David Harvey, an English professor in the United States, is one of the most influential practitioners of Marxist political economy. From The Limits of Capital (1982) to The Enigma of Capital (2010), his books have won a wide readership and have often defined the terms of the debate for the activist and academic left alike. Harvey sees his most significant contribution as being to integrate the discipline of geography into the concerns of political economy. For those newly searching for answers to the questions posed by a capitalist world very evidently in crisis, Harvey is probably best known for his remarkably popular online lectures on the volumes of Marx’s Capital (now in the process of being published).
In his latest contribution, Seventeen Contradictions and the End of Capitalism (2014), Harvey has written a wide-ranging and ambitious overview of contemporary capitalism and attempted to locate the sources of a more humane future. As the title suggests, Harvey examines capitalism through the prism of seventeen contradictions. There is nothing sacrosanct about the number seventeen but there is about the idea of contradiction. Harvey follows Marx’s approach of seeking to understand any given social form by means of its inner conflicts and tensions and of seeking to understand social change in terms of the resolution of these conflicts and tensions. Any resolution, in turn, sets up new conflicts and tensions which drive future social change.
Harvey’s description of conflicts within families and in work-life balance is an attractively accessible introduction to how contradictions work. He is perhaps a little cavalier in his overall treatment of the concept. He mentions in passing that he relies on the dialectical rather than Aristotelian conception of contradiction without explaining what the differences between these two methods are – other than to reference a work on the dialectic by Bertell Ollman. Better the light touch, though, than a heavy treatise on the subject.
It is important to understand that for Harvey capitalism and capital are distinct concepts. “By capitalism I mean any social formation in which processes of capital circulation and accumulation are hegemonic and dominant in providing and shaping the material, social and intellectual bases for social life” (page 7). Harvey uses the concept of capital in order “to isolate capital circulation and accumulation from everything else that is going on. I treat it as a ‘closed system’ in order to identify its main internal contradictions. I use, in short, the power of abstraction to build a model of how the economic engine of capitalism works” (page 8).
Harvey’s approach is built on firm Marxist ground. Marx reputedly never used capitalism to describe a social system. The object of his study of political economy was, as with Harvey, capital. Capitalist did serve as an adjective in Marx’s writings, as in the capitalist mode of production. Even this concept was an abstraction, there being in Marx’s day, and arguably, in our own, no pure capitalist society unadulterated with survivals from earlier social forms. Harvey’s idea that capitalism is a society in which capital is hegemonic is a useful way of relating the abstract to the concrete.
Havey’s focus on capital means that he does not tackle those aspects of society – even those which might give rise to acute contradictions – which he does not consider to be unique to capital. Questions of gender and race, which transcend capitalist forms of society, or geo-political conflict (discussed under the heading of imperialism by many on the left), which Harvey does not believe is intrinsic to the contradictions of capital, are largely (although not entirely) absent from this work.
So where does Harvey’s discussion of the contradictions of capital lead him? Harvey divides these contradictions into three broad categories: foundational, moving and dangerous. The foundational contradictions include those such as between use and exchange value, social labour and money, private property and the capitalist state, capital and labour, and production of commodities and their successful sale, which are a constant feature of capital across time and place.
Harvey’s moving contradictions (the nature of technological change and its impact on the role of labour, the alienation at the heart of capital’s division of labour, the tension between monopoly and competition, uneven development across the surface of the globe, inequalities, social reproduction, and freedom and domination) are in many ways also foundational to capital but, according to Harvey, change the form they take in different historical eras and in different places much more radically.
The dangerous contradictions – capital’s need to endlessly grow, the degradation of nature, and the acute form that human alienation will take in a world in which social labour tends to disappear – have perhaps emerged more recently and are the contradictions that have the potential to prove fatal for capital – and possibly human society.
Harvey makes clear from the beginning that his principal objective in this work is to uncover the causes of capitalism’s periodic economic crises, such as the crisis that resulted from the financial crash of 2008. For Harvey, capital’s central contradiction, which either flows from or shapes all the others, is undoubtedly that between its drive to produce as many use values as possible while seeking to reduce costs (including workers’ wages) to an absolute minimum, and its need to sell those products (as commodities with values) in the market in order to actually realise the profit that is the motor force of any economy based on capital. The reduction of workers’ wages shrinks the market for the goods that workers produce. The last foundational contradiction (“The Contradictory Unity of Production and Realisation”) is therefore the pivot around which the rest of the book revolves.
It is on this conclusion that I part company with Harvey. An economic crisis may be defined as the collapse of the market for a sizeable proportion of goods that are produced. Companies subsequently go bust and production facilities are left idle. Crisis is in a very immediate sense the separation of production and sale (realisation in Marxist terms). As Marx points out early in the first volume of Capital, the existence of money as a medium of exchange creates the possibility of a break in the circulation of commodities (and capital) and thereby is the first condition for an economic crisis.
