Monthly Archives: September 2018

Lecture #2: Value Theory and the Falling Rate of Profit

[lead bloggers: Laura Rivas Burgos, Roberto Elvira, and Nicolas Benacerraf]

In this week’s lecture, David Harvey reflected on Marx’s value theory, which is often mistaken for the “labor theory of value” discussed by classical economists. While Marx did engage the “labor theory of value” to formulate his own ideas around value production, he did so in a critical spirit and from a point of contention.

In order to explain how Marx’s concept of value works, Harvey revisited the six introductory chapters of Capital, Volume I, where Marx observed that the process of commodity exchange is facilitated by a common social standard of measurement (money). More precisely, different use values suddenly become commensurate in exchange under the larger umbrella of value. David Ricardo had previously equated value to congealed labor time, but Marx would distinctly qualify this statement to affirm that value is *socially necessary* labor time. As such, value is not simply a quantitative expression, or intrinsic, but is actually contingent on a series of social processes tied to the spheres of production and circulation where value is realized.

Value can only exist in a society where commodity exchange has become normalized, which in turn requires the existence of money to facilitate such exchange. Money is value’s form of appearance; a material representation of value that quantitatively expresses it, as well as a vehicle for its realization. But price and value are not the same. Whereas Ricardo was concerned with the former, Marx understood the potential incongruities between these two concepts and (in Volume I) was more interested in the consequences of value production for the worker. As such, his analysis transitioned into the production phase to better grasp how value is constituted through material activity.

The “coercive force of competition” compels capitalists to implement certain practices in the production phase (e.g. the extension of the working day) in order to maximize surplus value. Similarly, in order to boost relative surplus value, capitalists introduce cooperation, the division of labor, technological innovations, and so forth. Some of these measures eventually affect the organic composition of capital. For instance, technological innovations may result in an increase of constant capital at the expense of variable capital, reducing the proportion of labor power involved in the production process. The release of workers contributes to the formation of an industrial reserve army—a mass of potential workers living in immiserated conditions of social reproduction. This surplus of labor power fulfills the important role of keeping wages low, thus yielding more surplus value for the capitalist. As such, value as it is conceived in the market is constantly being revolutionized through modifications at the level of production and at the expense of the worker. Marx’s distinctive value theory expresses the contradictory unity of the labor theory of value (exposed in the first 6 chapters of Capital Volume I) and the “value theory of labor” (as Diane Elson calls it) in the sphere of production. In many ways then, Harvey suggests, the theory of value is also a theory about the conditions of the worker; a theory of the alienation of workers from the fruits of production.

This interpretation of the value theory illuminates certain contradictions within the process of value production. This takes us to the second section of Harvey’s lecture, concerning the falling rate of profit. In Capital, Volume III, Marx explores how labor-saving technologies have a tendency to reduce the overall surplus value. That is, a decrease in labor input also results in a falling rate of profit because workers are the ones who actually produce value. However, commodities need to be sold in order for this value to be realized. This dynamic introduces a contradictory relation between competitive market processes that seek to yield more surplus value and the miserable conditions of social reproduction that these processes produce. That said, although the rate of profit is prone to decrease over time, the overall mass might still increase. And the proportion of profit that is allocated to the capitalist class also increases, producing a growing income disparity. There is a fundamental disconnect between the conditions in which value is produced and the conditions in which it is realized. Poor conditions of social reproduction drive consumption power down, leading to a crisis in realization. Again, this is an instance where we can observe that the capitalist experiences alienation. Here, alienated social power manifests itself and confronts society as an autonomous social *thing* that exists above and beyond the individual participants of all classes.

The regularity of market crises – momentary violent solutions that restore balance to the “limit cases” of capitalism – expose the inherent limits and contradictions of capitalist organization. To overcome those limits, the markets expand. Marx anticipated the building of a world market, which he called the destiny of the Bourgeoisie (Communist Manifesto). Only through the realization of surplus capital can crisis (“realization barriers”) be overcome, and this realization takes place in the act of consumption (be it final consumption or productive consumption). Accordingly, the increasing insufficiency of local or national realization obliges the expansion of capital on a global scale. The crisis of 2007/2008, which sprung in the subprime mortgage of the real-estate in the southern USA, was resolved through the productive consumption of China, which through infrastructural investment broke the barrier of realization by absorbing the surplus of capital and labor circulating at that time.


