Heinrich Contra Law of Falling Rate of Profit

So I said on the OCC thread that I would put considerations on the Kliman et al response and Heinrich's MR paper on here, where it belongs.

First, in relation to Heinrich's MR paper, I find that his specific counter-argument (the (s/v)/(c+v) stuff) to the LTRPF section is faulty. Including for some of the reasons Kliman points out (and arguably Marx did as well), i.e. that s/v is not a fraction of two independent variables, but a ratio that can be at most 100% of a limited variable - hours worked in a production period (day/whatever). However, the tangled mess that Heinrich gets himself into in the last two paras of that section (beginning: "However, this conclusion is only correct if the capital (c + v) necessary to employ the two workers is of an amount at least as great as that required to employ twenty-four workers before.") actually could be made to make sense IF you drop the assumption of the OCC, i.e. that VCC in socially-aggregate constant capital is increasing. Kliman's argument that Heinrich's account presupposes the "dis-accumulation of capital" is based precisely on this micro-level OCC technical/value slippage, and on the macro-level "physicalist" error that capital can only be accumulated in the form of fixed and constant production capital, and not the financial and commodity moments of the full value-in-process cycle delineated in Vol II.*

Which really brings us on the meat of the disagreement between Heinrich and Kliman et al (and the whole neo-orthodox position as a whole, I submit) - that is on the question of whether Vol III actually contains a completed theorisation of credit - i.e. whether Marx's capital is "complete" or not. And here I side very much with Heinrich. For e.g. this appears to me to be broadly correct:

The Kliman et al paper responds with a true confessio de fide in its Section IV "The Theoretical Completeness of Marx’s Crisis Theory" (even the title asserts it).

So there we have it - the "Complete Marx", nothing important left unfinished in the book on Capital. A complete theory of credit must either therefore be found within it, or be irrelevant.

And that, for me is the real dividing line. Any project for going beyond the incompleteness of Marx, for a real and useful theorisation of interest-bearing credit and financialisation (as something other than a evidence of decay) is prohibited from the outset, by the insistence on the completeness of Capital as a total, "scientific" theoretical deconstruction of capitalist dynamics. And in this day and age, that for me, is fatal.

* I'm tempted to call the considerations of the fuller composition of capital at a macro level, the "inorganic composition of capital", precisely to get away from this physicalist limitation.

Ocelot:

check here:

http://thenextrecession.wordpress.com/2013/07/25/returning-to-heinrich/

and here:

http://thenextrecession.wordpress.com/2013/07/28/heinrich-a-small-rejoinder/

Roberts is "Marxist economist," whose background I think is in Trotskyism of some type. I generally find his "economic" proposals to be way too Keynesian for my taste, or what I consider to be "Marxist"-- see for example his stuff on Cyprus and Greece-- replete with "People's Banks" or some equivalent thereof.

Regarding the "complete Marx"--- no such animal in the real world of course, not until the proletariat overthrows the bourgeoisie--- That is the whole point of Marx's critique of capital-- it is the conflict between labor and the conditions of labor.

What is important in what Kliman says is that Marx considered his book Capital completed, but unpolished and not fit for publication-- that what we know, or think we know as volumes 2 & 3 were completed as far as the elaboration of the critical themes.

That's a bit different from thinking Marx had elaborated a full complete permanent steadfast once and future analysis of capitalist crisis.

And let's keep in mind-- crisis is not the "omega" of capitalism-- it is exactly critical, necessary to capital, necessary to its reproduction-- the abolition is left to the "anti-capitalists" existing at the very core of accumulation.

I wasn't mightily impressed by some of Heinrich's article either. Not having access to the MEGA manuscripts makes it difficult to evaluate some of what he says . From what I have read (his article on the controversy surrounding Engels' editing of vol.3, for instance) have caused me to question the received interpretations I had accepted. The more I read the more convinced.I am of the fact that Marx's work is full of lacunae and contradictions and I feel much more.comfortable with the ready acceptance of Marx's fallibility than with declarations of.completeness that invite intellectual closure. Still have lingering reservations about aspects of VF analysis admittedly but sympathies are swinging from Kliman

what is a lacuane? is that english?

