The Crisis (Pt 5)

U.S. infection rates rise as states move to reopen

More and more U.S. states are moving to reopen non-essential businesses though there is no sign the COVID-19 epidemic is dying down. “Take the New York metropolitan area’s progress against the coronavirus out of the equation, Nicky Forster, Carla K. Johnson, and Mike Stobbe wrote May 4 in an Associated Press article, “and the numbers show the rest of the U.S. is moving in the wrong direction, with the known infection rate rising even as states move to lift their lockdowns. … ”

According to a leaked CDC document that appeared in The New York Times and Washington Post, the government projects that new COVID-19 cases will increase 225,000 a day by June, with deaths climbing to 3,000 per day. In early May, when this is being written, new cases are only 25,000 with deaths a mere 2,000. This despite all the social distancing and stay-at-home orders.

With President Trump leading the charge to reopen America for business, state and local governments are competing with one another for which one can lift the social distancing and stay-in-place orders the fastest. So far, these are the only policies that have slowed the pandemic in some areas.

In reality, the pandemic is still gaining momentum nationwide. Thanks to Trump and various state and local governments, the spread of COVID-19 in the U.S. could very well accelerate further in the coming months. A similar pattern is emerging in other capitalist countries. Of course, the growth of the pandemic in one country, particularly one as large as the U.S., is a threat to people of all other countries, since the virus does not respect national boundaries.

COVID-19 is the disease caused by a newly evolved virus named SARS-CoV-2. It belongs to a broader family of viruses called coronaviruses. They are called this because under an electron microscope they appear as ball-like objects covered by spikes resembling crowns. Viruses in this family use these “crowns” to inject their genetic material into a host cell. The viral genetic code then instructs the infected cell to produce more virus particles.

China-bashing and red-baiting

Most coronaviruses are either harmless to humans or only cause minor illnesses such as the common cold. The common cold is not a single disease but a collection of diseases. Some on the far right have claimed that the SARS-CoV-2 virus was created deliberately by the Chinese government and then released as a form of germ warfare. Trump’s secretary of state, Mike Pompeo, a former far-right-wing Republican congressman and then CIA director under Trump, while not going quite that far, blames the Chinese Communist Party for allowing the virus to escape from a Wuhan lab. By blaming the Chinese Communist Party, Pompeo manages to blame both the Chinese nation and “Communism” for COVID-19. Red-baiting, it seems, never goes out of style.

The May 5 edition of Business Insider quotes the now well-known Dr. Anthony Fauci, the chief U.S. government expert on infectious diseases, who explains that claims that the SARS-CoV-2 was a creation of the Chinese government — or the Chinese Communist Party — and released either accidentally or deliberately are nonsense. Dr. Fauci told National Geographic: “If you look at the evolution of the virus in bats and what’s out there now, [the scientific evidence] is very, very strongly leaning toward this could not have been artificially or deliberately manipulated. … Everything about the stepwise evolution over time strongly indicates that [this virus] evolved in nature and then jumped species.”

Because SARS-Cov-2 virus particles use RNA to store their genetic information rather than DNA like cellular life (1) and many other viruses do, it mutates at a higher rate. DNA has evolved “editing functions” that can detect errors when its genetic information is copied incorrectly. The editing functions that go with the simpler RNA molecules are far less effective than those of DNA. This means that SARS-Cov-2 can quickly produce different strains that have slightly different genetic information stored in their RNA. Already, SARS-Cov-2 has mutated into different strains, some more pathogenic than others. The strain that hit the New York City area, believed to have originated in Europe, is particularly pathogenic.

Capitalist development and the pandemic

Thanks to the development of jet engine air travel, people can zip around the globe at speeds unthinkable in the past. Bubonic plague, caused by the bacteria Yersinia pestis — not a virus — ultimately killed a far greater percentage of the population than even the most pessimistic estimates of the ultimate death toll from COVID-19. Estimates for the 14th-century plague pandemic range up to 60 percent of the European population. However, because travel in the 14th century was by standards of the 21st century extremely slow, Yersinia pestis could not spread with the lightening speed that Sars-Cov-2 can today.

Capitalism’s destructive assault on the natural environment, which includes global warming among other things, is disrupting the biological world. It forces many species to rapidly adapt through the process of Darwinian natural selection or go extinct. Animals and plants with long-lived generations cannot keep up with the environmental damage wrought by capitalist development because it takes tens of thousands or even millions of years for new animal and plant species to evolve. This has caused many species to go extinct without giving rise to new species adapted to the rapidly changing conditions.

