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BRENNER AND CRISIS THEORY: ISSUES IN SYSTEMATIC AND

HISTORICAL DIALECTICS

Tony Smith

Philosophy, Iowa State

University

Robert Brenner‟s recent monograph on the economics of global turbulence has

renewed interest in one of the most important topics in Marxian thought, the theory of

crisis tendencies in capitalism.1 In their introduction to Brenner‟s monograph the editors

of The New Left Review praise him as a worthy successor to Marx in the strongest

possible terms. In the eyes of a number of critics, however, Brenner is guilty of a major

betrayal of Marx‟s legacy. In Michael Lebowitz‟s view, for instance, Brenner should

now be seen as a disciple of Adam Smith, not Karl Marx, while Fine, Lapavitsas, and

Milonakis refer to Brenner‟s position as “a distinctly non-Marxist perspective.”

Brenner‟s critics have presented far more arguments than it is possible to

consider adequately in a single paper. Here I shall investigate two central and closely

related issues, the claim that the logical structure of Brenner‟s theory is fundamentally

inconsistent with the framework employed by Marx in Capital, and the claim that the

practical implications of Brenner‟s theory are quite different from Marx‟s. I shall argue

that on these two crucial points, at least, Brenner‟s account can be defended. The

defense requires, however, pushing his argument past the point where he himself leaves

things.

Brenner’s Argument and the Priority of “Capital-in-General” in Marxian Theory

Brenner‟s goal is to account for the long downswing in the global economy

that has persisted over the last quarter century. In his view a decline in profitability set

off this slowdown, not a decline in productivity. Declines in productivity then

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followed the lower rates of investment that resulted from lower profit rates. What, then,

led to the decline in profitability? For Brenner, the answer lies primarily in a malign

working of the “invisible hand.” Responses to market competition that were rational

from the standpoint of individual units of capital led to results that were irrational

from the standpoint of the system as a whole. Individual firms rationally responded to

global competition by increasing productivity. But the very measures that improved

productivity for individual firms resulted in overcapacity problems in the global

economy as a whole, threatening profit levels:

In this view, the fall in aggregate profitability that was responsible for the long

downturn was the result . . . of the over-capacity and over-production which

resulted from intensified, horizontal inter-capitalist competition. The

intensification of inter-capitalist competition was itself the manifestation of the

introduction of lower-cost, lower price goods into the world market, especially in

manufacturing, at the expense of already existing higher-cost, higher price

producers, their profitability and their productive capacity.2

In the standard textbooks of neoclassical economics the workings of the invisible

hand are always benign. When lower cost competitors arise in a particular sector,

market share is immediately ceded to them. The capital that would otherwise have been

invested in older enterprises in that particular sector then flows to other areas of the

economy. The initial sector is now more efficient, while dynamic new sectors have

funds for expansion. The system as a whole is thus enhanced. In Brenner‟s story, in

contrast, when the position of U.S. manufacturers began to erode in the face of

competition from West Germany and, especially, Japan, market share was not simply

ceded. Nor was this path chosen later when imports from the so-called newly

industrializing countries began to grow significantly. Similarly, units of capital from

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these other regions did not withdraw when the competitive position of U.S. firms

eventually improved. This behavior generated a problem of global overcapacity that has

yet to be resolved.

How does this perspective relate to the logical structure of Capital? Capital is

an exceedingly complex and controversial work. For present purposes I shall simply

assert that we can trace a systematic progression in this work from the abstract level of

“capital-in-general” to the relatively concrete level of competition among “many

capitals.” On the level of capital-in-general Marx begins with an explication of the

constituent categories of the value form, “commodity,” “money,” and “capital.” He then

examines the aggregate relationships that hold on the level of the total social capital,

especially the relationship between capital as a whole and wage labor as a whole.3

There are two central claims of his theory of value on this level. The first, the main

theme of Volume I, is that capital is nothing but the result of the exploitation of wage

labor, albeit a result that bizarrely takes on the form of an alien power subsuming wage

laborers (and society as a whole) under its imperatives. The second main claim,

discussed in detail in Volume II, is that the reproduction of the total social capital is

identical to the reproduction of the capital/wage labor relation.4

At the beginning of Volume III Marx moves from the level of total social capital

to a consideration of many capitals. With the categories “cost prices” and “prices of

production” Marx introduces two features of capitalism from which he had previously

abstracted: different sectors of industrial capital have different organic compositions of

capital and different turnover times. He then shows that these facts are consistent with

his theory of exploitation and the assumption that competition generates a tendency for

rates of profit to equalize across sectors. The key to his argument is the claim that there

is a (logical) process of redistribution in which surplus value is transferred from sectors

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with a low organic composition of capital and/or rapid rate of turnover to those with the

opposite characteristics. We also find in Volume III a much more sketchy theory of

“market prices.” The central Marxian claim here is that the ability of individual units of

capital to attain surplus profits (as a result of technological breakthroughs, exceptional

locational advantages, favorable supply and demand considerations, and so on), also

involves the redistribution of surplus value from some units of capital to others.5

The remainder of Volume III is devoted to the profits appropriated by merchant

capital and finance capital, and the rents claimed by certain categories of property

owners. Marx‟s primary goal is to explain these profits and rents in a way that coheres

with the claim that the only source of surplus value is the surplus labor of wage laborers

in the industrial sector. Once again, Marx employs the notion of a (logical) process of

redistribution of surplus value as the key to his argument.

All theories necessarily make use of categories in order to understand the world,

and Brenner‟s theory is no exception. What are the central categories employed by

Brenner, and how do they relate to the categories introduced by Marx in the course of

his attempt to reconstruct the capitalist mode of production in thought? The core of

Brenner‟s account is the idea that inter-capital competition in manufacturing leads to

investments in fixed capital resulting in overcapacity, a theme that falls on the level of

many capitals and market prices. But, Brenner‟s critics assert, in Marx‟s systematic

theory explanatory primacy lies on the level of “capital-in-general,” with its emphasis on

the class relations between capital as a whole and the working class as a whole. While

Marx insists that class relations between capital and labor explain the dynamics of

capitalist competition, in Brenner “everything is reversed.” In so far as Brenner

explicitly abandons Marx‟s claim that the total social capital must be granted

explanatory priority over the behavior of individual units of capital, it would seem to

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follow that his work counts as a profound rejection of the Marxian viewpoint. From a

methodological point of view, it appears that Brenner has completely capitulated to the

methodological individualism of non-Marxian economics. As Michael Lebowitz writes,

(E)mphasis upon the competition of capitals to explain the dynamics of the

system is precisely what Marx rejected. Rather, he stressed that competition was

simply the „way in which the immanent laws of capitalist production manifest

themselves in the external movement of the individual capitals‟.... Marx

concluded that the nature of capital and of those „general and necessary

tendencies‟ could be grasped only by beginning from consideration of capital as

a whole.6

For Lebowitz there is a tendency for capital to increase the rate of exploitation of

wage labor on the level of capital-in-general. As this tendency is actualized the

productive power of capitalism increases, while the purchasing power of wage laborers

is restricted. The result is a realization crisis. Heightened capitalist competition is a

result of this dynamic. Pace Brenner, inter-capital competition is thus part of what is to

be explained, and not itself the main explanatory variable:

We thus have two alternative orders of explanation --- (1) from the increase in

the rate of exploitation to overcapacity to intensified competitive struggle or

(2) from intensified competitive struggle to overcapacity ... Capital‟s tendency

to increase the rate of surplus value beyond the level warranted by the

conditions for realisation --- i.e. its tendency to produce more surplus value

than can be realised --- generates the crisis according to Marx‟s

overproduction theory.7

Fine, Lapavitsas, and Milonakis agree with Lebowitz that Brenner‟s approach

is fundamentally flawed in granting priority to the level of competition among many

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capitals, rather than the class relations examined by Marx on the earlier level of

capital-in-general:

