Heinrich Contra Law of Falling Rate of Profit

Red, I don't see what your point is. Kliman is saying Sweezy believes that a sufficient rise in exploitation can neutralize any fall in the rate of profit. Kliman's point is that there are limits to exploitation. So while this is indeed a counter tendency it won't always neutralize the tendency.

Arguing that there are limits to the counter tendency of rising surplus value is not the same as saying that this counter tendency never manifests itself! Its like you are accusing Mikus or Kliman of some sort of inverted Sweezy argument; where the tendency totally neutralizes the counter tendency in virtually every situation.

I think you miss the point. The point being: to take all these elements of the LTFRP into consideration as a unity.

IIRC Sweezy's claim is that the ROP is indeterminate - why privilege a rising C/V over a rising S/V - and hence he views the TROPF as of little use. I think there is a limit to the rate of surplus value and the tendency of the rate of profit to fall is real and will eventually assert itself. This has little do with Kliman and he certainly isn't the first to note this.

I do see Kliman as close to an inverted Sweezy. Firstly, his corn model examples for the TSSI using pre-production costs show a rise in productivity causing a fall in the ROP - as opposed to his simultaneist corn model examples. Yes, he describes the role of an increasing rate of surplus value or the cheapening of the elements of constant capital as counteracting influences but they're not exemplified - at least what I've read so far.

Second, there is Kliman's later empirical work on the rate of exploitation in the US and his claim that the portion of national (US) income going to workers ("total compensation") has risen since the early 1980s, i.e. that the rate of surplus value has actually fallen.

Kliman emphasises the tendency, as others emphasis the counter-tendencies. I agree that the aim is to take all elements into consideration and, crucially, that the balance of influences changes over time.

What in the world are you talking about? All Kliman is saying is that there is a maximum limit to the rate of profit, which we've all agreed is L/C. This holds even in your own example.

Yes, and once you look at those equations, it makes sense to determine which ones most closely correspond to real world conditions, which is what I did.

This would be relevant if Kliman had ever claimed that all rises in productivity must result in a fall in the rate of profit, but he never has. He has said the opposite countless times. One example, in "A Value-Theoretic Critique of the Okishio Theorem":

I believe you are correct here.

The corn models are all just simple disproofs of Okishio's claim that rises in productivity cannot cause the rate of profit to fall. They're not attempting to show that all rises in productivity must cause the rate of profit to fall.

I'm not sure what your criticism is here. Why would he emphasize a rise in the rate of surplus-value as a counter-tendency during the last 30 years if his empirical work shows that this hasn't actually been functioning as a counter-tendency? It wouldn't make any sense. If you have a criticism of him, criticize the empirical work, don't criticize him for not emphasizing a rise in the rate of surplus-value which his own work shows hasn't happened.

Well, first, the Kliman quote squarely contradicts the position that Mikus, in a post previous, claims Kliman holds.

Then, if you read further in Kliman, he provides something that looks like math to show, to formalized, to make explicit, these limits to this exploitation. My problem is that this math doesn't seem to work, unless there are further constraints I've missed (and hey, feel free to tell me what those are).

And further, further, if you read Capital I on relative surplus value or even Heinrich, you'll notice that s/v is not exploitation in the naive sense. While I would claim that there are "limits to exploitation" with exploitation taken in the technical sense, it is crucial to first understand that these are not the obvious limits; they are not the limit to number of hours in the days or the limit to the intensity of human activity over a day. (for example in "Production Of Relative Surplus Value" - "...a fall in the value of labour-power is also brought about by an increase in the productiveness of labour, and by a corresponding cheapening of commodities in those industries which supply the instruments of labour and the raw material, that form the material elements of the constant capital required for producing the necessaries of life").

Heinrich's article, btw, is not coincidentally focusing on the same equation as Kliman plays with in my link earlier link here (which I believe you gave on Facebook, in fact). This has been a key point in the debate for a long time; if there's no obvious limit to s/v, there's no real demonstration, no proof that the rate of profit even tends to decline.