The same is not true of micro-organisms like bacteria and especially viruses. Micro-organisms have extremely short-lived generations and can evolve new varieties under the laws of Darwinian natural section in a matter of weeks. This is why you have to get a new flu shot every year.

The flu, like the common cold, is a series of diseases caused by viruses that are constantly mutating and evolving. A vaccine that works against last year’s flu strains might not work against this year’s strains. Will SARS-Cov-2 behave similarly in this respect to the influenza-causing viruses? Or, in the worst case, will Sars-Cov-2 mutate so fast that it will be impossible to create a vaccine at all? Hopefully, this will not be the case, but scientists simply don’t know.

So far, the only effective way of slowing the spread of SARS-COV-2 has been through social-distancing and the shutdown of many unessential businesses. With people staying in their homes — or the immediate surrounding area — the virus has far fewer opportunities to spread from person to person. However, when businesses shut down, both the production of surplus value and its realization in the form of profit is halted. As a result, many factories cannot sell their commodities. This has led over the last few months to factories and other productive enterprises slashing their production and laying off their workers at a rate unprecedented in the history of capitalism.

The sharp curtailment of the production and realization of the value, including the surplus value, embodied in commodities is also threatening massive credit contraction. As credit contracts, the demand for commodities declines further, threatening a prolonged Depression on a scale equal to or exceeding the 1930s Great Depression. Even as it is, unemployment in the U.S. alone is now in the tens of millions and far beyond the worst of the 2007-2009 Great Recession. In absolute terms, it even exceeds the 1930s Depression. In terms of the rate of unemployment, it is approaching the levels of the Depression. While the capitalists were willing to put up with the stopping of business for a few weeks in the belief that this would quickly stamp out the pandemic — it didn’t — they are now running out of patience.

We can’t continue this way, they are crying. We need our profits and we need them now! Also, we must reopen so we can pay our bills coming due and avoid bankruptcy. If we don’t reopen now, the capitalists are complaining, we could face not months but years of sharply curtailed profits. If, the capitalists are saying, this means hundreds of thousands or even millions more deaths, it is a price that must be paid. Donald Trump, speaking for the capitalists, told ABC News: “Will some people be affected badly? Yes. But we have to get our country open and we have to get it open soon.”

Even if we lose a significant percentage of our current workforce to COVID-19, the capitalists believe, there are now tens of millions of candidates in the U.S. alone who are eager to replace them at significantly lower wages and worse working conditions. So the crisis is not without its upside for the capitalist class. This
helps to explain the recent upswing of share prices on Wall Street.

Trump has put himself at the head of “reopening America for business” even as the pandemic continues and gains momentum. Trump even considered closing down the White House COVID-19 task force before opposition forced him on May 6 to back down for now. The capitalists are, with Trump’s encouragement, mobilizing right-wing fascist-style armed demonstrations demanding that business be reopened immediately without restrictions. One such armed demonstration of right-wingers terrorized the Michigan State Legislature on April 30. Another took place May 14 closing down the legislature.

Trump’s actions and statements continue the pattern that began when he first denied the pandemic would affect the U.S. at all. Then he wanted to “reopen America for business” as early as Easter when the pandemic was still in its early stages. Now, state after state has announced plans to begin to lift the restrictions. If one state, perhaps run by ultra-right Republicans, opens for business, other states run by “progressive” Democrats feel pressured to reopen as well lest their businesses move to the “red” Republican states where the “business climate” is more favorable.

For example, the well-known industrial capitalist Elon Musk announced that he is moving the headquarters of his Tesla electric car company from California to Nevada or Texas. Texas, a former slave and Jim Crow state is dominated by extreme right-wing Republicans and has a “very favorable business climate.” Musk is threatening to close down and move the Tesla assembly plant located in Fremont, California, as well.

Under this type of capitalist pressure, Gavin Newsom of “progressive” California has announced a “Phase 2,” in which social-distancing and stay-at-home restrictions that have slowed the spread of the pandemic but not broken its back, will begin to be lifted. If the SARS-Co-2 virus turns out to be vulnerable to summer conditions like many viruses are — and experts are not confident about this — the pandemic could decline for a while but then explode as soon as cooler weather returns in the Northern Hemisphere’s fall and winter.