However, a description of a phenomenon is not the same thing as explaining it. Harvey quotes Marx to the effect that the point of science is to explore beneath the surface appearance of things. And when it comes to capital and capitalism the scientific method must seek to expose the myriad fetishisms with which our social system obscures its real nature. By this test, analyses, such as Harvey’s, that explain the underlying causes of capitalist crises in terms of a lack of effective demand fail.
Harvey explains that the model of the first volume of Capital assumes that capitalists can always increase their profits by maximising the exploitation of workers (by pumping out of the production process as much surplus value as possible). By contrast, Harvey claims, the second volume of Capital in studying the conditions of circulation and realisation concludes that lack of aggregate demand “creates a serious barrier to the continuity of capital accumulation” and that “working class consumer power is a significant component of that effective demand” (page 81).
Harvey talks of capitalist economic policy since 1945 oscillating between a management of demand consistent with the stance of volume 2 of Capital (up until the mid-1970s) and a neoliberal counter-revolution reducing the share going to workers in line with the analysis of volume 1 of Capital. The first policy approach created a profits-squeeze crisis in the 1970s as rising wages and the expansion of social provision cut into the surplus available for profits. The second phase of economic policy, despite promoting a credit boom in order to prolong the good times for capitalism through the 1990s and early 2000s, ended up undermining the demand for capital’s output and led to the most recent crash.
Harvey’s contention is that throughout the history of capitalism, the resolution of one crisis has moved the conditions that will create the next crisis continually from one set of contradictions to another set in precisely the way that he describes post-war economic history. The unifying theme is the tension between the need to sell what capital produces while taking steps that either restrict the market for capital’s goods or cut into the profit that can be made from selling them.
The problem with Harvey’s thesis is that it simply is not consistent with Marx’s model of a capitalist economy – least of all volume 2 of Capital. Now, Marx’s model could be wrong, but Harvey is attempting to construct his own theoretical approach on the basis of what he claims is Marx’s model. The reproduction schemes at the end of volume 2 demonstrate that the continual circulation of capital is possible however tightly squeezed workers’ wages are. In these schemes Marx does not privilege production goods (Marx’s Department I) or consumer goods (Marx’s Department II) as the ultimate source of effective demand. There is a relationship between the two sectors of the economy – workers producing production goods spend their wages on consumer goods and capitalists producing consumer goods purchase production goods to keep their factories going – but there is no set ratio between the size of one sector and the other. It is perfectly possible for the relative size of the production goods sector to increase while that of the consumer goods sector shrinks and for overall effective demand to stay the same.
The mistake many theorists (even those of a Marxist bent) make is to assume that in some sense a capitalist economy exists to produce use values for human beings and that, therefore, the production of consumer goods drives overall demand. On the contrary, capital is simply self-expanding value (the production of surplus value that is then reinvested to produce more surplus value) – it has no ultimate purpose beyond that and certainly no purpose that encompasses human welfare. If workers by industrial or political means increase their wages and force concessions from the capitalist state, capital will readily meet the effective demand produced by a ‘consumer society’. Capitalist politicians will assert that increasing living standards is the purpose of economics. But whatever the conscious motivations of capitalists and their apologists, dull economic compulsion will reassert itself so long as the rule of capital is not overthrown.
Common sense tells us that the suggestion that a reduction in the share of workers’ wages in the US economy of, say, 5% (which is the order of the shift that is claimed took place over the last two or three decades) would cause chronic demand problems for the US economy when there is no reason in principle why US capitalists could not expand the output of production goods does not make a lot of sense. After all, historically (take Britain in the nineteenth century) and geographically (take China today) capitalism has flourished when the share of workers’ wages was a lot lower than it is today in the United States. There must be another underlying explanation of the problems US capital experienced during this period.
In my view, the key contradiction that explains the periodic crises of capitalism is the drive to raise the productivity of workers – what Marx describes as the extraction of relative surplus value – and the way this reduces the value of individual commodities. A capitalist who increases the productivity of his (and let us assume as is usually the case that the capitalist is a man) workers by means of a new technique, form of organisation or new technology that steals a march on his competitors can sell his goods at a price that reaps him an increased profit. Once the technique, method or technology becomes generalised, the price of all the goods produced in that field of production falls back and no one will be making any more profit per worker-hour than before. Only if the increase occurs in the consumer goods sector and allows the value of workers’ wages to be reduced will capitalists collectively be able to increase the rate of exploitation and profits. Even so it is quite possible that the rate of profit will have fallen – if capitalists are now spending more than they were before on capital goods, for example, an expensive piece of machinery.
The paradox for capital is that while workers may be producing immensely more use values than they were before any given increase in productivity, value is measured in terms of the amount of time a worker puts in. The value that an average worker produces in an hour remains the same across all epochs of capitalism. Twenty-first century capital squeezes exactly the same amount of value out of an hour of an average productive worker today as nineteenth century capital did from an equivalent worker one hundred and fifty years ago.