Lacunae-- empty space, or missing part.

Oh, I see. Like a hole or something.

Yeah, Capital obviously wasn't completed so it's not a finished work. I think the point that Kliman makes, however, is that Marx felt that the three books were theoretically complete but not exaclty presentable. That doesn't mean they are just because he said so, but if we want to make claims to the contrary then we need to actually provide evidence. And the system as is appears to explain a lot so it shouldn't be just taken as a given that there are holes or contradictions all over Capital-- that was actually the standard practice until fairly recently; people just assumed that Marx was completely discredited because economists said his work was full of holes. Personally, I agree with the TSS interpretation that at least Marx's value-theory was coherent-- that's one of only two small claims that TSSI makes, btw, but I'll admit that beyond that there may indeed be contradictions.

This Micheal Robert paper is at least interesting.

I'm doubtful you can frame things quite this simply - the problem is the phase of relative surplus allows a rise in the rate of exploitation that's different than a simple increase in the working day.
But if you frame this argument "more broadly", it might indeed be "ultimately true" - class, social and material factors together limit the rate of exploitation.

What I'd be curious about is where in Marx one find Robert's argument? I don't recall something like this in Capital III.

Cool. Thanks for the links. That'll take me a few days to read through the comment threads (for the record I don't think that much of Michael Roberts' initial post, for my usual "begging the question" objections re the OCC - but the interest is in the discussion in the comment threads anyway).

Yes,
The thread debates are interesting.
The Boffy character is interesting. His blog argues a rising global rate of profit.

He also argues:

Think that might be another way to frame the point that the "limits of the working day" as a limit of the rate of exploitation argument failing when you look at the production of relative surplus value. (And I personally think there is limit on the rate of exploitation, it's just you one can't derive this limit simplistically - ie, Marx himself doesn't derive this limit, at least not correctly).

On the other hand, when

He/she is missing the fact that the total capital of a society isn't measured by enterprise but by capital (sum of the value of the enterprises). If some high capital enterprises are replaced by low capital enterprises and other high capital enterprises get larger, the high capital enterprises wind-up being the only whose OCC matters. Craiglist, the enterprise, replaced a large chunk of the newspaper industry with a website run by twenty people and not mobilizing a terribly large capital base. So now, craiglist OCC just no longer matters, the declining or rising OCC is only whatever large enterprises do remain.

And just in general, it occurs to me that the dogmatic idiocy of "Marx is totally correct and complete" just pollutes too much of the interesting discussion concerning are the dynamics of prices, value, profits and so-forth. Andrew Kliman's acolytes and sympathetic might even be saying interesting things but they should realize that when it's wrapped in this kind of ideology, it is simply counter-productive (the way Kliman abuses even the sympathetic Mathias hopefully could serve as something for people to think about).

As in;

P’ = s’/{C/v}

Where

C = total working capital

ie fixed[Fc] + constant[c] + wage fund {v)

The rate of surplus value can increase to infinity; or 30 million if that is not enough, without any extension of the working day.

So the necessary labour time might diminish to a milli-second in an 8 hour day;

so s’= s/v

8 x 60 x 60 x 1000 -1/1

= 28,800,000 -1 /1

That is the argument for the inevitability of socialism and the realm of freedom thing in volume III

If you use;

P’ = S(total) /C(total)

Then S(total) can increase due to;

more workers

longer working day

increase rate of exploitation.

There is ‘a tendency’ in the place I work ie manufacturing for less workers and thus ‘less S’ (as long as the rate of exploitation remains the same) and more capital.

Thus lowering of the rate of profit.

(and more use values greater output).

I realise that the likes of myself working in modern industry are now a minority in the ‘West’ , but that was ‘the tendency’ that Karl was focusing on as a trend in his day.

However a lot of ‘new’ products or services now can have a low composition of capital eg call centres etc.

C/v is about 500 where I work; it is probably about 1 where Michael Heinrich, Kilman etc work; if you call what they do work.

And low paid workers in the third world make it possible to produce hard concrete commodities profitably with low levels of fixed capital etc.

That starts to get a bit complicated comparing ‘them’ with ‘us’.

