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