Marx‟s organizing concept in his analysis of capitalism in [his mature] works,

that of value, is largely absent from all of Brenner‟s works, including his

attempt at explaining the dynamics of the recent slowdown of capitals. Given

Brenner‟s insistence [in earlier writings] on offering a class analysis of

capitalism, this absence is extraordinary since, in the presence of commodity

fetishism an appropriate class analysis of capitalism becomes impossible

without a dialectic of value. Without an appropriate value theory, the veiled

nature of the capital/labor relations cannot be laid bare, and the basis for inter-

capitalist competition – a factor so strongly emphasized by Brenner in his

latest work – cannot be revealed.8

Fred Moseley has formulated another version of this objection. For Moseley, the

central variable of Brenner‟s theory is the degree of competition, and so Brenner‟s

theory is essentially the same as Baran and Sweezy‟s. Baran and Sweezy wrote in a

period when U.S. manufacturing firms were shielded from competition (“monopoly

capitalism”), while Brenner discusses the subsequent era in which international

competition increased. However, “the basic assumption in both theories is that the

rate of profit is determined by the degree of competition.” Marx, in contrast, insisted

that the general rate of profit is independent of the degree of competition or

monopoly, being instead “determined by the composition of capital and the rate of

surplus-value, and ultimately on the relation of the total amount of surplus-value to

the total capital invested.”9 For Marx, in other words, the level of capital-in-general is

primary, the level of many capitals secondary. Brenner‟s perspective, like Baran and

Sweezy‟s, grants priority to the latter, and thus abandons Marx‟s methodological

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framework.10

The Practical Consequences of Brenner’s Theory of Crisis

The dialectical unity of theory and practice holds for all theoretical endeavors,

not just for those within the Marxian tradition. But Marxian social theory incorporates

practical concerns in an especially self-reflective manner. This does not mean that

Marxism is committed to a crass form of pragmatism, in which the truth of propositions

is adjudicated by their practical consequences. But the ultimate goal of Marxian theory

is to further the self-emancipation of the working classes. It would seem to follow that

if a social theory demonstrably does not contribute to this goal, that in itself is a reason

to consider it outside the Marxian tradition. Can a theory formulated on the level of

many capitals further the emancipatory historical project to which Marxists are

committed?

In Marx‟s systematic ordering of economic categories, the initial categories

define the essence of the capitalist mode of production, while later categorial levels

concern surface level appearances. Theories that focus exclusively on later levels such

as the competition among units of industrial capital thus do not address the heart of the

capitalist order. Since Brenner‟s account is not formulated in the language of

exploitation, his theory does not naturally lead to the idea that struggles against high

rates of exploitation must be undertaken. It therefore has no intrinsic connection to the

dialectic of history Marxists are committed to bringing about, according to Lebowitz and

other critics.

Brenner himself insists that his emphasis on the market failures resulting from

inter-capital competition provides a strong argument in support of working class

movements. But, Lebowitz replies, if the root of the problems discussed by Brenner lies

in the connection between capitalist competition and overproduction, then the logic of

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his position points in a different direction. For these problems could then be overcome

if units of capital united in cartels to restrict competition and divide up market shares.11

Or the same result could be attained through mergers and acquisitions in which one

firm buys another in order to close down its productive capacity.12

Or perhaps an

international Keynesian authority could be established to set demand at a level high

enough to allow renewed investment and dampen the problems raised by competition

among industrial capitalists.13

None of these proposals points towards the

“expropriation of the expropriators” that is the strategic goal of Marxian praxis. For

both Lebowitz and Fine and his co-authors, this provides yet another reason for Marxists

to reject Brenner‟s theoretical account.

It is now time to inquire whether these two criticisms can be sustained.

Capital-in-General, Many Capitals, and Brenner‟s Crisis Theory

There is no question that Brenner explicitly underplays the capital/wage

labor class relations that are Marx‟s central theme on the level of capital-in-general,

emphasizing instead the inter-capital competition Marx discusses on the level of many

capitals. But the theoretical relationship between his position and value theory may be

more complex than this suggests. In the present section I shall present four propositions

that point in this direction.

1. In principle, theories formulated on the level of capital-in-general and

theories formulated on the level of many capitals can be compatible.

I shall take this proposition as given here, although there is disagreement about

what this compatibility means and how it can be established. I take the thesis to be an

extension of an argument proposed by Fred Moseley. Beginning from the insight that

the value theory presented in Volume I of Capital is formulated in terms of the

aggregate monetary magnitudes holding on the level of the total social capital, Moseley

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has shown that the so-called “transformation problem” that arises when we move to the

more concrete level of prices of production in Volume III can be easily solved. It is a

fairly straightforward matter to show that the monetary sums of prices and profits

assumed on the aggregate level when we abstract from differences in organic

compositions in different sectors of industrial capital remain identical when we

introduce these differences.14

Capital does not consist of a single “transformation,” but rather a series of them.

The Moseley thesis also holds when we move to “money prices,” the level beyond

prices of production in Marx‟s systematic ordering. Prior to this point in the systematic

ordering of Capital Marx abstracted from the relatively concrete phenomena associated

with competition among units of industrial capital that are of special interest to Brenner.

When such phenomena are explicitly introduced, however, the sum of prices and profits

remains identical to the aggregate sums fixed on the level of capital-in-general. The

Marxian view here is that in any given period market prices, like prices of production,

result from a (logical) process of redistribution among capitals that leaves the aggregate

figures in place.

This logical process of redistribution is an essential feature of capital.

And it is necessarily the case that the only form of appearance this redistribution could

possibly take is the success (or failure) of individual units of capital at “adding on”

profits to their costs. Thus when Brenner discusses fluctuations in the ability of U.S.

manufacturers to raise prices in the face of rising costs, this is not in itself a betrayal of

value theory. Values must appear concretely in the form of market prices; there is no

other objective form of appearance they could possibly have.15

Statements regarding the

“adding on” of profits can thus always be translated into statements regarding

exploitation and the logical process of redistribution of surplus value.

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The systematic connection between the levels of capital-in-general and

many capitals can thus be formulated as follows: all relations between capital and labor

necessarily involve relations among capitals; all relations among capitals necessarily

involve capital/labor relations. This holds for both relations within a given period and,

as we shall see below, moves from one period to another. The point can be put even

stronger: the distinction between capital/labor relations and inter-capital relations is a

distinction of reason only. While the two relations can be distinguished in thought for

the sake of theoretical analysis, they are inseparably conjoined. Ultimately, explanations

employing the categories of these two different systematic levels must cohere.

I shall assume that this point is not in dispute. What is in dispute is whether

Brenner‟s particular theory of many capitals is consistent with Marx‟s theory of capital-

in-general. The next three propositions have to do with this issue, beginning with the

question of what exactly counts as Marx‟s theory of crisis on the level of capital-in-

general.

2. There is an alternative account of crisis on the level of capital-in-general to

that provided by Lebowitz.

It is obviously not possible here to justify in detail a particular reading of Marx‟s

theory of crisis on the level of capital-in-general. Many of Marx‟s remarks are truncated

and even apparently contradictory. Nonetheless, one problem with Lebowitz‟s reading

is immediately striking. In his interpretation this theory takes the form of a theory of

realization crises; as the rate of exploitation increases, wage laborers do not provide the

effective demand necessary to absorb all of the surplus value that has been produced.

But on the level of capital-in-general Marx explicitly abstracts from divergences in

supply and demand.16

Divergences between supply and effective demand are introduced

later, on the more concrete stage of many capitals and market prices. And so the theory

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of realization crises advocated by Lebowitz is probably not the best interpretation of

Marx‟s theory of crisis on the abstract level of capital-in-general.17

I do not think it can be disputed that in his discussion of crisis tendencies on the

level of capital-in-general Marx himself emphasized increases in the value composition

of capital first and foremost. Starting with the equation r = s/(c+v) and dividing the

numerator and denominator of the right hand side by v we arrive at the standard

equation for the rate of profit used by Marx on the level of capital-in-general: r =

(s/v)/[(c/v)+1]. This equation implies that if (c/v), the value composition of capital (that

is, the ratio between investment in means of production and investment in labor),

increases at a faster rate than the rate of surplus value (s/v), then the rate of profit will

fall. The heart of Marx‟s argument for a tendency for the rate of profit to fall on the

level of capital-in-general is that there is a tendency for this to occur.18

In my view Henryk Grossmann has provided an accurate account of Marx‟s

theory of crisis on the level of capital-in-general. Grossmann builds upon Bauer‟s

version of the reproduction schemes of Volume II, which traced exchanges between a

division of capital devoted to the production of means of production (“Division I”), and

another division devoted to the production of consumption goods (“Division II”). In

Grossmann‟s presentation the schemes bring out an inherent tendency towards crisis in

the process of the reproduction of the total social capital, even if we assume a balance of

supply and demand. Suppose that investment in constant capital increases by 10% per

period. Suppose further that the working population increases by 5% per period, which

implies that investment in variable capital also increases at this rate (supply and demand

are assumed to be in balance in labor markets, and so there is no unemployment).