(Heinrich also argues that Marx in Capital III starts with this equation but then tries to come up with other arguments to show a decline in the rate of profit regardless of increases in s/v. So I suppose Heinrich is arguing that Kliman is following the later, more obscure arguments in "Contradictions of the Law" but that both of them are wrong).

Now I personally do agree that there are limitations to s/v but the point is to provide an exact analysis of why. As I've said, I think it's quite possible to put real maths to the demonstration that the rate of profit declines. Comuniseur's proof seems like a fine effort in that direction, for example.

Any reasonable reading would take "Maximum limit" to mean a finite quantity. To further this claim [that "maximum limit" means finite in Kliman's context]; if all Kliman is saying is that there is an expression for the limit of the profit but that expression can go to infinity, then he's clearly not contradicting a claim that "there's no 'necessity' for the rate of profit to fall". So the motivation of the math in the quote has to be to show that there is a finite value to the expression L/C as t, as time, goes to infinity and I have already shown that this is not in general true.

And you conveniently don't acknowledge of the way the Kliman quote contradicts your previous post.

I'm afraid you're going to have to reread Kliman's original email before giving yourself any further pats on the back.

Immediately before stating that "there is a clear maximum limit to the profit rate", he mentions that as the exploitation of labor increases "r[ate of profit] approaches L/c". Which makes it quite obvious that he's referring to L/c as the "clear maximum limit to the profit rate". Going from here it does not take a mathematical genius to see that if the magnitude of constant capital forever decreases while the extraction of living labor remains constant (as in your example), the rate of profit will forever rise.

A. I'm not really interested showing that my point involves genius. If "Maximum limit" isn't finite then Kliman isn't contradicting the position he imputes to Sweazy et all.

B. You are right I indeed have to look at the email even though Kliman definitely is claiming finiteness. The key passage seems to be "unless one is a simultaneist, and keeps reducing c proportionately to L, ceteris paribus)." That's at least an "escape" so Kliman stands obscure if not refuted. Anyway, if someone cares explain the mathematical magic in a other than "simultaneist" position that limits c relative to L, I'd be happy to hear it. Edit: In any case, limiting C relative to L is nearly identical to limiting s/v so I think either way one has to offer the reason for this limiting.

I think that Red needs to answer the objections raised to his post #61 where he exhibits a basic, fundamental misapprehension of Marx's argument by expressing incredulity at, essentially, reproduction of that argument by others.

Except where circumstances are such that the rate of increase in surplus value, s/v substantially exceeds the rate of accumulation, the rate of capitalization of surplus value as means of production, living and dead, s/c+v, the rate of profit tends to fall.

Now is it necessary that, over time, s/v does not exceed the rate of capitalization of surplus value? Yes. The mechanisms of expression, of manifesting, this involve 1) the distribution of the social surplus value, the aggregate profit, through prices of production and the establishment of a general or average rate of profit 2) conflicts between capitalist production time and the reproduction of capital as a whole which involves circulation, and circulation time. This latter expression takes the form most clearly as overproduction where the mass of commodities cannot "find a market"; or "markets contract" which is simply another way of saying value cannot be realized in exchange.

This in turn is particularly acute in the "less developed" countries of capitalism where 1) access to labor as free dispossessed labor encounters the obstacles of low productivity in agriculture 2) the unevenness of development where the domestic market is so encumbered that it drives industrial production and manufacture in these countries into the world market where competition is so intense, and productivity so augmented, that such production can only be sustained in "niche" areas of the economy like special enterprise zones, maquiladoras etc.

In Marx's critique of capitalism, we simply need to answer on question, and it doesn't require a mathematical "proof." Is it possible for capitalism to increase the rate of surplus value without increasing the accumulated value of the means of production as capital? The answer is logically NOT, since the whole point of capital is the accumulation of the means of production as capital and this can only be done through reducing the necessary labor time; while in fact surplus value depends, requires, the maintenance, and preservation, of the necessary labor time.