Depreciation of the value of Capital or C(total) due to the development of technology is a nightmare problem, literally, for the poor capitalist class thanks to scientists and engineers like myself.

It cheapens everything including capital.

That caused the demise of Jeremy Clarkson’s (of top gear) millionaire capitalist ancestor in the episode of Who Do You Think You Are ancestry programme.

The ones that don’t get caught out get spooked easily and don’t reinvest their surplus value back into productive capital and keep the profit as money.

Then there is too much money sloshing about and that can result in ‘nominally’ low interest rates.

The interest rate on loaned money capital ‘shadows’ the rate of profit.

If you think you can make a safe 10% rate of profit on loaned capital to purchase manufacturing capital; you go to ‘Dragons Den’ and borrow it at 0% from the bank of Japan and do it.

But mass usury and debt peonage is becoming more extensive in modern first world capitalism and that requires another analysis.

We are also living in a strange world today though with green paper money.

When the old capitalist wanted to turn there surplus value into non productive capital when they got spooked they used it to purchase gold.

That was OK for capitalism as the surplus product of wheat, shovels and clothes etc went to and exchanged with the producers of the universal money commodity, the gold miners.

In fact you had five departments of production, not two

Stuff for the workers to consume.

Stuff for the capitalist to consume. [Karl combined the two]

Raw material for production.

Fixed capital production. [Karl ommited that completely]

Universal money commodity production. [Karl ommited that completely]

What determines the rate of surplus value is interesting.

Karl basically said it was determined by the what was required to reproduce the workers labour power (which is left a bit arbitrary and undefined)and the workers productivity.

Adam smith had an interesting idea that it was the ratio of productive capital to available labour power.

Not a bonkers idea; during the Black Death the amount or quality of available
productive capital ie good land increased in proportion to the number of workers and so did wages

It took a little time to parse this paragraph but it seems it is the same old insufficient argument. "s/v is limited by the working day". Except it isn't. Heinrich deals with the claim and it has been raised many times previously.

S would be output from a working day
V would be the price of labor-power for a working day.

First in the case of an arbitrary mathematical model, With enough hypothetical productivity , there is no limit to S/V. S could be zillions of times higher than S. [ Say you have a good G, one unit of which that satisfies all human needs for a day and you have a machine that operated by a single person produces a million units of G per day. Pay each worker the price of one unit of G and then S/V= one million QED ] . There is no abstract proof of the limits to S/V within the "space" of arbitrary models. The Marxian situation where S/V is limited by the working day includes the situation of absolute surplus value production and all those situations production is assumed already to be proportionate to labor power input and of course, if you are assuming this situation, you are putting the cart before the horse.

However, alternatively to the above paragraph, you get concrete and look at the specifics of a capitalist economy in the modern world and argue there that material factors do limit the output versus the price of labor-power. It seems like Michael Robert does that. I would do that. I think there are numerous good arguments here.

The thing is Heinrich makes a fairly plausible argument that Marx wanted a proof in the world of the absolute abstraction, of any mathematical model and in this "space", no proof is satisfactory. But maybe Heinrich is wrong in this regard. Maybe Marx didn't approach things that way, sure. The problem is that I don't know of any reference in Marx to the kind of particular structural limitations within capitalist relations that would limit S/V (and if ya'll very read folks can find such, please tell me). And there are the loud, shrill voices calling Marx's theory full, true and complete and (clearly though implicitly) cursing those who would sully this theory by extrapolating from it to any degree.

So, what to do...?

RedHughs, aren't you guilty of what Kliman calls physicalism? Increasing productivity means more units produced, not value. Of course the objection about the limit of the working day does not apply if you do not determine value by labour time!

Hmm,

I would say that the example I've given actually shows that a limit on the rate of exploitation is pretty much a necessary for price to have a strong relation to the amount of labor time input into production. That also seems rather intuitively obvious - if capitalist could get an indefinitely larger amount out of workers than they put in, then labor-power wouldn't be much of a constraint.

Again, I would argue that in the real world, there is a basic limit to the rate of exploitation. Indeed, I'd say that's what makes the labor theory of value true.

