consumption.  Hence, social relations of alienation and reification. If  consumption were the logic of production, there would be no accumulation of capital : “Capitalist production, therefore should never be depicted as something that it is not, i.e. as production whose immediate purpose is consumption”. (14)   Harvey does not share Marxist value theory; the relationship of the sale of commodities to socially necessary labour time is  elusive and doubtful, as far as he is concerned.  Although, he leaves aside the ongoing debate among Marxists about the relationship between value and money.  However, if capitalism works by boom and bust, then it also works by alternating between the market and state intervention.  We choose neither option.  We stand for the growing revolt of the working class against the Capitalist State.


1  David Harvey, 2011, The Enigma of Capital,p 95.

2 David Harvey 2011p94

3 Andrew Kliman, 2012,The failure of Capitalist Production, p.161

4 Karl Marx,1981, Capital,Vol 3, (Penguin) p.368

5 David Harvey,2011, p.95

6 David Harvey,2011,p.94

7 Karl Marx,1981,p.318

8 Andrew Kliman 2012,p.6

9 David Harvey,2011,p.242

10 David Harvey,2011,p.247

11 Paul Mattick Jnr,2011,Business as Usual,p.62

12 Robert Skidelsky,2010, Keynes,The Return of the Master,  p.153

13 Tom Kemp,1982, Karl Marx’s Capital Today, p.108

14 Karl Marx 1981, p.352

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12 responses

23 09 2012

“Foster and Magdoff 2009 (Monthly Review writers) presentation of Government statistics to show workers share of national income in the USA has fallen from 52% of GDP in 1960 down to 46% GDP 2007. This graph (Harvey Page 13) has been challenged by Andrew Kliman (2012). Kliman argues that the chart does not show the full social wage-health care, pensions and so on- accruing to workers. Therefore, it is misleading: the share of the national income has not fallen”

We would have to agree that if true this flies in the face of actual experience. It could mean 2 things of course, there are now less capitalists in relation to workers now than in 1960 or it could mean that capitalists are more and more paying themsleves management fees that don’t factor into their profits, as G4S infamously have done in relation to the Olympics.
Also, doesn’t this contradict with other stats, such as a huge increase in household debt?

“In a fundamental sense, Value production is indifferent to use value”

Except that Marx says without use value you have no realisation of exchange value. And without realisation the capitalist does not have anything with which to buy the free necessary labour in the next cycle.

It stands to reason to me that one of the ways a crisis within capitalism can occur is if the capital-labour relation becomes so one sided it affects the ability of workers to act as consumers. Surley this is an historically proved fact?

24 09 2012

Steve H,
I think the point Kliman is making is it’s not an increase in the rate of exploitation & a realisation problem that has caused the crisis, rather a rise in the organic composition of capital that has caused the rate of profit to fall & so a crisis. And one of the reactions to this falling rate of profit is financialisation & increase debt. This debt is artifically supporting profit rates & they are creating even more debt to keep the bubble inflated. The capitalists are trying to buck the market.

24 09 2012

I am far from an expert in how profit rates, workers share of national income etc are calculated but if management costs or remuneration is included under wages then the stats are not worth anything from a class perspective. I think there is a Marxist Oxford professor (Mahoun?) who has done the rate of profit calculations, factoring in management remuneration, and the results look very different to what Kliman claims and correspond more to my reality of the last 20 years.

Re debt, I was talking about household debt. If workers share of national income has increased why has their debt levels increased so much?

25 09 2012

Steve H— Fundamentally the essence or nature of capitalism is rooted in surplus value extraction from exploited workers in the production process which is primary. The self expansion of value is ultimately illogical,production for productions sake,accumulation for accumulations sake. In other words, human need is subordinated to exchange value. If you say, as Harvey does, that modern capitalism’s inner dynamic is now about consumerism, then what’s good for workers can be good for capitalism. We do not have to transcend capitalism. We can look to the state for a fiscal stimulus to lift all boats.David Harvey looks to China: “if global growth is to revive then it will be because the eastern path of keynesian stimulus prevails” p274. This is an outrageous comment when you consider the savage exploitation of china’s working class. With other comments ,it also implies workers co-operation and integration in the state regulation of Capitalism.

The capitalist solution to depression is surely the destruction of capital value in one form or another.Kliman argues that there was not enough destruction of values in the recession of 1974/5 or 1981/2.So Capitalism never fully recovered. On Andew Kliman’s view there has been RELATIVE stagnation ever since. He follows Marx in arguing that the fall in the rate of profit is not a direct cause of the crisis, but underlies the crisis, expressed in financial and market instability. Low profitability, as Marx explained, can lead to risky financial speculation and easy credit and debt build up,including household debt, and when it cannot be paid back, can trigger depression/ economic crisis.