Finally, assume that the rate of exploitation remains constant from period to period at

100%. Under these assumptions it can be easily shown that within a finite number of

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cycles of accumulation there will not be sufficient surplus value to valorize the

accumulated constant capital. Funds that would have gone to capitalists‟ consumption

must be devoted to the valorization process for reproduction under the stated

assumptions to continue, and soon these funds will be exhausted as well.19

In my view

Grossmann‟s account of crisis tendencies on the aggregate level of capital-in-general is

far more consistent with the methodological assumptions employed by Marx on this

level than Lebowitz‟s. And I believe that Grossmann‟s results are closer to Marx‟s as

well: the basic crisis tendency on this level of abstraction arises from the

overaccumulation of capital, not a lack of effective demand.

On the concrete level of capitalist history, of course, it is always possible for

circuits of capital accumulation to be interrupted due to an insufficient purchasing power

of workers stemming from an increase in the rate of exploitation. But on the abstract

level of capital-in-general the most fundamental problem for the reproduction of the

total social capital is that too little surplus value has been appropriated, not too much.

Realization crises of the sort discussed by Lebowitz are disproportionality disturbances.

In principle they can be resolved by shifting investment from Division II to Division I,

or by shifts within Division II from investment in the production of non-luxury

consumption goods and services to investment in luxury commodities.

Overaccumulation crises, in contrast, cannot be addressed by simply shifting investment.

The problem is that there has been too much investment, not that investment has been

made in the wrong areas. A massive devaluation of capital is required before a new

period of rapid expanded reproduction can commence again. This is a much more

serious form of crisis, one that better fits with Marx‟s judgement that capitalism is an

internally irrational mode of production.

3. Marx‟s crisis theory of the level of capital-in-general faces a problem of

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“microfoundations.”

Grossmann‟s position - and thus Marx‟s as well - faces one serious difficulty. If

Grossmann‟s assumptions are granted, his conclusion follows. But why should we grant

these assumptions? Why should we rule out the possibility of the rate of surplus value

increasing enough to compensate for any growth in investment in constant capital? Why

should we rule out the possibility that technical change will result in a decline in the c/v

ratio, even if the physical magnitudes of machinery, and so on, used in production

increase in use value terms? Why should we assume that capitalists keep investing in

constant capital past the point where further investment fails to lead to higher rates of

profit? After all, the drive to increase the rate of surplus value is surely built-into

capitalism, as is the drive to lower constant capital costs and increase profits.

Grossmann‟s position, I believe, rests upon a historical intuition he shared with

Marx regarding the utter uniqueness of capitalism in comparison to all previous modes

of production. Capitalism is not unique in resting on the expropriation of a surplus

product produced through the surplus labor of an exploited class. It is certainly true that

in capitalism the mysterious nature of the value form masks this process in a way that is

historically unique. But it is not exploitation per se that distinguishes capitalism from

other class-based modes of production. What is unique to capitalism is the way the

intra- and interclass relations of this mode of production institutionalize technological

change. The following famous passage from the Manifesto captures this intuition:

The bourgeoisie … has accomplished wonders far surpassing Egyptian

pyramids, Roman aqueducts, and Gothic cathedrals … The bourgeoisie cannot

exist without constantly revolutionizing the instruments of production … The

bourgeoisie, during its rule of scarcely one hundred years, has created more

massive and more colossal productive forces than have all preceding generations

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together. Subjection of Nature‟s forces to man, machinery, application of

chemistry to industry and agriculture, steam-navigation, railways, electric

telegraphs, clearing of whole continents for cultivation, canalization of rivers,

whole populations conjured out of the ground – what earlier century had even a

presentiment that such productive forces slumbered in the lap of social labour?20

This historically unprecedented explosion of large-scale technological artifacts far

exceeds the rate of population growth. It seems intuitively plausible that at a certain

point this explosion will be associated with an increase in the rate of constant capital

investment that exceeds the rate at which surplus value grows.

It would be completely mistaken to search for an argument that conclusively

establishes that Grossmann‟s assumptions must hold always and everywhere in

capitalism. Grossmann and Marx both explicitly mention a host of other factors that

allow the capital accumulation process to proceed, including increases in the rate of

exploitation and technical advances that lower constant capital costs. The question is

why in the logical structure of Capital these factors are first abstracted from and

introduced only later as complicating counter-tendencies. Why not reverse matters?

Why not term the tendencies that allow capital accumulation to proceed the essential

tendencies, and the factors that lead to an interruption of capital accumulation the

“counter-tendencies”?

I think the best answer to this question raises the issue of the historical

specificity of capital. In pre-capitalist modes of production, economic crises were

primarily exogenous matters, the results of contingent occurrences such as natural

catastrophes or military invasions.21

Capitalism, in contrast, has an intrinsic potential

for crisis, as Grossmann‟s argument shows. Since this is a characteristic that essentially

distinguishes it from other modes of production, it is legitimate to consider it as an

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essential feature of capital-in-general.

This response will not satisfy those who demand that micro-mechanisms be

provided for all assertions regarding capital as a totality. And Grossmann is not really in

a position to dismiss this demand, since he himself attempted to provide a micro-

mechanism for his account. In his story the desire of capitalists to increase their

personal consumption keeps the accumulation of total social capital in motion. When

this desire can no longer be fulfilled due to overaccumulation, the behavior of capitalists

changes such that the reproduction of the total social capital breaks down.22

But,

Grossmann‟s critics would say, once the behavior of capitalists is granted this central

role, his crisis theory faces a serious problem. Once it has become clear that increasing

investment in constant capital period after period threatens their profits and their

personal consumption, why would capitalists persist in behavior that so clearly goes

against their self-interest?

3. Brenner‟s account of many capitals complements the Marx/Grossmann

theory of crisis tendencies on the level of capital-in-general.

For many readers this will appear as a ludicrous claim. After all, Brenner

himself explicitly rejects the Marxian position regarding a general tendency for the

rate of profit to fall in capitalism. He begins with what he refers to as the “standard”

formula for the rate of profit, r = P/K, the ratio of profits to the capital stock. This

equation is equivalent to r = (P/Y) x (Y/K); the profit rate equals the profit share times

the output-capital ratio. Regarding P/Y, Brenner insists that capital‟s control of

investment prevents wage laborers from winning wage increases sufficient to lower

the profit share significantly in the medium-to-long term. A tendency for the rate of

profit to fall in the medium-to-long term can thus only arise if there is a tendency for

the output/labor ratio to decrease. According to Brenner, this gives the falling rate of

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profit argument a “Malthusian character” that is incongruous with the remainder of

Marx‟s theory and “flies in the face of common sense.” Brenner concludes that we

must accept Okishio‟s theorem. Competition forces capitalists to introduce technical

changes that raise their rate of profit by reducing their total costs. The result of the

general adoption of this innovation will be a reduction in the exchange value of their

goods. This leads directly or indirectly to a reduction in the exchange value of the

wage, and thus to a rise in the average rate of profit, given a constant real wage.

Marx‟s theory of a tendency for the rate of profit to fall thus lacks microfoundations.

It rests on the implausible assumption that capitalists adopt techniques that decrease

their own rate of profit.23

Three comments are in order here. First, from the standpoint of Marx‟s theory

of capital the “standard” formula for the rate of profit, r = (P/Y) x (Y/K), cannot be

accepted as an adequate representation of the most basic relationships in capitalism.

The equation ignores labor altogether, and the term Y/K suggests that capital is itself

inherently productive. For Marx, in contrast, the ultimate source of profits is surplus

value appropriated through the exploitation of wage labor. And while the value of

capital goods may be transferred to final products (due to the fact that labor preserves

as well as creates value), capital goods in themselves are neither value preserving nor

value creating. It follows that the equation examined by Brenner can hardly be used to

illuminate features of the Marxian standpoint, however standard it may be in

competing research programs.