This phenomenon is often described in terms of Marx’s law of the tendential fall in the rate of profit – described in the third volume of Capital which is devoted to the formation of the rate of profit (including the circumstances in which it falls) and its distribution among the factions of the capitalist class.
I think it is a little too simplistic to describe the formation of crises purely and simply as a response to changes in the organic composition of capital. This is the ratio between capitalists’ investment in capital goods and the number of workers employed – when it is high the rate of profit will tend to be low because capitalists’ outlays are high compared with the amount of value that can be produced.
I think we need to decompose the elements that contribute to the rate of profit. I suggest that the fall in the value of fixed capital purchased at the beginning of the economic cycle (Marx’s ‘moral depreciation’ and which can ultimately counteract the fall in the rate of profit) by the end of the economic cycle reduces anticipated profits for a section of capitalists. This makes it a strong candidate for the factor which regulates the ups and downs of the short-term ‘business cycle’.
The organic composition of capital determines the direction and level of the rate of profit over time (the so-called long waves of economic development) and the severity of economic downturns. Since the rate of profit forms the upper boundary to levels of investment and to the rate of growth that is possible, the fact that global economic growth was lower over the decades before the crash of 2008 than in the post-war boom strongly suggests that the rate of profit was also lower. Rather than trying to develop a model that ascribes lower growth to problems of demand, Marxists would do better to stick to the more straightforward explanation. That explanation has the added advantage of being consistent with Marx’s model of capital.
The various speculative financial and asset booms of the 1990s and 2000s can then be seen as attempts by capitalists to boost a low rate of profit, as opposed to the alternative explanation that they were seeking an outlet for ‘surplus capital’ – shifting the underlying explanation of crises from realisation to the rate of profit (and the realm of production) is a model that allows for the incorporation of all the contradictions of capital as Marx insisted was necessary.
It is not that Harvey ignores the problem of the production of value and the consequent impact on profits. It is just that it is constantly overshadowed and generally subsumed in his thinking by the problem of consumer demand. He even at one point (page 107) manufactures a counteracting factor to the fall in the rate of profit (“a class of consumers who produced nothing”) that he ascribes to Marx but bears no relationship to anything in Marx’s main works and would only work if Marx’s discussion of falling profit rates was about demand in the market rather than the production of value. I assume that Harvey is misinterpreting an altogether different factor.
The sharp differences I have with aspects of Harvey’s central analysis do not detract from the value of much of what he write. The discussion of each contradiction forms something of a separate essay. In them Harvey’s thinking and range of interests offer a multitude of insights. His well-known concept of “accumulation by dispossession” (first introduced in The New Imperialism, 2003) does feature freely and lacks too much in the way of precision for my liking. Nevertheless, his discussion of the balance between monopoly and competition in the development of capitalism is a tour de force. His discussion of the dynamics of capitalism’s spread around the globe and the geographic relocation of capital’s contradiction is fascinating. If he gave more weight to the problems of value production in his discussion of the conflict between fixity and motion around the massive investments that are made in fixed capital Harvey’s writing on the geographical element of Marxist political economy would be enriched.
And Harvey does point towards the end point of capitalism. If production were to be completely (or substantially) automated, value would cease to exist. Yet, faced with this prospect, Harvey cannot help but pose the question of who would purchase the use values that were being produced if no one were employed as a worker. But the key problem would not be one of demand. It would be on what basis a price could be attached to a product that had no value.
Harvey seems to believe that capitalism could survive the evisceration of value – with rent-extraction taking the place of the extraction of surplus value. How could that be the case? In a capitalist society rent involves the redistribution of surplus value produced elsewhere in the economy. The absence of value must involve a shift to a post-capitalist society. Either the products of a broadly valueless production would be freely available in a socialist or communist society of free human beings. Or an unfree society would prevail based either on the forcible extraction of a surplus in the form of some kind of non-capitalist rent, or simply through the physical control and distribution of use values by an unaccountable elite – probably in a world of competing warlords. The dystopian outcome would not be capitalism – if there were no value, capital as self-expanding value could not exist.
The key political question for socialists is, therefore, what we can do to build a future of genuine human freedom rather than slip into one of a number of alternative barbarisms. Harvey ends his discussion of each contradiction with a survey of the implications as he sees them for the anti-capitalist struggle. The Epilogue summarises the points he makes. He has not drafted a comprehensive political programme – let alone tackled the political forms that the struggle for a future society should take – but he does offer a range of interesting ideas that are worth studying. I draw the same conclusions about the book as a whole. It is a tribute to the creativity of Harvey’s thinking and the clarity of his writing that, despite my differences with him, I nevertheless found this a worthwhile and thought-provoking book.
Seventeen Contradictions and the End of Capitalism by David Harvey. Profile Books (3 April 2014). The paperback version will be published in April 2015.