Indeed, it is hard to see what would stop the virus before 2021 at the earliest since, according to the experts, in the best case a vaccine will not be available and tested until another fall/winter season has come and gone.

The bottom line is that capitalism is unable to stick with the only set of policies that have proven to be effective in slowing the exponential growth of the pandemic long enough to break its back. The biological-medical aspects of the pandemic combined with capitalism’s profit-at-any-price drive are a deadly combination indeed.

The pandemic meets a crisis of overproduction

How will the pandemic crisis interact with the “normal” crisis of capitalist overproduction that according to all indications was approaching just as the pandemic hit? We have seen that the global industrial cycle was already in the “critical period” that occurs before the general recession — or a more serious crisis of overproduction — breaks out. Indeed, the congressional Republicans advanced their highly regressive, pro-cyclical tax cut from 2019, when it was originally scheduled to take effect, to 2018 in a bid to pump demand into the economy that they hoped would postpone the inevitable recession until after the November 2020 elections.

The Republicans feared that in light of how much Trump and the GOP are hated among people of color and the younger generation of all nationalities and races if they didn’t do something to “pump up the economy” in time for the 2020 elections, they would lose many congressional seats as well as the White House. The question now is, how will the cyclical crisis of overproduction that would have soon broken out anyway interact with the economic effects of the pandemic and the resulting shutdowns?

Since the current situation of a crisis of overproduction combined with a massive biological-medical crisis is unprecedented in the history of capitalism, there is no precedent we can refer to. However, to explore the possibilities we should begin with a review of what happens in a normal cyclical crisis of overproduction.

Pure crises of overproduction

Once capitalism has developed to a certain point, periodic crises of overproduction become inevitable. Even if there are no outside shock, such as pandemics like the current one, massive crop failures resulting in rising food prices, the depletion of goldfields, and more local natural disasters such as hurricanes, tornadoes and floods, crises of generalized overproduction will occur at periodic intervals. In addition to the natural disasters listed above, there are also the effects on the industrial cycle of very unnatural disasters such as the impact of war, as well as mistaken or reckless policies of governments and central banks — for example, the pro-cyclical Trump-Republican tax cut. These “outside shocks” can profoundly affect the evolution of particular industrial cycles.

When outside shocks such as the current pandemic do occur, they interact with crises of overproduction, sometimes counteracting and more often magnifying them. For example, World War I drove the general price level measured in terms of gold sharply higher at a time when global gold production was already beginning to level off. The sharp inflation caused the prices of commodities in terms of gold to more than double. These prices were already “too high” relative to the underlying prices of production — the prices that equalize profits so that equal quantities of capital yield equal profits in equal periods of time — when the war broke out in August 1914.

The result was a sharp reduction of gold production between the outbreak of the war in 1914 and 1921 when prices in gold terms fell sharply and gold production finally bottomed out. But even then, market prices were still above the prices of production, and gold production remained below the levels prevailing in 1914, though both the production and prices of commodities were still above the levels prevailing in 1914. As a result, during the 1920s the ability of the global market to expand was sharply curtailed. The result was the super-crisis/Depression (with a capital “D”) of the 1930s.

Another more recent example was the depletion of the South African goldfields that became evident around the turn of the 21st century. For many decades, the capitalist mining companies were able to dig ever deeper into the South African goldfields thanks to advancing technology. But finally, around 2001, this reached a limit, at least with the current level of mining technology, leading to declining South African gold production.

As a result, the ability of the world market to expand was curtailed and this both accelerated the coming of and magnified the extent of, the next cyclical downturn in the industrial cycle. This magnified downturn was the Great Recession of 2007-09. Though the effect was severe, it was still less than the impact of World I on both the level of gold production and the resulting aggravation of the cyclical downturn.

What happens when there are no external shocks?

Let’s now review why crises of generalized overproduction are inevitable in a developed capitalist economy, even in the absence of external shocks. Crises of overproduction are caused by a general overproduction of all — or in practice most — commodities relative to the commodity that serves as money. The money commodity is the commodity that in its own use value measures the value of other commodities.

Value in capitalist society can never be measured directly in terms of quantities of labor measured in some unit of time. The value of a commodity must therefore always be measured in the use value of some other commodity. The commodity use value that serves as the unit of measure must be in terms that are appropriate to that particular commodity’s use value — for example, troy ounces, grams, or metric tons of gold bullion. Marx defined the situation where the value of one commodity is measured in terms of the use value of another commodity as exchange value (2), or the form of value.