Discussion Questions

1) Harvey mentioned that crises in capital do not represent endpoints, but violent solutions that restore order to existing contradictions. In what sort of situations could these crises and contradictions represent – if not an endpoint to capital – at least a threshold for articulating anticapitalist thought and action?

2) In Capitalism, price functions as a representation of value, offering a material substitution for an abstract/immaterial concept. Part of the job of anticapitalists is to articulate the alternative forms of value that are excluded from the capitalist model. What are some examples of movements, actions, or authors that reveal other alternative forms of value? Might this relate to the prospect of inventing “socialist money”, which Harvey alluded to during the lecture?

3) Alienation is both a condition of the exploited as of the exploiter – of the laborer and of the capitalist. However, how do these forms of alienation differ? Is it enough to state that one is of the production and the other one of the realization process? If alienation is an integral part of the capitalist system, and if time (when) and space (where) class identity (who) are also a part of it, what role does context play in the experience of alienation?

4) We will post summaries of the questions that were asked in person during the lecture. You might choose to continue one of those threads.

Introductory Lecture: Summary and Discussion Questions

[lead bloggers: Hilary Wilson, Anthony Ramos, and Benjamin Rubin]

In his first lecture in the series, “Anti-Capitalist Thought and Action,” David Harvey created a foundation for understanding the problems of capitalism today, by thinking through Karl Marx’s Capital. Rather than an ideological commitment to (capital M) Marxism, Harvey is motivated to return to a Marxist conceptualization of political economy out of a concern for capitalism’s inherent tendency toward compound growth, and the social and ecological catastrophe it has created. We have lived through a crisis of capitalism that was resolved through debt financing; and are currently in a phase of ever-increasing debt to finance the required growth. Why debt? Money is the only form of capital––unlike productive capacity and commodities––that can increase without a physical limit, and so for the past ten years, money-creation has been turned to in order to pump up economies that can not grow fast enough by other means.

Harvey introduces this lecture series by turning the basic diagram of capital accumulation, M-C-M’, into an expanding cycle or spiral. The diagram has many complexities, but the central point is that capital moves between three distinct phases: 1) Valorization of capital through the production of commodities, 2) Circulation of capital in which it is realized as value, and 3) the Distribution of capital, in which the value in money form is divided between different groups according to different levels of social power. Each of these corresponds to a single volume of Marx’s opus, Das Kapital, and entails particular sets of social relations that operate according to particular logics. While each phase is related to the others, these relationships are not deterministic. Further, because each volume explores only one of these phases, it analyses that phase as if the other two were unproblematic, assuming away the contradictions arising from other the phases. The remainder of this post will give an overview of each phase in capital circulation which was covered in Harvey’s lecture.



Volume I of Capital focuses on the phase of valorization or production. The principal goal in the valorization process is the production of relative surplus value, which can be understood as the equivalent of money capital plus surplus value extracted from labor power. In order for capitalist production to function, there must be an adequate money system and commodity market in place or it must be created. Money capital is used to purchase two kinds of commodities: labor power and the means of production (e.g. physical capital in the form of machinery), while what Marx called “free gifts of nature” (including human nature), are appropriated as the raw materials for the production process. Like subsequent volumes of Capital, Volume I operates under certain assumptions in order to illustrate the particular rules governing the valorization process. Namely, landlords, merchant capitalists, and bankers – all of whom figure prominently in the distribution phase – are largely absent from Volume I. Further, it assumes there are no barriers to the realization of value, which becomes an important point of contradiction in Volume 2. As such, the primary contradiction animating capitalist relations as they relate to valorization is that between labor and capital, with capital incentivized to drive down wages in order to extract as much surplus value as possible, resulting in the increasing immiseration of the working class. Capitalists also undercut labor power through the creation and maintenance of an industrial reserve army of unemployed and alienated workers, as well as through technological change.



In Volume 2 of Capital, Marx turns from production to the circulation of capital. Assuming perfect stability in the other forms (stable production––meaning no technological change, and perfect distribution) allows him to engage in the conditions of realization of capital; i.e. the moment when the value that the capitalist assumes and hopes is embodied in commodity C becomes real money as it is sold in the market for M’.


