Althusser Darwin Monod Emergence

In my last post I showed how around 1966 Althusser was converted, by his collaborator Pierre Macherey, to the view that the concept of immanent structural causality should allow for, and account for, forms of order which were created in and through disorder. But the precise methodology involved remained an unresolved problem.

In the autumn of 1967 Althusser hailed Jacques Monod as having managed to clarify the type of structural causality which Althusser considered that Marx had used in a practical way in Capital but had not been able to formulate explicitly as a methodology. Monod was a leading pioneer in genetic research (later a Nobel prize winner) who had just been appointed Professor of Molecular Biology at the Sorbonne. In his inaugural lecture Monod explained the concept of living system. Within weeks, Althusser responded with a lecture in which he argued that the categories of emergence and of living system, as used by Monod, could aid understanding of the conceptual framework of structural causality in Marx.[1]  Here I draw on the detailed account provided by Maria Turchetto in an elegant and carefully researched article.[2]

Monod started by explaining that the causal processes of genetic reproduction via DNA were purely mechanical. ‘The cornerstone of the scientific method is the postulate that nature is objective.  In other words, the systemic denial that true knowledge can be got at by interpreting phenomena in terms of  final causes – that is to say of ‘purpose’.[3] Thus, any kind of teleology is emphatically ruled out.

But here there is a difficulty.  Biology studies living beings, and these are, as Monod put it, ‘objects with a purpose, represented in their structure, and at the same time realised through their performance.’ They are driven to survive and reproduce – thus they are teleonomic.[4]

So how to resolve the apparent contradiction between teleonomy and objectivity in biology? How does causality avoid drifting into teleology – final cause determinism – when dealing with organic creatures whose structure is adapted to survival?

Monod attacks the two major theories which have tried to deal with this problem: vitalism and animism. Vitalism argues that living objects are made of a form of matter which is fundamentally different from ordinary matter because it contains a built-in survival drive. Prominent advocates of vitalism included Henri Bergson (élan vital) and the physicist Niels Bohr. But, as I have noted, Monod insists that at the fundamental particle level there is no difference between organic and inorganic material.

Animism, in Monod’s words, is the hypothesis that natural phenomena can and must be explained in the same manner, by the same “laws” as subjective human activity, conscious and purposeful.[5] One of the main examples which Monod gives of animistic thought is dialectical materialism, in what is now often called its Soviet variant. He attacks Engels’ Anti-Dühring and Dialectics of Nature which he sees as based on an anthropocentric and idealist projection of human thought processes on to the natural world. He concedes that alternative views can possibly be found in Marx and Engels.  His main target is the version of dialectics of nature which was official doctrine in the French Communist Party.[6]

In this period Althusser still wished to retain influence in the Party and was generally careful to make no public challenge to its deterministic version of the dialectics of nature.[7] Privately (as his archives were to show) he was as critical as Monod of the dogmatic pseudo-science of Soviet style Diamat. As Turchetto notes the model of scientific explanation utilised by genetics, as Monod presented it in his inaugural lecture, was exactly what Althusser in fact recognised and valued as a dialectical materialist methodology.[8]

To preserve teleonomy, without lapsing into teleology, Monod introduces the concept of emergence. This he uses in two senses:

  • emergence as the property of a system insofar as it is different from the elements that compose it. Life emerges from a certain organization of matter – but it’s the same matter that is treated by physics. Advances in molecular biology have, ‘explained the physical support of emergence and the physical nature of the elementary teleonomic interactions’.[9]There are living systems. There is no living matter’.
  • the genesis of such organizations or systems – and this genesis, Monod insisted, is a matter of chance.

The operation of chance – of random events – is crucial to Monod’s concept of science as non-teleological and objective. The historical evolution of living organisms takes place as the determined result of the operation of scientific laws. But not in a way that can be predicted. Such laws are a necessary part of the explanation of evolution – but the course of evolution is not deducible from these laws.  At this point, in Monod’s lecture, he produced a pebble and used it as an analogy.  Science, he explained, cannot predict the exact configuration of the atoms in this particular pebble – but that configuration must, of necessity, be compatible with the laws of physics.  In this respect, he argued, the entire biosphere is no different from the pebble. The necessary laws of science must allow for the operation of chance.  But whatever the combination of chance and necessity – purpose and teleology have to be excluded.

And here Monod invoked the name of Darwin.  The discovery of DNA, long after his death, gave decisive support to Darwin’s central contention: that the emergence of living objects whose behaviour is teleonomic – directed to survival and reproduction – is a matter of chance.  Not foreseeable or deductible from the laws of science.[10]

In the 1960s Althusser was generally labelled a structuralist, and therefore, presumed to belong to some kind of determinist current of materialism. This was the Althusser targeted by the invective of Edward Thompson and many others.

Since Althusser’s death in 1990, publication of material from the huge archive of manuscript work which he left behind has shown that already in the mid-1960s Althusser was thinking intensely about the problems posed by the interrelation of contingency and structure – encounter and necessity.  Later Althusser would identify these categories as central to a philosophical position which he called aleatory materialism. (from the Latin alea = dice).  Aleatory themes are explored again and again in texts written in the 1960s and 1970s but kept in secrecy at the time.  Their publication since Althusser’s death has led in turn to a re-examination of the works which were published in that period, and a clearer recognition that texts like the celebrated essays in For Marx (for example) are complicated by a subversive subtext.  One of the main deviant strands is that of chance and the encounter.  This subtext is closely examined in some of the best recent books on Althusser.  Notably those by Warren Montag and Emilio de Ípola.[11]  Also – and in absorbing detail – by Micco Lahtinen in his outstanding study of Althusser’s recurrent engagement with the thought of Machiavelli from 1962 onwards.[12]  He celebrated Machiavelli as a major exponent of aleatory materialism. He was fascinated by Machiavelli’s account of political transformation as the possible result of an encounter between Fortuna (chance) and a leader – the Prince – whose personal leadership capacities (his Virtù) would (if the right circumstances came along) enable him to seize and exercise revolutionary power. Althusser wrote much about Lenin as just such a leader. But not with the intensity of focus and thought evident in his extraordinary book Machiavelli and Us which was published nine years after his death.

Much of Althusser’s 1967 lecture is an attack on Monod’s attempt to apply natural selection to cultural and philosophical developments.  But Althusser also pays homage to the scientific richness and intellectual honesty of Monod’s lecture – its profound materialist and dialectical tendency.  What Althusser praises in Monod is the theme of how chance and necessity interweave in Darwin’s work to generate emergence of species. Althusser refers to the scientific category of emergence as, full of dialectical resonance. Here Althusser (though in a rather tentative way) suggests that emergence might be an acceptable element in the dialectics of nature, despite the general determinism of official Communist Party materialist doctrine.

Traditionally one speaks of the ‘qualitative leap’ of ‘the dialectical transition from quantity to quality’ etc. In the notion of emergence Monod offer something that allows us, to a partial extent, to restate this question with intra-scientific elements.[13]

 Althusser is critical of Monod’s use of the single term emergence to cover both (1) the generation of structures and forms, and (2) also processes of reproduction of such stable entities once they have come into existence. He notes however that, in practice, Monod nearly always uses the word ‘emergence’, to designate the sudden appearance of new forms.[14] Althusser wants to emphasise the element of chance in the generation of systems, in contrast to the forces of law and necessity which come into operation to maintain and reproduce systems once they have been created.

 Althusser in the 1980s

The themes of chance and necessity which were strategic in Monod’s discussion of biology, were to become explicit and central in Althusser’s final phase of work in the 1980s.  In the vividly written and posthumously published paper, written in 1982, to which its editors gave the title, The Underground Current of the Materialism of the Encounter, Althusser argues that, in the history of material philosophy, it is deterministic variants which have been dominant.  He identifies an alternative and subterranean current of aleatory materialism.  The figures he lists include: Epicurus, Machiavelli, Spinoza, Hobbes, Rousseau, Marx, Nietzsche, Heidegger and Derrida.[15]

As in his earlier work, Althusser refers to events which happen by chance as encounters. Sometimes the elements which meet in an encounter combine, take hold, gel, take form – i.e. turn into more stable patterns, structures or beings.[16]

For a being (a body, an animal, a man, state (or Prince) to be, an encounter has to have taken place… every encounter is aleatory, not only in its origins (nothing ever guarantees an encounter) but also in its effects… nothing in the elements of the encounter prefigures, before the actual encounter the contours and determinations of the being that will emerge from it.[17]

This has implications for causal explanation.  Causes can be identified, but only by a retrospective procedure.

No determination of the being which issues from the taking hold of the encounter is prefigured, even in outline, in the being of the elements which converge in the encounter. Quite the contrary: no determination of these elements can be assigned except by working backwards from  the result to its becoming, in its retroaction.[18]

It is at this point in the argument that Althusser invokes the work of Darwin as an example of aleatory materialism. Darwin’s evolutionary biology centres on the role of natural selection in generating – out of an infinity of random encounters – organic creatures and species which possess some degree of relative stability.[19]

There is an useful discussion in Morfino’s fine book of the way in which Althusser identifies Darwin’s The Origin of Species as an exemplary instance of structural causation.  Darwin is not about explaining how forms appear in nature. These are the result of random processes – encounters, contingency, the aleatory  The main focus in Darwin is on the processes of natural selection as these operate on forms.

The fundamental core of Darwin’s thesis is not the thesis concerning the evolution of forms (against fixism). It is instead the thesis concerning the primacy of the encounter over form, i.e., the contingency not so much of the world (a term which has no sense in Darwin’s thought) but of each and every form, insofar as each is the result of a complex weave of encounters, each of which is necessary and  result of the operation of causal laws. But according to a necessity that, is completely aleatory, that is, deprived of both project and telos [i.e. purpose and aim].

 In this sense, the elements that have come together are not there for the sake of the form, with each having its own history, each an effect in its turn of a weave of encounters that have taken place or, to the contrary, of encounters that have been missed.[20]

 In the final section of the Underground Current Althusser turns to consider the origins of capitalism.

The aleatory in Marx

Althusser sees Marx as drawing – sometimes in an inconsistent way – on both the deterministic and the aleatory traditions in materialism. In tracing the aleatory strand in Marx, Althusser places much stress on Marx’s account of the historical emergence of industrial capitalism.  Marx argues that there was element of chance in this; he writes of the encounter [das Vorgefundene] between available labour power and the owners of money. We can suppose, says Althusser, that this encounter had occurred several times in history before taking hold in the West.  Capitalism did not create the conditions for its own emergence as a system.  Instead a number of developments took place separately and independently. Notably, the accumulation of sums of money in the hands in incipient industrial entrepreneurs; the availability of workers who had been deprived of access to land.[21]

We must beware of a temptation to say that because capitalism became strongly established as a self-reproducing self-perpetuating system, there was an inevitability about this process.  The danger here is slipping into a teleological reading of historical development. There was not a ideal type capitalist structure waiting in advance for its component elements to appear. There was a element of chance: for example, as Marx notes, the conditions for the emergence of industrial capitalism seemed to be present in and around the City states of Northern Italy in the 16th Century; yet it did not happen on any large scale.  The reason, he suggests, was the absence of a large enough national domestic market to absorb the products of industry.[22]

Here Monod’s pebble is a relevant analogy.  Once capitalism has become established as a system, the factors and forces which led to that outcome can be explored and argued over.  But the chains of causation which historians identify and debate, should not be treated as establishing any kind of an inevitable development.  Althusser argues that materialism becomes contaminated with idealism when it uses the concept of genesis to explain historical developments – as if capitalism as a structure was waiting in advance, and helped to organise the preconditions for its emergence.

The various elements which went into the making of capitalism ‘took hold’, fused, and lasted, and led to the creation of,

stable relationships and a necessity the study of which yields laws – tendential laws, of course: the laws of the development of the capitalist mode of production (the law of value, the law of exchange, the law of cyclical crises).[23]

Let’s be clear that Althusser is in no way questioning the search for the chains of causation which led to the development of capitalism.  Since he wrote, for example the eurocentrism and nationalism of traditional explanations has come under attack; a wider range of causal forces are being studied and debated by historians. Nor is he questioning the search for the laws of motion of a capitalist system, once established.  But the laws of motion of a system cannot explain its genesis.  The forces at work as systems and beings emerge cannot be deduced from the laws of motion governing such entities once they have become established.

Malabou on Althusser/Darwin and aleatory materialism

The distinguished French philosopher, Catherine Malabou has written a lucid commentary on Althusser’s invocation of Darwin as an exponent of aleatory materialism.[24]  She focuses strongly on the theme of selection. Here she introduces the category of plasticity – a term which she uses widely in her own philosophical work – and which she uses to mean (roughly) openness to change, to the creation of the new, in nature and in society.

An attentive reading of The Origin of Species reveals that plasticity constitutes one of the central motifs of Darwin’s work [it refers to] a fundamental connection between the variability of individuals within the same species and the natural selection between these same individuals… The form ‘takes’ when variability encounters natural selection … selection guides variability and regulates the formation of forms … plasticity is understand as the fluidity of structures, on the one hand, and the selection of viable durable forms likely to constitute a legacy or lineage on the other.[25]

The second focus in Malabou’s account of the Darwin / Althusser connection is (disconcertingly) the category of nothingness.  Both of them, she writes, share the same vision of the encounter as, a strange ontological point of departure: nothingness, nothing, the same critique of teleology the same concept of selection – thus the same materialism.[26]

 To refer to Althusser’s terminology, variability is the ‘void’ or ‘empty point’ or ‘nothingness’ from where forms can emerge.[27]

 Commentary on Althusser’s posthumous publications has stressed the enormous importance of the void in his thinking, and the difficulties in interpreting this dimension of his work.[28]  For her part, Malabou develops a directly political argument based on the void and the encounter.  We need, she  argues, to free the repressed philosophical status of impoverishment, expropriation, dispossession as the origin of any formative process… practice and theory both owe their energy, the power of their dynamism to their orginary absence of determine being.[29] The promise of justice, equality and legitimacy cannot be presupposed. It has to be made possible.


A final comment

I have been looking at the Althusser-Darwin connection for exploration of more adequate models of causation that those which are in general use in Marxist political economy today. If capitalism is seen as a complex adaptive system, what types of causation are at work when crisis comes along? The study of emergence processes is one promising direction being taken in current research.  To see where Althusser and Darwin intersect on emergence is a way of identifying some of the key methodological issues in what I think is an interesting way.  In Althusser, there is a huge stress on the crucial gap at the point of contact between the encounter and the development of stable forms and structures. I find the invocation of nothingness both fascinating and troubling.  In their treatment of the gap between encounter and necessity what I find questionable is the way in which Althusser, and some of his commentators, reach for analogies and metaphors.  For example, to illustrate the process in which structures are formed Althusser starts talking about how ‘water “takes hold” when ice is there waiting for it, or milk does when it curdles, or mayonnaise when it emulsifies’.[30]  This relapse into homely metaphors is a sign that difficulties are probably being evaded.  Is the freezing of water really an example of the operation of chance?  If ice is waiting for water to freeze does this not suggest the advance presence of a structural pattern – exactly what Althusser has explicitly ruled out. This issue has been troublesome since the start of the aleatory tradition in philosophy. Epicurus suggested that when atoms collide with each other as they swerve, the ones which more permanently stick together have little hooks.  Notice how even a highly accurate thinker like Malabou find it difficult to avoid qualifying her endorsement of the aleatory.  She writes: Matter is what forms itself in producing the conditions of possibly of this formation itself.[31]  Again the hint of some kind of process or logic of pattern formation.

I want a political economy which gives a central place to the categories of uncertainty, risk (and its commodification) – so I’d rather have a nothingness gap than talk of mayonnaise.  But I worry that grand talk about encounters may distract attention from where real progress  needs to be made in current research.  Which is exactly how and why – in all kinds of circumstances, both today and historically – capitalism takes root, or is prevented from coming into existence by the prevalence of other forms of surplus-value extraction.

Darwin’s emphasis on chance has not gone unchallenged.  At least one notable  scientific researcher, Stuart Kauffman, has argued that the encounters which natural selection gets to work on, may not be random, but are guided by some kind of logic of pattern formation.[32] The historical emergence of capitalism needs a similar scrutiny.

There is a danger of mysticism in reaching too quickly for causation by chance, as a substitute for resourceful and painstaking empirical work.


[1] Althusser 1990, pp.145-165.