Jeesh

In that earlier quote, you misinterprete what I mean in the context of a back-and-forth exchange and seemingly take it as some sort of fundamental statement (or perhaps some weird Freudian revelation?). I didn't reply earlier because it was such a gnarly, contentless red herring. Go back and look at the interchange the provoked this. The key statement is "By your reasoning here" ie, "if what you are saying is true" ie, conclusions coming off of antecedents of this sort is not by any necessity going to be what a person is asserting or what they are denying. 'Contrariwise,' continued Tweedledee, 'if it was so, it might be; and if it were so, it would be; but as it isn't, it ain't. That's logic.'

I whole heartedly agree that a theory of the falling rate of profit is based on the assumption "The increases in the rate of surplus value tend to not offset for the rise in the organic composition of capital." My argument from the get-go has simply been that this needs to be proven - well, at least if one is going say proven.

And I don't object to any of the rest of your statements here. It's just, if you want to say it's proven, formalize and show your formalization means what you claim. That is all.

mikus wrote:

I never said that Kliman's corn models show that the rate of profit will always fall with a rise in productivity. The issue is that the numerical examples I have seen are chosen to show that.

You missed out my following sentence:
"Yes, he describes the role of an increasing rate of surplus value or the cheapening of the elements of constant capital as counteracting influences but they're not exemplified - at least what I've read so far."

If there are numerical examples based on the same corn model that show a rise in the rate of profit, please point me in that direction. Perhaps it is obvious and you believe it is only necessary to state it.

Why take only one's own empirical work into account? Unless you believe that it is such a clear advance on what came before. That's the point.

As I said previously, put all this together and the emphasis is on the tendency rather than the counter-tendencies.

You can "formalize" it if you care to. The fact of the matter is that the rate of profit does not fall under all momentary circumstances; it is driven to fall by the process of accumulation itself, which is made evident in the actual fabric of capital reproduction. You can construct a proof that says- "except in such circumstances where the change in surplus value is sufficiently greater than the additional recapitalization of surplus value into production as capital, the rate of profit will tend to fall" --but exactly what are we "proving" in what amounts to or approaches being a tautology.

The issue is the actual process, the actual metabolism of capital where accumulation becomes its own obstacle. That is a truth demonstrated historically, as a "whole" so to speak, not a formalized proof.

I say it-- the tendency for the rate of profit to decline has been demonstrated historically as being inherent in, immanent to capitalist accumulation.

It's not a law; it's a tendency that is manifested by capitalism under most conditions and for certain irreversible reasons.

To me, it's like asking for the mathematical proof that abstract labor exists. It's a social relation.

Did anyone else notice the argument between Kliman and a poster in the comments section? Kliman says that a jointly-authored response to Heinrich is forthcoming.

http://www.marxisthumanistinitiative.org/economic-crisis/more-misused-wage-data-from-monthly-review-the-overaccumulation-of-a-surplus-of-errors.html

He also brought up something that struck me about Heinrich's article; Heinrich never mentions how Marx always said that the LTFRP was "the most important law of political economy."

Something that also struck me while reading Heinrich's article was that he seemingly skips over the section on the LTFRP from the 1861-63 manuscripts. He basically goes from the Grundrisse to the 1865 manuscripts- which is only published in German. I think Heinrich should have gone over that if his intent was to give a historical break-down of Marx's work on the law!

EDIT: (Heinrich sticks it in a footnote to be fair)
http://www.marxists.org/archive/marx/works/1863/theories-surplus-value/ch16.htm#s3

Exactly, that's because the whole point of his corn models is to show that it is possible that the rate of profit can fall due to a rise in productivity. Creating corn models to show that the rate of profit might not fall due to a rise in productivity would have been pointless, as it wouldn't have served the function of the demonstration, which was to show that Okishio was wrong to deny the possibility that rates of profit might fall due to a rise in productivity.