As commodity production develops, the world of commodities becomes polarized between the few commodities — gold and silver, and eventually gold alone — that serve as money and all other commodities. Long before capitalist production proper developed, where labor power itself became a commodity, the differentiation of the money commodity from commodities in general developed.

But this was by itself not enough for the emergence of periodic crises of overproduction. Another condition had to be met before crises of overproduction were transformed from a purely theoretical possibility to a periodic inevitability. This was the ability of the industrial capitalists to sharply increase the production of commodities on a global scale within a few years. This only became possible with the industrial revolution that began in the late 18th century. The industrial revolution involved the large-scale application of steam as a motive power to the process of industrial production. Shortly afterward, full-scale industrial cycles appeared beginning with the crisis of 1825.

Thereafter, the progress of capitalist industry was marked by the reproduction of industrial cycles including their crowning phase, the general crisis of the relative overproduction of commodities. World Wars I and II disrupted that process temporarily, suppressing the industrial cycle. But when these wars ended and normal peacetime production and expanded reproduction resumed, industrial cycles reappeared.

What causes industrial cycles?

Real prices, regardless of whether a gold standard or “fiat money” systems prevail, are always what economist Anwar Shaikh calls “golden prices.” If we don’t understand this point, we really cannot explain why capitalist expanded reproduction is doomed to pass through repeated industrial cycles. When I refer to prices here, I am referring to real, or “golden” prices (3), not nominal prices measured in arbitrary currency units such as pounds, euros, or U.S. dollars.

As the upswing of the industrial cycle gains momentum, demand increases faster than supply at existing prices. From the viewpoint of the capitalists in the industry that produces money material, this means that the production of money material will experience rising cost prices.

Here we need to examine things a little more closely. Cost prices are, like all other prices, measured in terms of the use value of money material. But money material is exchanged against (non-money) commodities. Therefore, money material itself has no actual price. Instead, it has what Marx called the expanded form of value, where the value of a commodity is measured by its exchange ratios against all other commodities. Therefore, the closest we can get to the “price” of money material is to read all price lists backward.

However, the profits of the industry that produces money material, like the profits of all other industries, must be measured in terms of the use value of money material. Like all industrial capitalists, the gold capitalists start with a sum of money M that is a quantity of gold — or something that represents gold — measured in some unit of weight. They exchange this gold for means of production such as mining equipment and labor power. Their product — money material — absorbs surplus value just as is the case with all other commodities. The profit of the gold capitalists is the difference between the quantity of gold they produce and the quantity of gold they advance intending to produce more gold.

There is no guarantee that gold capitalists will make a profit. They might very well make a loss instead. If the gold they mine and refine into bars of gold bullion in a given period — say, a year — is less than the gold they used to purchase their means of production and labor power, the total quantity of gold in the world will have indeed increased. But the gold capitalists will have lost money. That is, the money value of their total capital, which happens to be measured in terms of the use value of the commodity they produce, will have contracted instead of expanded. Therefore, like all other lines of business, the production of money material involves a risk.

The rule is that the more market prices fall below the prices of production of commodities, the more profitable gold mining and refining will be both absolutely and relative to other branches of production. Conversely, the more market prices rise above production prices, the less profitable production of money material will be, both relative to other branches of industry and absolutely. As is the case in all other branches of production, if the rate of profit of a particular branch of production is higher than the average rate of profit, capital will flow into the gold mining and refining business from other branches of production. If it is lower, capital will flow out.

Therefore, when market prices rise above the prices of production, which equalize the rates of profit across industries, the production of additional money material and with it the ability of the central banks to create more currency without deprecation of that currency will decline. But when market prices fall below the prices of production, the more production of the money commodity will rise and with it the ability of the central banks to create additional currency before they face problems arising from the depreciation of that currency.

Therefore, while central banks appear to be in command of the rate of growth of the “real money supply,” they are not. Instead, they are at the mercy of the fluctuations of gold production, which in turn are regulated by the fluctuations of market prices of production around the prices of production of commodities. The central banks exercise no control over this relationship.

This means that as the boom acquires momentum the rate of profit — which must be measured, just like prices, in terms of the use value of the money commodity — will rise in the branches of production that produce non-money commodities, but the rate of profit of the industry that produces money material will decline. This, by the way, is not a property of gold but rather of money. Therefore, as the volume of commodities produced as well as the prices of individual commodities increase, a greater quantity of money is necessary to circulate them. At the same time, less new money material will be produced. In a situation like this, a crisis of general overproduction is only a matter of time.