[2] Turchetto 2009.

[3] Monod 1972, p.30.  This is an extended book-length version of his 1967 lecture.

[4] A dictionary definition is: the property of living systems of being organized towards the attainment of ends without true purposiveness (OED).

[5] Monod 1972, p.38.

[6] See Morfino 2014, Ch. 1 for a careful analysis of Engels’ dialectics of nature and of Monod’s critique.

[7] Elliott 1996 is an outstanding account of Althusser’s political activity.

[8] Turchetto 2009, p.64.

[9] For a classic and still important discussion of life by a physicist, see Schrödinger [1943] 1989.  Rosen 2000 has a useful evaluation of Monod and Schrödinger the light of current scientific knowledge.

[10] For interesting discussions on the limitations of the laws of physics see Cartwright 1983 and  2007.

[11] Montag 2013, de Ípola 2018.

[12] Lahtinen 2009.

[13] Althusser 1990, p.149.

[14] Althusser 1990, p.155.

[15] Althusser 2006, p.167

[16] Althusser 2006, p. 191.

[17] Althusser 2006, p.193.

[18] Ibid.

[19] Althusser 2006, p.194.

[20] Morfino 2014, p.60.

[21] Althusser 2006, p.198. His main reference here is to Capital Vol. 1, p.874 (in Ch. 26, The Secret of Primitive Accumulation).

[22] Marx 1976, p.876.

[23] Althusser 2006, p.197.

[24] Malabou 2015.  In her collaborative work with Derrida (previously her PhD supervisor), and in her own major books, plasticity has been a central concept for Malabou.

[25] Malabou 2015, p.50. Malabou seeks to qualify Althusser’s encounter argument by talking about planned social selectivity (she mentions exams, job interviews and similar processes of social role allocation).  She could however have noted the political economy argument that planning by economic units – firms, households, governments etc. – does not prevent overall incoherence and anarchy as an effect of competition.

[26] Malabou 2015, p.48.

[27] Malabou 2015, p.50.

[28] See Matheron 1998, and Montag 2010 for two powerful accounts.

[29] Malabou 2015, p.58.

[30] Althusser 2006, p.192.

[31] Malabou 2015, 48.

[32] See, for example, Kauffman 1993.


Althusser, Louis 1990, Philosophy and the Spontaneous Philosophy of the Scientists, London: Verso.

Althusser, Louis 2006, Philosophy of the Encounter: Later Writings 1978-1978, London: Verso.

 Althusser, Louis 2006, The Underground Current of the Materialism of the Encounter, in, Althusser 2006.

Bhandar Brenna and Jonathan Goldberg-Hiller (eds.) 2015, Plastic Materialities: Politics, Legality and Metamorphosis in the Work of Catherine Malabou, Durham NC: Duke University Press.

Cartwright, Nancy 1983, How the Laws of Physics Lie, Oxford: Oxford University Press.

Cartwright, Nancy 2007, Hunting Causes and Using Them, Cambridge: Cambridge University Press.

de Ípola, Emilio 2018, Althusser: The Infinite Farewell, (trans. Gavin Arnall), Durham NC: Duke University Press.

Kauffman, Stuart 1993, The Origins of Order: Self-Organization and Selection In Evolution, Oxford: Oxford University Press.

Lahtinen, Mikko 2009 Politics and Philosophy: Niccoló Machiavelli and Louis Althusser’s Aleatory Materialism, Leiden: Brill.

Malabou, Catherine 2015, Whither Materialism? Althusser/Darwin, in, Bhandar and Goldberg-Hiller (eds.).

Marx, Karl 1976, Capital Vol. 1, London: Penguin Books.

Matheron, François 1998, The Recurrence of the Void in Louis Althusser, Rethinking Marxism, 10.3: 22-37.

Monod, Jacques 1972, Chance and Necessity: An Essay on the Natural Philosophy of Modern Biology, London: Collins.

Montag, Warren 2010, The Late Althusser: Materialism of the Encounter or Philosophy of Nothing? Culture Theory and Critique, 51, 2: 157-170.

Montag, Warren 2013, Althusser and His Contemporaries: Philosophy’s Perpetual War, Durham NC: Duke University Press.

Morfino, Vittorio 2014, Plural Temporality: Transindividuality and the ‘Aleatory Between Spinoza and Althusser, Leiden: Brill.

Rosen, Robert 1990, Essays on Life Itself, New York: Columbia University Press.

Schrödinger, Erwin 1962, What Is Life? Cambridge: Cambridge University Press.

Turchetto, Maria 2009, Althusser and Monod: A New ‘Alliance’? Historical Materialism 17,3: 61-79.

Althusser and Macherey on Structure

Althusser triumphantly hailed the concept of structural causality which he saw as at the core of Marx’s theoretical revolution.  But what exactly does the word structure mean in such a form of causality?

Warren Montag, in his excellent book Althusser and His Contemporaries, shows that there is incoherence in the way that Althusser defines structure in his contributions to the 1st edition of Reading Capital published in 1965.  Montag records that when this edition was being made ready for publication, one of the other contributors, Pierre Macherey, wrote to Althusser pointing out the ambiguity of the latter’s treatment of structure in his chapter ‘The Object of Capital’.  Macherey suggests that Althusser sometimes implies that there must be some kind of totality – or whole – whose structure is exercising causative powers. At other times Althusser suggests that in structural causality the structures exist only in their effects – thus causation is an immanent process.

Macherey himself wants to hold to the immanent concept of structure, i.e. as having no existence other than in its effects. In his letter to Althusser he says,

it seems to me that when you speak of a set (ensemble) or of a whole, you thereby add a concept that is absolutely unnecessary to the demonstration and which may later become an obstacle.[i]

There certainly is a contradiction here. In a useful paper, Giorgos Fourtounis comments that, ‘the concept of the structured whole cannot but invalidate the thesis that structure is nothing outside its effects’.[ii]  He thus agrees that Montag is right to see an antinomy between holistic and immanent concepts of structure.  The danger is, as Macherey says, that in the totality variant, structure becomes the equivalent of an essence, a transcendent determining principle.  There is then a conceptual drift back towards the expressive model which, as I noted in a previous post, Althusser had argued that Marx had overcome in and through his repeated critiques of Hegel.

Althusser wrote back to Macherey accepting the criticism and acknowledging that, I have a tendency to take refuge in certain of Marx’s texts where there is a reference to an “organic whole”. At this stage Althusser made no alterations to the chapter in Reading Capital which Macherey was criticising and it was duly published, as it stood, in 1965  in the 1st edition of Reading Capital. However he did appeal to Macherey in the same letter, to suggest how he might, ‘replace the provisional concepts with better defined concepts. I still lack the latter’. Macherey responded in a further letter that, ‘the solution to this problem will take some time’ – but that he believes the elements of an alternative are to be found in Lucretius and Spinoza.[iii]

Macherey developed his idea of an alternative concept of structure in a text written in November 1965 and which can be found in his book A Theory of Literary Production as a chapter called, ‘Literary Analysis: The Tomb of Structures’.

Here I can only provide a very rough summary of Montag’s careful and detailed analysis of the account of structure in Macherey’s Literary Production book.  We are certainly in strange terrain here. Montag says little about the fact that the whole discussion in his own book has slipped away from structure as economic mode of production – to structure as employed by analysts of literature and other cultural material. Literary structure is the entire focus of Macherey’s book.  Evidently some kind of analogy between literary texts and socio-economic reality is being tacitly assumed by Montag, Althusser and Macherey. However let’s suspend judgement on this, and see where their discussion takes us.

Having read the Tomb of Structures paper Althusser wrote to Macherey that he now sees the ambiguity that the latter was criticising.  The division,

between a conception of structure as interioritythe “latent structure” or “latent dynamic” of the work… and another conception, very close to your own, in which structure is thought as absent exteriority, the concept of the dialectique à la cantonade.[iv]

La cantonade is the part of a theatrical stage not visible to the audience – in English, off-stage, the wings.  The metaphor is of a dialectic which operates immanently, in the action taking place on-stage. Structure is there, but is invisible and absent, existing only in the play as it unfolds.[v]

The 2nd edition of Reading Capital was about to go to press and Althusser responded to Macherey’s criticisms by making a number of cuts in ‘The Object of Capital’ chapter.  He did not however alert his readers to these changes or offer any explanation for them.[vi]  The cuts had the effect of inflecting his argument more strongly towards the concept of structural causality as operating in an immanent way, existing only in its effects.  But, in Montag’s view, enough of the ambiguity is still present to sow confusion in the minds of readers of the 2nd edition – and it was this edition which got translated into English and other languages.[vii]

Montag’s book contains a close study of the passages which were excised by Althusser.  Montag believes – correctly in my view  – that Althusser’s ambiguities and struggles with this issue are worth careful study.  It is not simply the case that Macherey was right when he said that the holistic totality version of structure should be abandoned in favour of a more correct immanent variant.  Both Macherey himself, and also Montag, see the difficulty.  Montag writes that, ‘Macherey’s question becomes all the more pertinentwhy preserve the concept of structure at all, if, even in Althusser’s own work it appears destined to transmit as if by contagion an ideology of the whole anterior to and greater than its parts?’  Surely, as a concept, ‘structure implies a totality or ensemble … if not, then  why use the word’.  And, Montag adds, it is also surely the case that ‘the concept of structure also implies a latent meaning or order’.[viii]  

What complicates the situation is that in his Tomb of Structures chapter Macherey rejects both of the above ways of defining structure.  He wants to retain the term – but to detach it from any association with a concept of order  He refuses to accept the traditional implication that whatever is structured is a unified whole. Such a way of defining the meaning of structure is associated with organic and conservative metaphors of the social order. Macherey writes that:

Structure should be used to identify ‘that which maintains the work as it is in its irreducible complexitystructure ‘holds it (la tient)’ all the more in that the work is diverse, scattered, irregular. To see structure is to see irregularity.”[ix]

Thus, in Macherey’s new concept, structure becomes the principle of the unevenness of a literary work – how its scatteredness is tied together.  But equally important, Macherey argues that structure is to be that which explains the necessity of this unevenness. He uses the phrase determinate disorder ­– a disorder which can be accounted for and given significance.[x]

Throughout his book on literature Macherey is attacking traditional literary criticism’s way of dealing with major works of art.  One of the things that makes a work major is that directly or indirectly it registers the social conflicts and tensions of the period in which it was written – in form, or imagery, or narrative plot, or via fantasy elements etc. etc.  But as social contradictions impact, the effect is to generate disorder in the text.  Macherey attacks forms of literary criticism whose impulse is to deny and repress the symptoms of social conflict and injustice as these show up in texts.  Traditional criticism seeks to identify an inner harmonious order out of the diverse meanings at play in the text. In reducing the text to a hidden order they become unable to account for the singularity of work – what makes it uniquely what it is.  In such an approach the interpretation of the work ends up by being treated as more real than the work itself.

But throughout all this Macherey clings on to the concept of structure as a way of resisting a drift towards an endless randomisation and proliferation of meanings.  There is, he insists, a causality at work which determines the significance which emerges in and through the disorder in a text. A structural causality.

Thus, as I have noted above, Althusser found that Macherey’s ‘Tomb of Structures’ chapter helped clarify an ambiguity in his own thinking about structural causality.  But, given the radicality of Macherey’s new direction, it is perhaps not surprising that Althusser’s immediate reaction was no more that a series of unexplained cuts in his ‘Object of Capital’ chapter as Reading Capital was revised in 1966 for its 2nd edition.  For indeed Macherey has laid out a formidable set of proposals.

He is arguing; (1) that structural causality in a Marxist analysis of history can be illuminated by the materialist assault on the way in which major literary works have been converted into ideology by traditional criticism.  (2) He wants invoke a causality in which there is concept of structure which: (a) exists only immanently in its effects; (b) does not deny or assume away the disorder and unevenness of social development; but (c) which is able to identify some kind of necessity or logic which operates to give significance and unity to that unevenness and disorder. In addition, when such concepts of structure are deployed in the analysis of socio-economic situations it must be in ways which allow for the operation of chance as well as logic.  After Althusser died in 1990, the archive of his papers were found to contain a huge number of unpublished manuscripts. Scholarly work on this material has show that, already in the early 1960s, concepts of the aleatory (i.e. chance) and of conjuncture were a central and obsessive focus in Althusser’s thinking about structure and causality.[xi]

Not surprisingly the commentary literature on Althusser and Macherey has found it difficult to know what to do with all this. To take only one example, it is Warren Montag who has provided the most detailed accounts of the evolution of thinking about these questions by Althusser and his team.  But Montag’s final evaluation is, in the end, that Althusser remained tangled in paradoxes.  For example, that, for Althusser, structural causality means that it is the economic which determines social structure – but only in the last instance … and Althusser insists precisely that the last instance never actually arrives. (See my last post) Montag refers optimistically to:

the diverse lines of enquiry that might be summarised under the heading of “structural causality” (the presence / absence of the structure in its effects, the site of an oscillation rather than a dialectical unity) merged to produce the fault that runs across Reading Capital giving it its unevenness and conferring upon it the permanent instability that is  source of its power.[xii]

Montag explains, in a fascinating account, that, in the Reading Capital period, Althusser found himself in sync with the paradoxical thinking of Jacques Lacan. For example Althusser suggested a parallel between how the economic acted as a cause which existed only in its effects, and the way in which, ‘the unconscious is manifested, that is, exists in its effects’. Montag adds that:

Like Althusser, and just as at ease with paradox and contradiction, Lacan recognises that the very inquiry he pursues demands a theory of causality that does not (yet) exist and which can only emerge from the very inquiry that cannot proceed in its absence.[xiii]  

 Good luck with that …. is the tempting and obvious response.

But a less dramatic but more practical way forward has been suggested by Panagiotis Sotiris.  In an exceptionally perceptive article, he reflects on Althusser’s contributions to Reading Capital in relation to the accounts of causality given in two of the earlier essays in  For Marx – ‘Contradictions and Overdetermination’ and ‘On the Materialistic Dialectic’.  Sotiris fully acknowledges the never-resolved tension in Althusser between: (1) a concept of structure as present but latent; and (2) a structural causality which is immanent in its effects and which can allow for, and account for, singularity and conjuncture in situations and events.[xiv] Sotiris suggests that:

instead of remaining within the contours of the supposed structure / conjuncture dichotomy, it is better to try to rethink new ways to theorise the differential effectivity of both structural and conjunctural elements: within a conception of social forms that combine relationality, singularity, and reproduction.[xv].

Sotiris proposes that we can and should read,

the existence of a structure in its effects … as a highly original concept of structural determinations and / or law-like tendencies that do not have any existence of their own other than in concrete social formations.  In this sense structure is not ontologically prioritised not is it considered to be beneath the surface. Moreover, structural causality should not be opposed to the dynamics of transformation and the possibility of historical change.’[xvi]

 In his reference to law-like tendencies Sotiris pointing to a direction not taken by Montag.  It is an approach which is powerfully developed by Vittorio Morfino in his astonishing book Plural Temporality (2014).  Morfino emphasises his conviction that Althusser and his team were on to something crucial and indispensable about Marx’s concept of modes of production, and associated structural causality  But Morfino argues that the necessary analogy which they needed to invoke was not with structure and unevenness in literary texts, nor with the treatment of the unconscious in psychoanalysis.  But rather with complexity in populations of living creatures.  Morfino has a chapter on how Darwin studied the contrasting patterns of natural selection at work in a two pieces of land in Staffordshire (how concrete can you get!) It is Morfino’s proposal that this would be an example of structural causality in action.

The approach developed by Morfino opens up promising questions of logics of competition and cooperation in the analysis of modes of production.  In case of capitalism it suggests an analogy between the selectivity operated by Marx’s law of value and Darwin’s theory of natural selection. In both paradigms a principle of structuration operates by asserting itself, via selectivity, in and through a haze of random encounters and events.  In Marx’s words:

[in] the division of this social labour and the reciprocal complementarity or metabolism of its products, subjugation to and insertion into the social mechanism, is left to the accidental [zufälligen] and reciprocally countervailing motives of the individual capitalist producers.

 Since these confront one another only as commodity owners, each trying to sell his commodity as dear as  possible (and seeming to be governed only by caprice [Willkür] even in the regulation of production), the inner law operates only by way of their competition [setz sich das innere Gesetz, nur durch vermittelst ihre Konkurrenz]  their reciprocal pressure on one another, which is how divergences are mutually counterbalanced.