Second, “Malthusian” theories of crisis assert that capitalism eventually faces

inherent natural limits to the production of use-values. Marx‟s theory of crisis,

however, concerns immanent limits to the production of value. These latter limits

arise even as the productive capacity of capitalism continues to grow, that is, even as

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more and more use values can be produced. Marx‟s overaccumulation theory of crisis

thus does not appeal in any way to a Malthusian pessimism regarding capitalism‟s

ability to produce ever-increasing numbers of use values. The problem is instead that

the production of surplus value is not sufficient to valorize all the capital that has been

accumulated.

Third, and perhaps most important, Okishio‟s theorem is based upon a static

equilibrium analysis. We imagine some point in time T1 prior to an innovation, with

a given rate of profit holding in a particular sector. We then consider the sort of

innovation a firm in this sector might plausibly introduce. Finally, we ask what rate of

profit will hold at some T2 when that innovation has been adopted throughout the

sector. As Geert Reuten has forcefully pointed out, such a static equilibrium analysis

is completely inappropriate when the theoretical task is to consider the

microfoundations of claims regarding the general rate of profit.24

The Okishio

analysis assumes that all units of capital in a sector are homogeneous. It also ignores

differences in fixed capital. But these are precisely the things that matter on the

concrete level in which microfoundations must be sought.

Reuten‟s critique of Okishio‟s theorem begins by insisting that stratification

within sectors must be represented on the level of abstraction relevant here. Older

plants have a lower value composition of capital, that is, a smaller ratio between

investment in means of production and investment in labor, and a lower level of labor

productivity. With output prices assumed uniform in the sector, older firms also

appropriate lower profit rates. Suppose an existing stratification extends from plant 1

to plant n, and then assume that some new plant n+1 with a higher value composition

and a higher level of labor productivity is added to the sector stratification. It will

enjoy lower unit costs, and hence be able to win a higher level of profits than the next

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highest plant in the sector, plant n. And so from the standpoint of this individual unit

of capital it will be rational to enter the sector in question. As plant n+1 wins market

share, it forces some of the oldest units of capital, plants 1 to h, say, to withdraw from

the sector. But it is not necessarily rational for all plants to withdraw from a sector

when a new, more productive, competitor enters. Nor is it necessarily rational for all

the remaining plants to adopt immediately the new technical innovation introduced by

plant n+1. Plants h to n have made previous investments in fixed capital that they do

not wish to write off. It can be rational for them to remain in operation as long as the

prices they receive are sufficient to cover their operating costs, that is, as long as they

receive the average rate of profit on their circulating capital. Since the lower unit costs

of the leading plant tend to bring down the output prices of the sector as a whole, we

may conclude as follows:

Therefore, because investments and costs are unaffected whilst revenue

decreases, the rate of profit of the capital accumulated in the remaining part of

the previous stratification (1+h, . . ., n) decreases. That of the capital invested

in the new plant (n+1) tends at the new price to increase, as compared with the

average rate of profit (1, . . ., n) at the previous price, or with the rate of profit

of the plant just below it in the stratification, n, at the previous price. Since the

new plant (n+1) operates at lower production costs than the previous plant (n),

then in any case the rate of profit of the new plant capital at the new price is

above that of the nth and the average rate of profit. (This is in fact sufficient

for the argument.) Because with the additional plant the average VCC [value

composition of capital] tends to increase, the average rate of profit tends to

decrease.25

This argument, needless to say, does not establish that rates of profit must fall

19

always and everywhere in capitalism as a result of this process, which Reuten terms

the devalorization of capital. But this argument does provide microfoundations for

the Marx/Grossmann claim that there is a general tendency in capitalism for the value

composition of capital to increase (due to the entry of a plant with a high value

composition and the exit of units with low value compositions) to the point where the

surplus value produced is not sufficient to valorize the total social capital at the

previous average rate of profit. The scope of Okishio‟s theorem is shown to be

restricted to the quite special case of neoclassical perfect competition in the absence of

fixed capital, a case that is hardly of great relevance.26

Brenner accepts this reasoning. This relationship between the stratification of

capitals and profit rates is in fact the absolutely central element of his explanation of

global turbulence in the post world war two global economy. The heart of Brenner‟s

theory is the argument that it may be rational from the standpoint of established units

of capital to remain in a given sector rather than write off previous investments in

fixed capital when more productive units of capital arise. He argues in specific that

U.S. manufactures in key sectors did not withdraw when more productive

manufacturers from Japan and West Germany (and, later, the Asian “tigers”) entered

the world market, and that their sunk costs help explain this behavior. He also

supplements the stratification argument by introducing a number of other

considerations besides sunk costs to explain why it may be rational for established

firms to remain in a given sector, including:

Established firms have sector-specific management expertise that would be

difficult to reproduce.

Established firms have labor forces with specific-specific skills.

Established firms have ties with suppliers and customers that would be

20

difficult to duplicate elsewhere.

Established firms have lines of credit that allow them to remain in operation

when profit rates decline.

Established firms can generally rely on the state to further their interests in

a variety of ways (direct subsidies, funding for research and development,

the socialization of infrastructure and training costs, favorable tax

treatment, favorable labor laws and so on).27

Yet Brenner fails to see how his own account implicitly provides the

microfoundations required by Marx‟s theory of crisis on the level of capital-in-

general. And he fails to see that his own approach implicitly undermines Okishio‟s

theorem by showing that its assumptions (all units of capital in a sector are

homogeneous, no fixed capital) are inappropriate to a consideration of the Marxian

theory of the tendency for the rate of profit to fall.

Matters become somewhat more complicated when we note that the decline in

output prices underlying the devalorization process eventually lead to a decline in

input prices for fixed capital. This implies that previous fixed capital investments in

plants h to n suffer a devaluation of capital. In historical cost accounting this “moral

depreciation” translates immediately into a lower rate of profit. With current-cost

accounting capital is written off as soon as prices of means of production decline,

allowing the profit rate in accounting books to remain what it was immediately prior

to the devaluation. But the valorization potential has decreased just the same. In

either case, this devaluation of capital counteracts the increase in the value

composition of capital.28

To the extent this is the case, does not the emphasis given to

a rising value composition of capital in the Marx/Grossmann theory of crisis still

appear misplaced?

21

I believe that the answer to this last question is no. To see why this is the case

we must recall Marx‟s thesis that there is a tendency for the concentration and

centralization of capital to increase. In early stages of the concentration and

centralization of capital, the devaluation of capital may result in profound local and

regional economic disturbances. But as the concentration and centralization process

proceeds, the negative effects of devaluation become more and more serious to the

national economy as a whole. At a certain point state officials will judge that more

and more firms have become “too big to fail.” At that point they will generally

provide yet higher levels of direct and indirect subsidies, yet lower rates of effective

corporate taxation, and labor regulations that shift the balance of class forces in favor

of capital yet more. In the post world war two period Keynesian deficit spending was

also used to prop up growth rates. Finally, strong states can attempt to negotiate

changes in currency exchange rates that would favor their manufacturers‟ exports.

Brenner discusses in great detail the profound role these sorts of measures

played in the global economy after world war two. The main point to stress here is

that these sorts of measures socialize the costs of devaluation. Such measures thus buy

time for established capitals to restructure when more efficient competitors enter their

sector. But “restructuring” means adopting yet higher value compositions of capital

themselves, that is introducing some plant n+2. In this manner the whole process

described above begins again on a higher level. While it is rational for plant n+2 to

enter the sector, it may also be rational for plants h+y, …, n+1 to remain. The

immediate result, once again, is a higher value composition of capital such that the

surplus value produced is not sufficient to valorize the total social capital at the

previous rate of profit. The ultimate result is a need for devaluation on a yet more

extensive level.29

22

Brenner himself talks about the overcapacity problems that arise on the level

of many capitals in competition with each other, rather than the overaccumulation of

capital problem on the level of capital-in-general central to the Marx/Grossmann

account. On the reading presented here, however, the former is not merely compatible

with the latter. The former provides the microfoundations for the latter. Grossmann‟s

own attempt to provide the micromechanisms needed to make the dynamic of the total

social capital intelligible fails; capitalists‟ self-interest in personal consumption does

not do the job. But the Reuten/Brenner stratification theory based on the self-interest

of established units of capital in remaining in a given sector can fill this gap,

especially when supplemented with Brenner‟s account of state attempts to put off the

costs of devaluation. To put the point somewhat differently: the overcapacity

discussed by Brenner is the necessary form of appearance of the overaccumulation of

capital central to Marx‟s theory of crisis. And so any adequate explanation of the

former must contribute to the understanding of the latter as well.