He does believe it's a big advance on what came before it. He explains why in his book, and he has written numerous papers since then criticizing other empirical approaches (particularly those in Monthly Review). IMO his criticisms are convincing.

This is going to be my last comment on the debate with Red. It's hard to debate with someone who demonstrates such severe difficulties with reading comprehension.

Let's look at what Kliman actually says in the email:

It should be obvious to anyone with a minimal amount of honesty that the limit he is referring to is the fact that the rate of profit is limited by the length of the working day.

Furthermore, look at how he summarizes the position he is arguing against:

Note the bold. Any rise in the organic composition of capital. I.e. Under all conditions. He has indeed shown that this is false, since under certain conditions (for example, the very realistic one in which capital is actually being accumulated), the rise in the rate of surplus-value cannot counteract the rise in the organic composition of capital.

All you have shown with your numerical example is that under certain conditions a rise in the rate of surplus-value can counteract a rise in the organic composition of capital. But this is expressly not the position that Kliman is arguing against.

You are exhibiting basic problems with reading comprehension and/or logic.

Again, yes, it is contradicting Sweezy because Sweezy claims that in the real world, where accumulation actually takes place, increases in the rate of surplus-value might always counter-act the rise in the organic composition of capital. Kliman shows that this is not true.

It's not obscure just because you don't understand it. Kliman is referring to the fact that in any simultaneist model, c will decrease proportionately to L because they retroactively revalue c every period as productivity rises. This is so basic to the entire discussion of TSSI that it is hopeless to even debate this with someone who doesn't understand it.

Coming from someone who likes to claim that other people are being obscure, this paragraph is a real gem.

Red-- honestly, I don't think you're making very much sense here.

I am reading Heinrich's book at the moment. There is maybe something relevant to this discussion -- in section 5.6 he disputes increasing industrial reserve army from machines replacing workers. Surely this underlies the present debate.

I don't understand Heinrich's argument though. He distinguishes between concentration of capital (capital accumulation) and centralization of capital (buyouts, takeovers). Concentration of capital tends to increase employment, and centralization of capital tends to reduce it. Then whether employment or redundancy effect occurs on the level of the whole economy depends on the frequency of centralization processes. So Marx's claim cannot be substantiated.
[I would quote from the text so that I do not misrepresent his argument from memory, but I have the ebook on my computer and the DRM won't let me open it]

But I do not remember the argument in Capital I being anything like this at all. I thought it was about how capital accumulation operates, investing in means of production to get relative surplus value, expelling labour from the labour process etc, not about centralization of capital. Anyone care to explain?

mikus wrote:

That's fine, but is that as far as it goes - to refute Okishio? The Persistent Fall in Profitability Underlying the Current Crisis: New Temporalist Evidence (2nd draft) has amongst its conclusions:

"1. U.S. corporations’ rate of profit began to fall about a decade after the end of World War II and the falling trend has persisted until the present time. Some measures of the rate of profit leveled off or increased very slightly after the early 1980s, while others have continued to decline. None indicates that a genuine, sustainable rebound in profitability took place.

2. Claims to the contrary are based on cherry-picking of the data and on the use of current-cost “rates of profit” that are not rates of profit in any normal sense."

And concludes with:

"The record needs to be set straight, and the “Marxian economics” tradition –– which has given us “consistent” but spurious current-cost rates of profit that head ever upward while the economy goes down the tubes and, as a direct result, Marxian theories of the current economic crisis that take surface financial-sector phenomena to be essential causes of the economic crisis––needs to be repudiated."

It seems to me that much greater claims are being made for TSSI and that one of the grievous mistakes made in establishing a measurable Marxist rate of profit is simultaneism.

I'm sure he does. As Kliman points out himself in Lies, Damned Lies, and Underconsumptionist Statistics it is possible for the labour share to fall without blaming low wages for crises. A falling labour share doesn't necessarily lead to the underconsumptionist conclusion of the Monthly Review and other Left Keynesians.