As the rate of profit declines in the industry that mines and refines gold, a shortage of gold — money material — develops relative to other commodities. Or to put it differently, a general overproduction of commodities relative to the money commodity develops. Marx and Engels described cyclical crises as crises of the overproduction of commodities rather than crises of the underproduction of money material because the former is the active element that disrupts the equilibrium between the number of commodities and the quantity of money necessary for the circulation of commodities.

The overproduction of (non-monetary) commodities does not lead to a crisis right away. At the beginning of each industrial cycle, there is always a huge surplus of idle money that can be drawn into circulation as the upward phase of the industrial cycle gains momentum. As the growth of the money supply starts slowing down, the surplus hoards of money stored in the banks are increasingly drawn into circulation. In other words, the velocity of circulation increases. As the money lying idle in the banks begins to be exhausted, the credit system expands.

As this occurs, “hard cash” is increasingly replaced by credit money and just plain credit. What begins as a “monetary system” at the beginning of the expansion phase of the industrial cycle becomes a “credit system.” Eventually, both the velocity of the circulation of the currency and the inflation of credit on a given monetary base of “hard money” reaches its limits. In the final stage of the industrial cycle, the inflated credit system is operating on a very small base of actual money. It becomes a “house of cards” that soon collapses.

When the credit system collapses, there is a sudden collapse in demand. At this point, the overproduction becomes obvious as unsold commodities pile up in warehouses. The commercial capitalists slash or cancel new orders and are forced to hold “sales” to raise cash. The industrial capitalists faced by falling and even canceled orders from other industrial capitalists experience a sudden drop in demand and to raise cash have to slash production and lay off workers.

It appears at first as though the crisis is a credit or financial crisis caused by the pile-up of unsold commodities in warehouses that in turn forces the capitalists to lay off workers. In reality, it the reverse. It is the overproduction of commodities — always relative to money material — that is the cause of the financial credit crisis. When the crisis comes, the central bank is always blamed for “tightening” too fast or for overestimating the “danger of inflation.” Next time, the central bankers claim, they will learn from their mistakes and get it right. After a few prosperity years have passed, the economists and the central bankers claim that they have now learned how to avoid crises. But the crises always return.

Fiat money, the commonsense solution to crises

The bourgeois economists and central bankers claim that the solution to the problem of recurring crises of overproduction is to replace currency systems based on “commodity money” — gold — with what they call “fiat money.” If this is done, the economists explain, and a shortage of money begins to threaten a crisis, the “monetary authority” — usually the central bank — can step in and create “by fiat” the necessary additional money to prevent the crisis. Problem solved!

Marx explained that fiat money is, in reality, token money that merely represents real money in circulation. Therefore, the “commonsense solution” of using fiat money to avoid crises does not work in practice. It does, however, involve complications of its own as the 1970s demonstrated in practice. Today, the 1970s experience is hidden behind the much more recent 2008 Great Recession and largely forgotten by the economists.

The most consistent advocates of the view that crises of overproduction can be banished by fiat money are the supporters of Modern Monetary Theory. MMT is popular among young progressives and newly minted “democratic socialists” who were attracted to Bernie Sanders’ two campaigns to win the Democratic Party presidential nomination. MMT is attractive to today’s young progressives because if it were true, the limits of pro-working class reforms within the capitalist system would be less strict than they are in reality.

If you want reforms to make capitalism more humane but do not desire revolution, MMT is for you. However — and this is important, whether revolution is desirable or not — the objective laws of capitalism are those discovered by — not made up by — Marx. MMT, on the other hand, is based on wishful and superficial reasoning about the nature of the capitalist system, money and crises, and its many other contradictions. Needless to say, this does not rule out united-front actions between those who have fully understood Marx’s analysis of capitalism and MMT supporters.

As we know, during 2019 signs multiplied that the end of the industrial cycle that began with the crisis of 2007-09 — the Great Recession — was approaching its inevitable end. In the U.S. and throughout most of the capitalist world, by the end of 2019 industrial production had already ceased to rise and had entered a mild recession. In the U.S., only the growth in the “service sector” prevented the U.S. from entering a “formal” recession as 2019 drew to an end.