Lebowitz rejects Brenner on the ground that his story ignores the level of

capital-in-general. It is certainly true, of course, that Brenner does not himself connect

his work to this level. But if the correct Marxian account of crisis tendencies on the

level of capital-in- general is Grossmann‟s, not Lebowitz‟s, and if Brenner provides a

necessary supplement to Grossmann‟s theory, then matters are much more complex

than Lebowitz conveys. Lebowitz writes,

What [Brenner] fails to explain, however, is why the maximising activities of

individual capitals cease to generate benign results. After all, that very

„intercapitalist competition‟ which he describes as the source of capitalism‟s

dynamism now reappears as the source of its misery. But what has changed?

That there is fixed capital? That firms have sunk costs not only in fixed

23

capital but also in established routines and relationships? That firms function

under conditions of uncertainty? Having rejected the prior necessity to

understand the structure within which that competition of capitals occurs – i.e.,

the logical priority of the whole, Brenner is unable to explain exactly why

market failure has emerged.30

In the reading of the logic of Brenner‟s position offered here there is a simple answer

to this question. What has changed is that the accumulation of capital that is

responsible for capitalism‟s dynamism eventually leads to an overaccumulation of

capital on the level of the whole. This is the difference that makes the difference.31

I thus also believe that the following interpretation by Fine, Lapavitsas, and

Milonakis is off the mark: “Brenner‟s theory of falling profitability can be thought of

as under-consumptionism of a special type being underwritten by a particular

explanation of underinvestment. Essentially, Brenner posits the possibility of crisis if

individual capitalists hold back from investment in deference to fear of being unable

to obtain sufficient markets for their expanded, and even more productive, investment.

Such behavior is self-reinforcing as failing to invest undermines the markets of

others.”32

As Marx remarks, all crises appear to be underconsumption crises, and this

is true in Brenner‟s story as well. But in this story it is not investors‟ “fear of being

unable to obtain sufficient markets” that pushes the narrative; this subjective emotion

is a response to the objective problem of overaccumulation of fixed capital.

Similarly, the logic of Brenner‟s argument cannot be identified with the position

defended by Baran and Sweezy, as Moseley asserts. For Baran and Sweezy, as for

Lebowitz, the basic problem is that much more surplus value has been produced than

can be realized. This is the opposite of the position that the fundamental difficulty is a

failure to produce sufficient surplus value to valorize the accumulated capital, the

24

position that is explicit in Marx and Grossmann and, I believe, implicit in Brenner. In

the alternative reading presented here it is thus not correct to assert that “The basic

assumption in both theories [Baran and Sweezy‟s and Brenner‟s] is that the rate of profit

is determined by the degree of competition.”33

In the underlying logic of Brenner‟s

account, if not its surface level, the rate of profit is ultimately determined by the

overaccumulation of fixed capital.34

Competition among capitals is but the micro-

mechanism that explains why overaccumulation is a dominant structural tendency on the

level of capital-in-general (a micro-mechanism that, once again, is superior to that

provided by Grossmann). If we push Brenner‟s position in this direction it is not in

principle incompatible with the Marxian view that “the general rate of profit is

determined by the composition of capital and the rate of surplus-value, and ultimately on

the relation of the total amount of surplus-value to the total capital invested,” even if

Brenner himself does not refer to the level of capital-in-general.35

Three proposition have been presented for discussion in this section thus far: (1)

findings on the level of capital-in-general and the level of many (industrial) capitals

must ultimately be compatible; (2) Grossmann provides a plausible Marxian account of

crisis tendencies on the level of capital-in-general; and (3) Brenner‟s account of the rise

of overcapacity problems on the level of many capitals is ultimately compatible with

(provides a necessary supplement to) the Marx/Grossmann account of overaccumulation

crises on the level of capital-in-general. Even if these three propositions are accepted,

however, the fact remains that for Marx explanatory primacy lies on the level of capital-

in-general and the class relations between labor and capital. In contrast, Brenner

explicitly, repeatedly, and forcefully proclaims that the main weight in his account of

global turbulence is placed on inter-capital competition. No matter how much the logic

of his position is pushed, it thus appears that an unbridgeable gulf remains between

25

Brenner‟s standpoint and a Marxian point of view. This brings us to a fourth

proposition.

4. There is an unbridgeable gulf between systematic dialectics and historical

theorizing such that explanatory primacy in the former does not imply explanatory

primacy in the latter.

In Capital Marx reconstructed in thought the “inner nature” of the capitalist

mode of production through a systematic progression of the basic social forms

(“categories”) that make this mode of production intelligible.36

How does this

systematic ordering relate to explanations of historical developments within the Marxian

research program? Many of Brenner‟s critics simply presuppose that systematic

primacy in Capital necessarily implies primacy in historical explanations. For these

theorists if the capital/wage labor relation discussed by Marx on the level of capital-in-

general has priority in the systematic reconstruction of the capital form, then it must

have explanatory primacy in accounts of historical developments of capitalism as well.

My position, in contrast, is that there is a gulf between systematic dialectics and

historical narratives such that there is no warrant for this presupposition.

In my view it is part of the “hard core” of the Marxian research program that the

capital/wage labor relation is the essential social relation that distinguishes the capitalist

mode of production from all other modes of production, and that the surplus value

produced by the working class and appropriated by the capitalist class has logical

priority over the redistribution of this surplus value among units of capital. But I do not

see why it necessarily follows from this that Marxian explanations of historical

developments in capitalism must always and everywhere grant primacy to “vertical”

class relations.37

In principle, at least, I believe it is justified to emphasize “horizontal”

relations among units of capital in a particular historical narrative if two conditions hold.

26

First, the relevant relations among capitals must enjoy a fairly high degree of “relative

autonomy.” This means that they cannot be directly reduced to mere moments of the

capital/labor dynamic, however inseparable from that dynamic they might ultimately be.

Second, overt class conflict must be in relative abeyance in the period in question, due to

low levels of class-consciousness and agency on the part of the working class. A case

can be made that both conditions are met in case at hand.

Regarding the first condition, the process of investment in fixed capital certainly

involves a certain degree of “relative autonomy.” Of course many such investments are

made to deskill laborers, lower wage costs, and “divide and conquer” the working class,

and these phenomena are highlighted in Brenner‟s account. But such goals are probably

best met through setting up state-of-the-art facilities in regions of the globe with the

lowest wages, and even in the age of globalization the vast majority of investment

remains in the core region where the capital was originally accumulated. If we examine

the investments that do flow across borders, relatively little foreign investment flows

from the leading capitalist countries to areas with the lowest wages. In the 1980‟s and

90‟s the vast majority of foreign investment by countries of the core has been made in

other countries of the core, where wage levels are relatively high: “most of the time,

only about 20% of overseas investment from the North flows South.”38

There are numerous factors explaining this pattern. High levels of investment in

fixed capital must be made in areas where previous investment in fixed capital has been

made, otherwise the previous investment must be written off. The owners and

controllers of capital have an interest in retaining the parts of the production chain where

the greatest amount of “value” is added in regions where they have the greatest political

and legal influence.39

Further, the geographical dispersion of production associated with

globalization is paradoxically associated with new forms of regional agglomeration;

27

overseeing production chains extending across borders requires massive investments in

state-of-the-art information technology. Investments on the required scale tend to be

made in only a handful of “global cities,” almost all of which are located in “core”

regions.40

A final factor to mention here is the importance of “technological milieus” in

capitalist history. There are many areas with lower wage than Silicon Valley, but the

informal networks connecting entrepreneurs, venture capitalists, researchers at Stanford

and Berkeley, and a highly skilled technical, managerial, and marketing labor pool have

proven extremely difficult to replicate.