 It is only as an inner law, a blind natural force [blindes Naturgesetz] vis-à-vis the individual agents, that the law of value operates here and that the social balance of production is asserted in the midst of accidental fluctuations [wirkt hier das Gesetz des Werts … inmitten ihrer zufälligen Fluktuationen].[xvii]

 Here are some of the themes which Macherey was invoking.  Structural patterns which emerge not because of external regulation or command – but as the result of the operation of an inner law – an immanent process.  Marx is talking about how the system controls what is to count as valid value-creating social labour and what will be treated as wasted labour.  This is determined not by fiat, but by the law of value asserting itself in and through the accidental fluctuations of capitalist competition.  The concept of law implies some kind of necessity operating, not as an underlying essence beneath the surface of an economy, but via the everyday competitive pressures [Drucks] on capitalists to reduce costs of production and circulation.

In a future post I’ll say more about Morfino, Marx and the Darwinian analogy.


[i] Montag 2013, p. 74.

[ii] Fourtounis himself prefers to see both of these concepts of structure as necessary to a Marxist concept of structure and urges that they be amalgamated.  The resulting combination, he optimistically hopes, can involve ‘creative tension’ rather than the contradiction of logical incoherence. (Fourtounis 2005 p.105.)

[iii] Montag, 2013, p.75.  Macherey found inspiration in a remarkable article on Lucretius which Deleuze published in 1961 and which is to be found as an Appendix in Deleuze 1990. Lucretius’ poem On the Nature of Things [de Rerum Natura] was based on the philosophy of Epicurus which was one of the main topics of Marx’s PhD thesis.  Deleuze emphasises themes in Lucretius which were resumed in Macherey’s work on literature.  Nature as diverse and non-totalisable; the swerving and thus aleatory movement of atoms [the clinamen]; hence the role of chance in causation.  But also an insistence on structure as linked to causation   ‘Lucretius’ naturalism’, writes Deleuze, ‘requires a highly structured principle of causality to account for the production of the diverse inside different and non-totalizable compositions and combinations of the elements of Nature’ (p.268),

[iv] Montag 2013, p.76.

[v] I have no space in this post to comment on the important question of Darstellung – i.e. the analogy between how capitalism represents itself and the staging of a play. Darstellung is a theatrical analogy occasionally used by Marx and picked up again by the Althusser team – especially in the brilliant chapter by Rancière in Reading Capital.  See also the perceptive discussion in Montag 2003 of Althusser’s Piccolo Teatro chapter in For Marx.

[vi] Also Deleuze had sent to Althusser a draft article about structuralism which the latter discussed with Macherey and sent back the comments which Deleuze had requested.  See the interesting account of this exchange in Stolze 1998.

[vii] Montag 2013, p.80.

[viii] Montag 2013, pp. 78 and 84.

[ix] Montag 2013, p.78.

[x] Montag 2013, p.79.

[xi] See Matheron 1997, p.10 for working notes made by Althusser in 1966.  These mention Epicurus and the clinamen [swerve of the atom], ‘theory of the encounter, conjuncture  (= structure)’,  i.e. structure as linked to role of chance. In an annotation made by Althusser on his copy of Macherey’s Literature book he writes: ‘Theory of a clinamen.  First theory of the encounter’.  Recent scholarship on Althusser has emphasised that categories of chance, encounter, and the aleatory were central in his thinking from the mid-1960s onwards and not just – as in the received mythology – a new last phase in the 1980s. See the introduction to Goshgarian (ed.) 2006.  But for a variety of reasons the encounter and allied concepts remained a submerged and repressed undercurrent in his published work of the 1960s and 1970s.  Recent scholarship has also traced the complex linkages in Althusser’s work between concepts of structure, chance and plural temporalities.

[xii] Montag in Nesbitt (ed.) 2017, p.176. See also the chapter on Lacan in Montag 2013.

[xiii] Althusser as quoted by Montag in Nesbitt (ed.) 2107, p.181.

[xiv] Sotiris 2014 p.30.

[xv] Sotiris 2014, p. 7.

[xvi] Sotiris 2014, p.14. See also Sotiris in Diefenbach et al. (eds.) 2013.

[xvii] Marx 1981, p.1020.


Althusser Louis 1977 For Marx, (Trans. Ben Brewer), London: Verso.

Althusser, Louis, Étienne Balibar, Roger Establet, Pierre Macherey, and Jacques Rancière, 2015, Reading Capital, (Trans. Ben Brewer and David Fernbach), London: Verso.

Deleuze, Gilles 1990 The Logic of Sense, London: Athlone Press.

Diefenbach, Katja, Sara R. Ferris, Gal Kirn and Peter D. Thomas  2013, Encountering Althusser: Politics and Materialism in Contemporary Radical Thought, London: Bloomsbury.

Fourtounis, Giorgos 2005, On Althusser’s Immanentist Structuralism: Reading Montag Reading Althusser Reading Spinoza, Rethinking Marxism 17,1.

Goshgarian, G.M 2006, Introduction to Althusser Philosophy of the Encounter: Later Writings, 1978-1987, London: Verso.

Marx, Karl 1981, Capital Vol. 3, London: Penguin Books.

Matheron, Alexandre 1997, Introduction to Althusser, The Spectre of Hegel; Early Writings (trans. G. M. Goshgarian), London: Verso.

Montag, Warren 2003, Louis Althusser, London: Palgrave.

Montag, Warren 2013, Althusser and His Contemporaries: Philosophy’s Perpetual War, Durham NC: Duke University Press.

Morfino, Vittorio 2014, Plural Temporality: Transindividuality and the Aleatory Between Spinoza and Althusser, Leiden: Brill.

Nesbitt, Nick (ed.) 2017,The Concept in Crisis, Durham NC: Duke University Press.

Sotiris, Panagiotis 2014, Rethinking Structure and Conjuncture in Althusser, Historical Materialism, 22,3: 5-51.

Stolze, Ted 1998, Deleuze and Althusser: Flirting with Structuralism, Rethinking Marxism 10, 3: pp. 51-63.

A Debate on Value Theory Guest Post by Pete Green

On the recent (2018) debate over value theory between David Harvey and his critics

A short essay by David Harvey, raising some questions about value theory in Marx, has  provoked the polemical responses he may well have expected. First onto the field to defend his version of orthodoxy came the redoubtable Michael Roberts, who was soon supported, though from a rather different angle, by Paul Cockshott. Links to the relevant pieces, including a response from Harvey to the Roberts critique, can be found most easily on the Michael Roberts blog. In what follows I  attempt to evaluate some of the central points of difference along with two other critical concepts (‘anti-value’ and ‘devaluation’) thrown into the debate by Harvey in his response. I will also refer to Harvey’s recent book Marx, Capital and the Madness of Economic Reason which ranges much more widely across the whole terrain touched on by his essay. Roberts refers to this text but does not appear to have read the whole book, as that might well have obliged him to correct, or at least qualify, his dismissal of Harvey as an under-consumptionist.

Harvey’s essay is titled “Marx’s Refusal of the Labour Theory of Value” and this in itself has provoked the ire of his most prominent critics. For Harvey the labour theory of value ‘belonged to Ricardo’ and Marx himself only ever refers to ‘value theory’. Harvey also gives a complimentary nod to Diane Elson’s ‘seminal article’ “The Value Theory of Labour”, an article which whilst certainly insightful effectively dismissed the quantitative dimension of Marx’s work.[i] (Elson was conceding the terrain of price determination to the Sraffian or neo-Ricardian school whilst defending the ‘qualitative’ dimension of Marx’s analysis of value-forms and the alienation of labour). Insofar as Harvey’s critics insist on defending the coherence and empirical relevance of the quantitative dimension of Marx’s theory they are, in my view, correct to do so. But that does not settle the arguments discussed below.

Cockshott, in particular, insists that on ‘ key components’ of value theory Marx and Ricardo were in agreement. He vigorously challenges the most problematic two sentences in Harvey’s essay which are as follows:

Ricardo’s hope was that the labour theory of value would provide a basis for understanding price formation. It is this hope that subsequent analysis has so ruthlessly and properly crushed

Harvey is seriously mistaken on this point and curiously it’s not a claim he makes in his latest book. Cockshott references studies by himself and others, such as Anwar Shaikh, revealing the strong statistical relationship between changes in the labour content of diverse commodities as a result of changes in the productivity of labour, and the movement of market prices. Marx’s claim that values are the underlying regulators of prices amidst the turbulent fluctuations of the market place is validated by these studies (and this is what Marx meant by the law of value in my view, a law which capitals seek to resist or overcome via price-fixing and monopolization). Yet little of what Harvey has to say about prices in his book, as distinct from the essay quoted above, is incompatible with what Shaikh and others have elaborated in detail.

However Cockshott’s own summary of how Marx progressed from Ricardo with, for example, the introduction of the concept of surplus-value, exposes a significant lacuna in his analysis. Neither Cockshott nor Roberts appear to attribute any weight to Marx’s critique of  Ricardo’s theory of money and the latter’s disregard for the specific social form of value. As Marx noted in Theories of Surplus-Value:

But Ricardo does not examine the form – the peculiar characteristic of labour that creates exchange-value or manifests itself in exchange-values – the nature of this labour. Hence he does not grasp the connection of this labour with money or that it must assume the form of money. Hence he completely fails to grasp the connection between the determination of the exchange-value of the commodity by labour-time and the fact that the development of commodities necessarily leads to the formation of money. Hence his erroneous theory of money. Right from the start he is only concerned with the magnitude of value…” (Marx 1968, p.164.)

See also the much-quoted footnote on p.174 of Capital Volume 1 in the Penguin edition, 1976.

Michael Roberts argues correctly that Marx’s distinction between abstract and concrete labour also distinguishes his value theory from that of Ricardo and on this he seems to differ from Cockshott who strangely claims that this distinction can be found in Adam Smith. In brackets Roberts defines abstract labour as “value measured in labour-time when ‘socially’ tested on the market”. This is to equate the concept of abstract labour with that of ‘socially necessary labour-time’, and at the same time disregard  the necessary connection between ‘abstract labour’ and money proposed by Marx himself. Those who share such a perspective might well be puzzled as to why Marx spends so much effort in the opening chapters of Capital Volume 1 on elucidating the forms of value and the ‘development of money’.

I am not going to dwell further on the complex question of Marx’s intellectual relationship with Ricardo or other classical economists, a relationship which certainly evolved over time.  Instead I want to focus on some critical issues raised by Harvey which deserve more serious consideration than either of his critics have managed to provide.

On “the contradictory unity of production and realization”

That’s a quote from Marx, and Harvey, who deploys the phrase (without a page reference!) in his response to Roberts, is certainly correct to emphasize its importance. This should not be controversial amongst serious Marxist scholars. Value is created in the process of production but it can only be realized in the course of exchange in the market, when the produced commodities are actually sold. Harvey suggests that the value created in production is only a potential value until it is realized, and just a little reflection on the meaning of the term ‘realization’ should support that interpretation, although as far as I am aware the word ‘potential’ (or its German equivalent ‘Potenzial’) is not used by Marx himself. If the commodity is not sold it has no value, or rather loses whatever value it potentially had (although it may reappear on the market at a lower price and as such ‘devalued’ – on which more below). It is also the case that a commodity can be exchanged for a sum of money whose value (or representation of value) is greater or less than the potential or ‘intrinsic’ value contained in the commodity as it goes to market – although, as Harvey notes, Marx  explicitly assumes that this is not the case, or that prices correspond to values, from Part 3 onwards in Volume 1 when he focuses on the production of value.  But Marx never forgets that the process of  exchange is always uncertain, and the possibility of a failure of realization ever-present.

Harvey also emphasizes in his own distinctive way that constant changes in the productivity and intensity of labour ‘under pressures of competition in the market’ entail that:

Value becomes an unstable and perpetually evolving inner connectivity (an internal or dialectical relation) between value as defined in the realm of circulation in the market and value as constantly being redefined through revolutions in the realm of production”

Unfortunately,  ‘value as defined in the realm of circulation’ is  an example of the loose phraseology found elsewhere in his essay which opens Harvey up to serious misrepresentation of his argument. But his response, which insists on the distinction between production and realization as noted above, should be welcomed for its clarification of the fundamental issue. Harvey is also right to emphasise the instability which results from technological and organizational innovations but manifests itself in the process of circulation in the market.

What’s critically at stake, as far as both Harvey and Roberts are concerned, is a broader question about the relationship between the process of production and circulation not simply of commodities but of capital as a totality. Harvey in his earlier work on Volume 2 of Capital has quite correctly emphasized that the process of circulation of capital is essential to the capitalist mode of production, and should not be  regarded as secondary, or neglected because Volume 2 is such a tedious volume by comparison with the sparkling prose of Volume 1.[ii]

Harvey’s Companion to Capital Volume 2 is replete with illuminating insights into the multiple dimensions of that work. In particular, he emphasizes that for Marx the time spent in the circulation phase of capital’s circuit is time in which capital is not engaged in the production of surplus-value. Capital is therefore driven by competition not just to speed up the labour process within the factory but to reduce the time spent in transportation to and from the market-place itself, as well as the time lost waiting for commodities to be sold. Hence of course the need for massive spending on infrastructures which often only states with their capacities for taxation and borrowing can manage to deliver. But the consequence for capital will be a reduction in turnover time which will counteract any tendency for the rate of profit to fall.

In his latest book Harvey begins with the notion directly derived from Marx of capital as ‘value in motion’. He develops an extended analogy in diagrammatic form between the circuits of capital and the hydrological cycle of water. All such analogies can be overstated and Harvey acknowledges this. But I share his appreciation of the parallel between the ways in which H2O changes its forms (water, steam, rain, ice, snow, fog etc) and the diverse speeds at which they move, and the diverse forms taken by capital (money, commodities, means of production etc) and their differential turnover times. Only close attention to Volume 2 of Capital will enable us to grasp why Marx understood that it was necessary to explore these issues before developing an adequate theory of capitalist crisis. But as I’ve suggested in an earlier contribution to this blog, Michael Roberts prefers to ignore Volume 2 and in effect leap straight from the focus on production in Volume 1 to the fragments on profitability and crisis in Volume 3.

In the short essay, however, Harvey prefers a different analogy, ‘simple but crude’, with the circulation of blood inside the human body in which ‘the two phenomena are mutually constitutive. Value formation likewise cannot be understood outside of the circulation process that houses it. The mutual inter-dependency within the totality of capital circulation is what matters’.  But this analogy could be misleading if it implies that we can only talk about value formation as he suggests ‘under conditions of capital accumulation’. My own view is that value formation is necessarily tied to the existence of money and commodity exchange but these are themselves preconditions of capital accumulation and predate the consolidation of capitalism as a mode of production (which is not to endorse the notion of a simple commodity mode of production proposed by Engels). But how we analyse the necessary connection between value and money is itself controversial.

 The Question of Money

Harvey in his essay introduces money as a ‘material representation of value’. There is of course much, much more to be said about Marx’s analysis of money and the materiality of money is today certainly in question (see in particular the recent collection of essays by Costas Lapavitsas).[iii]  Arguably it is preferable to follow Marx in Chapter 2 of Volume 1 and introduce money as, in the first instance, the ‘universal equivalent’. But there should be no dispute that for Marx money serves as the external measure of value and the ‘social incarnation of labour’, and is “the necessary form of appearance of the measure of value which is immanent in commodities, namely labour-time” (Volume 1 p.188). So without money there is no ‘value’ as such and, at least in one sense of the term, no ‘abstract labour’.

Michael Roberts, who indirectly quotes the same passage from Marx I have just used, also agrees that without money there is no value. However, he also quotes at length Murray Smith’s critique of those whose emphasis on the ‘value-form’ lead them to “sever commodity values entirely from any determination in the conditions of production, and the way is paved for an effective identification of value and price”. Roberts extends this critique to Harvey without any justification other than the latter’s emphasis on the necessity of the realization of value in the exchange of commodities for money.