A key contradiction in this process is that different forms of capital circulate at different speeds: capital-as-infrastructure is built with different lifespans, capital-as-production-technology becomes obsolete and replaced at different rates, and so on. This creates a problem of coordinating different time scales which requires some mechanism of deferring the realization of value into the future, or accessing the money form of capital now, based on assumptions of future realization of locked capital: in a word, credit. Conflicts in the speed of circulation are resolved through financial means. Capital stock is valued at a discount rate, money capital is priced via the interest rate, fixed commodities like homes become streams of payment stretched out over years; all showing how credit relations allow the alignment of different temporalities. However, there is no way to hedge against value loss without facilitating speculation- the system of value can not work without fictitious value.



David Harvey described how Karl Marx understood the Distribution of Value in the Form of Money as not a passive stage in the process of Capital but rather a dynamic and active stage. From Harvey’s diagram of this moment of Capitalization, we can visualize the relationship between various participants in the total process of Capital and how surplus-value and Value (or total value) fold back into the larger process. Particularly evident at this moment is not simply the competing interests among the various factions nor the differences between the forms of value, but rather the contradictions (and unity) between, say, the State’s interest in drawing revenues from wages and the power relations driving down wages in field of production.

While reading through Harvey’s recent book, “Madness of Economic Reason,” I made note of how he described another area of the ‘contradictory unity’ of the field of distribution with the fields of realization and valorization:

‘While a lot of wealth is extracted by capital from realisation, even more is sucked out from distribution. The most blatant form of redistribution has to highlight the declining share of labour in the national product in much of the world and the failure of labour in recent times in particular to receive any benefits from rising productivity… The shift from productive to unproductive labour accompanied by excessive bureaucratisation within both the state and corporations has not helped.” (200).


The solution to this contradiction, as we have witnessed in various historical moments since the 1970s, has been financial “innovations” that continue to make new fictitious forms of value —  think quantitative easing and the dark CDO markets — and neoliberal economic policies and political pacts. Less talked about, during our first lecture, were the political mechanisms put into place to secure the collection of debts from those who have been enticed or coerced into taking on loans that “innovative” financial mechanisms are backing. This is particularly noticeable for me, especially as I think through Harvey’s assertion that Marx did not consider the working-class to have a say in the field of distribution. Social movements, including Occupy and recently in Michigan, Wisconsin, Puerto Rico, and Venezuela — as well as progressive/reactionary politics like the Bernie campaign and Brexit — have foregrounded fiscal policy and economic inequality in political action.


Discussion Questions

1. As a phase of capital, production is already a terrain of a particular struggle, the struggle between laborers and capitalists. What are the forms of struggle inherent to the other two phases of capital, realization and distribution? How can conflicts over distribution and realization be made part of a class struggle, or an anti-capitalist struggle?

2. Marx described capitalism’s dependence on “free gifts of nature”. Many scholars have pointed to the similarities between the need for cheap nature, and the need for cheap labor. These are not merely analogous. Historically, a key way that labor has been devalued has been by ideological claims about human nature: that native people are closer to a dangerous nature, and thus less civilized; that women are closer to a nurturing nature, and thus naturally suited to domestic care work. How are these ideologies of nature and human nature reflected in Harvey’s expanding spiral of capital?

3. In his talk, Harvey demonstrated that crises often result from contradictions among the various phases in capital circulation, for example, from the inability to realize surplus value because of insufficient demand. At the same time, Harvey emphasized the necessity for anti-capitalist movements to understand that there are different rules governing different games, engendering different social relations at each phase in capital circulation. But I wonder how a focus on the differences between moments or phases in the capitalist economy helps us formulate a strategy for confronting / resolving crises arising from contradictions among these phases. Put another way, while the relations between workers and capitalists is certainly distinct from that between renters and landlords, or creditors and debtors, it seems that what social movements have been less successful at doing is understanding these relations collectively, as interrelated parts of a totality which calls for an expansive, “cross-phase” approach.

4. Strategy: contradictions inherent within phases of capital, vs between the conflicting demands between the different phases of capital.

For Harvey, many of the contradictions of capitalism can be understood as contradictions between the dictates of capital in its different phases. For example, as valorization of capital takes place through the production process, surplus value is extracted from labor; and thus a pressure exists to lower the costs of labor as much as possible. However, the circulation of capital relies on consumer demand, and thus lower wages––while beneficial for the valorization of the capital invested in the production process––become a problem for realizing that value in the market.



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