I do not mean to suggest that capital/wage labor relations are not important in the

history of investment in fixed capital. And none of the above factors suggest that we

must abandon the thesis that capital simply is surplus value appropriated from the

working class. But none of these factors can be treated as a mere epiphenomenon of

capital/labor class relations. This suggests that historical explanations regarding

investments in fixed capital need not always and everywhere grant exclusive explanatory

primacy to capital/labor relations. In certain historical periods, at least, it is legitimate

for Marxists to look elsewhere for the explanation of many significant processes. Why

should we a priori dismiss all of the factors mentioned in the previous paragraph as

secondary on the grounds that “the real story of this period” is the way capital divides

and separates workers?41

What of the second condition? Suppose there are certain historical

periods in which working class organizations and leadership overwhelmingly refrain

from asserting an independent class interest, but rather are positioned as junior partners

within coalitions including various factions of capital and the state. The quiescence of

labor may be the most important variable explaining what does not happen in the social

world in such periods. But it is not necessarily the key variable in explanations of

28

everything that does occur. Systematic Marxian theory can explain why working men

and women have an independent class interest always and everywhere capitalism is in

place. But Marx‟s systematic dialectic does not imply that the working class is the most

important actor on the historical stage wherever we find capitalism.

In the leading capitalist countries of the post World War II period the

labor movement was not committed to the aggressive assertion of the independent class

interests of the working class. In the U.S. Japan, and West Germany the labor

movement was instead positioned as a junior partner in coalitions where the interests of

certain factions of capital had hegemony. In a historical period such as this I do not see

why it is illegitimate in principle for Brenner to grant explanatory primacy to

competition among units of capital from these regions. Nor do I see why stressing this

competition is necessarily incompatible with the central claim of systematic Marxian

theory regarding the explanatory primacy of the capital/wage labor relation in defining

what capital is.

This distinction between systematic primacy and primacy in specific

historical explanations is not grasped by many of Brenner‟s critics. The following

passage from Fine and his co-authors is typical:

The emphasis here [in Brenner‟s work] is on intercapitalist rivalry as

opposed to the capital-labour relation and the relative strength of the two classes

. . . Now this is a distinctly non-Marxist position. For one thing, Marx himself

has made it plain on many occasions that no matter what the economic system

under consideration its defining feature is the vertical relationship between

appropriators and producers.42

Yes, the class relation between appropriators and producers always essentially

defines modes of production. But it does not at all follow that this relation provides the

29

relevant causal explanation of all historical processes within this mode of production.

These are two quite different matters. The world is not a simple place, and our theories

about the world should not be simple either. The historical efficacy of class struggles is

subject to ebbs and crests. During an ebb period other factors, such as inter-capital

competition, must be given greater weight.43

The Practical Implications of Crisis Theories

According to Lebowitz, the practical consequences of the Brenner‟s theoretical

perspective are quite different from what Brenner acknowledges. If the main cause of

global turbulence is the inter-capital competition that generates overcapacity, then it

would appear that there is a practical solution ready at hand for capital: the formation

of cartels. The various units of capital could then divide up market share among

themselves, thereby lessening competition and the need to introduce expansions of

productive capacity. (Fine et al. point out that the same results can be attained

through mergers and acquisitions.) For Lebowitz, theories formulated on the

systematic level of many capitals are inherently reformist. For a theory to have truly

revolutionary practical consequences, it must be formulated on the level of capital-in-

general.

There is one small problem with Lebowitz‟s argument. A similar objection can

be made to any Marxian theory of crisis. If one accepts Lebowitz‟s account and traces

the source of crisis to the restricted purchasing power of wage labor due to increases

in the rate of surplus value, from the standpoint of capital the response to crisis is

straightforward enough. There must simply be a shift in the output of Division II from

means of consumption addressing the wants and needs of workers to items for luxury

consumption, and a shift to higher levels of investment in the firms of Division I

producing means of production for luxury industries. From the standpoint of capital,

30

at least, there is no reason why the hyperconsumerism of the few cannot fully

compensate for any reduction in the consumption powers of others.

Similarly, if one follows Grossmann and holds that crises stem from the

overaccumulation of capital, from the standpoint of capital the practical conclusion

can be drawn that R&D aiming at lower constant capital costs ought to be pursued as

vigorously as possible. Or if one holds that the main cause of the global slowdown is

an increase in unproductive labor, from the standpoint of capital the practical

conclusion to be drawn is that the number of workers who do not add “value” to the

final product must be reduced, a main objective of so-called “lean production.”44

If

one holds instead that crises stem from shifts in expectations in the financial sphere,

then state officials can attempt to send strong signals that they will take effective

measures to reverse the situations that led to this shift.

These various strategies will surely not succeed in avoiding crises indefinitely.

But there is no reason to think that they are less promising from the standpoint of

capital than attempts to respond to overcapacity problems by forming cartels. The

point here is simply that any Marxian theory of crisis can be translated into a set of

recommendations for capital to follow to avoid crisis. It is not an especially good idea

for Marxists to assert that theories of crisis ought to be rejected if they can be

translated into capitalist strategies to avoid crisis. There would be no Marxian

theories of crisis left standing.

A far better way to assess the practical significance of Brenner‟s study is to ask

how it relates to the main perspectives on “global turbulence,” a topic that has been

subject to much discussion since the outbreak of economic crisis in East Asia. For

present purposes there are four main viewpoints to consider, beginning with

neoliberalism.45

Advocates of this outlook assert that global free markets necessarily

31

tend to enhance economic efficiency and provide mutual benefits. Problems in the

global economy arise from exogenous sources, such as “crony capitalism,” inflexible

labor markets, a lack of transparency in accounting practices, and so on.46

Neoliberals

call for reforms to eliminate these shortcomings, confident that such measures will

lessen the likelihood of future disruptions in the global capitalist economy.

A second perspective on global turbulence can be termed the neoconservative

perspective, since its adherents emphasize the need to conserve communities with

their living traditions and cultural values. In their view it is more and more difficult to

maintain even minimally acceptable levels of social stability in the global economy.

The recent downturn in Asia and elsewhere shows that unregulated flows of finance

capital across borders do not always oscillate near an equilibrium point like a

pendulum. They can gyrate in wild swings like a wrecking ball, to employ George

Soros‟s striking image.47

Results of this generalized social instability are likely to

include extremist political movements, environmental catastrophes, the outbreak of

wars, and political anarchy. Neoconservatives conclude that global flows of finance

capital must be subject to social controls:

A regime of global governance is needed in which world markets are managed

so as to promote the cohesion of societies and the integrity of states. Only a

framework of global regulation – of currencies, capital movements, trade and

environmental conservation – can enable the creativity of the world economy

to be harnessed in the service of human needs.48

John Grey mentions the “Tobin Tax” as an example of the sort of regulation he has in

mind. This is a small tax on short-term currency exchanges designed to discourage

speculation. George Soros advocates a variety of proposals in this context, including

international credit guarantee schemes (with close regulation of the banks authorized

32

to distribute credit), more stringent capital adequacy standards, margin requirements

for all derivatives, and licensing of all synthetic financial instruments.49

A third viewpoint may be termed cosmopolitan social democracy. Defenders

of this perspective agree with neoconservatives that the extension of global free

markets advocated by neoliberals comes at great cost to the social good. But they are

less concerned with “the cohesion of societies and the integrity of states” per se than

with the institutionalization of what they take to be universal principles of justice,

such as equality of economic opportunity, democratic citizenship rights, and so on.

Global capitalist markets left to themselves do not automatically institutionalize such

principles. For example, the income gap between the fifth of the world‟s population

living in the richest countries and the fifth in the poorest increased from 30 to 1 in

1960 to 60 to 1 in 1990. By 1997 it worsened yet further to a 74 to 1 ratio. Today the

fifth of the world‟s people living in the highest-income countries claim 86% of world

GNP, while the bottom fifth enjoy just 1%.50

Global disparities of this magnitude

deny the poor the opportunity to develop their essential capacities and effectively

exercise their citizenship rights.