In this respect Roberts’ polemical arrows are aimed at the wrong target.  There are certainly writers in the ‘value-form’ tradition, dating back to the work of Backhaus and Reichelt in Germany in the late 1960s (rather than to Rubin whose earlier work is sometimes blamed for this construction) for whom money is the only possible measure of social value and who therefore cannot effectively differentiate value and price, or have any concept of unequal exchange. I have commented critically  on  examples of this tendency in a review essay in the Historical Materialism journal.[iv] (22.1, 2014 pp. 200-222)

But nothing that Harvey says in his essay justifies tarnishing him with the same brush. Indeed  in Chapter 5 of his book, headed ‘Prices without Values’, Harvey focuses in on the examples of commodities with prices but no values that Marx himself mentions, such as land and unique works of art, and argues that this has become a more widespread phenomena. Harvey is very interesting on how the ‘free gifts’ of human creativity, and scientific knowledge are being enclosed and  commodified via the enforcement of intellectual property rights. He then proceeds to explicitly reject any ‘monetary theory of value’ stating that

To ignore the money-value contradiction altogether is to cut off an important, though admittedly complicated avenue to understand the dilemmas of contemporary capital accumulation’.[v]

There are two treacherous paths that Marxists need to avoid in these debates, not just one. On the one hand there are those value-form theorists who deny that it is possible to measure socially-necessary labour-time independently of exchange and end up collapsing value into exchange-value or price. On the other hand, there are those for whom the moment of realization is always subordinate to the production of value, and who collapse the social category of value into the physical performance of labour, and even forget that value which is not realized is either devalued or negated completely. David Harvey, despite occasional hesitations, avoids the first path but Michael Roberts appears to be travelling along the second, although he would no doubt vigorously protest at the suggestion. 

‘Underconsumptionism and crises’

For Michael Roberts there is no doubt that Harvey’s cardinal sin is his ‘underconsumptionist theory of crisis’.  Everything that Harvey says about the necessity of the realization of value, or the significance of the circulation of capital, is interpreted by Roberts as a challenge to his own insistence that only a ‘falling rate of profit’ can explain each and every crisis of capitalism. In a sentence which opens. as I’ve already shown. with a serious distortion of Harvey’s argument Roberts sums up his critique:

If value is created only at the moment of exchange for money and ‘money rules’, then it will be (effective) demand that will decide whether capitalism smoothly  accumulates without recurring crises”

In his essay  Harvey  raises the  question of the reproduction of labour-power today in conditions which to some extent, given rising levels of poverty and precarity, recall those described by Marx and Engels in mid-19th century Victorian Britain. He also references the insights of social reproduction theory as explored in the recent collection edited by Tithi Bhattacharya (Pluto Press 2017) and this is a welcome development in my view. But typically Harvey offers up one sentence which for Roberts confirms Harvey’s cardinal sin:

As Marx notes in Volume 2 of Capital, the real root of capitalist crisis lies in the suppression of wages and the reduction of the mass of the population to the status of penniless paupers

Roberts rather predictably counters with another classic Marx quote (“It is sheer tautology to say that crises are caused by the scarcity of effective consumption….”) and a misguided attempt to downplay the significance of final demand by emphasizing the demand for intermediate goods and materials as if the two were not deeply interconnected. Roberts is on stronger ground when he emphasizes in his own book (The Long Depression) that investment has always been the component of demand which fluctuates most violently across the cycles of boom and slump. But as Anwar Shaikh has argued investment in capital accumulation depends on ‘expected profit-rates for the regulating capitals’.[vi] (Shaikh 2016 Capitalism). Such expectations are influenced not simply by past profit-rates as Roberts assumes but also by changing levels of effective demand and business confidence.

This is not the place for me to expand on my own pursuit of a ‘multi-dimensional crisis theory’. However, two distinct questions are frequently confused in these arguments and a little clarification might be helpful to those looking to move beyond the polarization evident in the Harvey/Roberts exchange.

Firstly, there is the fact that the limited consumption of the mass of the population is for Marx a precondition, or the ‘real root’ of capitalist crises simply because if all the net product is consumed by the masses, capitalism itself could no longer exist. But this ‘under-consumption’ is of course a permanent condition, and cannot by itself explain the periodic crises punctuating the  cyclical fluctuations which have beset capitalism since the early 19th century.

Secondly, there is the empirical question of the role played at specific historical moments by changes in wages, and levels of mass consumption (which in contemporary capitalism can also be financed by credit mechanisms and state distribution of benefits). The evidence presented by Atif Mian and Amir Sufi in their book House of Debt suggests that the housing crisis in the USA which first emerged 2006-7 led to a sizeable reduction in levels of consumption spending by those households squeezed by falling house prices and a high level of debt, as well as a fall in housebuilding. It is this fall in consumer spending along with a rise in the price of raw materials which explain most of the fall in the mass of profits in the course of 2007-8  in the USA which Roberts himself has highlighted. This preceded the sharp drop in non-residential investment spending which followed the collapse of Lehman Brothers and the paralysis of the credit system globally. Certainly that fall in the mass of profits cannot be explained by rising wages or a change in the underlying organic composition of capital and Roberts himself provides no alternative explanation. See the comment on Mian and Sufi’s analysis in a previous post by Jim Kincaid on this blog.

Harvey could have avoided some of the misrepresentation of his position if he had clarified the difference between the two claims made above. But we need to examine the specific features of each major historical crisis and not assume, as Roberts and others do, that the same mechanisms are at work in every crisis. The pattern of crisis in 2007-8 was very different, for example, from that in 1974-75 or in the early 1980s, when the combination of a fall in the rate of profit in the core economies with sharp hikes in interest-rates was the critical determinant. Harvey has certainly not provided a definitive account of the decade long period of crisis and stagnation which began in 2007 but he has drawn on Capital Volume 2 to outline a framework – the circuit of capital – which enables us to identify the multiple fault-lines in the system as distinct from the single fault-line on which Michael Roberts focuses. 

Anti-Value and Devaluation

In his response to Michael Roberts’ critique Harvey makes a passing reference to his own original conception of anti-value or not-value which he explores in a whole chapter of his 2017 Madness book. He connects this to the need for a ‘strong theory of devaluation to account for what happens in the market-place’. I agree with Harvey’s emphasis on devaluation and the fact that this critical process ‘rarely appears in Roberts’ accounts’. I am, however, reluctant to endorse his category of anti-value.

‘Anti-value’ is a new category in Harvey’s work and one which is explored in detail in a chapter of the book. Harvey’s analogy is with the concepts of matter and anti-matter in physics but as a non-physicist I suspect that the concept of ‘anti-matter’ is rather more precisely defined than ‘anti-value’. Harvey’s first examples are all about devaluation as a necessary moment of the circulation process. He draws primarily on quotes from the Grundrisse to argue that capital which for whatever reason suffers from a pause or even a slowdown in its movement through the phases of circulation will experience a loss  of value, or a virtual devaluation which may be overcome if capital’s movement is resumed. Harvey notes that in the Grundrisse capital lying ‘at rest’  is variously termed ‘negated’, ‘fallow’, ‘dormant’ or ‘fixated’ and this is clearly relevant to the mechanisms of crisis when unsold inventories accumulate or surplus money capital is immobilized rather than reinvested in production.[vii] This is a whole dimension of Marxist crisis theory which is widely ignored in the contemporary literature.

However, Harvey proceeds to extend the category of ‘anti-value’ to embrace other quite diverse phenomena and processes, such as resistance at the point of production or struggles over commodification of essential goods such as water, education  and health-care. He also regards debt as a ‘crucial form of anti-value’, which I find very curious indeed and finally throws various types of unproductive labour into the mix as well. By the end of the chapter the category of anti-value has become so copious and slippery that it is unlikely to be  widely adopted in the way that Harvey’s equally compendious but rather better focused category of accumulation by dispossession has been.

That said we should welcome Harvey’s efforts to stimulate debate on this and related questions. We need to hold onto all the core categories of Marx’s thought, but not treat their application to the contemporary world of global capital as a simple matter of finding correlates for those categories in the national income accounts constructed by economists and statisticians with very different models of the world. Harvey may get it wrong on occasions, as I’ve suggested above, but he is certainly right to challenge the reduction of the contradictions of capital as ‘value in motion’ to the sphere of production alone.


Harvey’s Critique of Moseley.

As a rather technical aside, I need to criticize Harvey’s own misrepresentation of Fred Moseley, whose book Money and Totality is the only work referenced in a footnote as an example of a ‘monetary theory of capital’. Moseley is certainly not someone who ‘ignores the money-value contradiction’ and has himself criticized adherents of value-form analysis such as Reuten for that error. Moseley’s primary target in his book is  the ‘physicalism’ of those neo-Ricardians who have turned to Sraffa’s equations for a solution to the so-called transformation question of the relationship between values and prices of production when profit-rates are equalized across sectors. Moseley is correct in my view to argue that both the constant and variable capital on which profit-rates are calculated are monetary quantities for the purpose of Marx’s transformation and once this is accepted the supposed ‘inconsistencies’ in Marx’s solution disappear. This, however, presupposes acceptance of a version of the MELT or the Monetary Expression of Labour-Time as an alternative to locating the value of the money commodity (Gold or Silver in Marx’s day) in the labour-time necessary for its production as Marx himself did. Shaikh, Fine and Saad-Filho are the most prominent critics of the so-called “New Interpretation” in this respect but on this they are stubbornly wrong-headed. Harvey does not directly address this question but it would be  consistent with his wider outlook to adopt the MELT formulation himself.

[i] The essay is in Elson (ed.) 1979.

[ii] Harvey 2013.

[iii] Lapavitsas 2017.

[iv] Green 2014, pp. 200-222.

[v] Harvey 2017, p. 105.

[vi] Shaikh pp. 619-637.

[vii] Harvey 2017, p.74.


Bhattacharya, Tithi 2017, Social Reproduction Theory: Remapping Class, Recentring Oppression, London: Pluto.

Elson Diane (ed.) 1979, Value: The Representation of Labour in Capitalism, London: CSE Books.

Green, Peter 2014, Review of Two Books edited by Riccardo Bellofiore et al., Historical Materialism, 22,1. pp. 200-222.

Harvey, David 2017, Marx, Capital and the Madness of Economic Reason, London: Profile Books

Harvey, David 2013, A Companion to Marx’s Capital Volume 2, London: Verso.

Lapavitsas, Costas 2017, Marxist Monetary Theory. Collected Papers, Leiden: Brill.

Marx, Karl 1968, Theories of Surplus Value, Volume 2, London: Lawrence and Wishart.

Mian, Atif and Amir Sufi 2014, House of Debt, Chicago: Chicago University Press.

Moseley, Fred 2015, Money and Totality, Leiden: Brill.

Shaikh, Anwar 2016, Capitalism, Oxford: Oxford University Press.

Causality and the Rate of Profit

I have returned to an long-standing interest in causality in Marx’s political economy as a result of involvement in controversies about the falling rate of profit. In particular a debate with Michael Roberts, currently one of the leading exponents of the thesis that the fundamental and decisive cause of capitalist crisis is the tendency of the rate of profit to fall.  Other subsidiary causes are added into the mix, but on an ad hoc ad lib basis – for example levels of debt and financial fragility.  See e.g. my post. This contains links to Michael’s reply.

I worry that many participants in these, and allied debates, rely too heavily on a simple conception of isolated and direct cause and effect processes – mechanical causation in  Althusser’s terminology.

A current example is the on-going controversy between David Harvey and Michael Roberts which has revolved round the question of whether the latter is too mono-causal in his account of the crisis. See the exchange between the two in the excellent collection of articles on the 2008 financial crisis edited by the Turkish scholar Turan Subasat. Also the further stage of debate reported here in Michael’s blog.

Pete Green has sent me a well argued critical comment on this latest round of the Harvey vs. Roberts debate which I will publish in the near future as a guest post.

One of the influential sceptics about a declining rate of profit as the master key to explain all crises  is Costas Lapavitsas.  He makes the case with particular sharpness in a recent interview.

A tendency has emerged explaining everything pretty much in terms of some putative tendency of the profit rate to fall. This kind of thinking has somehow mutated into the Marxist account of the macroeconomic performance of capitalism and the behaviour of capitalism over time. …. in theoretical terms I find this kind of practice by Marxists terribly poor and saddening. It tells you very little in theoretical terms. Empirically it has no substance at all. I have measured the rate of profit time and again. In fact, I’m publishing work now  on the rate of profit in the USA and there is no evidence that it has been falling in any serious ways since the early 1980s. Of course it fluctuates but there has been no evidence that is has been falling in the long term. …  crises are very complex events so a theory of crisis most also be complex… It is not enough to invent a decline in the rate of profit and then on the basis of that add some kind of low level of sociology which is presumed to explain the crisis from the rate of profit.

The falling rate of profit exponents often try to short-circuit theoretical debate by arguing that the available data provide conclusive empirical evidence to support their explanation of the 2008 crisis.  In a series of posts starting in March 2016 I show that the US National Accounts data provide no convincing evidence that a fall in the average rate of profit was the cause of the crisis.

In any case, apart from the huge technical limitations I and others identify, it is simply implausible that the comparatively small variations in profit rates which took place in the years before 2008 could be the major cause of such a deep financial crisis.

For example, tendencies in industrial profit rates cannot explain the rapid rise in mortgage default by US households in 2006; the general fall in house prices which resulted, and the impact of this on consumer demand.  See my summary of the important book by Mian and Sufi which explains this major dimension in the 2008 crisis.

There are also many other difficulties. For example, the questionable conception of the rate of profit as a linear variable; the higher it is, the healthier the system, and vice versa. This is rarely stated explicitly, but often implicitly assumed.

Or again, how can the continuous operation attributed to the falling tendency of  the rate of profit explain the cyclical patterns in economic growth, demand and employment which are so evident in empirical studies of capitalist economies?

To be clear: I’m not questioning that cause and effect processes are how the world operates.  Mechanical causality is not the happiest of terms – maybe transitive causality would be more accurate. But neither in science nor in everyday life can there be any question of abolishing the concept or denying the processes it refers to.

The objection is that when it you are trying to understand a system – it can be misleading to treat individual causes in isolation from each other.  Or to explain what happens in a system by taking a number of separate causes and trying to add them up together. Causes come in clusters and interact with each other.  Individual causes have different effects depending on the state of the overall system.  Chains of causation build up through the operation of feed-back loops.

Perhaps a better starting point is to think of capitalism as a complex adaptive system.[1] In such a system it would not be plausible that a single underlying cause (or contradiction) could have the direct, continuous, and overwhelming causative power which Michael Roberts and others attribute to the average rate of profit in the major economies. There, is for example, a logical glitch here –an often overlooked non-sequitur. The quest for profits drives the system. OK we are all in agreement about that.  But you cannot conclude from this that, if the system enters crisis, however major, it can only be because the rate of profit is not high enough.  There is a difference between what drives a system and the outcomes which result from failure in the system.

But does it make any sense to think of a system itself as acting as some kind of cause?  A capitalist system for example. Is something like this implied when attempts are made to capture and explain the structures and dynamics of capitalism by terms like complex adaptation, and system?

Many scholars have contributed to thinking about these and allied questions.  I have started with the account of structural causality by Althusser and his Reading Capital colleagues for several reasons.[2] They closely studied the text of Marx’s Capital. The rigorous philosophical training which they had undergone in the French higher education system gave then an unusual alertness and clarity about Marx’s methods of argumentation.  More important, their way of reading Capital, and the originality of their theoretical angle of vision, owed much to the context of their collective work.  Paris in the 1960s was the locus of an extraordinarily fertile and creative interaction between philosophical thought and political action.[3] It was the rich development of structuralist thought in France which enabled and predisposed Althusser to see patterns of structural causality in Marx’s account of history.[4]

It was Althusser’s argument that, though Marx may have said little about the logical status of this type of causality, he was able, in a practical way, to find ways of using the concept in Capital.  For example in his analysis of modes of production (slave, feudal. capitalist etc.) in which forces and relations of production were combined in differing structural patterns. But Althusser considered that it was important to explain how structural causality worked as an epistemological paradigm.  What kind of causality is at work when the mode of production, as a structure, acts as a determining influence in social development.

But what happens next is that Althusser himself then gets into intractable difficulties in trying to formulate clearly what he means by the concept of structure. For example he often seems to alternate between: (1) a holistic concept of structure –  the effects which the structure of a totality might have in ordering its constituent elements; and (2) a structure which has no existence except in its effects. A form of immanent causality.  

I’ll comment more about this inconsistency, and why it matters, in my next post.


Althusser, Louis, Étienne Balibar, Roger Establet, Pierre Macherey, and Jacques Rancière, 2015, Reading Capital, (Trans. Ben Brewer and David Fernbach), London: Verso.