The Federal Reserve System reacted to the approaching recession by reducing its target for the federal funds rate not once, not twice, but three times. The effect was to draw out the “critical stage,” which forms the final stage of the industrial cycle. Without the Fed’s extremely aggressive “fed funds rate” reductions and the cancellation of its policy of reducing its inflated balance sheet, there is little doubt the U.S. and world economy as a whole would have fallen into full-scale recession sometime during 2019.

The Trump administration, which was counting on “prosperity” to win reelection (in the Electoral College), put tremendous pressure on the Federal Reserve to reduce the fed funds targets and even resume the full-fledged “quantitative easing” that it had first launched when full-scale financial panic broke out on Wall Street in September 2008. This time, however, the panic was not on Wall Street but in the White House, which feared that Trump would not win a second term. The White House — and Republicans — were counting on the prosperity lingering until at least November 3, 2020.

This incipient recession, whose full eruption was staved off by the Fed’s “expansionary policy” during the first quarter of 2020, abruptly met the biological-medical crisis represented by the COVID-19 pandemic. The Federal Reserve’s response to this unprecedented situation will be the subject of next week’s post.

To be continued.


1 Viruses, unlike life that is made up of cells, cannot on their own reproduce. Instead, viruses must insert themselves into the living cells of other organisms, and then splice their genetic material into the infected cell’s DNA. The viral DNA carries instructions that tell the cell to reproduce additional virus particles. (back)

2 The classical economists, and Marx as well before 1857, confused the form of value, exchange value, defined as the value of one commodity measured in terms of the use value of another, with value itself, defined as the quantity of labor socially necessary to produce a commodity of a given type and quality.

The year 1857 brought a sharp if short-lived crisis of global overproduction. While Marx’s hopes that this crisis would revive the revolutionary wave of 1848 were not realized, the crisis stimulated his interest in economics, causing him to write during the British winter of 1857-58 the notebooks now known as “The Grundrisse.” In these notebooks, Marx worked out the solution of reconciling the exchange of equal quantities of labor with surplus value when he realized it was necessary to distinguish between labor and labor power. Marx then became the first economic thinker to be able to explain how profit arises not from cheating but from an equal exchange.

Marx also worked out the difference between value — the quantity of labor necessary to produce a commodity of a given use value and quality and its form exchange value, where the value of one commodity is measured in terms of the use value of another commodity. In this way, Marx decisively transcended the Ricardian theory of value. The generalization of exchange value as the form of value is the money relationship of production. Therefore, Marx was able for the first time in the history of economics to explain exactly what money is, something no other economic thinker before him had been able to do.

Of Marx’s two decisive discoveries of 1857-58, his theory of surplus value is generally understood by all educated Marxists. Indeed, the classical workers’ movement of the Second and Third Internationals was raised on Marx’s theory of surplus value. However, Marx’s theory of exchange value as the form of value and his theories of prices and profit that flow from it have with some exceptions not been understood. This opened the way for Marxism to be diluted by the various forms of “left Keynesianism” and today Modern Monetary Theory. (back)

3 Anwar Shaikh near the end of his book “Capitalism” abandons Marx’s theory of exchange value and money when he claims that since 1940 gold has ceased to be the measure of value. He bases his reasoning on the fact that prices though moving up and down with industrial cycles show little long-run trend from the 19th century until 1940. However, beginning in 1940, U.S. dollar prices break with this pattern of long-term stability and begin to rise virtually uninterruptedly.

What Shaikh has overlooked is Roosevelt’s 40 percent devaluation against gold of the U.S. dollar carried out between 1933 and 1934. During the remainder of the Depression, commodity prices calculated in U.S. dollars changed little as the Depression conditions prevented them from rising. After the Depression, however, dollar prices rose reflecting the 1933-34 devaluation.

From 1968 on, there have been repeated further devaluations of the gold value of dollar expressed in the secular rising — with many interruptions — of the dollar price of gold. Shaikh’s retreat from Marxist value theory in the later pages of his “Capitalism,” does not negate the value of the scientific part of his writing. It means that in Shaikh as in Ricardo, we have to distinguish between Shaikh’s scientific writings and the “vulgar” parts where he lumps Marx together with Piero Sraffa in a continuous “classical tradition” that includes Adam Smith, David Ricardo, Marx, Piero Sraffa, and Shaikh himself. Marx. in contrast to Shaikh. though he admired and learned from the scientific content of the classical tradition saw his work as a radical break from bourgeois classical economy — hence the critique of political economy. (back)