But I claim that's because of the concrete conditions of production and social relations, rather being something one can glibly assume a-priori.

Edit: This is in reference to Heinrich's article and Kliman's reply. Heinrich argues that Marx didn't publish his theory because he couldn't prove the rate of profit declined without assuming the rate of exploitation is constant. Kliman has repeatedly claimed that there's some proof or other that the rate of profit declines without the need for assuming a limit on the rate of exploitation.
-- I'm not arguing for the part where Heinrich says the rate of profit doesn't decline but I am agreeing that one needs to show a limit on the rate of exploitation to the rate of profit to decline and to get prices to follow labor-value for that matter.

KHM is right. Given the LTV, s (surplus value)* is bound by hours worked, lets call it h.

h = s + v
s = h - v => max(s) = h [with assumption v non-negative]

The trouble with s/v is that we abstract from h, reasonably because the ratio remains the same whatever the value of h (8 hours, 12 hours, etc). However when we use it as a function, i.e.

s = f(v)

we forget that the result of f(v) is still bound by h - that is v is not genuinely an external unbound variable in relation to f(). Another way of saying this is that because f() is defined (circularly) in terms of s & v, then the range of possible inputs v is limited such that the output of f(v) can still never exceed hours worked (h). The only way to determine the absolute value of s, in labour time, is to make a proper (non-circularly defined) function F with external variable h, such that s = F(h), where F() is defined as 1/x . h where min(x) = 1.

In the example RH gave of an extreme rate of exploitation of 100,000,000%, if the working day was 8 hours, then v is going to be 28.8 milliseconds and s... is still going to be 8 hours minus 28.8 milliseconds.

The rate of profit is defined by the absolute surplus (in relation to absolute productive capital) not the rate of the surplus.

All of which to say, that I basically agree when Kliman (in the comments thread to the first Robert's post) says:

What I disagree with is that 2) is real.

* let's stick to the conventional use, s is not RH's "output".

errata: " the ratio remains the same whatever the value of h (8 hours, 12 hours, etc)" is incorrect, given a general level of social productivity, the absolute time of necessary labour is an unchanging given, therefore the s/v ratio changes as the day shortens or lengthens (absolute surplus value strategy)

Sure but that's doing nothing but changing the unit of measurement.

If we all the way back to s/C, the rate of profit, from Volume, Chapter 13, we see that C is a variable capital advanced. In this case, C will be one the price of 28.8 milliseconds of labor-power (what the capitalist buys the labor at), s is going to be the price of eight hours of labor-power minus 28.8 milliseconds and the rate of profit and the rate of profit will again be around a million.

The only thing that looks awkward is that the capitalist's capital is now seen as having very small units. That is true but so what? One obviously, we could concoct less extreme counter-examples along these lines involving Internet companies and such. The overall material world is different but we talking the implications of hypothetical models. Keep in mind that when one wishes a model to prove things about the real world, one introduces constraints into one's model that better fit the real world.

I've heard this before as some kind of objection. I'm still mystified what it would mean in concrete terms.

IE, Does that mean profit never equals s/C, that it sometimes equals s/C or that it always equals s/C? If profit only sometimes equals s/C, what are the conditions in which it doesn't equal s/C?

Edit: One might object that the capitalist has to pay the workers in unit of labor. Sure, then change the units again and you get the same result. One could object that the capitalist has to buy in units of labor and then sell for the same price of units of labor plus profit but that is what he does, only the profit is assumed to be very high.

Again, again, I have no objection to whatever argument (class struggle, social structure, etc) one makes to plausibly claim s/v is limited. What I'm objecting to, again, again, is the claim that there a magic arithmetic or insight or something that pushes profits down without s/v being limited.

You are dealing with rate of exploitation, not rate of profit. I assume your factory where a single worker can produce one million units has a reasonable amount of constant capital invested. One would imagine that it is a lot larger than the amount of variable capital, and there is only one labourer to be exploited. Sounds like a pretty low rate of profit.

Strangely enough, your counter-example resembles Kliman's argument in favour of the TFROP, where V approaches 0. This was the condition Heinrich dismissed in a footnote in the original article (but misconceived as v=0).