Elliott, Gregory 1987, Althusser: The Detour of Theory, London: Verso.

Mason, Paul 2015 Post Capitalism: A Guide to Our Future, London: Penguin Books.

Mian, Arif and Amir Sufi 2014, House of Debt, Chicago: University of Chicago Press.

Montag, Warren, 2013, Althusser and His Contemporaries, Durham NC: Duke University Press.

Peden, Knox 2014, Spinoza contra Phenomenology: French Rationalism from Cavaillès to Deleuze, Stanford CA, Stanford University Press.

Subasat, Turan (ed.) 2016, The Great Financial Meltdown: Systemic, Conjunctural or Policy Created? Cheltenham: Edward Elgar.


[1] There is a a lively defence of the concept of capitalism as a complex adaptive system in Mason 2015,  in the chapter called ‘Was Marx Right’.

[2] Althusser et al. 2015.

[3] Elliott 1987.

[4] See Montag 2013, and Peden 2014.


Althusser on Causality in Marx

I have not posted anything for some months for two reasons.  First I had to complete a chapter on Money and Finance for the Handbook on Marxism, to be published by Sage, edited by Beverley Skeggs, Sara Farris and Alberto Toscano.

Then in November I had a meeting with Demet Dinler – unfailing source of inspiration and good advice – about what work to do next. Demet urged me to return to themes which I first explored in 2005-9 in a series of papers on Marx’s value theory and on the conceptual narrative of Capital.  (These are available on my ResearchGate website).

Roughly, what I was attempting at that time was to bring into alignment and interplay two areas of Marxist research: (1) ways of reading Marx’s text which register its metaphorical and performative dimensions; (2) the logics and selective pressures of the law of value, reconsidered in the light of recent developments in complexity theory and in ecology.

As her own outstanding research and editorial work will testify, Demet has a brilliant sense, of where in the present period, creative Marxist research can and needs to be done.  She has persuaded me that further work on the above topics, however modest, would be worthwhile.

It has taken me several months to catch up with only some of the necessary reading.  Partly this is because of the sheer volume of relevant material which has appeared over the past ten years.

But also because a further difficulty had to be faced.  In my training and approach to the reading of Marx, the central philosophical reference point was always Hegel.  But some of the most powerful strands of Marxist thought in recent years have roots less in Hegel than in Spinoza.  Think only of the many currents which derive from the autonomist project and the debates which it has provoked in areas such as: labour process, cognitive capital, social reproduction, and eco-Marxism.

There is too the literature of commentary on Althusser by scholars working in the tradition he established. When Althusser died in 1990 he left a large archive of manuscripts, many of which have now been published.  This new material, together with revised ways of reading his earlier books, have posed a radical challenge to the earlier, and widely held view, that Althusser was a doctrinaire structuralist who distorted Marx by denying the role of human agency in history.  Instead of the implacable dogmatist, Althusser now emerges as a tortured thinker, exploring conflicting positions, within and around Marxist thought, in a highly productive way.  But, on many important issues, without being able to come to a final and definitive resolution.  Warren Montag, one of the finest of recent commentators on Althusser, writes that:

In opposition to the mechanistic doctrine attributed to him by E. P. Thompson and others, Althusser worked to overcome the opposition between chance and necessity by defining historical necessity as the product of chance encounters between absolutely singular entities.[i]

The intense exploration of paradoxical propositions like this, not surprisingly, led to texts characterised by severe tensions. Montag, in the final summary of his magnificent book Althusser and His Contemporaries (2013), comments on,

the tumult of Althusser’s oeuvre, its risks, its tragedies, its exultations, the way in which he frenetically pursues a meaning that constantly eludes him, even if this meaning is none other than the pursuit itself, producing … a new way of inhabiting philosophy, that is, the philosophical conjuncture, that makes visible the lines of force that constitute it, opening the possibility of change … the shattering of obstacles that opens new perspectives.[ii]

What has been carefully studied in recent research on Althusser by Montag and others, are the implications of his characterisation of himself as a follower of Spinoza. As Althusser explained: ‘We never were structuralists … We were guilty of an equally powerful and compromising passion: we were Spinozists’[iii]

I believe that recent scholarly work on the Spinoza-Hegel connection, and on ‘the new Althusser’, can point the way to some promising developments in Marxist theory.

Here I start with the question of causality in Marx.

The year 2015 saw the publication, for the first time, of a complete English translation of Reading Capital written by Althusser and four of his students. Lire le Capital had appeared in Paris in 1965, but until three years ago the only English translation available was of the severely truncated second edition of 1968).

In the studies of Marx’s Capital which Althusser and his team summarise in this book, a huge weight is placed on the concept of structural causality.  In their view it was the central and decisive element in the theoretical revolution effected by Marx in Capital.  Here, they argued, was a new form of causality, without precedent in earlier scientific work.

They considered however that Marx did not have available to him the concepts with which to formulate explicitly and clearly the innovative form of causality which he was using in a practical way in his political economy. But were Althusser and his co-workers able to do any better?

Althusser has a chapter in Reading Capital, called ‘Marx’s Immense Revolution’, in which he explores at length the question of causality.  He explains that in the scientific and philosophical tradition which Marx inherited there were only two systems of concepts with which to think causation.

  • Mechanistic causality. This term (not a very happy one) covered the concepts and forms of causality operative both in everyday life and in scientific work.  Here particular causes were seen as having particular effects.  The link is some kind of direct transitive effectivity.  Such a model, Althusser suggests, has a serious limitation. It cannot register the effectivity of a whole – a totality – on its constituent elements.[iv]
  • Expressive causality. This second system was one conceived precisely in order to deal with the effectivity of a whole on its elements.  It was classically formulated by Leibniz in his concept of expression. The parts express the essential character of the whole. ‘This’, says Althusser, ‘is the model that dominates all Hegel’s thought. It presupposes that the whole in question be reducible to an inner essence, of which the elements of the whole are then no more than the phenomenal forms of expression’.[v]

As an example of expressive causality in Marxism, consider the influential account of Capital in History and Class Consciousness by Georg Lukacs. In this, two concepts are central – totality and commodity. What Lukacs argues can be summarised as follows:

(1) It is not the primacy of economic motives in historical explanation that constitutes the decisive difference between Marxism and bourgeois thought, but the point of view of totality. The category of totality, the all-pervasive supremacy of the whole over the parts, is the essence of the method which Marx took over from Hegel and brilliantly transformed into the foundations of a wholly new science.[vi]

(2) In the dialectical totality the individual elements incorporate the structure of the whole. This was made clear on the level of theory by the fact that e.g. it was possible to gain an understanding of the whole of bourgeois society from its commodity structure.[vii]

(3) The commodity can only be understood in its undistorted essence when it becomes the universal category of society as a whole. Only in this context does the reification produced by commodity relations assume decisive importance both for the objective evolution of society and for the stance adopted by men towards it.[viii]

Althusser and his colleagues were hostile to all variants of expressive causality in Marxist thought.[ix]  These seemed to them to represent a regression into idealism.  They accepted of course that commodity fetishism was an element in Marx’s account of capitalism, and the chapter by Pierre Macherey in Reading Capital discussed what Marx wrote about the commodity in the first section of Capital Vol. 1.  But not the commodity as some kind of essence which, once identified, allows the analyst to read off at sight the entire structure of a capitalist society.[x]

Instead their attention was focused on Marx’s account of the differing modes of production in historical development.  Here they emphasised the interrelation between forces of production and relations of production, and the patterns of uneven development which result. They saw the political, legal, religious and other major institutions as determined in the last instance by the economic structure.

Althusser asks: how is it possible to define the concept of structural causality? He comments that:

This simple theoretical question sums up Marx’s extraordinary scientific discovery: the discovery of the theory of history and political economy, the discovery of Capital. But it sums it up as an extraordinary theoretical question contained ‘in the practical state’ in Marx’s scientific discovery, the question Marx ‘practised’ in his work, in answer to which he gave his scientific work, without producing the concept of it in a philosophical opus of the same rigour…

This simple question was so new and unforeseen that it contained enough to smash all the classical theories of causality – or enough to ensure that it would be unrecognized, that it would pass unperceived and be buried even before it was born.[xi]

Althusser is arguing that Marx’s breakthrough was so revolutionary that the subsequent  commentary literature on Marx has simply overlooked that a new concept of causality is operative in Capital. They have been able to avoid this recognition because Marx himself did not have the categories to clarify the profound shift in scientific procedure which he was implementing in practice.

What we find instead in the Marxist theory of the 2nd International and in the Communist Parties is a reversion to simple transitive causality. The economic base determines the superstructure of politics, law, ideology etc.

But how could Althusser and his Reading Capital co-authors argue that it was the economic structure which was fundamentally determinative, while,at the same time, avoiding mechanistic cause-effect patterns?

Here I mention only one of the paths they tried to take through this difficulty.  This was by invoking Marx’s suggestion that economic relationships were decisive in the last instance.

Balibar notes,

the principle explicitly present in Marx of a definition of the determination in the last instance of the economy. In different structures, the economy is determinant in that it determines which of the instances of the social structure occupies the determinant place. Not a simple relation, but rather a relation between relations; not a transitive causality, but rather a structural causality.[xii]

As Balibar explains, the Marxist vision is of societies characterised by,

a certain type of complexity, the unity of a structured whole containing what can be called levels or instances which are distinct and ‘relatively autonomous’, and co-exist within this complex structural unity, articulated with one another according to specific determinations, fixed in the last instance by the level or instance of the economy.[xiii] . 

So, if we follow the contortion of this prose, does the economic structure in fact predominate?  Well yes … sort of … but only in the last instance.

But this implies that the last instance must eventually come along to exercise the causative powers of the economy on the superstructure. But such a final arrival is just what is flatly ruled out by Althusser in some memorable phrases:

In History, these instances, the superstructures, etc. — are never seen to step respectfully aside when their work is done or, when the Time comes, as his pure phenomena, to scatter before His Majesty the Economy as he strides along the royal road of the Dialectic. From the first moment to the last, the lonely hour of the ‘last instance’ never comes.[xiv]

More is involved here than simple inconsistency or confusion.[xv]  The Althusser team are wrestling with some serious difficulties in Marxist theory which are often ignored or treated evasively in the literature. I believe their difficulties about the concept of structure are illuminating and worth careful study.  In my next post will try to show why.


Althusser, Louis 1977 For Marx, (Trans. Ben Brewer), London: Verso.

Althusser, Louis, Étienne Balibar, Roger Establet, Pierre Macherey, and Jacques Rancière, 2015, Reading Capital, (Trans. Ben Brewer and David Fernbach), London: Verso.

Eliot, Gregory 1987, Althusser: The Detour of Theory, London: Verso.

Lukacs, Georg 1971, History and Class Consciousness, (Trans. Rodney Livingstone), London: Merlin Press.

Montag, Warren, 2013, Althusser and His Contemporaries, Durham NC: Duke University Press.

Sotiris, Panagiotos 2014, Rethinking Structure and Conjuncture in Althusser, Historical Materialism, 22,3: 5-51.

Thomas, Peter 2002, Philosophical Strategies: Althusser and Spinoza, Historical Materialism, 10,3: 71-113.


[i] Montag 2013, p. 10.

[ii] Montag 2013, p. 210.

[iii] Althusser 1974, p.132.

[iv] Or not at least without contortions.  Althusser here refers to mechanistic causality as theorised by Descartes.  He notes that when Descartes tried to formulate the type of causality through which a whole (e.g. the mind) controls another whole (e.g. the body), he was compelled to fall back on the famous absurdity of the pineal gland as acting as a point of transmission and control.

[v] Althusser et al. 2015, p.342.

[vi] Lukacs 1968, p. 27.

[vii] Ibid, p.198.

[viii] Ibid, p. 86.

[ix] See Elliot 1987 for a valuable discussion of the political reasons why Althusser and co. attacked alienation centred Marxism – its adoption by the French CP as central to the theoretical justification of the pro-Stalinist position.

[x] See on this question, and on some of the other topics I discuss here, two meticulously argued articles: Thomas 2002 and Sotiris 2014.

[xi] Althusser et al. 2015, p.342.

[xii] Ibid p. 385.

[xiii] Althusser et al. 2015, p.244.

[xiv] Althusser 1977, p.113.

[xv] Though inconsistency there certainly is: see Thomas 2002 for a lucid analysis.

Value, Natural Forces, and Productivity

One of the most frequent objections to Marx’s value theory is that there are many commodities which are not produced by labour, yet can be given a price and sold. Marx writes that:

Since money is the transformed shape of the commodity, it does not reveal what has been transformed into it: whether conscience or virginity or horse dung (Capital Vol. 1, p.1073).

Or, as he says at the very beginning of Capital:

A thing can be a use-value without being a value.  This is the case whenever its utility to man is not mediated through labour.  Air, virgin soil, natural meadows, unplanted forests, etc. fall into this category (Capital Vol. 1, p.131).

And, in a later formulation,

Labour is not the source of all wealth. Nature is just as much the source of use values (and it is surely of such that material wealth consists!) as labour, which itself is only the manifestation of a force of nature, human labour power.[i]

 Marx distinguishes between the use-value of commodities as underlying what he calls wealth [Reichtum] – and value [Wert] whose substance is labour and whose measure is socially necessary labour-time.

For commodities produced by labour, labour-time determines value, but the selling price of such a commodity will usually differ from its value.  Among the reasons why exchange-value (i.e. price) differs from value, one of the most important is the operation of supply and demand.  If there is a greater demand than supply of a given commodity, its price will rise above its value.  If supply is greater than demand then price will be below value.  Marx spells out this  argument in detail in Capital Vol. 3, pp.278-96.

In the case of commodities which are not produced by labour, yet are sold for a price, it is the balance of supply and demand which determines what that price will be.  Air has no value because not produced by labour, and no price because its supply is, for most practical purposes, without limit.

When talking about prices Marx often stresses the role of rent.  If someone can establish control of the supply of a commodity for which there is a demand, then a higher price can be charged.  Thus the price of commodities is affected by property relations.  These in turn are underpinned by the power of law, and/or violence.

Marx brings great care to the analysis of means of production which have not been produced by labour-power.  One notable example he uses is – the waterfall.

Marx’s analysis runs as follows. Access to a waterfall increases the productivity of labour employed by the firm which uses the water as a source of power. Higher productivity allows a surplus profit to be achieved.  But for a firm to get such surplus profits depends on: (1) the fact that there is a limited supply of locations which have a waterfall, and (2) that the owner of any  given waterfall has monopoly control of its use a source of power in production. Marx writes:

Those manufacturers who possess waterfalls exclude those who do not possess them from employing this natural force, because land is limited, and still more so land endowed with water-power…. Possession of this natural force forms a monopoly in the hands of its owner, a condition of higher productivity for the capital invested, which cannot be produced by capital’s own production process.  The natural force that can be monopolized in this way is always chained to the earth. A natural force of this kind does not belong to the general conditions of the sphere of production in question nor to those of its conditions that are generally reproducible… a capital cannot create a waterfall from its own resources (Capital Vol. 3, p.784).

There is however another way in which a waterfall may be used to increase productivity and so get surplus profits. Technical modifications can be made to increase the efficiency of its operation.

Although the number of natural waterfalls in a country is limited, the amount of water-power that industry can use may still be increased. A waterfall can be artificially channelled to make its motive power fully useable; a water-wheel can be improved in order to use as much of this water-power as possible; where the ordinary type of wheel is not suited to the supply of water, turbines can be used, etc. (Capital Vol. 3, p.784).

Thus use of the natural power of a waterfall to increase productivity can be enhanced if technical improvements have been made to it. This higher productivity will tend to increase profits.

But who gets those profits?  Marx argues that the surplus profits which derive from the natural existence of the waterfall are realised in the particular form of rent.

Here Marx defines rent as the extraction of a flow of profit based on property ownership and monopoly control of a means of production. This is because the profitability advantage is then based on the fact that competitors can’t get access to the waterfall and use their capital to get a share in its operation.

What is impressive is the precision with which Marx analyses the difference between these two different sources of surplus profit: natural location and technical efficiency.  In turn this leads him to distinguish between two sorts of rent – he calls them Differential Rent 1 and 2. [DR1, DR2].

