Book Review from the August 2015 issue of the Socialist Standard
'Capitalism’s Crises: A Debate'. Contributions by Andrew Kliman, David Harvey, and Doug Lain. Marxist-Humanist Initiative. 54 pages.
Andrew Kliman wins this debate hands down. David Harvey has tried to argue that Marx didn’t really hold or didn’t stick to the theory of ‘the law of the tendency of the rate of profit to fall’. He did suggest that, as labour is the only source of profit and as capital accumulation tended to be labour-saving, there was a tendency for the amount of profit to grow more slowly than the amount of capital invested. So Harvey’s view is easy enough to rebut. The real debate, which Harvey does not enter into, is how this tendency might be related to financial crises and economic downturns.
Some argue that there is a direct link between the falling rate of profit theory and crises, in that, as a result of the introduction of more and more labour-saving machinery over a period, the rate of profit eventually falls so low that there is no longer an incentive to invest so much and so there’s a slump in production.
Kliman’s argument is that the link is only indirect:
‘Marx did not regard the tendency of the rate of profit to fall as an immediate cause of commercial or financial crises. He argued that a decline in the rate of profit leads to a crisis indirectly and after some delay. It promotes overproduction (by, e.g., depressing productive investment demand). It also promotes financial speculation and swindling (…) it is only when debt finally cannot be repaid that a crisis – that is, a financial crisis – erupts, and the crisis then leads to stagnation’ [Kliman’s emphasis].
He also writes of ‘the existence of many intermediate links between the fall in the rate of profit and the outbreak of crisis.’ But with all these intermediate links is this really a falling rate of profit theory of crises? Doesn’t it amount in the end to saying in effect that capitalism causes crises?
No such questions arise over the complementary view that during a slump the rate of profit rises through the devaluation of capital (capital is not a thing but a sum of values), so creating the condition for a resumption of capital accumulation. Kliman explains this well, underlining a very useful distinction between a financial crash (the actual ‘crisis’ point) and the drop in production that follows, useful because those in the Marxist tradition (including ourselves on occasion) sometimes use the word ‘crisis’ to cover both.