In the old version of social democracy it was the responsibility of national

governments to ensure that markets functioned in a manner consistent with principles

of justice.51

In the era of globalization this is no longer sufficient. The normative

goals of social democracy can now only be attained through cosmopolitan law.52

The

regulations on global finance recommended by neoconservatives are a necessary part

of cosmopolitan social democracy. But financial controls by themselves do not ensure

that all stakeholders benefit from the global economy in the manner demanded by

justice. Further measures are required, including codes of conduct for multinationals

to safeguard labor rights, international agreements to reduce military spending while

33

increasing expenditures on health and education, global agreements on poverty

eradication, internationally funded investments in technologies addressing the needs

of poorer countries, democratically accountable international legislatures, and so on.53

Finally, there is the perspective of Marxian internationalism. In my view the

heart of the Marxian standpoint is found in the claim that the basic units of the global

capitalist economy are neither individual investors and consumers (neoliberalism), nor

communities (neoconservativism), nor the rich and the poor (cosmopolitan social

democracy). None of these perspectives captures the truly bizarre social ontology of

capitalism.

Capitalism is based upon privately undertaken labor that may or may not prove

to have been socially wasted. This generates a need to establish the social necessity of

privately undertaken labor, that is, a need to show that social value has been created.

This is established through successful exchange in the market. However, if sales

depended on each party in a transaction needing the particular commodity produced

by the other party, commodity exchange would be restricted and sporadic. Capitalism

by definition is generalized commodity exchange, and generalized commodity

exchange requires a general commodity, a commodity that represents generalized

exchangeability. This universal commodity is money, the objective form of value and

the general representation of value-producing labor. Once money plays this role it

necessarily tends to become the end of exchange, and not a mere means to facilitate

exchanges. There is an immanent expansionary drive built-into this structure, for there

is no fixed limit to the appropriation of the value form, money as capital, an

appropriation that rests on the exploitation of wage labor.

For Marx, the institutionalization of the value form leads to a bizarre inversion

of subject and object of the sort described in Hegel‟s theory of alienation.54

An object

34

produced by human subjects, “value,” takes on the alien form of a pseudo-subject

standing over and above human subjects, reducing them to objective moments in its

circuit of self-reproduction:

[Value] is constantly changing from one form into the other, without becoming

lost in this movement; it thus becomes transformed into an automatic subject .

. . (V)alue is here the subject of a process in which, while constantly assuming

the form in turn of money and commodities, it changes its own magnitude,

throws off surplus-value from itself considered as original value, and thus

valorizes itself independently. For the movement in the course of which it

adds surplus-value is its own movement, its valorization is therefore self-

valorization . . . As the dominant subject of this process, in which it alternately

assumes and loses the form of money and the form of commodities, but

preserves and expands itself through all these changes, value requires above all

an independent form by means of which its identity with itself may be

asserted. Only in the shape of money does it posses this form.55

From the Marxian standpoint, neoliberal policies to extend global free markets

may be the proximate cause of both the social instability neoconservatives complain

about, and the distributional problems that concern cosmopolitan social democrats.

But they are not their ultimate cause. The ultimate cause is the dominance of the

value form, which necessarily tends to invade every nook and cranny of social life,

subordinating all other social concerns to the imperatives of valorization. The political

regulations of finance capital proposed by Grey and Soros leave the value form in

place. The mechanisms of global redistribution advocated by cosmopolitan social

democrats leave the value form in place. Hence from the Marxian standpoint both

sets of proposals are ultimately doomed to fail to attain their proclaimed goal, “a

35

framework of global regulation [that] can enable the creativity of the world economy

to be harnessed in the service of human needs.” Attaining this objective demands a

break with the value form. For Marxists, cross-border alliances of working men and

women are absolutely crucial for making such a break.56

The exact form this break

might take must remain open.57

Likely measures include socially acknowledged and

enforced rights to employment and a guaranteed standard of living, community owned

worker cooperatives, the democratic planning of public goods and new investment

priorities on local, regional, national, and international levels, and the allocation of

resources for new investment to regions in proportion to the size of their populations.

If this is a reasonably accurate presentation of the four major perspectives on

the global economy, the question of the practical implications of Brenner‟s theory can

be reformulated as follows: which of these four positions is most furthered by his

work? The answer should be clear. The tendency towards overaccumulation-

overcapacity crisis Brenner discusses is built-into the value form. As the process of

concentration and centralization of capital proceeds, each subsequent

overaccumulation/overcapacity crisis demands a more massive devaluation of capital.

In the past, only extended global depressions and world wars have been able to

accomplish devaluation on the scale now required. Since world wars are, hopefully, no

longer an option, the devaluation must occur through extended global downswings.

Units of capital can desperately attempt to impose this devaluation on other units.

Nation-states can use all their considerable powers to shift the costs of devaluation onto

other regions. Some may succeed; most will fail. Throughout this process the greatest

burdens of devaluation will be inflicted on those who benefited least from the growth

period in the global economy, working men and women and their communities.

Regulations on the movement of finance capital do not change this state of affairs.

36

Regulations that hope to prevent the worst forms of labor abuse and poverty do not

change this state of affairs. The only thing that can hope to change this state of affairs is

a break from the dominance of the value form. This is the ultimate practical implication

of Brenner‟s study. And this is without question a Marxian conclusion.

From the standpoint of Marx‟s systematic dialectic in Capital, from the

standpoint of a proper understanding of the relationship between systematic theory

and historical explanations within the Marxian research program, and from the

standpoint of the unity of theory and practice, Brenner‟s critics have proposed many

objections to his recent work. I have tried to suggest that some of the most serious

objections do not withstand close examination. This does not imply, of course, that

all of the particular empirical claims made by Brenner in the course of his monograph

are valid, or that his theoretical framework does not need to be expanded or revised in

significant ways. His work provides but a part of the story, and his critics are right to

insist that the omission of a theory of value on the level of capital-in-general is a

profound flaw. Nonetheless, Brenner‟s account of global turbulence provides

powerful grounds for thinking that we are now at a point in history where the

destructive features of capitalism outweigh the creative dimension Marx himself

acknowledged. This surely counts as a major contribution to the on-going

development of Marxian thought.

Notes

1 I would like to thank Chris Arthur, Riccardo Bellofiore, Robert Brenner, Andrew

Brown, Martha Campbell, Fred Moseley, Patrick Murray, and, especially, Geert

Reuten for very helpful comments on an earlier draft of this paper. They are not

responsible for whatever mistakes remain.

2 Brenner 1998, pp. 8-9.

37

3 Mattick 1981; Moseley 1993.

4 Smith 1998.

5 Smith 1999.

6 Lebowitz 1999, pp. 6-7 [change to HM page reference]; emphasis in text).

7 Lebowitz 1999, pp. 9-10 [change to HM page reference]).

8 Fine et al. 1999, p. 78.

9 Moseley 1999, p. 13 [change to correct HM page numbers]).

10 Fine and his co-authors do not share Lebowitz‟s view that realization crises are

central to value theory. In their account the dialectical unity of industrial and financial

capital plays the central role in any adequate theory of crisis, especially the

expectations of those who allocate credit: “expectations about returns, backed by

finance, come to play a decisive role in determining the rhythm of capitalist

accumulation” (Fine et al. 1999, p.64; in previous writings Fine put more emphasis on

changes in the composition of capital; see Fine 1982). For Moseley, the explosion of

unproductive labor is the key to the global slowdown.

11 Lebowitz 1999, p. 13 [change to HM page reference]. Cartels have indeed been

forming. See “U.S. Outlines How Makers of Vitamins Fixed Global Prices,” New

York Times, May 23, 1999.

12 Fine et al. 1999, p. 56.

13 Fine et al. 1999, p. 83. See note 29 below.

14 Moseley 1993.

15 See Murray 1988.

16

The starting point of Marx‟s theory of capital is the fact that in societies of generalized

commodity exchange privately undertaken labor may be socially wasted. Privately

undertaken labor must prove that it was socially necessary – that is, that value has been

38

created – through the successful sale of its products in the market. If supply and demand

always coincided, there would be no danger of socially wasted labor and there would be

no capitalism. After having established this point, however, Marx abstracts from

divergences between supply and demand. He did so in order to ignore complicating

matters irrelevant to the goal of explaining how profits and rents rest on the production

and redistribution of surplus value (see Marx 1976, p. 201; Grossmann 1992, p. 69).