DR1 is based on the higher productivity and profit achieved through the use of the natural power of the waterfall.  Marx refers to, the use by capital of a monopolizable and monopolized natural force. Under these conditions, the surplus profit is transformed into ground-rent, i.e. it accrues to the owner of the waterfall (Capital Vol. 3, p.785).

DR2 arises from the investment of capital to enhance the efficiency of a natural means of production.  In the case of the waterfall, the extra profit is shared between the owner of the waterfall and the capitalist whose technical improvements increase the productivity of the labour making use of it as a power source.

If the industrial capitalist happens also to be the owner of the waterfall then he or she gets both sorts of rent.

Marx says that the natural location and power of the waterfall is only one instance of a much broader category of what he calls free gifts of nature.  When these are generally available for capital to exploit they add use-value – but no value — to the commodities being produced.

Again and again, Marx stresses that where private ownership and monopoly control has been  established over a freely available force of production, the rent extracted is not derived from value added to commodities produced by its use.  Rather, rent is money captured by landowners from the capitalists who use the land in productive operations which extract surplus-value from the workers they employ.  Rent is a transfer from the class of industrialists to the class of landowners.

The same argument about the waterfall is used by Marx when discussing agricultural land.  If a particular piece of land has a higher natural fertility, there is more use-value, but not more value, to be generated from its cultivation.   However labour employed on relatively more fertile land has higher productivity.  This allows a higher rate of surplus-value to be extracted from those workers, and it is Marx’s argument that monopoly enables the owner of the land to appropriate the extra surplus-value in the form of rent.

A similar case can be made about oil and other mineral resources.  There can be huge differences in costs of extraction or in the quality of available reserves.  The labour employed in the processes of extraction is correspondingly more or less productive. Where higher productivity generates an extra profit this is captured by the owner of the land and its mineral rights.

Why does it matter to Marx to make such an elaborate and precise distinction between the labour productivity which derives from: (1) a force of production which is a free gift of nature, as opposed to, (2) technological improvements?  Often, in practice, they are combined. Marx discusses for example how industrialisation increases the scale of the natural forces which can be deployed in production.

It is cooperation on a large scale with the employment of machines that first subjugates the forces of nature on a large scale – wind water steam electricity – to the direct production process, convert them into agents of social labour… Since these natural agents cost nothing, they enter into the labour process without entering into the valorisation process.  They make labour more productive without raising the value of the product, without adding to the value of the commodity.[ii]

What is crucial for Marx, is maximum clarity that living labour is the only source of surplus-value. We have always to distinguish clearly between the extraction of surplus-value as commodities are produced, and its subsequent redistribution in the circulation process.  As, for example, in the rent which industrial capitalists are compelled to pay to the owners of land and its resources.

As I emphasised in my last post – for Marx, a rise in labour productivity does not, in itself, increase the quantity of value produced.  But a firm is able to capture more profit at the expense of its competitors if it can improve the productivity of its labour force. However, to the extent that higher productivity is due to use of a monopolised natural force, then it’s owner of this who captures the increment in profit in the form of rent.

In the above I have spelled out an argument in rather abstract terms.  To finish I will look briefly at two examples of research which build on Marx’s analysis of the use of natural forces as means of production.

1]   Andreas Malm, in his deeply researched and vividly written book, Fossil Capital, (2016) explores the switch from water to coal power in the English textile industry in the first half of the 19th century.  Water power was cheap compared with the cost of extracting and transporting coal.  But to stabilise the supply of water via systems of reservoirs etc. would have required collaborative and collective organization which was impossible given the competitive capitalism of the period. Coal and steam won out because their use gave higher profits to individual capitalists. After Watt’s invention of the double-rotating engine in the 1770s, it required decades of technical innovation before coal-driven steam became clearly more efficient than water power.  Malm shows that what was decisive was that the portability of coal allowed capitalists to build factories in urban centres where a larger supply of labour was available, than in the upland valleys with waterfalls.  Control of labour by capital was the crucial factor in the transition from water to coal.

2]    In recent article called Value, Nature and Labor: A Defense of Marx, Matthew Huber[iii] has analysed the production of nitrogen fertiliser – a major input into the global agro-food complex:

 Take a nitrogen fertilizer factory for example…the nitrogen that these factories depend upon is freely appropriated air. The atmosphere is 79 percent nitrogen, but this nitrogen is non-reactivein forms that could be taken up by plants. The HaberBosch process of synthesizingreactive nitrogen takes freenitrogen from the atmosphere and combines it with hydrogen (along with tremendous levels of heat and pressure) to produce ammonia. Since there was no labor involved in producing the nitrogenous air,it bears no value. Yet the pernicious aspect of this free appropriationof the atmosphere is that capital also treats it as a freesink for its pollution. One of the main by-products of ammonia synthesis is carbon dioxide. The fertilizer industry is one of the major industrial emitters of carbon (p.43).

Because capital has yet found a way of enclosing the atmosphere and establishing private property rights, its use as a source of nitrogen in fertiliser production (and its abuse as a pollution sink) costs the industry nothing, but is not, in itself, a source of value, profit or rent.  However in this industry, the main economic cost is also a natural resource, but one which is monopolizable, namely natural gas.

Most estimates suggest the price of natural gas forms 7090 percent of the operating cost of nitrogen fertilizer facilities…Thus, it should be no surprise that chemical capital has substantially increased its efficiency in the use of natural gas over the last 5 decades … This is what Marx calls economy in the use of constant capital (Capital Vol. 3 Ch. 5.).

Natural gas is a cheapand not easily replaceablesource of hydrogen to combine with free atmospheric nitrogen to form ammonia. The hydrogen is extracted from natural gas through the material-energy-water intensive process of steam reformingand carbon dioxide is the primary waste product. With this cheap yet pollution-generating and finite source of hydrogen, natural gas forms the material basis of cheap fertilizer, and with it cheap grain, cheap meat and our processed food culture (p. 48).

The shale gas boom based on hydro-fracking has created a renaissance of cheap natural gas-based fertilizer. The plant I visited was in the middle of a $2.1-billion dollar expansion, and the company had made investments in new fertilizer plants throughout the United States. All this expansion is made possible by the fracking that has produced cheap natural gas. A Marxian value perspective should seek to understand how the technical transformations of hydraulic fracturing have reshaped the socially necessary labor time it takes to produce natural gas across the industryand how those value shifts have also reshaped geographies of the chemical industry, electric utilities, and household heating fuel (p. 49).

The fertiliser industry is pollution-intensive and reliant on two natural resources, nitrogen and hydrogen. However, the hydrogen is not a free gift of nature like the nitrogen, but is produced by industrial processes from natural gas.  As Huber explains, It is the huge advance in labour productivity in the production of natural gas – most recently via fracking – which  has underpinned the drop in fertiliser prices, kept costs of production down, and supported profitability right across the world-wide agro-food industrial complex.

[i] Critique of the Gotha Programme, in, Marx and Engels Collected Works, Lawrence and Wishart, Vol. 24, p.81.

[ii] Marx and Engels Collected Works, Lawrence and Wishart, Vol. 34, p.32.

[iii] Published in, Capitalism Nature Socialism, Vol. 28, 1, pp. 39-52. Huber is also the author of an excellent Marxist analysis of the linkages between cheap oil, the politics of neoliberalism, and the construction of a certain ‘American way of life’ based on suburbanisation, and mass availability of cars, roads and retail petrol stations. See Huber 2013, Lifeblood: Oil, Freedom, and the Forces of Capital, Minneapolis: University of Minnesota Press.

Value Theory and the Schism in Eco-Marxism

In the eco-socialist movement there have been frequent complaints that Marx’s value theory, with its central emphasis on labour-time, is fatally flawed and irrelevant. It seems to discount the exploitation of nature in the pursuit of profit. Students of Marx have responded by tracing the close attention which Marx and Engels gave to ecological research and debate in their period.  Crucially, it has been argued that it is precisely its central focus on labour productivity which enables Marx’s value theory to generate a unique and powerful account of the environmental destructiveness of capital.

Here, two writers associated with the New York journal Monthly Review have produced an outstanding body of work. John Bellamy Foster’s brilliant book, Marx’s Ecology (2000) is now an established classic, and Paul Burkett’s Marx and Nature (1999) not far behind as a standard reference. Since then, both writers have produced further influential work in eco-Marxism, most recently the jointly authored Marx and the Earth, which has just come out in paperback. What they have emphasised above all is Marx’s thesis that capitalism tends to use natural resources without concern for sustainability.  He uses the term Stoffwechsel ­ for the metabolic exchange of matter and energy between humans and nature, and notes, for example, how capitalist industrialisation,

produces conditions that provoke an irreparable rift [Riss] in the interdependent process of social metabolism, a metabolism prescribed by the natural laws of life itself. The result of this is a squandering of the vitality of the soil. (Capital Vol. 3, p.949).

Recently however, the Monthly Review account of the ecological dimension in Marx has been challenged by a new kid on the block.  Jason Moore’s Capitalism and the Web of Life (2015), [Web] accuses the Monthly Review team of failing to develop a properly dialectical account of Marx’s ecology.  They remain mired in Cartesian dualism. They counterpose two separate and opposed entities: Society vs. Nature. Thus their focus is too confined to a one-way account of the damage which capitalism is currently inflicting on the environment.

Moore is not denying that we may be currently heading towards environmental disaster.  But he argues that the stark Monthly Review conclusion – abolition of capitalism or planetary destruction – can lead to fatalism rather than creative political responses. Moore writes that:  A dual systems approach to metabolism gives us only one flavor of crisis —the apocalypse (Web p.8o). But the combination of economic and environmental crisis which we face may take many forms in the coming period, and all sorts of technological and political action will be needed in response.

Much of Moore’s book is an exploration of the historical background to the present situation.  From its inception in the long 16th century, capitalism has been hit by successive waves of crisis as it came up against limits in the availability of necessary means of production such as raw materials, energy, and land.  Moore traces major turning points over the past 500 years as capitalism has reacted to resource limits by expanding geographically and technically to absorb new and cheap supplies of necessary means of production and labour. What is distinctive in this approach is Moore’s enormous stress on appropriation as opposed to exploitation.  In discussing the historical evolution of capitalism, he talks, for example, about islands of exploitation in oceans of appropriation.

As originators and guardians of the reigning paradigm in eco-Marxism, the Monthly Review writers have responded aggressively to Moore’s accusation that their work is not dialectical. According to Foster, for example, Jason Moore,

abandons value theory … and has joined the long line of scholars who have set out to update or deepen Marxism in various ways, but have ended up by abandoning Marxism’s revolutionary essence and adapting to capitalist ideologies’.  See interview.

My own view is that, despite many criticisms which can be made of Moore’s work, he has identified some dimensions of Marx’s value theory, which have not had the attention they deserve, not just by eco-Marxists, but more generally across the spectrum of mainstream Marxist political economy. He is asking us to look again at a fundamental question: the relationship between use-value and value in the productive process – and how they intersect when labour productivity rises.  His thinking, for example, has implications for current debates about trends in profitability.

What is striking in the dispute between Moore and the Monthly Review writers is that both sides start out from the same reading of Marx’s value theory. They both strongly defend its central emphasis on socially necessary labour, against the view, widely shared among radical critics, that Marxist doctrine is complicit in a devaluation of nature.

Competition forces capitalists to reduce prices by increasing labour productivity.  This is achieved mainly by mechanisation and by advances in the organization of production.  As Marx pointed out, an increase in productivity will generally require an input of larger quantities of means of production, such as e.g. raw materials and energy.  To sustain the rate of profit these should be obtained as cheaply as possible.

From this starting point, Moore develops a less orthodox line of argument: that the advance of labour productivity can take place without a hit to profits if capital can tap into what he calls a rising “ecological surplus” of Cheap Nature – especially in the form of low cost energy, land, and raw materials.  Also labour-power, kept cheap because its reproduction is not paid for by capital – but secured, for example, by enslavement or domestic labour.

But where capital appropriates means of production cheaply and without paying the full costs of their reproduction, it tends to exhaust its own social-ecological conditions. Moore thus posits a general tendency for the ecological surplus to fall, and for cheap nature to become less cheap. Hence recurrent crises as capital runs up against limits in available resources. If the ecological surplus falls – as Moore argues is happening in the current period – then inputs into production rise in price. Capital must absorb an increasing share of the costs of reproduction.  As costs rise, productivity and profits are threatened with stagnation. Thus Moore traces linkages between environmental devastation and the current economic crisis.

Let’s look more closely at the theoretical underpinning of these conclusions. Central to value theory is that the pressures of competition require firms to lower prices – and the major way in which this is done is by increasing productivity.  At the centre of Marx’s law of value is labour productivity.

Marx’s basic propositions about productivity are formulated as follows:

  • a working day of a given length always creates the same amount of value, no matter how the productivity of labour may vary ­(Capital 1, p.656). If productivity rises, more commodities are produced in a given time period, but the average value of each commodity – and therefore its selling price – will fall correspondingly.
  • However, as productivity rises there tends to be an increase in the rate of surplus-value. As Marx puts it,

an increase in the productivity of labour causes a fall in the value of labour-power and a consequent rise in surplus-valuethe value of labour-power is determined  by the value of the means of subsistence habitually required of the average worker (Capital Vol. 1, pp.655-7).

There are some complications here: Marx accepts that more value can be produced in a given time period if there is an intensification of labour (working harder) or an increase in the skill level of workers. But these qualifications can be initially set aside in order to clarify the fundamental issue.  The source of surplus-value is unpaid labour-time.  An increase in productivity does not increase the total value produced in a given time, but it does increase the rate of surplus-value.

But does it also increase the rate of profit?  Here the key issue is that a rise in productivity, for example via mechanisation, tends to increase the amount of constant capital which capitalists need to use in order to stay competitive.  A rise in the ratio of constant capital to labour will tend to reduce the rate of profit. More capital has been advanced relative to the unpaid labour which is the basis of profit.

As productivity advances there is likely to be a rise in the mass of means of production (machinery, raw materials, energy etc.) required in production.  As Marx notes,

the consequence of …the  application of machinery is that more raw material is worked up in the same time, and therefore a greater mass of raw material and auxiliary substances enters into the labour process…  [An increase in] the mass of machinery, beasts of burden, mineral manures, drain-pipes, etc. is a condition of the increasing productivity of labour… [For example] the mass of raw material, instruments of labour, etc. that a certain quantity of spinning labour consumes productively today is many hundred times greater than at the beginning of the 18th century. (Capital Vol. 1, p.774).

A rise in the ratio of constant to variable capital threatens to lower the rate of profit. A given rate of surplus-value has then to be divided by a larger amount of capital advanced when calculating the rate of profit.

But there is a counteracting tendency.  If the advance in productivity is general, then it will apply in the sector of the economy which produces means of production.  The value of a given unit of constant capital will be reduced. This fall in the cost of producing the means of production required will thus limit, or even reverse, the decline in the rate of profit as more constant capital is used.

Thus Marx emphases that as labour productivity rises, this also lowers the value and therefore the price of the constant capital required for production.  The result is what Marx calls a cheapening of the elements of constant capital.  The value of means of production rises, as productivity advances, but at a lower rate than the mass of means of production being used.

For example, the quantity of cotton that a single European spinning operative works up in a modern factory has grown to a most colossal extent in comparison with that which a European spinner used to process with the spinning wheel. But the value of the cotton processed has not grown in the same proportion as its mass.

 It is the same with machines and other fixed capital. In other words, the same development that raises the mass of constant capital in comparison with variable reduces the value of its elements, as a result of the higher productivity of labour, and hence prevents the value of the constant capital, even though this grows steadily, from growing in the same degree as its material volume, i.e. the material volume of the means of production that are set in motion by the same amount of labour-power… In certain cases, the mass of the constant capital elements may increase while their total value remains the same or even falls. (Capital Vol. 3, p.342).

Thus, in summary, as productivity rises, there is likely to be an increase in the mass of means of production in use.  But the value – and thus the price – of those means of production will tend not to rise to a corresponding extent. A general rise in productivity will also reduce the cost of means of production and so slow down the fall in the rate of profit.

In clarifying this analysis, Marx introduces an important distinction: between the technical composition of capital and the organic composition of capital.

There are two ways of looking at the capital / labour ratio.  As a relation between two values – constant and variable capital. Or as a ratio between a mass of physical means of production and a mass of labour-power.

