John Bellamy Foster’s Latest Attempt To Reconcile Marx and Kalecki

In the “Review of the Month,” entitled “Marx, Kalecki, and Socialist Strategy,” in the April 2013 edition of Monthly Review, John Bellamy Foster once again attempts to show that the views of economist Michal Kalecki (1899-1970) are fully compatible with Marx. Foster even quotes Marx’s “Value, Price and Profit” to show that Marx agreed with Kalecki—and Keynes—that higher wages lead to higher prices.

Foster writes, “Although a general rise in the money-wage level, Marx indicated, would lead to a decrease in the profit share, the economic effect would be minor since capitalists would be enabled to raise prices ‘by the increased demand.’”

Foster’s promotion of the theory that higher money wages cause prices to rise is so out of line with Marx’s whole body of work in general and “Value, Price and Profit” in particular that I could not let it pass without comment.

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2 thoughts on “John Bellamy Foster’s Latest Attempt To Reconcile Marx and Kalecki

  1. Part 3 of Capital Volume III does read as if Marx has found a basis for *cyclical* crises in the falling rate of profit consequent upon capital accumulation itself.
    Whether this really was Marx’s position on cyclical crises is not totally clear. But for Engels to make it such a prominent part of his masterpiece, you would have thought it must have been at some point. Maybe he did had doubts towards the end of his life, & we must remember that he never published Volume III whilst alive.
    Marx also stated in Part 3 that disproportionality & “society’s power of consumption” (realisation problem) had something to do with crises. But there’s nothing in part3 of Vol. III stating them to be the root causes of crises. It reads as if the falling rate of profit is the cause that lies behind the disproportionality or generalised overproduction. Or to be more exact the rise in the value composition of capital is the root cause.
    If this was Marx’s viewpoint, was he right to hold this to be the explanation of cyclical crises?
    This is essentially an empirical question. Can crises be explained by a falling rate of profit caused by a rise in the value composition of capital? The weight of evidence doesn’t appear to be there. But that’s not to say all crises have to this singular cause. There may be evidence for some of them, e.g. the current crisis dating back to the fall in profitability in the 1960′s (Andrew Kliman), itself a result of a rise in the value composition of capital.
    It could be argued, at least theoretically, that Marx’s law of the tendential falling rate of profit better fits a longer cycle (or wave) now generally referred to as the Krondratieff cycle. (I like Mandel’s argument about it being a wave with a downward tendency that’s endogenous to capitalism, but with no guaranteed upturn, unless gold, or a new more productive basis for production is discovered, e.g. oil).
    However, I think we need to be careful that we don’t miss the importance of the falling rate of profit for capitalism. It is probably not the basis of the cyclical crises of capitalism over the last 200 years, but it can still be the nature of the ‘final’ crisis of capitalism, even if that crisis takes an outward form of generalised overproduction. This is because this would be the natural reaction capitalism would take to an underlying crisis of profitability, especially under a fiat money regime. By which I’m referring to the printing of money & the vast expansion of credit/debt to artificially support recorded profit rates. Profit rates based upon credit/debt are claims on future labour time that may not be realised. It that sense that are fictitious profit rates that delude the capitalists until realisation dawns that the debt can never be repaid. This sounds very much like the crisis of 2007/08. Governments & central banks coming to the rescue & taking some of the bad debts onto their books doesn’t make the profit rates real or resolve the crisis of profitability. But again, all this is up for debate. The empirical evidence is far from conclusive because it’s so difficult to calculate, or even estimate, in terms of Marxist labour values. It may, I accept, be just another crisis of overproduction. My guess though is that there is a profitability issue.
    The easy way to look at it is to differentiate cyclical & breakdown crises, at least in terms of theory.
    Cyclical crises capitalism can always potentially recover from as the law of value brings prices back in line with values. But capitalism will eventually, if it continues, run into the material limits of planet earth. Oil & many other resources, such as fertile land, are limited. Only a certain number of human beings can be supported by earth’s eco-system. When population growth reaches its limit, so too does labour time. This is then where Part 3 of Volume III takes on a particular importance. With labour time limited (as I think Marx assumes, correct me if I’m wrong) to make a profit capitalism has to increase relative surplus value, i.e. it has to steal a growing % of the working day. To do this without making the workers materially worse off requires productivity gains. This can theoretically happen & profit rates don’t fall & workers just get a smaller & smaller % of the value they create, even if this value represents the same level of material well-being. But they would see a vast increase in inequality, even without any increases in profit rates. Given the resource limitations is it not more likely that the increases in relative surplus value at the expense of the workers, actually makes the workers materially worse off. As we can see with oil today, as the price of energy has increased both the labour time going to constant & variable capital can increase at the expense of surplus value. That is, the rate of exploitation goes into reverse, workers are materially worse off & profitability suffers (if c increases more than v then we also have the increase in the organic composition of capital, even without new technological improvements). So without increases in absolute surplus value available, the falling rate of profit can go hand in hand with attacks on the workers standard of living & generate the conditions ripe for revolution.
    So let’s not forget the importance of the falling rate of profit, even if it’s necessary to make clear the role of credit/debt in crises of overproduction.

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