Financialisation and Neo Liberalism are surely not a new stage or phase of capitalism. According to Kliman, US corporations have invested a larger share of their profit to productive investment between 1981 and 2001, than they did between 1947/80. Andrew Kliman, Alan Freeman and others are in a minority in the way they calculate profit as the rate of return on historical investment, rather than the cost of the current replacement of capital assets. But my complaint about Harvey is that he does not relate or even give references to this debate, so people can be encouraged to follow and understand it. He dogmatically puts the underconsumptionist view of the Monthly Review Tradition. (Baron and Sweezy)

25 09 2012

Harvey’s entire analysis rams home the point that Marxism is about surplus value production, he isn’t unaware of this fact in the slightest and nowhere does he say capitalism is now about “consumerism”. That is such a fundamental misinterpretation of his view.

Neither does Harvey say that capitalism doesn’t need transcending.

Since 1981 a far greater level of productive investment went into computing, an industry which is low on constant capital and high in variable capital. So how come Kliman is claiming a profit crisis based on an higher proportion of constant capital?

Also can you explain why from 1980 to 2007 household debt more than doubled relative to disposable income? If, as Kliman claims, workers share was in fact rising?

There is far more to neo liberalism than ‘financialisation’ (why would this lead to lower productive investment anyway?), neo liberalism is a class project, that includes, tax reductions for the wealthiest, vast inequalities, an extreme capitalist domination of labour, a break with social democratic consensus, deregulation of business, privatisation, and attacks on the public sector,

The current crisis seems structural to me, neo liberalism has exhausted itself. There is nothing inevitable in the demise of capitalism, nothing has changed, we still have to win hearts and minds.

26 09 2012

Steve why do you state the following about Harvey with such confidence : “Nowhere does he say Capitalism is about Consumerism” But in the first paragraph of my Review of the Enigma of Capital, I gave the page reference where he does say that the dynamic of Capitalism is the effective demand of consumerism. According to Harvey the great recession “has placed the development of consumer and rising effective demand at the centre of the sustainability of contemporary capitalism, in ways that Marx, for one, would have found hard to understand” page 95. And somewhere else in enigma he says” the organisation of consumption through urbanisation has become absolutely central to Capitalism dynamic”page 175.

Your other overconfident assertion is not accurate either. You state that “Harvey’s entire analysis rams home the point that Marxism is about Surplus Value production”. In fact he does not and cannot ram home this point, since he does not accept Marx’s Labour theory of value,the falling rate of profit based on value analysis,or Marx’s theory of capital accumulation.

He follows Paul Sweezy ( The theory of Capitalist development 1942 and Monopoly Capital with Baron 1966) with the concept of surplus or surplus Capital looking for effective demand. This surplus, which is something of an enigma in itself, is not a concept of surplus value, but something rather different. Its all about the surplus absorbsion problem which is why effective demand in the market is the keystone of this view of capitalism.

So we get “the turn to financialisation since 1973 was born of necessity.It offered a way of dealing with surplus absorbsion problems”page 30 And “There has been a serious underlying problem, particularly since the crisis of 1973-82, about how to absorb greater and greater amounts of capital surpluses in the production of goods and services”. page 28 This is why “the solution lies in capitalist consumption”page 110.

This is also why he agrees with Keynes and keynsians that the solution to the great depression and the current great recession is stimulating effective demand. This is a reformist not a revolutionary solution. Remember he agrees with Rosa Luxemburg’s rejection of Marx’s theory of the reproduction of Capital in Capital Vol 2,but thinks she missed the solution-yes his mantra the thing he really does ram home-effective demand. In his, A Companion to Marx’s Capital, he disagrees with Marx on all the fundamentals,but expresses his differences gently with scepticism or doubts about the logic or consistency. A careful reading of Harvey is required.