The organic composition of capital is determined by the ratio of the value of the means of production, as compared with wages. I.e. the value ratio between constant capital and variable capital

 The technical composition of capital refers to material use-values- here capital is divided into means of production and living labour-power. Marx writes that:

the technical composition is determined by the relation between the mass of the means of production employed on the one hand, and the mass of labour necessary for their employment on the other. (Capital Vol. 1, p.762) [i]

It is here that Moore’s account moves in a distinctive direction.  Mechanisation and improved organization of production are not the only ways in which cheaper means of production may be secured.  If means of production can be appropriated – at low cost, or, better still, at zero cost – then the hit to profits because of rising organic composition of capital can be reduced or nullified.  This is Moore’s central argument, one which is directly founded on Marx’s value theory.  By seeking geographical or technological frontiers where the four Cheaps (raw materials, food, land and labour) can be appropriated, capital can raise productivity while protecting the rate of profit.  Recurrently in the history of capital, the appropriation of new forms of cheap inputs has,

allowed capital to advance labour productivity while reducing (or checking) the tendentially rising value composition of production. The technical composition of production—the mass of machinery and raw materials relative to labour-power— could rise without undermining the rate of profit. Capitalism, we have seen, is a frontier process (Web, p.107).

Cheap Nature, as an accumulation strategy, works by reducing the value composition—but increasing the technical composition—of capital as a whole; by opening new opportunities for the investment; and, in its qualitative dimension, by allowing technologies and new kinds of nature to transform extant structures of capital accumulation and world power. In all this, commodity frontiers – frontiers of appropriation – are central. (Web, p.53).

Here Moore is challenging the analysis in Burkett’s Marx and Nature. Although Burkett – like Moore – starts out from the basics of value theory, his treatment of the mass and value of constant capital employed in production remains at a rather elementary level. I can find no reference to the organic composition of capital in either of Burkett two ecological books.  There are many general comments on profit as driving the system. But no discussion of the counter-tendencies which operate to limit or reverse the downward pressure on the rate of profit as productivity rises. No attention is given to the increase in the capital/labour ratio, which Marx calls the technical composition of capital.

The monopoly capitalist tradition of Monthly Review is flawed precisely in its relative lack of interest in competition and price movements, and in Marx’s account of the determinants of rates of profit.  The monopoly capitalist thesis is that, because of the concentration of capital, companies are now able to evade competition by cartels, and determine prices by fiat.

There is one moment in Burkett’s Nature book where he does discuss one of the examples of appropriation which preoccupy Moore.  Burkett has a section discussing ‘child rearing labour’ and the ‘natural force of household labour power’. He writes that,

The exploitable [sic] labour power associated with domestic activities is freely appropriated by capital. It is a use value, not a value.

Burkett then notes that the appropriation by capital of this use value has implications for surplus-value.

Capital’s free appropriation of the domestic enhancement of labour power increases the rate of surplus value in so far as domestic activities lower the value of labour power (by raising the productivity of wage-labour or reducing workers’ commodified causation requirements).  (Marx and Nature, p.105).

So appropriation of unpaid domestic labour by capital does not increase the total value produced, but does increase the rate of surplus-value.  Capital gets its labour cheaper, and retains more of the value produced.

What Moore is proposing is a generalisation of this account of domestic labour – extending it to capital’s appropriation of natural resources.

But is it right to assimilate domestic labour, as Moore does, into a wider category of work/energy?  This leads him to talk, for example, about how natural resources are kept cheap because they ‘do unpaid work for capital’. However, Moore is clear that this kind of ‘work’ has nothing in common with the abstract labour which creates value.  ‘Work’ here is a use-value concept – but one which follows capital in treating use-value abstractly.  The objective here is to trace capital’s abstractification of nature and its consequences.

Meticulous research by Burkett and Foster has clarified the engagement of Marx and Engels with the thermodynamic and energetics debates of their period. In their Marx and the Earth book, they trace how Marx used energy concepts to think through the use-value dimension of the labour process.  There is, of course, no suggestion that the creation of value and surplus-value in the labour process is in any way determined by concrete labour. But the creation of value is also a physical metabolic process which can be studied in terms of amounts and transfers of abstract energy.  In words which resonate with Moore’s work/energy concept, Burkett and Foster summarise Marx’s thinking about this as follows:

In energy terms, ‘What the free worker sells is always nothing more than a specific, particular measure of force-expenditure’; but ‘labour capacity as a totality is greater than every particular expenditure’ (Grundrisse p.464). ‘In this exchange, then, the worker … sells himself as an effect’, and ‘is absorbed into the body of capital as a cause, as activity’ (Grundrisse p.674). The result is an energy subsidy for the capitalist who appropriates and sells the commodities produced during the portion of the workday over and above that required to produce the means of subsistence represented by the wage (Marx and the Earth, p.145).

There certainly are some major criticisms to be made of Moore’s work and I’ll look at these in a future post. Some valuable commentaries on Moore’s work have already been published. [ii].  Some valid objections have come from the Monthly Review camp. For example, Foster is right to say (in the Climate and Capitalism blog cited above) that Moore neglects the question of rent.  There is too little in his Web book about how private property control gets established over raw material and energy sources. The theme of enclosure, so strongly emphasised in Marx’s account of primitive accumulation, is under-weight in Moore.  Often industrial capitals find that the so-called Cheap inputs are not actually so cheap  – after rent is extracted by the monopoly owners of oil wells and mineral resources.

The strength of Moore’s book is the way it traces, from the long 16th century onwards, how the abstract logics of labour productivity are implemented and play out concretely – as crises of resource limits are encountered and overcome by the violence of capital, science, and state power. His focus on appropriation may at time be over-pitched, but Moore consistently directs much needed attention on the necessary conditions for the operation of the law of value.  How the economic and technical requirements that make possible exploitation and value creation are established and maintained.

An addendum on profit.

Marx used the term circulating capital to refer to raw material and energy inputs.  Moore’s  focus on these highlights the neglect of circulating capital in current Marxist debates about trends in profits. For example, profit rates are generally calculated solely on a denominator of fixed capital (machinery etc.).  This fact is rarely even mentioned in current work using National Accounts data.  An exception is Andrew Kliman who mentions casually in his Failure of Capitalist Production book (pp.80-82) that:  ‘My rate of profit measures … exclude circulating capital … expenditures for inventories of raw materials and the like – because information on the turnover of circulating capital is not available’.  One of many instances in which the easily available National Accounts data are used and their limitations ignored.  Company account based data is more difficult to obtain and use, but can be a more accurate corrective to national account based data.

[i] For a lucid  account of the TCC/OCC distinction, see: Ben Fine and Alfredo Saad-Filho 2010, Marx’s Capital, Ch. 8.

[ii] See, for example, an excellent critique of Moore by the radical geographer Sara Nelson, on the Antipode website February 2016.  Benjamin Kunkel has produced an outstanding account of debates around the anthropocene / capitalocene concepts – and the disagreements between Moore and the Monthly Review team.  See London Review of Books 2 March 2017.

Crisis Theory Needs a Demand Story

In an essay dated June 2005 (and republished in 2009 as Chapter 2 of The Great Recession) Michael Roberts has a perceptive account of what he calls ‘the property time bomb’.  He notes that never before had real house prices risen so fast for so long in so many countries, and quotes an Economist article of June 2005 which called it, ‘the biggest bubble in history’.

The total value of residential property in the OECD had more than doubled from $30bn to $70bn in the previous five years.  House values had never been higher in America, Britain, Australia, New Zealand, France, Spain, Holland, and Ireland. This was a bigger bubble bigger than the stock market boom of the 1990s that collapsed in 2000, or the great boom of the 1920s which ended in the Great Depression of 1929-33.  In The Great Recession [TGR]  Michael writes that:

World capitalist growth now depends on US household spending and US spending depends on housing prices in the US rising forever.  This is a pyramid scheme that will topple over eventually… the US housing bubble is set to burst …the US economy will drop like a stone, as many Americans face bankruptcy when they cannot make their mortgage payments, while others will have to pull in their spending horns … this year the UK and Australian housing markets have slumped.  With that economic growth has slowed to under 2 per cent a year. Spending in the shops has stopped growing altogether (TGR p.10).

Here Michael’s line of causation directly accords with the analysis which Atif Mian and Amir Sufi were to elaborate in their 2014 book, House of Debt which has attracted much attention.  In Michael’s 2005 discussion, a fall in profits is mentioned only in passing, and as a  consequence of a fall in consumer demand, not as a cause of the crisis – ‘if the housing market collapses that will make a huge hit on the profits of big business’ (p.12).

In Feb 2006 Michael published another accurate and well-documented analysis of the growing crisis caused by falling house prices in the UK, Australia and the US.

The downturn in the US housing market has now started … housing affordability, particularly in the coastal cities is stretched to the limits. America’s households are leveraged up to their eyeballs and now rely on rising housing prices to supplement their incomes … so even just a slowdown in house price rises would hit consumption (TGR p.17).

What has already happened in the UK and Australia, he suggests, shows what lies in store for the US.

The collapse of a house price boom in the UK (and in Australia) last year is the future for US homeowners.  The price fall deducted something like 2-3 per cent from real spending growth in these economies.… UK retail sales are now growing at their weakest rate for 20 years and recorded the worst figures for January sales since 1945 … and unemployment is steadily rising. (TGR p.17).

This fall in demand – and the reasons for it – is a major dimension of the 2007 -09 crisis in the US and in the way in which the crisis unfolded in other countries, notably Ireland and Spain.  It is essential that the house price / housing debt / demand story be incorporated into any fully developed Marxist account of the crisis.

Yet in recent years Michael’s thinking about the 2007-09 crisis has taken a radically different direction.  His new book The Long Depression is to be welcomed as currently the most thorough exploration of the crisis from a falling profits standpoint.  It contains a wealth of indispensable empirical material, the analysis covers the major sectors of the global economy, and it is a lively read. Here I focus only on Michael’s account of the US phase of the crisis.

In arguing for the tendency of the rate of profit to fall as the crucial underlying cause of the 2007-09, Michael has given far too little weight to other causal forces which were in play.  The house price/consumer demand dimension of the crisis is mentioned only occasionally and briefly. In his main discussion of the 2007-09 US crisis (Chapter 5), housing as such is not discussed.  There is only a passing mention that:

investment in real-estate took an almighty plunge after the credit-fuelled boom up to 2007, but investment in productive assets also tumbled.  The mass of profits dropped like a stone, especially for the financial sector (TLD p. 67).

Factually this is not correct.  The general category of real-estate includes the vast sector of commercial property and this did not collapse in 2007.  The initial crash was in residential house prices and it started at the beginning of 2007, well before the banking crisis became serious. Certainly investment in the house construction sector fell, but overall investment levels in the non-financial sector did not fall until 2009. (See my earlier post  for a summary of the evidence).  The effect of a fall in investment by firms in the residential housing sector was more than counterbalanced by an increase in investment in other sectors. The Economic Report of the President for 2008 says that:

In contrast to residential investment, real business investment in non-residential structures grew at a strong 16 per cent annual rate over the four quarters of 2007… investment in equipment and software grew 3.7 per cent, a bit faster than the 2006  pace. (ERP 2008 p.32).

It was in late 2008 and early 2009 that ‘investment spending (other than structures) plummeted’ (ERP 2010 p.126).  But by the fourth quarter of 2008 well over than a million jobs had been lost as a consequence of the fall in household demand which happened as a reaction to the collapse of house prices from the beginning of 2007 onward. (See Table 5 in my recent post.)

Michael does discuss debt, but now sees it as a secondary question – a trigger of crises, rather than a cause.  In his book, Chapter 6 is called Debt Matters and it contains much material of great interest.  But the analysis is focused almost exclusively on corporate debt.  There is a section on housing but it is very brief.

By mid-2006 the residential boom in the United States had reached mega proportions.  Household debt expanded rapidly during the so-called neoliberal era As a result of falling interest rates that reduced the cost of borrowing and created the ensuing property boom in many advanced capitalist economies in the past fifteen years.  The creditors were the banks and other money lenders. The assets (home values) eventually collapsed, placing a severe burden of deleveraging on the financial sector (TLD p.99).

The discussion that follows concentrates only on debt in the corporate sector.  Astonishingly there is no mention of the collapse in consumer demand as millions of households across America had began to deleveraging following the drop in house prices at the start of 2007.  No note is taken here of the mass of evidence, painstakingly presented in Mian and Sufi’s House of Debt book, that before the banking crisis went critical (when  Lehman folded in September 2008) jobs and businesses in large parts of the US had already been severely hit as a result of the contraction in consumer demand from the start of 2007 as household borrowing began to fall, and income was switched to debt repayment. See my recent post.

Michael had already dismissed the analysis in the House of Debt when it was published in 2014. Rightly he criticises its authors for lack of discussion of profit. But he then argues:

Sure consumption falls in recessions, but investment falls even more. The Great Recession and the subsequent weak recovery is not the result of consumption contracting. But investment virtually stopped (see my post ) And behind investment (whether in productive or unproductive sectors) lies profitability.

Certainly there is much to criticise in Mian and Sufi’s book, not least their failure to discuss profitability. The surplus money capital which poured into the financial systems of the US and other countries – and which fuelled the expansion of mortgage lending and housing prices was not just based, as they suggest, on East Asian trade surpluses.  As I have shown, there were two other major sources: (1) accumulations of money wealth in the hands of the rich as inequality increased, and (2) the swelling cash reserves of the corporate sector, as profits recovered faster than investment after the 2000 downturn.  Mian and Sufi also play down the impact of the banking crisis on the continuing rise in unemployment at the end of 2008 and in 2009.

But it is not convincing to say simply that a Marxist analysis must entirely reject their convincing analysis that the 2007 crash in house prices and fall in consumer demand directly led to large increases in unemployment before the banking crisis went critical. Marxism needs a demand story.

There are sections of Michael’s book which show a commendable alertness to the complex forces which determine a major crisis.  The analysis of five inter-twinned cycles in the history of capitalist development is a promising line of theoretical and empirical advance which needs to be followed. Three of the cycles are clearly evident in the 2007-09 crisis. A construction cycle (housing) was interconnected with credit processes (mortgage financing) and with the profitability for the banks of mortgage-based securities.

But Michael’s way of tracing the linkages between these dimensions of crisis runs into difficulties He creates difficulties for his account by misreading some basic elements in Marx’s value theory.

In my view, and I think in Marx’s, circulation and distribution are at a lower plane of causal abstraction, or if you like, closer to the proximate than the ultimate or underlying causes. A collapse in the stock market or in real-estate prices will not lead to a collapse in production unless there are already serious difficulties in the latter. There have been many stock market collapses without a slump in production (1987) but not vice versa.

But the stock market deals with fictitious capital, in which contractual claims on the flow of surplus-value are traded.  It is external to the circuit of productive capital. As Marx says at the start of Capital Vol. 3, ‘the capitalist production process, taken as a whole, is a unity of the production and circulation processes (p.117).  Capital in the money form is both the starting point and the necessary terminus of the social reproduction sequence. Only to the extent that demand is available at each stage in the circulation process can value and surplus-value be realised in the money form.

Levels of abstraction are not the same as a hierarchy of causal processes.  Michael is right to say that a large-scale collapse of demand needs explanation and that Keynesian accounts are inadequate.

To say the cause of the Great Recession was due to a lack of demand is bit like saying that that the cause of the streets being wet today is because it is raining today. That tells us nothing about why it is raining today and/or what causes rain to happen. Describing the Great Recession as a lack of demand is just that, a description, not an explanation.

The critique of Keynesian demand management in this article is well argued and deserves careful study. But in his insistence that demand is simply and directly determined by the level of productive investment, Michael seriously weakens the explanatory power of Marxist political economy. In his review of the Mian and Sufi  book he writes:

It’s investment that is the swing factor in recessions and recoveries, not consumption. Or to be more exact, it is profits that call the tune, because investment demand drops off when profits do. As profitability falls over time, eventually the mass of profit will fall and this will force weaker businesses to cut back on investment or even close down. Then there is a cascade of falling ‘effective demand’ as companies go bust or lay off labour.

Here some of the tendencies identified in Marxist analysis are treated as direct causal determinations operating automatically.  Both factually and theoretically the explanation of the 2007-09 crisis which results is seriously flawed, given that overall investment levels in the US non-financial sector did not fall until 2009.

