Capitalism in the 21st Century: Through the Prism of Value (IIPPE)

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In Capitalism in the 21 st Century, the authors show how Marx's law of value explains numerous issues in our modern world. In both advanced economies and the periphery, value theory provides a piercing analytical framework through which we can approach topics as varied as labor, profitability, technology, the environment, the role of China, imperialism, and the state. The purpose of this book is to bring to the reader a Marxist interpretation of some of the major issues in contemporary capitalism in the 21st century. We rely on the tool of Marx’s value theory to deliver scientific explanations of the laws of motion in 21st century capitalism. Marx’s theory of value in capitalism is the red thread running through the book. The major factor influencing profitability is technology. New technologies replace workers with means of production. They produce less value and surplus value but realise more value at the cost of the technological laggards. The latter, in their turn, will shift to more efficient technologies. It is this continual process of modification driven by changes in technology and competition that tells you that Marx’s law of value is not a static equilibrium theory, instead, that the process of commodity production is in continual motion. When a production process (P1) terminates, another one (P2) begins, that is, the outputs of P1 become the inputs of P2. The value of the inputs of P2 is then their value contained as output of P1. This is the basis of the temporalist theory of the transformation of (1) labour into value and of (2) value contained into value realised, which is usually referred to as the transformation of value into price.

Regular readers of Roberts’s excellent blog, “The Next Recession”, will be ­familiar with many of the arguments presented here about money. Marx developed his theory of money in the first three chapters of the first volume of Capital: As capitalism develops, new labour-saving and productivity-increasing ­technologies replace the old ones, and the amount of constant capital rises in relation to variable capital (outlay on wages). Because labour power hired with variable capital is the only part of capital that produces value (and thus also surplus value), the amount of value (and thus, other things being equal, of surplus value) falls relative to total capital invested. This depresses the rate of profit—unless there is a faster increase in the rate of surplus value, among other counter-tendencies. However, Marx contends that the law will assert itself sooner or later, that is, when the counter-tendencies can no longer counter the tendency. 14Imperialist nation-states are defined as those with a persistently large number of high technology companies and a persistently higher national average organic composition of capital. This leads Carchedi and Roberts to define the imperialist countries as those making up the G7, which comprises Britain, Canada, France, Germany, Italy, Japan and the US. The dominated countries thus include the rest of the G20, which includes Brazil, China, India, Russia, Saudi Arabia, South Africa and Turkey. Choonara, Joseph, 2018, “The Political Economy of a Long Depression”, International Socialism 158 (spring), http://isj.org.uk/the-political-economy-of-a-long-depression Applying all this to the post-war period, the inflationary period of the 1970s was therefore not caused by a ‘wage-price spiral’, as the mainstream insists. Rather, the cause lies in the interaction of constant capital growth and combined purchasing power growth (CPP, including profits and wages). While ‘total value rises at 8.7 per cent, constant capital grows by 19.2 per cent and the CPP by 8.5 per cent … Thus, the CPP falls as a percentage of total value, but given that total value grows strongly, the CPP rises percentage-wise. This explains inflation’.

Counter-tendencies temporarily dampen or reverse the tendency of the rate of profit to fall. When they have exhausted their action, the tendency emerges once more. The operation of the counter-tendencies mean that crisis is temporary, and the accumulation process takes the form of periodic cycles. A crisis or a slump in production is necessary to correct and reverse the fall in the rate of profit and, eventually, any fall in the mass of profit. The graph below shows the changes in the rate of profit for the G20 countries between 1950 and 2019. Capitalism will always be capitalism, but in the 21st century new forms, controversies and challenges have appeared ... This book masterfully shows the strength of Marx’s law of value and the alternative socialist planning'

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However, when it comes to empirically validating their theory with data, Carchedi and Roberts calculate a “value rate of inflation” by combining the purchasing power in value terms with money quantities. Yet, it is unclear why the combined purchasing power can be used to measure the amount of new value created. In my opinion, the work on inflation needs to be presented with much greater clarity and transparency. The view of Carchedi and Roberts is that neither mainstream nor Marxist theories of inflation have adequately explained changes in price inflation in economies with fiat currencies. 12 Unfortunately, this still appears to be the case. 13 Crises, robots and knowledge PDF / EPUB File Name: Capitalism_in_the_21st_Century_-_Guglielmo_Carchedi.pdf, Capitalism_in_the_21st_Century_-_Guglielmo_Carchedi.epub We define imperialist exploitation as a persistent and long-term net ­appropriation of surplus value by the high-technology imperialist countries from the ­low-technology, dominated ones. This process is placed within the secular ­tendential fall in ­profitability, and not only in the imperialist countries, but also in the dominated ones. 25 If crisis is recurrent and if they have different causes, these different causes can explain the different crises, but not their recurrence. If they are recurrent, they must have a common cause that manifests itself recurrently as different causes of different crises. 17 The authors conduct a number of other tests to determine the value of human capital at high-income levels, including whether most top earners are simply children of 1-percenters living off an inheritance, and they find that more than three quarters of top-earning children are “self-made.”

The authors argue that there has been a long-term decline in the US inflation rate measured by the Consumer Price Index from 1960 to 2019. Within that 60-year period, there are 2 phases. In the first, between 1960 and 1979, inflation was rising; in the second, between 1980 and 2019, inflation fell. The relationships between total value, constant capital, and the combined purchasing power of wages and profits are then used to explain the two different periods as well as the overall fall in the rate of inflation in the long run. Carchedi and Roberts also critically examine alternative Marxist theories of crisis, namely, those focusing on instability and anarchy in the banking and financial sectors, underconsumption by the working class, and the inherent ­disproportion between different “departments” of the economy. Each of these theories has ­something to offer in understanding the complexities of a specific crisis, but none of them can explain recuring crises. The authors, I think convincingly, argue:

Capitalism changes shape as it develops, and the economy develops a greater mass of constant capital (machinery, infrastructure and so on) over time, relative to what can circulate within the economy. That this deflationary tendency is a reality is borne out by the data over the period 1960-2018 which shows ‘a long-term secular decline in the US consumer price index (CPI) inflation’, even despite inflationary periods, such as that of the 1970s (p.76). A Marxist theory of inflation In value terms, replacing human labour by robots raises the productivity of the remaining workers and increases the profitability of those capitalists who are the first adopters. However, once the new robotic techniques have been generalised, the first adopters lose their advantage and profitability falls due to less workers being employed. This is one of Marx’s fundamental insights to the workings of capitalism; it is a contradiction that flows from the competitive accumulation of capital. So, in this sense, robots are just another stage in the growing productivity of labour and the consequent tendency of the rate of profit to fall. The finding that most 1-percenters earn labor income is reinforced by the fact that the ages of these working owners mirrors those of other working professionals, while those who passively draw capital income are mostly older. Also, as described above, most of the profits for these firms are derived from relatively labor-intensive industries, like law, health, and finance. Profits at these relatively small firms are highly dependent on individual human capital, which includes personal goodwill and client relationships. Traditional C corporations, on the other hand, are more capital intensive and dependent on manufacturing processes to derive profits. Marx’s law has a double edge. Even if the rate of profit falls, it is perfectly possible for the mass of profits to rise, and this can keep investment and production rising. Nonetheless, a persistently falling rate of profit will eventually slow and reverse the rise in the mass of profits. When the rate of profit falls to the point where the mass of profit goes into decline, this is a tipping point that opens the way for crisis. Profitability falls first, then investment falls. As profits go down, less is left for investments. Following an examination of the data, Carchedi and Roberts argue: