bloggingfromamarxisteconomist

DavidHarveyisthewellknownMarxistProfessorofAnthropologyandGeographyattheGraduate
CenteroftheCityUniversityofNewYork.HarveyhasanewbookoutandhasalsoreviewedThomas
Pikeys (hp://davidharvey.org/2014/05/aerthoughtspikeyscapital/ (hp://davidharvey.org/2014/05
/aerthoughtspikeyscapital/)). Harvey is prey critical of Pikeys book. Harvey recognises that
Pikey provides powerful data on the inequality of wealth and income in the major capitalist
economies since thecapitalism becamethe dominantmodeofproduction andsocialrelationsfrom
about1750.WhatPikeydoesshowstatistically(andweshouldbeindebtedtohimandhiscolleaguesfor
this)isthatcapitalhastendedthroughoutitshistorytoproduceevergreaterlevelsofinequality.Thisis,for
many of us, hardly news. It was, moreover, exactly Marxs theoretical conclusion in Volume One of his
versionofCapital.
But, as Harvey says, Pikey says nothing about recurrent crises of production and investment in
capitalism.Pikeydoesnottelluswhythecrashof2008occurredandwhyitistakingsolongforsomany
people to get out from under the dual burdens of prolonged unemployment and millions of houses lost to
foreclosure.ItdoesnothelpusunderstandwhygrowthiscurrentlysosluggishintheUSasopposedtoChina
andwhyEuropeislockeddowninapoliticsofausterityandaneconomyofstagnation.
ThenHarveytellsusthatallPikeyhadtodowasreadMarx(which,asIhavepointedoutbefore,he
didnotdo
hp://thenextrecession.wordpress.com/2014/05/06/haveyoureadpikeywellhehasnotreadmarx/
(hp://thenextrecession.wordpress.com/2014/05/06/haveyoureadpikeywellhehasnotreadmarx/))
Ifhehad,saysHarvey,hewouldhavefoundinVolume2ofMarxsCapital(whichPikeyalsohasnot
readevenashecheerfullydismissesit)Marxpointedoutthatcapitalspenchantfordrivingwagesdown
wouldatsomepointrestrictthecapacityofthemarkettoabsorbcapitalsproduct.
SoHarveysaystheexplanationofcrisesincapitalismistobefoundinMarxsCapitalVolume2and
notinVolume1or3.Actually,thereisnoexplanationofrecurrentcrisesofcapitalismtobefoundin
Volume2.ItismostlyinVolume3withMarxsoutliningofthelawofthetendencyoftherateofprot
tofallanditscountertendencies.
Harveys underconsumption alternative explanation is not new from him (see my post on Harvey
backin2011,
hp://thenextrecession.wordpress.com/2011/11/13/davidharveymarxsmethodandtheenigmaofsurplus
(hp://thenextrecession.wordpress.com/2011/11/13/davidharveymarxsmethodandtheenigmaofsurplus)/
and also see Paul Maick Jnrs excellent critique of Harveys work, maick on harvey
(hp://thenextrecession.les.wordpress.com/2014/05/maickonharvey.pdf)). But it is not Marxs
explanation.
Abouttheseads(hp://en.wordpress.com/abouttheseads/)
In his new book, which looks well worth reading (hp://davidharvey.org/2014/03/newbookseventeen
contradictionsendcapitalism (hp://davidharvey.org/2014/03/newbookseventeencontradictions
endcapitalism)/)IhavenotreadityetHarveyoutlineswhatheseesasthecontradictionsattheheart
ofcapitalismitsdrive,forexample,toaccumulatecapitalbeyondthemeansofinvestingit,itsimperativeto
usethecheapestmethodsofproductionthatleadstoconsumerswithnomeansofconsumption
Indeed,HarveyspositionisthatMarxslawofprotabilityisirrelevanttoanexplanationofcrises.It
leadshimtoarguethattheneoliberaldrivetoraiseprotsfromthe1980swasnotdictatedbyany
mathematical law (presumably meaning Marxs law of protability). He quotes Alan Budd, an
economic advisor to Margaret Thatcher who confessed in an unguarded moment that the
antiinationpoliciesofthe1980sturnedouttobeaverygoodwaytoraiseunemployment,andraising
unemploymentwasanextremelydesirablewayofreducingthestrengthoftheworkingclasseswhatwas
engineeredthereinMarxisttermswasacrisisofcapitalismwhichrecreatedareservearmyoflabourandhas
allowedcapitaliststomakehighprotseversince.(Budd). Thisquoteactuallysuggeststomethatthe
neoliberalagendawasverymuchtorestoreprotabilitythathadreachedpostwarlowsbythelate
1970s. But apparently, according to Harvey, the deep doubledip recession of the early 1980s that
devaluedanddestroyedcapitalandrestoredprotabilityhadnothingtodowithit.Insteaditwasall
aboutpolitics.
Harvey criticises Pikey for failing to observe that the squeeze on wage share and the potential
underconsumptionthatitcouldcreatewasovercomebyamassiveriseinhouseholddebt:whereis
thedemand?Pikeysystematicallyignoresthisquestion.The1990sfudgedtheanswerbyavastexpansionof
credit,includingtheextensionofmortgagenanceintosubprimemarkets.Buttheresultantassetbubblewas
boundtogopopasitdidin20078bringingdownLehmanBrothersandthecreditsystemwithit. Thus
crisesareaproductofalackofdemand.Creditbubblescancompensate,butonlyforawhile.
HarveymakesthepointthatCrisesarenotsingularevents.Whiletheyhavetheirobvioustriggers,the
tectonicshistheyrepresenttakemanyyearstoworkoutWiththebenetofhindsightitisnothardtospot
abundantsignsofproblemstocomewellbeforeacrisisexplodesintofullview. Butforhim,thesignsof
crisesaretobefoundnotinanymovementinprotabilitybutincredit,becausethedebtsaturatedand
increasinglyderegulatedglobalnancialisationthatbeganinthe1980sasawaytosolveconictswithlabour
byfacilitatinggeographicalmobilityanddispersalproduceditsdenouementinthefalloftheinvestmentbank
ofLehmanBrotherson15September2008.
HarveycorrectlyidentiesPikeyskeyfailingasamistakendenitionofcapital.Capitalisaprocessnot
athing.Itisaprocessofcirculationinwhichmoneyisusedtomakemoremoneyoen,butnotexclusively,
throughtheexploitationoflaborpower.Thewholeofneoclassicaleconomicthought(whichisthebasisof
Pikeysthinking)isfoundedonatautology.Therateofreturnoncapitaldependscruciallyontherateof
growthbecausecapitalisvaluedbywayofthatwhichitproducesandnotbywhatwentintoitsproduction.
ThisisapointthatJamesGalbraithandothersincludingmehavemadeaboutPikeynotrecognising
thatcapitalisnotwealth.Andthismakesadierence.AsHarveysays,ifwetakeouthousingand
realestatewealthfromthemeasureofcapital,Pikeysforecastofastablereturnoncapital,whichis
higherthanthelongtermtrendgrowthratedoesnotstand.
Inanewpaper,EstebanMaitoshowsjustthat.UsingPikeysowndata,hendsthatitisMarxslaw
ofthetendencyoftherateofprottofallovertimethatisconrmedbytheevidence,notPikeys
stablereturnoncapital
(Maito__Esteban_Ezequiel_
_Pikey_against_Pikey_(on_evaluation_on_Review_of_Political_Economy)libre
(hp://thenextrecession.les.wordpress.com/2014/05/maito__esteban_ezequiel_
_pikey_against_pikey_on_evaluation_on_review_of_political_economylibre.pdf)).
MaitoexplainsthatinPikeysperspective,capitalisnotrelatedtotheproductionorvalorizationprocess.
Asasynonymforthewordwealth,anygoodorserviceexchangeableinthemarketiscapital.Butthetrends
describedbyMarxrefertocapitalistproduction.Inthisrespect,anyassessmentofMarxiantheory,evenits
empiricalvalidation,hastoconsiderthisbasicaspectinitsanalysis.Insuchaway,dwellingsshouldnotbe
considered part of the capital, as particular consumer goods rather than means of production. Similar
considerationsmaybestatedinothercaseslikenancialassets(apurecircuitMM)orland.
Indeed,overtherecentperiod(sincethemid1960speak),evenPikeysreturnoncapitalhastended
tofallinlinewiththeMarxianrateofprotbecauselandandresidentialpropertyhavebecomeless
signicantasashareofwealthcomparedtomachineryandnonresidentialproperty.
Marxslawofprotabilityexplainsthecentralcontradictionofcapitalism,notPikeysr,norHarveys
nomeansofconsumption.

ThisentrywaspostedonMay19,2014at10:55amandisledundercapitalism,economics,marxism,
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GeorgeFinchSays:
May19,2014at6:04pm|Reply
DidyouunderstandHarveys,itwaspolitical.Bythatdidhemeanitwasthroughthepolitical
that capital hammered labor? Yes, thee was a falling rate of prot, but how do you restore it (
through the political?) Also where is the falling rate of prot now? Corporations have record
prots,buthowmuchfromproduction,howmuchfromnancialassets.Whyinvestwhentheydo
nothaveto,butwouldntothercompaniesinvesttobemorecompetitive?Andhowinvestmentis
thereoverseascomparedtodomestic.
BoySays:
May20,2014at8:24am|Reply
SoHarveysaystheexplanationofcrisesincapitalismistobefoundinMarxsCapitalVolume2
andnotinVolume1or3.Actually,thereisnoexplanationofrecurrentcrisesofcapitalismtobe
foundinVolume2.
Thatsnottrue.InhisanalysisofthecirculationofCapitalinCapitalII,Marxsetsoutthatcrisescan
arisefromabreakdownatanyofthestagesofthecircuitofindustrialcapital,andthendescribes
whatthecausesofsuchbreakdownsmightbe.Healsodescribestheconditionsforacrisiswhich
naturallyowfromadisproportionbetweenDepartmentIandII,adisproportion,whichhesaysis
notconnedtocapitalism,butwhichwouldexistunderSocialismtoo.
It arises because xed capital does not wear out at a uniform rate. The consequence is that
DepartmentIIproducersrecoverthevalueofthewearandtearoftheirxedcapitalinthevalueof
theirproduction,butthisvalueishoardedasmoneycapital,untilitisrequired.Atthesametime,
someDepartmentIIcapitalistsareusingpreviouslyhoardedmoneycapitaltobuylargeamountsof
xedcapitalwithoutpuinganequivalentamountofvalueofcommoditiesintocirculation.Some
arebuyersbutnotsellers,whilstothersaresellersbutnotbuyers.Providedthetwobalanceout
everythingisne,butthechancesthathappensisremote.
Marx specically says, that the cycle for the replacement of such increasing quantities of xed
capital is the basis of the business cycle. He also says that, if in the situation described above,
DepartmentIIcapitalistssimplydonotreplaceallofthexedcapitaltheyshouldhavebeendoing
andwhichDepartmentIanticipated initsproduction, inotherwords, he says if DepartmentII
capitalists underconsume, then this will inevitably cause a crisis of overproduction to arise in
DepartmentI.Moreover,heevenemphasisesthatthiscrisisofoverproductioncausedbytheunder
consumptionofDepartmentIIcapitalists,canariseevenunderSimpleReproduction.
To those who argued that the dierence could simply have been made up by the capitalists
consumeagreaterportionoftheunconsumedsurplus,Marxhasbasicallytworesponses.Firstly,
thepointistoinvestthesurplustocreatemoresurplus,nottoconsumeit.Secondly,thereisonlya
point consuming the surplus productively, if there is a potential to be able to sell the ultimate
product of that additional productive investment. If the surplus cant be realised now, then
producinganevengreaterquantitywillonlyexacerbatethatproblem,andsothereisnoreason
capitalistswillproductivelyconsumemorewhentheycantprotablysellwhattheyarealready
producing.
Indeed, as he sets out in Theories of Surplus Value, and in Capital III, the reason that the
overproduction arises in the rst place, is because high rates and masses of prot encourage
existing capitalists to relatively reduce their unproductive consumption, and increase their
productiveconsumption,sothemassofusevaluesdumpedonthemarketincreasesatprecisely
thetimewhenthecapitalistsownunproductiveconsumptivedemandisrelativelydeclining.
Inaddition,spurredonbythesehighratesandmassesofprot,someworkers,formermanagers
etc.chancetheirareatgrabbingsomeofit.Soiscreatedtheplethoraofsmallcapitalthatistherst
tobedestroyedwhentheresultantoverproductionmanifestsitselfinacrisis.Againtheseformer
workers have reduced their own nal consumption in order to increase their productive
consumption.
BoySays:
May20,2014at8:42am|Reply
Insteaditwasallaboutpolitics.
Theproblemwiththeitsallaboutpoliticsapproachisthatitdoesntaddressthequestionofwhy
thepoliticscouldworkthenparticularly.WilsontriedtointroduceInPlaceofStrifeandfailed,
Heath tried the IRC and failed, and failed even more disastrously in taking on the miners. The
SocialContractworkedonlyforatime,andthenfaileddisastrouslyin1979.
Whydidthesefail?Theworkingclasswastoostrong.Whywastheworkingclasstoostrong?The
underlying economics meant that despite low rates of prot, it was still worth while bosses
concedingtoworkers.Bythe1980sthatwasnolongertrue.Fewernewcapitalswerebeingformed,
existingcapitalswerenotgrowing,andsomewereshrinking.Strikesarebadsolutionstofactory
closures,andlackofgrowth,andtheLehadnorealstrategyotherthanthemoremilitancythat
ithadbuiltitselfonfortheprevious30years.
Thereweretheridiculouscallsforthecapitaliststatetonationalisethe200topmonopolies,but
thosemakingthemdidntseemtohavenoticedthatthiswasacapitaliststatethathadnoreasonto
undertakesuchactionsintheinterestsofworkers,andthatworkersofsuchnationalisedindustries
bothasworkersand consumerswasnotendearingthemtosuchanalternative. Oenthe state
capitalistemployerwasmuchworsethanlargeprivateemployers.
Thatcherbecamepossiblebecauseworkersweregivennoplausiblepoliticalalternative.Thatchers
aacks on the workingclass was successful because the class had already been materially
weakenedbyrisingunemployment,andaninabilityofcapitaltoconcedeandstayinbusiness.It
had been politically and ideologically weakened by 30 years of miseducation by its leaders who
were thoroughly imbued with a bourgeois, reformist, statist ideology that oered workers no
solutiontothenewconditions.
kapitalism101Says:
May20,2014at11:00am|Reply
IstartedHarveysrecentbookbutcouldntnishit.Itisabominablybadramblingandincoherent
and full of errors. He for instance, lists a contradiction between usevalue and exchangevalue
whichheillustrateswithexamplesfromrealestateratherthanusevalueandvalueandexamples
ofcommodities.Healsothinksthatoxidizeablemoneywillhelpsolvetheproblemsofcapital.
OneoftheironiesofHarveysfrequentcontemporaryappealtounderconsumptionargumentsis
that in some of his earlier books he makes a decent critique of Rosa Luxemburgs
underconsumptionism and of underconsumptionism in general. In Enigma he repeats these
critiques while at the same time, in other chapters, advancing an underconsumptionist thesis. I
have not gured out how he reconciles these two ideas. He denitely has not addressed the
contradictiondirectlyinanythingIvereadofhis.ButImnotsureanymoreifitisimportantfor
Harveytohaveconsistentargumentationinhiswork.
WhatstruckmeabouthispieceonPikeywashowmuchheagreedwithPikeyintermsofthe
data and in terms of the narrative about wage repression and inequality. It seems a very weak
retort.
sartesianSays:
May20,2014at1:15pm|Reply
Marx says lots of things about overproduction in the Grundrisse, in volume 3, in almost all his
writings about capitalism, and I dont recall him ever arguing that in the rst place
overproduction occurs precisely at a time of, or because of, relatively declining unproductive
consumptiondemandbythebourgeoisie.
Overproduction certainly does occur with the overproduction of the means of production as
capital,asthevalueextractingconditionoflabor.
Thelevelofunproductiveconsumptionofcapitalbythebourgeoisieisbasicallyirrelevantasthat
consumption,bydenition,isnotthereproductionofcapital.Marxmakesthisclearinexploding
thecapitalistmythologyretheoriginalaccumulationofcapitalbeinginthehardwork,selfdenial,
etc.etc.ofthewouldbecapitalist.
We have to distinguish among overproduction, crises, and the structural decline in protability.
Overproductionisinherentincapital;iscontinuous,anddoesnotbecomecriticalimmediately.
Crisis is a short term process so while its accurate to describe a crisis in 20082009, it is not
accuratetospeakofacrisisexistingfrom1970,whentherateofprotpeakedintheUS,through
2014.
Itisaccuratetopointoutthatwithinthestructuraldeclineofprotability,thereremainsthecyclical
movement;sothattherecoveriesintherateofprotintheUSforexample19932000,andagain
20032007didnotexceedthepeakof19691970.
Disruptions can occur in the reproduction process for any number of reasons including
disproportionbutsuchdisruptionsarereallyancillarytotherealconictatthecoreofcapital
whichistheorganizationoflaborasvalueproducing.
The linkage between overproduction, crisis, and the long and the short term movement in
protabilityiswhatamountstotheimmanentcritiqueofcapital
CarolWilcoxSays:
May20,2014at2:56pm|Reply
Yes,Pikeyignoresthewaythatcapitalsqueezesthesharewhichgoestolabour.ButbothHarvey
andPikeyignorethesharewhichgoestoland.Haveyounotnoticedtherelentlessincreasein
landvaluesmainlyasaresultoftheincreaseincreditsecuredonlandvalues.?
BoySays:
May20,2014at4:42pm|Reply
Withthedevelopmentoftheprocess,whichexpressesitselfinadropintherateofprot,the
massofsurplusvaluethusproducedswellstoimmensedimensions.Nowcomesthesecondactof
theprocess.Theentiremassofcommodities,i.e.,thetotalproduct,includingtheportionwhich
replacestheconstantandvariablecapital,andthatrepresentingsurplusvalue,mustbesold.Ifthis
isnotdone,ordoneonlyinpart,oronlyatpricesbelowthepricesofproduction,thelabourerhas
beenindeedexploited,buthisexploitationisnotrealisedassuchforthecapitalist,andthiscanbe
boundupwithatotalorpartialfailuretorealisethesurplusvaluepressedoutofhim,indeedeven
with the partial or total loss of the capital. The conditions of direct exploitation, and those of
realisingit,arenotidentical.Theydivergenotonlyinplaceandtime,butalsologically.Therstare
onlylimitedbytheproductivepowerofsociety,thelaerbytheproportionalrelationofthevarious
branchesofproductionandtheconsumerpowerofsociety.Butthislastnamedisnotdetermined
eitherbytheabsoluteproductivepower,orbytheabsoluteconsumerpower,butbytheconsumer
powerbasedonantagonisticconditionsofdistribution,whichreducetheconsumptionofthebulk
ofsocietytoaminimumvaryingwithinmoreorlessnarrowlimits.Itisfurthermorerestrictedby
thetendencytoaccumulate,thedrivetoexpandcapitalandproducesurplusvalueonanextended
scale.
CapitalIII,Chapter15
BoySays:
May20,2014at5:43pm|Reply
Since(IIb)visrealisedinanequivalentpartof(IIa)s,itfollowsthatinproportionastheluxury
partoftheannualproductgrows,asthereforeanincreasingshareofthelabourpowerisabsorbed
in the production of luxuries, the reconversion of the variable capital advanced in (IIb)v into
moneycapital functioning anew as the moneyform of the variable capital, and thereby the
existenceandreproductionofthepartoftheworkingclassemployedinIIbthesupplytothem
ofconsumernecessitiesdependsupontheprodigalityofthecapitalistclass,upontheexchange
ofaconsiderableportionoftheirsurplusvalueforarticlesofluxury.
Every crisis at once lessens the consumption of luxuries. It retards, delays the reconversion of
(IIb)v intomoneycapital, permiing itonlypartially andthus throwing acertainnumberofthe
labourersemployedintheproductionofluxuriesoutofwork,whileontheotherhanditthusclogs
the sale of consumer necessities and reduces it. And this without mentioning the unproductive
labourerswhoaredismissedatthesametime,labourerswhoreceivefortheirservicesaportionof
thecapitalistsluxuryexpensefund(theselabourersarethemselvesprotantoluxuries),andwho
takeparttoaveryconsiderableextentintheconsumptionofthenecessitiesoflife,etc.Thereverse
takesplaceinperiodsofprosperity,particularlyduringthetimesofbogusprosperity,inwhichthe
relativevalueofmoney,expressedincommodities,decreasesalsoforotherreasons(withoutany
actual revolution in values), so that the prices of commodities rise independently of their own
values. It is not alone the consumption of necessities of life which increases. The workingclass
(now actively reinforced by its entire reserve army) also enjoys momentarily articles of luxury
ordinarilybeyonditsreach,andthosearticleswhichatothertimesconstituteforthegreaterpart
consumernecessitiesonlyforthecapitalistclass.Thisonitspartcallsforthariseinprices.
Itissheertautology tosaythatcrisesarecausedbythescarcityofeective consumption,orof
eectiveconsumers.Thecapitalistsystemdoesnotknowanyothermodesofconsumptionthan
eective ones, except that of sub forma pauperis or of the swindler. That commodities are
unsaleable means only that no eective purchasers have been found for them, i.e., consumers
(sincecommoditiesareboughtinthenalanalysisforproductiveorindividualconsumption).Butif
oneweretoaempttogivethistautologythesemblanceofaprofounderjusticationbysayingthat
theworkingclassreceivestoosmallaportionofitsownproductandtheevilwouldberemediedas
soonasitreceivesalargershareofitanditswagesincreaseinconsequence,onecouldonlyremark
that crises are always prepared by precisely a period in which wages rise generally and the
workingclassactuallygetsalargershareofthatpartoftheannualproductwhichisintendedfor
consumption.
CapitalII,pp4145
Wesawawhileagothattheproportionbetweentheproductionofconsumernecessitiesandthat
ofluxuriesrequiresthedivisionofII(v+s)betweenIIaandIIb,andthusofIIcbetween(IIa)cand
(IIb)c.Hencethisdivisionaectsthecharacterandthequantitativerelationsofproductiontotheir
veryroots,andisanessentialdeterminingfactorofitsgeneralstructure.
Simplereproductionisessentiallydirectedtowardconsumptionasanend,althoughthegrabbingof
surplusvalue appears as the compelling motive of the individual capitalists; but surplusvalue,
whateveritsrelativemagnitudemaybe,isaerallsupposedtoservehereonlyfortheindividual
consumptionofthecapitalist.
Assimplereproductionisapart,andthemostimportantoneatthat,ofallannualreproductionon
anextendedscale,thismotiveremainsasanaccompanimentofandcontrasttotheselfenrichment
motive as such. In reality the maer is more complicated, because partners in the loot the
surplusvalueofthecapitalistgureasconsumersindependentofhim.
CapitalII,Chapter20
Onemayassumethatintheessentialbranchesofmodernindustrythislifecyclenowaveragesten
years.Howeverwearenotconcernedherewiththeexactgure.Thismuchisevident:thecycleof
interconnectedturnovers embracinganumberofyears,in whichcapital isheldfastbyitsxed
constituent part, furnishes a material basis for the periodic crises. During this cycle business
undergoessuccessiveperiodsofdepression,mediumactivity,precipitancy,crisis.True,periodsin
whichcapitalisinvesteddiergreatlyandfarfromcoincideintime.Butacrisisalwaysformsthe
startingpointoflargenewinvestments.Therefore,fromthepointofviewofsocietyasawhole,
moreorless,anewmaterialbasisforthenextturnovercycle.
CapitalII,Chapter9
Inthemanuscript,thefollowingnoteishereinsertedforfutureamplication:Contradictionin
the capitalistmode ofproduction:thelabourersasbuyersofcommodities areimportantforthe
market.Butassellersoftheirowncommoditylabourpowercapitalistsocietytendstokeep
themdowntotheminimumprice.
Further contradiction: the periods in which capitalist production exerts all its forces regularly
turnouttobeperiodsofoverproduction,becauseproductionpotentialscanneverbeutilisedto
such an extent that more value may not only be produced but also realised; but the sale of
commodities,therealisationofcommoditycapitalandthusofsurplusvalue,islimited,notbythe
consumer requirements of society in general, but by the consumer requirements of a society in
whichthevastmajorityarealwayspoorandmustalwaysremainpoor.However,thispertainsto
thenextpart.
CapitalII,(Note32,p320)
Theoppositecase,inwhichthereproductionofdemisesofxedcapitalIIinacertainyearisless
andonthecontrarythedepreciationpartgreater,needsnofurtherdiscussion.
Therewouldbeacrisisacrisisofoverproductioninspiteofreproductiononanunchanging
scale.
CapitalII,p471
Thisillustrationofxedcapital,onthebasisofanunchangedscaleofreproduction,isstriking.A
disproportionoftheproductionofxedandcirculatingcapitalisoneofthefavouriteargumentsof
theeconomistsinexplainingcrises.Thatsuchadisproportioncanandmustariseevenwhenthe
xed capitalismerelypreserved,thatitcanandmust dosoontheassumptionofidealnormal
production on the basis of simple reproduction of the already functioning social capital is
somethingnewtothem.
CapitalII,Chapter20
HerbieDestroystheEnvironmentSays:
May20,2014at8:30pm|Reply
Ithinkwehaveseenachangeinthepolitics.Inthattheresponsetoafailureofneoliberalismhas
beenanintensifyingofneoliberalism!Inthepastwewouldhavehadareactionwithmoresocial
democraticclothing.
Itseemsthatsocialdemocracynolongerworksinaglobalisedcapitalistworld.Thetendencywill
betowardauthoritarianism(arealityalready),andthoseinpowerhavethetechnologyandmeans
toenforceit.
Andsowhatifsocialdemocracynolongerworks,mostpeopledontseemtomindandcarryon
regardless, and when we are talking about the West Marx was plain wrong to say that which
reducetheconsumptionofthebulkofsocietytoaminimumvaryingwithinmoreorlessnarrow
limits
Peopleareconsuminglikeengcrazy,mygirlfriendsfamilyhave8TVsinthehouseandtheyare
solidlyworkingclassfolk!Theproblemofcapitalismistoomuchbloodyconsumption,nottoolile.
Marxclearlyhasnothingtoexplainthat.
Whocandenythatthele(Iwontsayworkingclass)havebeenthoroughlyandsoundlybeaten?
Iaskasacommunist,whatgoodisMarxnow?
henrySays:
May21,2014at5:37pm|Reply
Herbie,
Yes.ButtheargumentismorecomplicatedalsoreferringtothewageshareinGDP,ifwelookat
thelowestlayersofsociety, then moreandmore peoplearereally sueringevenintherich
countries, so underconsumption amongst overconsumption by the other classes and look at
regionsincountriesi.e.inEurope(i.e.inEasternEurope,Spain,Portugal)wherepeoplereally
suer,nottomentionAfrica.Marxisgoodifyoulookattheglobalpicture!Overproductionin
theNorthandsueringandsevereunderconsumption/hungerintheSouth.
BoySays:
May22,2014at12:42pm|Reply
Idontthinkitstruethatsocialdemocracydoesntworkinaglobalisedenvironment.Infact,the
oppositeseemstrue.Theeconomywheresocialdemocraticpolicieshavebeenadoptedinthe
sense of scal stimulus was, for example the US. Similar measures were adopted in China,
Japanandsoon.
ThedevelopmentofmanynewlyindustrialisedeconomieslikeBrazilandsoonwentalongwith
the replacement of former Bonapartist and militarist regimes. In the Asian Tigers something
similarhappened,andeventheirauthoritarianregimesfollowedasocialdemocraticstrategyof
developingwelfarestates,promotinghigherwagestrategiestomoveproductionupthevalue
chainandsoon.
The UK was promoting a socialdemocratic strategy until the LiberalTories took over. In
Europe,theimpositionofausterityontheperipheryismoretodowiththepoliticalcrisisin
Europe,duetothefailureatthatlevelofsocialdemocracytopushforwardthecreationofa
single European state that could adopt such a strategy, and which enhances the political
positionofconservativeforceswhosepoliciesaregearedtotheinterestsoftheirsmallcapital
base,andthelandedandnancialoligarchiestheyhavetraditionallybeenlinkedto,asopposed
tothebigindustrialcapitalthatisthefoundationofsocialdemocracy.
AsMarxputsit,wherever,thiskindofmerchantcapitalornancialcapitalisdominant,itleads
topoliticalbackwardness,comparedtowhereindustrialcapitalpredominates.
BoySays:
May23,2014at6:01am|Reply
Theother interestingexample isChina. ThechineseStalinistshaverecentlybeensupporting
demandsforhigherwagesaspartofmovingproductionupthevaluechain,ashappenedin
Singaporeandotherplaces,andasameansofdevelopingthedomesticmarket.But,alsothe
ChineseStalinistsarelookingatdevelopingaWelfareState,becauseaWelfareStateisvitaltoa
modernindustrialeconomyforseveralreasons.
Firstly, to produce educated workers on a mass production basis. Secondly, to ensure they
devoteasucientpartoftheirmeansofsubsistencetoprovidingfortheirhealthcaresothat
theresourcesspentoneducationarenotwastedbecauseofearlydeaths,orincapacitytowork.
Thirdly, to socialise the workers into acceptance of their conditions. Fourthly, to regulate the
laboursupply,andprovideautomaticstabilisersfortheeconomy.Fihly,toreducetheamount
ofsavings,inaneconomythatreliesonhighlevelsofconsumption.Chinesesavingsaresohigh,
becauseworkershavetoovercompensatefortheriskthattheymaybeill,unemployedandso
on.Byestablishingsocialinsuranceschemes,ashappenedinotherdevelopedeconomiesfrom
thestartofthelastcentury,thestatepreventsworkersprovidingsuchinsuranceviatheirown
collectiveactions,whichwouldmakethemapowerfuleconomicforce;itsecurestheirsavings
for its own purposes; and by reducing the need for such savings, encourages additional
consumption to keep the level of aggregate demand up so as to facilitate the realisation of
producedsurplusvalue.
mahewrusso9Says:
May20,2014at9:34pm|Reply
Insuch a way, dwellings should notbeconsideredpartofthecapital, asparticular consumer
goods ratherthan means ofproduction.Similarconsiderationsmaybestatedinothercaseslike
nancialassets(apurecircuitMM)orland.
Buthousing*is*partofthetotalsocialcapitalasthenishedcirculating(insitu)commoditycapital
ofthehousingdeveloper.ItisacommoditycapitalwithinDeptII.
Hencethecaseofhousingisnotatallsimilartothecasesofnancialassetsorland,therst
becauseitshortcircuitsthecommoditycapitalform,thesecondbecauseitisnottheresultofany
humanproductionprocess,muchlesscapitalistproduction.
BoySays:
May22,2014at12:52pm|Reply
Housesthathavebeensoldarenotpartofthecommoditycapitalofpropertydevelopers,they
aremerelycommoditiesthathavebeenbought.Theyarenomorecapitalthanisachocolatebar
atthatpoint.
Thecapitalvalueofthehousebythatpointhasalreadybeenreproducedasmoneycapitalor
productivecapital,orhaslethecircuitofcapitalasmoneytoformrevenueforexploiters.
sartesianSays:
May20,2014at10:20pm|Reply
BoyproducessomeverycomplexruminationsofMarxonthenatureofconsumption,noneof
which point out the overproduction occurs because of, precisely at the moment, when the
bourgeoisiereducetheirunproductiveconsumptiontheirabsorptionofrevenue.Itisthecrisis
asMarxpointsoutthatreducestheproduction,andtheconsumptionofluxuriesandeventhen,
ANDNOW,notalwaysasthehighendofnichemarketshavereboundedquitenicely,asfaras
the bourgeoisie are concerned. In any case the consumption of the bourgeoisie is but a
redistributionofexpropriatedvalue,andnotitsexpandedreproduction.
jeSays:
May21,2014at1:38am|Reply
Marxisnotfocusedonthisthough.DasKapitalisnotconcernedaboutconsumptionorgeing
theworkersmoremoneyorredistribution.ForMarx,thesearereformistliberalideas.
Marxwantstoshow,regardlessofdistributionorreformistideas,thatcapitalismwilleventually
haveproblemswithprotabilityduetoconstantlyincreasingmechanization(constantcapital)
asashareofinvestment.Incidentallythislinesuppreywellwithsomeneoclassicaltheories.
BytheendofBook3hesshownalotofwayscapitalismcangetaroundthisproblem.
Marxists support reformist movements because they increase working class condence,
solidarityandtheyaltertheperceivedsociallynecessarytimeexpectedtocreateaproduct.
Theydontsupportthemtoavoidrecessionsorxcapitalism.
sartesianSays:
May21,2014at3:49am
Butthatsnotreallytheissueunderdiscussion.Thereareseveralissuesunderdiscussion1)
doesvolume2containelaborationsofMarxsnotionsofthe(various)causesforcapitalist
crisisandIthinkitdoes2)doescrisisconformtosomesortofchangesintheproportionof
thebourgeoisiesclaimsonrevenue,onunproductiveconsumptionIthinkitdoesnt3)is
theinherent,necessaryexpropriationofsurplusvaluewhichmeansofcourse,underno
circumstancescantheworkingclassasaclassreceivetheequivalentfortheirentirelabor
time, and therefore must always underconsume the real limit to capitalist expansion I
thinktheanswertothatisno;and4)fromthisgeneraldiscussionistheresuchathingas
either a permanent crisis to capital, or indeed, a crisis that is the deathknell for
capitalismandIthinktheanswertobothofthoseisno.
Certainly Marx aacks underconsumptionist arguments in the Grundrisse and other
works; Just as clearly at several places in volume 3 and other works he talks about the
inherent conict between capitals need to develop the means of production without
restrictionwhentheveryconditionforthatdevelopmentisasocietywhereconsumptionis
determinedandlimitedbythecapitalrelation.
Ithink,however,thatMarxsEconomicManuscripts18571864,andvolume3reallymakeit
clearthatcrisisisinherenttocapitalism,andnecessarytoaccumulation.Mostimportantly,
those works conrm that Marx sees tendency for the rate of prot to decline as the
necessaryoutcomeofincreasedproductivityoflaborandthatspecicallyrepresentsthereal
limit to capital to its mode of organization of social labor. The labor process stands in
oppositiontothevalueprocess(usuallytranslatedasvalorizationprocess)
ThelasttimeIheardHarveyspeak,hewasbabblingaboutoxidizablemoney,andifIhad
hadadollarbillandapackofmatchesonme,Iwouldhavesetthedollaronreaswhat
oxidizablemoneymeans.
jeSays:
May21,2014at1:18am|Reply
Recessions and crises are just not central to Capital, they are usually asides or oen footnotes.
Under consumption theory is about explaining recessions and not something Marx is overly
concernedabout.
Capitalisacritiqueofcapitalismwhenitisrunningsmoothly.
BoySays:
May21,2014at9:09am|Reply
Je,
I dont think that is correct. Marxs analysis certainly is about explaining the mechanics of
Capitalonthebasisofidealtypes.Thecircuitsofreproductionassumethatwhatisproduced
ndswillingconsumers,i.e.theyfocusonshowingthatthevalueequationswork,thatsucient
revenueiscreatedtoconsumenalproduction.
But, its not true to say that Marx is not focussed on crisis. Having set out why these value
calculations work, he then focusses on showingthattheassumption that the fact that these
resultinsucientrevenuebeingcreatedtodemandnalproduction,aswellastheconstant
capitalbeingexchangedwithoutthecreationofrevenue,doesnothold.
His argument against under consumption, is in fact a dierent argument than that against
modern under consumptionists such as Keynes. What Marx was arguing against in arguing
againstunderconsumption,wasSaysLaw.Mill,Ricardo,andSayarguedthattherecouldbeno
general overproduction because supply creates its own demand. If I take a commodity to
market, Isellit,inordertobeabletoobtain anothercommodityinexchange foritofequal
value,therebycreatingademandforthisothercommodity.
Thosewhotodaywanttodenythepossibilityofunderconsumption,orafailureforsupplyto
nd demand, ironically adopt exactly this same position. But, its precisely against this
propositionthatMarxargues,inhisargumentagainstunderconsumptionandSaysLaw!
InTheoriesofSurplusValueII,Marxgiveshisdenitiveanalysisofcrises,andtheircauses.Its
clearlynottruetosaythathesnotconcernedwithit,becausehespendsnearly50pagesseing
it out clearly! In that analysis, he says, that Says Law iswrong, because it only appliesto a
situation of barter. As soon as money intervenes, the potential arises, that I may take a
commoditytomarket,andobtainmoneyinexchangeforit.But,havingobtainedthemoney,
thereisthennoreasonwhyIwillspendit,sosomeothercommodityownerwhoboughtmy
commodityislewiththeirownproductionunsold.
Mill,Ricardoetc.usedthisargumenttosaythatitasnotBritainthatwasoverproducingthat
wascausingaglutoftextilesonmarkets,butChina,Indiaetc,whowereunderconsuming.If
China would engage in more production, thereby employing more people, producing
commodities that Britain wanted to buy, they would then be able to absorb all of the
commodities that Britain wanted to dump on them. This was the under consumptionist
argumentthatMarxwasarguingagainst.
In fact, under consumptionists like Keynes accept Marxs argument that Says law does not
apply. Keynes arguments in relation to the savings rate, and the marginal propensity to
consume are simply restatements of Marxs arguments in Theories of Surplus Value against
SaysLaw,where forexampleMarxarguesthat all that isrequired foroverproductionof all
commoditiesisfortheirtobeapreferenceformoneyoverallothercommodities,forexample,
orhisstatementthatasproductionincreases,orincomesrise,theelasticityofdemandrises.So,
as Marx says, just because the production of knives expands massively due to technological
advances,whichalsoreducethevalueofknives,thisisnoreasonwhythedemandforknives
willriseinthesameproportion.JustbecauseIcanbuy6knivesforthesamepriceIpreviously
hadtopayfor1,isnoreasonwhyIwillthenbuy6hesays.
AshesetsoutintheGrundrisse,andinTOSV,supplyisafunctionofvalue,whereasdemandis
afunctionofusevalue.Peopleincreaseorreducetheirdemandforthingsbecauseoftheuse
valuetheyobtainfromthemhesays.
Thatiswhy,ashesays,crisesofoverproductionoccurwhentherateofprotandvolumeof
protishigh,notviceversa.Thehighratesandvolumeofprotcauseexuberanceandover
investment. They go along with periods of high levels of productivity that cause the prot
margintobelowerasheexplainsinChapter13onthethefallingrateofprot;theycausethe
demandforinputstorisesharplypushingupinputcostsandsqueezingprotsfurther;they
cause the demand for labourpower to rise, so that as he explains in Capital II, and in III
Chapter6and15,wagesrise,reducingtherateofsurplusvalue,butalsoashesetsoutthere,
thesehigherwagesforworkersmeanthatmoreoftheirconsumptionneedsaremet,sotheir
elasticity of demand for many commodities falls, to persuade them to buy more, the market
pricemustfallbyincreasingamounts,sendingitbelowthecostofproductiongiventhefalling
rateofprotmargins.Itswhyhesayssuchcrisesareusuallyprecededbyhigherthannormal
consumptionbyworkers.
But, as he says, the high prots cause capital to switch its own consumption paerns. The
prospectofbiggerprotsmeanscapitalinvestsmore.Inordertoinvestmore,ashesays,inhis
detailedanalysisofreproductioninCapitalII,someofwhichIhavecitedabove,capitalistshave
toshitheirconsumptionfromunproductiveconsumptionbeitluxuriesornecessitiesto
productiveconsumption.So,morevalueisputintoincreasingproduction,whilstthedemand
forunproductiveconsumptionbycapitalists isthereby, atleastrelativelyreduced,whilstthis
increasedsupplyofnalproducts,alreadybeingsoldatlowprotmarginsbecauseofthelaw
offallingprotmargins,facesincreasingproblemsinexpandingdemandfromworkerswhoare
already consuming more than normal, and looking for other types of commodities to buy,
looking to rebuild their domestic balance sheets by saving, or simply requiring much lower
pricestoenticethemtospendmoreontheexistingrangeofcommodities.
ThisisalsowhatMarxisreferringtointheGrundrisseinthesectiononTheCivilisingMission
ofCapital,whenhetalksabouttheseconditionsforcingCapitaltocontinuallydevelopnewuse
values,topersuadeconsumers,includingworkerstoopentheirwalletstospendmoneyrather
thansaveit,tobepreparedtopayhigherpricesforthesenewcommoditiesandsoon.
But, in Capital II, in explaining why you cannot simply assume that supply creates its own
demand,andthatcrisesarisepreciselybecausethisdoesnothappen,andundertheextended
scaleofoperationofCapitalismcomparedwithpreviousmodesofcommodityproductionand
exchange,mustresultincrises,setsoutanumberofreasonswhyitwillbreakdownatvarious
points of the circuit of capital. he also sets out some of these explanations in his Theory of
CrisesinTOSV2.
Forexample,acrisiscanarisesimplybecausecommoditiesarenotsoldinsomespeciedtime.
Becausemoneycomestoactincreasinglyasmeansofpaymentratherthanmeansofcirculation,
ifAdoesnotselltheircommoditiesbysomegivendate,whentheyexpectedtohavesoldthem,
itdoesnotmaeriftheysellallofthesecommoditiesbythefollowingweek.Thefactremains
thattheywillnothavereproducedtheircapitalintherequiredtimeperiod.Theymayhaveto
layotheirworkers,forlackoffundstopaythemwages,morespecically,theymaybeunable
to pay their suppliers who supplied on credit, and this in turn sparks a series of payments
failures,whichcauseswhathecallsacrisisofthesecondformamoneycrisis(asdistinctfrom
whathecallsanancialcrisisarisingsolelyinthemoneymarkets)whichisafeatureofall
crises,butarisesbecauseofafailureofpayments.
TheothercausemightbethatIreferredtoearlier,whichisamismatchbetweensupplyand
demandofxedcapital.AsMarxpointsoutitwouldbeamiracleifoutofallthemillionsof
individualtransactionsofthereplacementofxedcapital,thevalueDepartmentII,demandfor
replacementxedcapitalwherethereisbuyingwithoutselling,matchedthatwheretherewas
sellingwithoutbuying.Allittakesisforthexedcapitaltobeabitmoredurablethaninthe
past etc. and it will last that many more months, until a demand arises for its replacement,
leavingDepartmentIcapitalsinaconditionofoverproduction.
This has absolutely nothing to do with the falling rate of prot, whose fundamental basis is
technologicalchangebringingaboutarisingcompositionofcapital,because,asMarxsetsout,
thiskindofcrisiscanoccurevenifthereissimplereproduction!And,ashesays,thebasisof
periodiccrisesisestablishedfromthiscause,becausexedcapitaldoesgetreplacedatfairly
regularperiods.Forexample,therehasbeenathreeyearcycleforaboutthelast30yearsthat
seemstobetiedtothetechnologyupgradecycle.
Marxalsosetsoutwhyitisthatsupplyanddemandwillnotexceptbyaccidentcoincideso
causingcrises,notjustbecauseofchangingpreferencesofconsumers,risingdemandelasticity,
paymentscrisisandsoon,butsimplyduetodierentlevelsofproductivityindierentsectors,
anddierentratesofturnoverofcapital.
Forexample,inCapitalII,Chapter16,Marxsetsoutthatiftherearetwosectorswithdierent
ratesofcapitalturnover,onesectorwillbeproducingvaluethatispumpedintothemarketas
commoditiesthatcanbeboughtbytheworkersandcapitalistsofbothsectors.But,theother
sector whose turnover requires more than a year, will be paying out revenues wages to
workerswhowillbecomingintothemarketwiththatrevenueandbuyingthecommoditiesof
therstsector.Theworkersoftherstsector,however,willthencomeintothemarketwith
theirrevenues,onlytondthattheirarenosector2commoditiestobuy,becausetheywillnot
besentintothemarketforanotheryear!Unlesssucienthoardsareavailablethismustleadto
adisjunctionbetweensupplyanddemand.
But, also he sets out in TOSV2 that where there are 2 sectors with very dierent levels of
productivity,suchasituationwillarise.Bothsectorsmayhavecapitalofthesamevalue,and
mayexpandthiscapitalbythesameproportionhesays,butifcapital1hasamuchhigherlevel
ofproductivitythancapital2,itmayincreaseitsproductionofusevaluesbysay20%,whereas
capital2mayexpanditsproductionofusevaluesbyonly5%.
Theworkers,andexploitersofcapital1,maywellbeabletoabsorbtheadditional5%ofuse
valuesproducedbycapital2,byincreasingtheirdemand,butMarxsays,thereisabsolutelyno
reason why the workers and exploiters of Capital 2 will similarly increase their demand for
capital1scommodities,bythesame20%,itssupplyhasincreasedby.Theincreaseinvalueof
bothcapitalshasbeenthesame,inpurelyvalueterms,thereissucientvalueasrevenueinthe
handsofcapital2toabsorballofcapital1soutput,butMarxsaystheredemandisbasedon
use value, on their preferences, on how much of their physical requirement for capital 1s
commodityhasalreadybeensated.