17 It is also worth noting that Marx‟s account of crisis tendencies inherent on the level

of capital-in-general also abstracts from the distinction between industrial capital and

finance capital, and thus from role of credit that Fine, Lapavitsas, and Milonakis

emphasize in their critique of Brenner. (Marx does, of course, take credit into account

on a more concrete level of his theory.) Further, Marx does not introduce the

productive labor/unproductive labor distinction in his account of crisis tendencies on

the level of capital-in-general, the central factor of Moseley‟s theory of crisis

tendencies in contemporary capitalism.

18 See Marx 1981, Chapter 13. From a systematic standpoint this section of Capital

Volume 3 is prior to the distinction of sectors according to differences in composition

of capitals and turnover times.

19 Grossmann 1992, Chapter 2.

20 Marx and Engels 1977, pp. 224-25.

21 This statement must be qualified in one important respect: many pre-capitalist

formations did generate environmental crises as a result of endogenous factors. (I

would like to thank Martha Campbell for pointing this out.)

22 In Grossmann‟s reproduction schemes, “from year 21 onwards . . . capitalist

consumption begins to decline absolutely, [so] accumulation will have lost all

meaning for the capitalist. Each further advance in accumulation means a further

39

absolute reduction in capitalist consumption. The vital importance of capitalist

consumption to the continued existence of capitalism is evident only at this point . . .

The other two fractions of surplus value, the additional constant capital (ac) and the

additional variable capital (av) retain their character of surplus value only so long as

they are means for the production of the consumption fund of the capitalist class”

(Grossmann 1992, pp. 80-1).

23 Brenner 1998, pp. 11-12.

24 Reuten 1991.

25 Reuten 1991, p. 87; a more formal presentation of the argument is found in Reuten

and Williams 1989, pp. 135-38. This argument assumes a constant rate of surplus

value; on this level of abstraction changes in the rate of surplus value are due to

changes in the ratio of unemployed workers to the reserve army of the unemployed,

and that ratio is unaffected by the above considerations (Reuten 1991, p. 88 n.2).

26 Reuten 1991, p. 91.

27 See also Reuten and Williams 1989, pp. 245, 253-54.

28 Reuten 1991, pp. 88-89.

29 Fine and his co-authors conclude their critique by asserting “the evident policy

implication of Brenner‟s account, although not drawn by him, is to deplore the lack of

an international Keynesian authority which can set demand at a sufficiently high level

to allow renewed investment of fixed capital or, at least, to sort out the problems of

intensified horizontal competition between industrial capitals” (Fine et al. 1999, p.

83). But one of the most important conclusions of Brenner‟s analysis is that

Keynesian policies were ultimately incapable of “sorting out” the problems of global

capitalism: “Keynesian increases in demand could not, then, restore the economy‟s

dynamism because the fundamental problem was not that of realizing high potential

40

profits through greater investment and employment of unused capacity and

unemployed workers; it was, instead, overcapacity and over-production in

manufacturing . . .” (Brenner 1998, pp. 152-53). Playing the Keynesian card at best

postponed the outbreak of sharp downturns, at the cost of extended slowdowns, a

gradual worsening of the overaccumulation/overcapacity problem, and an eventual

need to devalue fixed capital on a more extensive scale. There is absolutely nothing in

Brenner‟s account suggesting that an “international Keynesian authority” would be

any more successful in “sorting out” the contradictions of capitalism.

30 Lebowitz 1999, p. 10 [change to HM page numbers].

31 Interestingly enough, Lebowitz grants this point in a footnote: “It is difficult not to

see this [Brenner‟s core argument] as a particular version of the FROP [falling rate of

profit] supply-side argument . . . Isn‟t the focus here upon the manner in which the

result of rational individual investment decisions is the declining efficiency of

investment --- falling output-capital ratios, rising value composition of capital and the

like?” (Lebowitz, 1999, p. 10 [change to HM page numbers]). This is indeed the

heart of Brenner‟s position, although Brenner‟s (inconsistent) acceptance of Okishio‟s

theorem gives a contrary impression. The reviewer who has seen this the most clearly

is Richard Walker: “The great virtue of Brenner‟s essay is that it offers a clear,

sustained and well-documented analysis of the Long Downturn based on Marx‟s

theory of the falling rate of profit. It is not exactly Marx‟s view of the matter . . . but

it is close to the spirit of Marx‟s critique . . . Why would profit rates fall? The

argument is simple: The numerator in the profit equation, surplus value, is outrun by

the denominator, capital stock (both measured in annual terms). In Brenner‟s account,

the denominator is the culprit . . . (E)xcess capital stock builds up in factories and

equipment around the world . . .” (Walker 1999, p. 33).

41

32

Fine et al. 1999, p. 53.

33 Moseley 1999, p. 13 [change to HM page reference])

34 Fred Moseley complains that for Brenner the general rate of profit is determined as

a weighed average of the rates of profit in the manufacturing and non-manufacturing

sectors. He then asks why on Brenner‟s assumptions the decline in the rate of profit in

manufacturing isn‟t matched by a gain in non-manufacturing due to lower costs of

manufactured inputs (see also Fine et al. 1999, p. 55). In the text as it stands Brenner

provides no answer. But if we push the text just a bit we arrive at the

Marx/Grossmann‟s answer: overaccumulation in the industrial sector is sufficient to

threaten the valorization of total social capital. With this small bit of violence to the

text we can avoid the conclusion that “from the perspective of Marx‟s theory, what

Brenner has explained is the loss of monopoly profits in the manufacturing sector of

the economy, not the decline of the general rate of profit” (Moseley 1993, p. 12

[provide HM reference]).

35 Moseley 1999, p. 13 [change to HM page reference]. More specifically, it appears

to me that Brenner and Moseley‟s positions are ultimately compatible. The former

emphasizes the factors that lead to an overaccumulation of constant capital, the latter a

factor that works against sufficient surplus value being available to valorize this

overaccumulated capital (an increase in the ratio of unproductive to productive labor).

It is worth noting, perhaps, that decreases in surplus value that result from increases

in unproductive labor are only a problem for capital because the resulting level of

surplus value is not sufficient to valorize the accumulated capital. So there is a sense

in which the overaccumulation of capital remains central, even if the ratio of

unproductive to productive labor changes more than changes in the composition of

capital.

42

36

Reuten and Williams 1989; Smith 1990.

37 For historical materialists, the state and the cultural sphere cannot be adequately

comprehended in abstraction from class relationships. Nonetheless, it is widely

accepted by Marxists that political and cultural matters are not mere epiphenomena of

class struggle. I am arguing that the same point may hold for the economic realm

narrowly conceived, at least in certain areas and in certain historical periods.

38 Moody 1997, p. 55.

39 The term “value added” is used here in the non-Marxian sense common in business

literature.

40 Sassen 1998.

41 Lebowitz 1999, p. 11 [replace with HM page reference].

42 Fine et al. 1999, p. 79.

43 This point is directly related to the oft-repeated criticism that Brenner‟s later work

is fundamentally inconsistent with his earlier stress on interclass relations in

explaining the transition from feudalism to capitalism. This criticism also rests on the

assumption that systematic priority implies causal priority always and everywhere. If

this mistaken assumption is abandoned, it is completely consistent to hold that in one

historical context interclass relations ought to be granted the greatest weight, while in

another intraclass relations among units of capital are more central, while in both

periods class relations essentially define the relevant modes of production.

44 Smith 2000.

45 No claim is made here that the following typology is complete, or that every

significant feature of the four perspectives is mentioned.

46 Organization for Economic Co-operation and Development, 1997.

47 Soros 1998, p. xvi.

43

48

Grey 1998, 1999.

49 Soros 1998, Chapter 8.

50 United National Human Development Report (UNHDR)1999, p. 3.

51 Rawls 1973.

52 Held 1996.

53 UNHDR 1999, pp. 9-10; see also Held 1996, Chapter 11; Kapstein 1999, Chapter 5.

54 Arthur 1993.

55 Marx 1976, p. 255.

56 Moody 1997; Mandel 1994; Went 1996.

57 A very helpful overview of contemporary discussion of this issue is found in

Ollman 1998.

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