Graham, you quote Kliman making strong claims about the tendency of the rate of profit to fall and (correctly) deduce that Kliman has done more than refute Okishio, but in your previous post you were criticizing him for the corn models not showing that the rate of profit might rise due to a rise in productivity. But again, the point of the corn models was very limited -- to refute Okishio. Certainly he has made other claims but those have little to do with the corn models.

TSSI stands for Temporal Single-System Interpretation. It is nothing more than an interpretation of what Marx was stating in capital. Whether or not Marx's theory was correct is a distinct issue. Kliman's first book, Reclaiming Marx's Capital, deals with the former issue and his second book, The Failure of Capitalist Production, deals with the latter.

Of course it's possible but I'm not sure what your point is here.

I'm not familiar with Heinrich's book so I can't comment on whether or not his book gets it right, but your summary of Marx's argument seems to me basically correct.

So references to "current cost rates of profit" in work after Reclaiming Marx's Capital have nothing to do with TSSI from that book? As in my example quotes above.

I just want to know how "distinct" the two are, for clarification. Nevertheless, it may be that use of "current" or a "historic" cost makes little empirical difference, other issues being more important for establishing the trend in a measured Marxist rate of profit.

The temporalist theory given in The Failure of Capitalist Production is based on Marx's interpretation, but the issue of whether or not the TSSI is correct is logically distinct. This is why Kliman uses the word "temporalist" to refer to the actual theory of capitalist production and "TSSI" to refer to the interpretation of Marx. One can agree with TSSI and disagree with temporalism, and vice versa. This is why he deals with these issues separately.

Completely distinct.

No, it may not be. In The Failure of Capitalist Production Kliman shows over and over again that this has made all of the empirical difference in measuring the trend of profit rates since the 1970s.

mikus wrote:

To distill: you're saying Marx was a "temporalist" in his analysis of capitalist production.

According to the TSSI (which I agree with), yes.

OK, I had to type all this out.

Hilarious. Of course it can be substantiated-- through the analysis of capital's actual waxing and wanings, and its historical movements, say post WW2 in Latin America, with massive migration to cities where capital had little ability to absorb and employ the labor. Or how about China, with the migrations from countryside to cities following the "Four Reforms"?

Or the US since 1974? Or Germany's fragmentation of its labor market, creating vast numbers of "minijobs"-- without protections, at lower wages, with lower hours-- to the point that the proportion of low paying jobs is greater in Germany than it is in other countries of the EU.

This what I mean about the difference between mathematical "proof" and historical truth.

mikus wrote:

Sure, what I'm trying to get to the bottom of is this previous statement:

You say that TSSI is Kliman's interpretation of Marx, but here we have a theory called temporalism that is based on Marx's interpretation.

My bad, I should've double checked my post before I submitted it. That sentence should say: "The temporalist theory given in The Failure of Capitalist Production is based on the TSSI of Marx, but the issue of whether or not the TSSI is correct is logically distinct."

mikus wrote:

OK, though your logic for the relationship between TSSI, temporalism and Marx is unclear.

TSSI and temporalism logically distinct? Let's take Marx's Law of the Tendency of the Rate of Profit to Fall.

1. Reject TSSI but accept LTROPF for reasons other than temporalism.
2. Reject TSSI but accept LTROPF based on temporalism.
3. Accept TSSI but reject LTROPF for reasons other than temporalism.
4. Accept TSSI but reject LTROPF based on temporalism.

1 and 3 are OK. What about 2 and 4?

2 and 4 are wrong.

But I don't think Mikus was saying that TSSI and Temporalism are distinct. Temporalism is one very important facet of the TSSI. TSSI means Temporal Single-System Interpretation. Temporalism refers to how, in that interpretation, Marx did not use simultaneous valuation of input and output prices of production. The singe-system part refers to the how value an price are determined interdependently.

The opposite of the single-system interpretation is the dual-system. The Dual System interpretation says that value and price are determined independently of one another.

So temporalism, technically speaking, is distinct from TSSI, but only because it is just one part of the TSSI.