IfCapital1wantstosellallofthisadditional20%ofadditionaloutput,therefore,Marxsays,
theywillhavetoreducethemarketpricebelowthepriceofproduction,anddependingupon
theextenttowhichCapital2sworkersandexploitersresistbuyingCapital1scommodity,the
marketpricemayfallbelowthecostofproduction.Thelowertheprotmargin,asaresultof
thelawoffallingprotmargins,themorelikelyitisthatthislowermarketpricewillbebeneath
thecostprice,resultinginlosses,andcrisis.
sartesianSays:
May21,2014at1:00pm|Reply
It arises because xed capital does not wear out at a uniform rate. The consequence is that
DepartmentIIproducersrecoverthevalueofthewearandtearoftheirxedcapitalinthevalueof
theirproduction,butthisvalueishoardedasmoneycapital,untilitisrequired.Atthesametime,
someDepartmentIIcapitalistsareusingpreviouslyhoardedmoneycapitaltobuylargeamountsof
xedcapitalwithoutpuinganequivalentamountofvalueofcommoditiesintocirculation.Some
arebuyersbutnotsellers,whilstothersaresellersbutnotbuyers.Providedthetwobalanceout
everythingisne,butthechancesthathappensisremote.
Marx specically says, that the cycle for the replacement of such increasing quantities of xed
capitalisthebasisofthebusinesscycle.
HereisoneoftheproblemsIhavewithdisproportiontheory.Supposedly,atoneandthesame
time,acrisisiscreatedinthedierentratesofdevaluationofthexedassets,whichdevaluation
occursasthexedassetstransfertheirvaluetocommoditiesthroughtheconsumptionoftheiruse
valueintheproductionprocess.Atthesametime,apparently,thewearrateisuniformenoughto
becomethebasisforthebusinesscycle.
Ithinkcapitalitselfresolvesthisissuethrough2mechanisms:1)creditMarxnotesthatthe
origin of credit is in the dierent circulation times of capital, and the need of the capitalists to
reduce that time to as near zero as possible 2) prices of production where, in agriculture for
example, the price of fertilizer, seeds, pesticides, machinery increases faster than the price of
agriculturalcommodities.
Anyway,thebestbookonthebusinesscycleisMaksakovkysTheCapitalistCycleandhedoes
holdtoatheoryofdisproportion.Atcore,though,disproportionreallyisanothertheoryofunder
consumption, something that comes through Maksakovskys brilliant exposition of the business
cycle.Whatyouarelewithattheconclusionofdisproportiontheoryissupplyanddemand,
andthesocalledlawsofsupplyanddemand.
Capitalism is always a system that is overproducing and underconsuming. The key to the
barriercapitalcreatesforitselfinitsneedforaccumulationisinthechangingproportionbetween
thecomponents,theexchange,thatisindeedcapitalthatislaborpowerconguredaswagelabor,
and the means of production congured as capital as a CONDITION of labor opposed to the
laborersthemselves.
NadeemSays:
May23,2014at11:06pm|Reply
Pikeyndingsundercutbyerrors
ByChrisGilesinLondon
May23,20147:00pm
hp://www..com/cms/s/2/e1f343cae28111e389fd00144feabdc0.html#axzz32ZnOeI6h
ThomasPikeysbook,CapitalintheTwentyFirstCentury,hasbeenthepublishingsensationof
theyear. Its thesisof risinginequalitytapped into the zeitgeistandelectried thepostnancial
crisispublicpolicydebate.
But,accordingtoaFinancialTimesinvestigation,therockstarFrencheconomistappearstohave
gothissumswrong.
ThedataunderpinningProfessorPikeys577pagetome,whichhasdominatedbestsellerlistsin
recent weeks, contain a series of errors that skew his ndings. The FT found mistakes and
unexplainedentriesinhisspreadsheets,similartothosewhichlastyearunderminedtheworkon
publicdebtandgrowthofCarmenReinhartandKennethRogo.
ThecentralthemeofProfPikeysworkisthatwealthinequalitiesareheadingbackuptolevelslast
seen before the rst world war. The investigation undercuts this claim, indicating there is lile
evidenceinProfPikeysoriginalsourcestobearoutthethesisthatanincreasingshareoftotal
wealthisheldbytherichestfew.
ProfPikey,43,providesdetailedsourcingforhisestimatesofwealthinequalityinEuropeandthe
USoverthepast200years.Inhisspreadsheets,however,therearetranscriptionerrorsfromthe
originalsourcesandincorrectformulas.Italsoappearsthatsomeofthedataarecherrypickedor
constructedwithoutanoriginalsource.
Forexample,oncetheFTcleanedupandsimpliedthedata,theEuropeannumbersdonotshow
anytendencytowardsrisingwealthinequalityaer1970.Anindependentspecialistinmeasuring
inequalitysharedtheFTsconcerns.
ContactedbytheFT,ProfPikeysaidhehadusedaverydiverseandheterogeneoussetofdata
sources[onwhich]oneneedstomakeanumberofadjustmentstotherawdatasources.
Ihavenodoubtthatmyhistoricaldataseriescanbeimprovedandwillbeimprovedinthefuture
butIwouldbeverysurprisedifanyofthesubstantiveconclusionaboutthelongrunevolution
ofwealthdistributionswasmuchaectedbytheseimprovements,hesaid.
Hiscontentiontohavefoundacentralcontradictionofcapitalismhasinrecentmonthsmade
himaheroofthele.Althoughhisconclusionshavestirredcontroversy,therehas,untilnow,been
nearunanimouspraiseforthequalityofhisstatisticalwork.
On a tour of the US last month, Prof Pikey met Jacob Lew, US Treasury secretary, gave a
presentationtotheWhiteHouseCouncilofEconomicAdvisersandlecturedattheInternational
MonetaryFundandtheUN.
Nobel prizewinning economists have heaped praised on Mr Pikeys work. Professor Paul
Krugman of Princeton University, said it was safe to say the book will be the most important
economicsbookoftheyearandmaybeofthedecade.
ProfessorJosephStiglitzofColumbiaUniversitysaidProfPikeysfundamentalcontributionwas
theprovisionofdataonthedistributionofwealth.Itwasthesubjectoflaudatoryreviewsinthe
FinancialTimesandotherpublications.
InBritain,EdMiliband,Labourleader,toldtheEveningStandard:Imintheearlystagesofthe
book.Inaway,heissymptomaticofwhatpeopleareactuallyfeeling.
InhisresponsetotheFT,ProfPikeysaidthatmorerecentdatanotinhisworkshowedtherise
intopwealthsharesintheUSinrecentdecadeshasbeenevenlargerthanwhatIshowinmy
book.
DougSays:
May24,2014at6:14pm|Reply
ExcellentMichael.PooroldPickeyexplainshisratherweakpoliticsonpage31andultimatelyis
ignorantofthelabourtheoryofvalueandarguesinequalityisnecessaryandthereforeexploitation
isok
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