Ah, I had a feeling that objection would come up. My "quick" statement assumed no constant capital. However, if you got back to the first page of this thread, I concoct a full counter-example with constant capital also taken care of. This example works no matter what units one use and no matter what equivalent formula one uses for the rate of profit (well, equivalent formulas lead to the same results for all situations, of course, but it seems I have to handle claims to the contrary, lol).

I gotta keep repeating, I concocting counter-examples to show that a given set of assumptions is insufficient to prove an assertion My examples here are how the real world doesn't work but the argument is about what set of assumptions can prove what.

Here total capital C = c + v, as normal.

C is not "variable capital advanced".

RH in general I am no longer able to follow the thread of your argument or see what it has to do with my contention that Heinrich's argument, in the section of his piece entitled “The Law of the Tendency of the Rate of Profit to Fall”—and its Failure (1865), based on the supposedly unbound or "unknowable" dynamics of s/v is fallacious.

I should also have added, for completeness, that I also agree with Kliman et als response, that the contention that Heinrich makes that the technical composition of the immediate production process cannot change without a change in the rate of exploitation, also to be a non-sequiteur (for reasons which should really be obvious, but I can expand on if necessary).

And finally, to reiterate - those specifics aside - I find Kliman et als. overall defence of LTRPF on the basis of the OCC (and the "complete Marx") to be entirely wrong and Heinrich's assertion that the argument is "systematically" wrong, in the absence of a proper theory of credit basically correct. The latter, imo, simply makes the mistake of not seeing the LTPRF as consequent of the OCC (and certain additional requirements of expansion of production and accumulation etc, as specified in the Kliman quote above).

---

How does the absence or presence of a theory of credit make a defense of the LTRPF on the basis of the OCC wrong?

Credit, clearly, is derivative, is derived (as IMO is made clear in the Grundrisse) in the different turnover times of capital. Credit is the mechanism for "bridging" those differences, and as such has distributive properties-- working in the main to establish an "average" rate of profit, but also in accordance with Marx's notion that capitals of equal size will claim equal profits.

So unless we have an argument of credit being able to create value, without itself organizing the means of production as capital and without engaging labor power as wage-labor, exactly what impact on the accumulation of capital, and in the rate of re-valorization can a "properly functioning theory of credit" or the real functioning of credit play, except to make more acute the dynamics of such accumulation that leads to the LTRPF?

yeah, why is credit considered the missing part of the theory for Heinrich, without which the LTFRP cannot be "proven"?

Well, in my opinion, that's because in his next "installment," I'm pretty sure Heinrich is going to introduce his speculation that Marx was not satisfied with the labor theory of value, and was going to discard it.

yeah, the "Monetary Theory of Value" is Heinrich's innovation. I guess since finance, credit, and so on are vital for the MTV then they must be for the LTFRP also. for H's system

Oh, okay. You know, It's hard to find Backhaus in English. Which texts of his are the most important regarding the MTV? Are they in English?

btw, nice quote-mining. Too bad that's all you can really do. Be nice if you made actual arguments for once. But I understand if you're just incapable.

I mean, that quote says that a developed system of credit is needed for an average rate of profit to materialize. But it doesn't necessarily follow that we need some extra special theory about credit to prove that there is such a thing as this average profit and the LTFRP and so on. If you wanted to make an argument you'd have to explain why we need this extra theory to explain the LTFRP, no?

Exactly-- the average profit is determined by the process of distribution of the total social capital. The is performed by banks and the credit system, with credit itself developing due to differences in the turnover rates of capital.

Now again, if in fact, the role played by banks and credit is a distributive one-- then how exactly does a fully developed theory of credit and banking system change this function of the banking system in the realization, distribution of profit.

Oh the ignorance of those who don't understand what they quote.

What is required is an understanding of the function of credit and banking as distributive-- as working partners in the establishment of the general rate of profit; not as somehow determinant of the rate of profit itself.

So one more time, how does the presence or the absence of "theory of credit" make the Tendency of the Rate of Profit to Fall, which is based on changes in the relations of the component parts of capital in the production process, right or wrong? And what does that theory of credit look like?

Take your time. Breathe deeply. .