26 09 2012
Jim Parker

The review and subsequent discussion are of interest even if I need a pencil, notepad and full access to my comprehensive Marxist library. Unfortunately blocked off behind the tv. The points I want to make are:
1. Read Harvey’s book, it’s well written, jargon light and supplies some insight into the current crisis.
2. To have any sort of influence on political consciousness, thousands are anti-capitalist motivated “99 per cent” slogans, none are Marxists so criticising anyone for not being a Marxist is so detached from the current situation as to be counter- revolutionary. Or is it simply that you duvet cover is stuffed with random pages of Marxist literature.
3. Having insulted too many people I will say that you must read Marx when you’re ready for philosophical and technical exposition but first read all popular accounts of the crisis, the insanity of neo-cons, the hand ringing of Keynsians they all give away the fact that current economic theory can get no further than serve the super rich and damage all others. From what you pick up you can get started on unravelling the common sense understanding that will leave the majority with nowhere (the Labour Party) to go.

30 09 2012

What Harvey says in relation to crisis is not the same thing as describing the essential inner workings of capitalism. Harvey even makes the point that in the Grundrisse when Marx talks about production is the opening pages he is actualy talking about surplus value production.

Many Marxists think a Keynesian solution could work as a short term fix because they believe capitalism is not actually bankrupt or that capitalism is in a long wave boom etc. This doesn’t mean they don’t think that there is a fundamental need to get rid of capitalism. Harvey talks about the limits of capitalism and how it is essential to move beyond capitalism to a ‘zero growth economy’. Harvey is no capitalist apologist.

Now workers are being attacked all over Europe, your analysis of the situation would say that the Tories are doing the right thing, from the capitalist standpoint. There are others, and I am one of them, who believe Austerity is making the problem far worse and that these drastic reductions in peoples living standards are not inevitable. Fight Austerity!

4 10 2012

once again,instead of engaging with the review or connecting with the author you simply express an arbitrary opinion: “What Harvey says in relation to the crisis is not the same thing as describing the essential workings of capitalism” This comment is not evidence you have read or studied the review or Harvey’s Enigma of Capital.As the review demonstrates with a number of direct quotations, Harvey does describe, what in his view is the inner workings of modern capitalism. Hence the title. Harvey’s book is an analysis of the nature of modern Capitalism in a “popular” format.

When you say Harvey is not an apologist for Capitalism, this is a comment which does not connect with anything I say in my review or in the ensuing one sided debate. A debate all on my side. If you are looking for a label which I was trying to avoid, I can provide an old fashioned one, which would be- revisionist. Someone who claims to stand in the Marxist tradition, but disagrees with Marx on all the fundamentals,but claims to be bringing Marx up to date or correcting his mistakes or logical errors.

Now even if you had read Harvey’s book or taken the trouble to follow the points I have made, I do not think the overall theory or the theoretical detail interest you. All you appear to require is an anti Tory attitude and a slogan-fight austerity. But to be anti Tory or to unfurl a banner against austerity is insufficient. The question is :how do we fight against Capitalism and the symptoms of Capitalist crisis? A Keynesian solution is a Capitalist Solution. It is one of the methods used by the capitalist class and its political representatives to save Capitalism, depending on the balance of forces /circumstances.

In the current international recession/ crisis, both financial stimulus and austerity cuts have been used.The working class pays in one form or another. Some people prefer the lesser Labourite evil,less drastic reductions, in the short term, or a slower application of the Knife. This is because of their left trade union perspective ,or narrow horizon’s.Looking to the capitalist state to intervene will only undermine or prevent ,be a detour away from, a grass roots challenge to the capitalist state. The history of Social Democracy is not a transition or a bridge to socialism or transcending Capitalism. And remember the nostalgia which underlines these political attitudes is the golden age following the second world war. But that boom was based on capital and Capital values destroyed in the Great Depression and the world war. That destruction of capital and capital values has still to run its course. Hence the on going crisis.

24 03 2013

barry why is it want to spend your time attacking davis harvey who clearly is anti-capitalist,and yes I have read the book.We should be sticking together as anti capitalist instead of the usual fractures and splits that seem to be highest on your agenda…marx is not a religion

25 03 2013
Jim Parker

Super mink,
Sadly too many have failed to notice that Marxism is not a religion. How many discussions have you heard cut short by a believer saying “Marx said….” ? I’ve no idea how to stop or minimise this but demanding current empirical evidence directly related to the issue being discussed! Might work if you are in dialectical mode with someone who actually wants to have their own and Marx’s ideas tested. Good luck.

27 03 2013

Supermink- why are you so intolerant of differences within the anti Capitalist movement? I do not agree with Harvey’s Keynesian, underconsumptionist approach. Its religion which rejects rational criticism. I have made numerous points about Capitalism, why not engage and respond to the points, instead of dismissing the article out of hand? As Rosa Luxemburg once said freedom is freedom for the one who thinks differently.


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