Marxian Economics: A Reappraisal

It should be remembered that volume III of Capital was edited by Engels; furthermore, to a considerable extent he set the framework for its reception through his commentaries. This contribution concerns the interpretation of the place of volume III in the structure of Capital as a whole advanced by Engels in his 1894 preface and 1895 supplement. However, there is a continuity between these texts and the logical-historical method Engels claimed to have found when he reviewed Marx’s Contribution to the Critique of Political Economy (1859). According to this method, Marx’s exposition is simply a corrected reflection of the historical development of the system of capitalist production. In his comments in volume III of Capital Engels interprets this method as implying that Marx started in volume I by describing a historical stage of ‘simple commodity production’, that it was there that value attained its ‘classical form’, and that subsequently the picture changed when, with capitalist production, commodity value appeared in a ‘secondary’ derivative form.

Two controversies concerning Marx’s theory of value were of particular importance during the 1960s and 1970s. The first is well known and has attracted most of the attention of Marxian scholars during these decades: I allude to the celebrated ‘transformation problem’² and to the spirited debates that followed the publication of Sraffa’s Production of Commodities by Means of Commodities. The second one, however, is much less well known among economists but is also of fundamental importance: it was more methodological in character and centred mainly on Marx’s ‘logic’ and the relationship between Marx and Hegel.

The last point to which attention is still to be drawn in the relation of labour to capital is this, that as the use value which confronts money posited as capital, labour is not this or another labour, but labour pure and simple, abstract labour; absolutely indifferent to its particular specificity, but capable of all specificities…. This economic relation — the character which capitalist and worker have as the extremes of a single relation of production — therefore develops more purely and adequately in proportion as labour loses all the characteristics of art; as its particular skill becomes something more abstract and irrelevant, and as it becomes more and more a purely abstract activity, a purely mechanical activity, hence indifferent to its particular form…. Here it can be seen once again that the particular specificity of the relation of production, of the category — here, capital and labour — becomes real only with the development of a particular material mode of production and of a particular stage in the development of the industrial productive forces. (This point in general to be particularly developed in connection with this relation, later; since it is here already posited [gesetzes] in the relation itself, while, in the case of the abstract concepts, exchange value, circulation, money, it still lies more in our subjective reflection.)

Marx’s theory of land rent was the object of study during the 1970s and early 1980s principally as a by-product of the debate among Marxist and neo-Ricardian economists on the transformation problem.² Another issue that has revived interest in Marx’s rent theory is the problem of speculation in the building sector (Lipietz, 1974; Broadbent, 1975; Folin, 1976), a problem that has continued to draw attention to draw Marx’s contribution until recently (Clark, 1987; Persky and White, 1988; Bovaird, 1993).

For most of the past one hundred years, Marxist economists have produced and disseminated a particular set of stories about capitalism and socialism. According to these well-known accounts, capitalism is a singularly destructive, crisis-prone system governed by the ‘logic of capital’, which is often expressed in terms of economic ‘laws of motion’ and the ‘drive to accumulate’ on the part of capitalists. Socialism, in contrast, represents the suppression or elimination of such a logic and its underlying laws and drives, and thus creates the possibility of a rational, planned way of organizing economic and social life.

The concept of form of value is certainly one of Marx’s outstanding contributions. A short discussion of the difficulties of the contemporary monetary theory in its most developed version (the neoclassical one) will show that this concept is the necessary starting point (or the rational basis) for monetary theory, hence for price theory, whatever the choice of a particular value theory.

This chapter is concerned with just a section of part V (‘The Division of Profit into Interest and Profit of Enterprise’) of volume III of Capital. ³ This section consists of the chapters 25 to 35. Although these should properly be grouped as a separate part, their unity escaped Engels’ attention and is accordingly missing in the current arrangement of volume III. This ‘ideal’ part (which could possibly be titled ‘Credit and Crises’ or ‘Money Capital and Fictitious Capital’, and will be referred to henceforth as ‘the unidentified part’) is not unrelated to what remains of part V (chapters 21-4 and 36) but should be considered more strictly as a follow-up of part IV, ‘The Transformation of Commodity Capital and Money Capital into Commodity-Dealing Capital and Money-Dealing Capital’ (Merchant’s Capital).⁴ It should also be noted that the unidentified part is less related to the nature of interest and to the difference between interest and profit (an issue fairly similar to that of rent and of the difference between rent and profit in part VII) than to that section of part IV where money-dealing capital is presented as a subspecies of merchant’s capital.

This chapter deals with the concept of finance capital — a high topic in early-twentieth-century Marxist literature — emphasizing its usefulness as an instrument with which to analyses modern capitalist economies. Drawing mainly on Marx’s observations on chapter 27 Volume III of Capital, ‘The Role of Credit in Capitalist Production’, on Hilferding’s Finance Capital and on the more general Marxian framework (capital as a social relation) it seems possible to replace this pseudo divorce (also known as the ‘corporate revolution’) with a new phase of capitalism in which capitalists are as dominant as before, although operating through a different institutional apparatus. In this sense the chapter resurrects the more general meaning of finance capital so as to include not only capital at the disposition of banks but also capital at the command of non- banking entities and/or individuals. Both forms of private wealth — bank deposits and tradable securities — are seen as enjoying the same essential properties of liquidity (readily convertible into its money equivalent) and increasing value (appreciation, interest, dividends) and should therefore qualify as finance capital. Breaking away from the notion that the dominance of finance capital evolves through the dominance of financial institutions it seems possible to speak of a financial phase as a stage in which an ever-increasing proportion of the capital used in industry is finance capital without resorting to the unlikely task of demonstrating the preeminence of the banking sector over non-banking activities.

This chapter bears upon the question of whether the monetary theory of income distribution — as by suggested Sraffa in Productions of Commodities by Means of Commodities — must be considered equally alien to Marx’s system as it was to classical political economy. Sraffa, who was clearly inspired by the works of the classical economists and Marx, remarked that his own system leaves open the possibility that the money rate of interest determines the rate of profit:

The rate of profit, as a ratio, has a significance which is independent of any prices, and can well be ‘given’ before the prices are fixed. It is accordingly susceptible of being determined from outside the system of production, in particular by the level of the money rates of interest (Sraffa, 1960, p. 33).

It is well known that this idea, upon which Sraffa did not elaborate, implies a radical reversal of the causality in the theory of income distribution that is found in the works of Ricardo and Thornton.

Marx’s analysis of the role of money in a capitalist economy marked a significant advance with respect to classical political economy, and in particular with respect to Ricardo. For Marx, money was no longer just a means of circulation but also a store of value. This has significant macroeconomic implications.

This chapter is intended to provide a preliminary analysis of a component of a larger project whose goal is to develop a ‘monetary theory of production’. The focus here will be the appropriate theories of value to be adopted in the larger project. The foundations for a monetary theory of production can be found in the works of Karl Marx and John Maynard Keynes, while Michal Kalecki has also provided some insights that help synthesize the approaches of the former authors. While authors have found it useful to synthesize the works of Marx and Keynes, I believe Dudley Dillard was among the few who fully recognized the importance of the labour theory of value (LTV) for Keynes’ own approach to the monetary theory of production (Wray 1993a).