House Prices and Consumer Demand in the 2007-9 US Crisis

In Marxist debate about the causes of the 2007-9 crisis in the US it is often assumed that we must choose between seeing it as either simply a financial crisis, or as one whose basic cause was a failure of profitability in the productive sector. Many believe that the fundamental primacy of production in Marxist theory must mean that a crisis of such enormous proportions can only have been the result of the tendency of the rate of profit to fall.

In fact the crisis had two quite different, though connected, dimensions and neither was based on a fall in the average profitability of non-financial companies. Both then and since, it was the near collapse of the US banking system which has attracted most attention. But the troubles in Wall Street did not become serious until March 2008, when Bear Stearns, one of largest investment banks in the US had to be saved from bankruptcy by the Federal Reserve.  Banking troubles had limited effect on the wider economy until September 2008 when Lehman Brothers folded, and a systemic collapse suddenly became a possibility.

A broader economic crisis had begun early in 2007, and at its centre was a rapidly spreading contraction in consumer demand. House prices in the US had been rising with increasing speed since about 1995.  On the strength of the increase in the value of their homes, households had built up high levels of mortgage and other forms of debt. At the end of 2006, the bubble reached its limits.  House prices began to fall, first in California, Arizona and Florida, but soon across the entire country. Faced with an erosion in the value of their homes, millions of households reacted by cutting back on borrowing, and starting  to pay off debt.  Consumer demand was compressed, the rate of increase in GDP began to fall, and by the start of 2008 unemployment was starting to rise rapidly.  The first phase of the crisis in the US actually began in 2007, and in the housing sector.

Housing was also to play a key role in the financial crisis which followed in 2008.  The banks had lent over $1 trillion in mortgages to subprime borrowers, many of whom were unable to sustain the level of payments required   In addition, the banks had created a vast number of securities, which were based on bundles of these mortgage contracts. These had been widely sold, in enormous quantities, to banks in the US and Europe, or retained on the books of the banks which had originated them.  The spreading tide of defaults on mortgage payments made many of these securities worthless, and trashed the balance-sheets of the major banks which had purchased them.

Across the political spectrum it has been widely assumed by commentators and researchers that the key mechanism which undermined production and jobs was the freeze-up of the banking system. A focus on the mesmerising drama of the possible collapse of the financial system has led to a general acceptance of the banking channel explanation for the huge rise in unemployment in the crisis.  The conventional narrative runs as follows. Hit by severe losses, and threatened with collapse, in the 2008-9 period the banks drastically reduced their lending.  Unable to borrow working capital from the banks, industrial and commercial companies were forced to cut investment.  There was a multiplier effect as falling investment led to loss of jobs, and the contraction of growth and demand.

It was just this view of the results of the crisis which in 2008 was used to justify, the expenditure of large sums of public money on rescuing the banks, and restoring their capacity to keep lending to business.

The banking explanation of the crisis has been strongly challenged in a book called House of Debt (2014).[i] Its authors, Atif Mian and Amir Sufi [M&S], are established academic economists at Princeton and Chicago respectively. Despite this disadvantage, their book can be recommended: it is short, simply written, and its results are based on a great deal of elegant empirical research which is explained with clarity.

Mian and Sufi argue that the banking crisis did not become critical until Lehman collapsed in September 2008.  They also show that, as a result of vast state subsidies, the banking system had been restored to reasonable health by 2009.  The reduction in industrial investment in the later stages of the crisis happened less because banks were unwilling to lend to industry than because industry responded to a prior fall in consumer demand by cutting investment.  The productive sector of the economy (apart from the auto industry) was generally in a strong enough financial position to survive the downturn without recourse to large amounts of extra bank finance.

So if the banks were not the primary cause of the contraction in customer demand – then what was?  Mian and Sufi focus on the fact that house prices in the US had risen with exceptional speed in the 2000-06 period.  Mortgage borrowing by US households had increased at a corresponding rate, and other forms of consumer debt as well. Mian and Sufi argue that it was the sharp fall in house prices from the start of 2007 which led to a massive contraction in consumer demand as households began to cut their current spending and run down debt. Mian and Sufi are able to show the close connection between demand contraction and the subsequent loss of jobs by making a very detailed comparison of geographical areas (pp.62-4). Their conclusion was that the drop in demand as households reduced their net indebtedness (leverage) was a direct and huge cause of the rise in unemployment in the crisis.

We estimate that 4 million jobs were lost between March 2007 and March 2008 because of household levered losses, which represents 65 per cent of all jobs lost in our sample (p.66).

Mian and Sufi argue that the widespread view that the crisis was caused by the banks was ideological special pleading to justify the fact that large sums of public money were used to rescue the banks and protect their shareholders from losses. Very little state money was made available to assist households threatened by loss of their home.

Let’s look at some of the detail. House prices in the US (in real terms) had remained basically unchanged since the end of World War 2 until the dramatic rise which started in 1995.  By 2002 average prices had risen by 30 per cent, and then accelerated even faster – over the 4 years ending in 2006, prices rose by a further 32 per cent. In many regions of the US, especially along the coasts, the rate of increase was much faster

There was a corresponding boom in the house construction industry. Output of houses rose by 50 per cent to a peak of 2.1 million in 2005 as the bubble in prices built up. But in 2005 the market was clearly over-supplied, and the number of housing starts went into decline. House construction is a quite large sector of the industrial economy and, as Mian and Sufi explain:

The collapse in residential investment was already in full swing two years before Lehman imploded. Residential investment (i.e. construction and maintenance of houses) fell by 17 per cent (on annualised basis) in Q2 of 2006. From then until the Q2 of 2009 residential investment declined by at least 12 per cent in every quarter, and reaching negative 30 per cent in Q4 of 2007 and Q1 of 2008. The decline in residential investment alone knocked off 1.1 to 1.4 per cent of GDP growth in the last three quarters of 2006 (p.32).

Obviously the profits of companies in this branch of the economy must have been hit. But as I showed in my last post other sectors more than compensated and, for non-financial companies, the average national rate of profit did not fall in a sustained way until mid-2007. (See Figure 2 in my last post More important, the evidence is conclusive that total investment did not decline in the non-financial sector until towards the end of 2008.  Thus average industrial investment levels in this crisis responded to a fall in growth, and were not its cause.. As the Economic Report of the President (2009) explained:

Real consumer spending stagnated in the first half of 2008 and then fell sharply in the third quarter in what was the largest quarterly decline since 1980. This was a major deceleration after the 2.8 per cent average annual rate of increase  during the 2001-07 expansion (p.33).

Apart from house construction, the other major sector to be hit was auto. As would be expected in a contraction of consumer debt, car purchase (so heavily dependent on instalment credit) was severely affected. ‘During the first three quarters of 2008 motor vehicle purchases fell to 12.9 million units at an annual rate, having fluctuated around 16-7 million annual pace during the expansion’. (ERP 2009 p.33).

But a fall in the investment levels of the house construction and auto industries does not show up in the aggregate national figures Marxists use in the debate about profitability.  What happened was that falling investment in these sectors was more than compensated for by a rise in other major sectors.  The Economic Report of the President (2009) notes that:

The reorientation of the US economy – which had been underway in 2006 and 2007 – away from housing investment and customer spending and towards exports and investment in business structures [factories, offices etc.] continued through the first three quarters of 2008 … In contrast to residential investment, real business investment in non-residential structures grew at a strong 12 per cent annual rate through the third quarter of 2008. The gains during 2008 made it the third consecutive year of strong growth (ERP pp.31 and.41).

The boom in mortgage finance

What underlay the boom in house prices was a huge increase in the availability of mortgage finance.  (See M&S p.85 for convincing arguments against those who believe the line of causation was the reverse).  Mortgage lending in the US rose to a peak in 2005. Behind this surge in lending lay the global surplus of money capital which I have emphasised in a previous post as due to high profits and a lag in industrial investment in many countries, plus increasing inequality in wealth ownership. Mian and Sufi themselves emphasise the third channel through which excess stocks of money capital accumulated. The exchange rate crisis which devastated a number of East Asian countries in 1997, convinced a large number of emerging economies – including crucially China – that it was vital to convert export surpluses into large reserve holdings of dollar.  ‘As foreign central banks built up their dollar war chests, money poured into the US economy … there was a breathtaking demand for new safe assets’ ( M&S p.93).

Mortgage lending and securities based on these loans were assumed to be safe investments. The effect of a surplus in what Marx called loanable capital was the huge fall in interest rates which took effect across the global economy from about 2000 onward. In the US this fall was amplified as the Fed implemented a relaxed monetary policy to pull the economy out of the dotcom recession of 2000-1.  But, as I have recounted in an earlier post when Greenspan began to increase short-term interest rates starting in April 2004, he found to his dismay that, the supply of loanable capital was too great, and there was not the usual corresponding rise in long-term rates – such as crucially the mortgage rate.

The deeper roots of the crisis lie here.  Profit rates rose in the post-1980 neo-liberal era because of the power of the counter-tendencies.  Rates of surplus-value and profitability  accelerated to levels well beyond the capacity of the system to absorb them in productive accumulation and reinvestment. The tide of interest-bearing capital meant high profits for the banking system – but as interest rates fell, huge pressures for the banks to seek yield by in increasingly risky ways – hence the surge in subprime lending.

As surplus money capital piled up in the global system, mortgage lending and house prices rose fast in the US and other major countries. The US stock market crash of 2000 took the glitter out of equities and added to the attractiveness of housing as a safe investment.  Mortgage and other forms of household debt soared as financial companies competed to find borrowers for an ample of surplus money capital.

Housing and consumer debt doubled in the six years after 2000 and the ratio of household debt to annual income rose by 50 per cent, from 1.4 to 2.1. Mian and Sufi draw a parallel with what happened in the nine years leading up to the crash of 1929 – a huge increase in mortgage and instalment debt (p.4).

But, largely unobserved at the time, a highly dangerous situation was building up.  During 2004-6 there was a rapid increase in the proportion of new mortgages which were subprime.  Subprime mortgage lending had been especially directed to black and Latino households, previously excluded by red-lining policies by the mortgage companies. By 2006 25 per cent of new mortgages originated in the US were subprime.  The reason? Same as for payday loans – lending to poor people can be highly profitable.  The securitisation of debt allowed the risk involved to be passed on to the banks and pension funds which eagerly bought up the mortgage-based securities

A useful summary of the rip-offs involved is by Randall Wray.

New and risky types of mortgages that offered low teaser rates for two or three years, with very high reset rates were pushed. As originators would not hold the mortgages, there was little reason to worry about ability to pay. Indeed, since banks, thrifts, and mortgage brokers relied on fee income, rather than interest, their incentive was to increase through-put, originating as many mortgages as possible. By design, these “affordability products” were not affordable—at the time of reset, the homeowner would need to refinance, generating early payment penalties and more fees for originators, securitizers, holders of securities, and all others in the home finance food chain.

The flow of predatory profits through chain, depended to the complicity of a series of agents.  Brokers who sold the mortgages, and made the credit checks on borrowers.  Appraisers who valued the houses.  Banks who lent the money, and converted bundles of mortgages into risk classified securities.  The ratings agencies who issued the AAA grades which allowed mortgage-backed securities to be sold to pension funds and the like.  And insurance companies, who reassured investors that they were insured against the risk of default.

Chairman Greenspan gave the maestro seal of approval to these practices, urging homebuyers to take on adjustable rate debt.(p.9).[ii]

The crash in house prices

Between 2006 and 2009, house prices fell by an average of 30 per cent nationally, and by much more in the worst-hit regions.  By 2009 11 million houses – 23 per cent of houses with mortgages – had negative equity.  They were underwater: their estimated selling price was less than the size of the outstanding mortgage.  The total number of foreclosures reached 4 million.

It is right that so much of the commentary on the crisis has focused on the foreclosure of houses. People losing their home was one of cruellest ways in which the crisis damaged individual lives – and it happened to 1 in 25 America households.  Also, it was lending of billions of dollars to households unable to sustain repayment which brought the financial system to the edge of collapse.

But Mian and Sufi direct our attention to ways in which foreclosure led to another sort of social damage – the loss of jobs as consumer demand contracted on a national scale. They emphasise that the effect of foreclosures is to hit all house prices in the areas affected.  Even householders with no debt are caught up in a wider fall in house prices.

The key problem is debt. Debt amplifies the decline in asset prices due to foreclosures and by concentrating losses on the indebted, who are almost always households with the lowest net worth in the economy… This is especially dangerous because the spending of indebted households is extremely sensitive to shock to their net worth – when their net worth is decimated, they sharply pull back on spending.  The demand shock overwhelms the economy, and the result is economic catastrophe’ (M&S p.70).

The previous peak for foreclosures was in the recession of 2001 when about 1.5 per cent of all mortgages were in foreclosure.  In 2009 the total reached was 5 per cent.

The effect of the fall of house prices on demand was not just confined to the crisis as it evolved up to the Lehman moment.  It continued to operate through to the start of post-crisis stabilisation in 2009.

In Q4 of 2007 business investment was a positive source of growth in GDP, and was pretty much neutral till the middle of 2008.  In Q3 of 2008 business investment fell by enough to bring down GDP by 1 per cent, but in the same quarter the drop in consumption reduced GDP by nearly 3 per cent. (M&S p.35).

Mian and Sufi were able to access official data about consumer spending levels by zip code.  They were thus able to make fine-grained geographical analysis of the levels and timing of changes in demand.  They find that it was in the counties with the largest drop in house prices from 2006 to 2009 that consumption was cut back by the largest amounts – 20 per cent as compared with a national average of 5 per cent. (M&S p.36).

Job losses materialised because households stopped buying, not because businesses stopped investing. In fact the evidence indicates that the decline in business investment was a reaction to the massive decline in household spending (M&S p.34).

It was the post-Lehman financial crisis which threatened the international system as the interbank markets stopped functioning and trade credit froze.  But, especially in its early stages, and in its direct effect on US employment levels, the crisis was driven by the fall in household demand as housing prices tumbled.

[i] Mian, Arif and Amir Sufi 2014, House of Debt, Chicago: University of Chicago Press.

[ii] Wray, Randal 2007, Lessons from the Subprime Meltdown, Working Paper No. 522,  New York: Levy Institute.

What Caused the 2007 Crisis in the US?

At the Historical Materialism conference in London on 14 November there was a session, organized by Al Campbell, on the Marxist debate about the 2007-09 crisis and since – with papers by Michael Roberts, Al and myself.  I posted an extended version of my paper in which I argued that a global surplus of money capital was a crucial underlying factor in the crisis, and criticised Michael’s falling rate of profit explanation.  Michael made a strong defence of his position in his post of 12 November.  However I believe that his case is flawed and that some of the evidence he has presented supports my reading of the crisis rather than his.

We are in agreement that underlying the 2007-9 crisis in the US were the conflicting forces which determine the rate of profit, as explained in Marxist theory. Michael argues that the empirical evidence, backed by theoretical analysis, indicates that it is the tendency for the rate of profit to fall which has been the decisive trend. I consider that the empirical evidence shows that it is the profit-raising countertendencies which have been dominant since the start of the neoliberal period in the early 1980s.

Michael believes that it was an actual fall in the rate of profit in the US after 1997 which was the crucial factor underlying the financial crisis in 2007-9.  I argue that the rate of profit in the US, and in some other large economies (plus also the rate of surplus-value) has been tending upwards from the late 1990s, through to 2015, though with cyclical downturns around 2000 and 2008.  This surge in profits, in combination with a sizable lag in investment, contributed to a global surplus of capital (in the money form) which the financial system has found great difficulty in on-lending or investing safely.

In the US the financial crisis of 2008 happened because more than $1 trillion of money capital had been lent out by the banks in high-risk subprime mortgages.  Default on these mortgages, and on the vast number of securities based on those mortgages which the banks had created, was the central immediate cause of the 2nd phase of the crisis – which went critical when Lehman folded in the autumn of 2008. But the 1st phase of the crisis had started to unfold early in 2007 as the crash in house prices led to a steep fall in consumer demand.

Using Michael’s own data, I showed that the US corporate profit rate did not, as he had argued, ‘reach a peak in 1997, which has not been since surpassed’.  Figure 1 summarises the results I reported.


As Figure 1 shows, the rate of profit was just under 27 per cent in 1997, but after a dip during the dotcom crisis of 2000-1, recovered strongly to reach 27 per cent in 2005, and 29 per cent in 2006.  Also there was a rapid recovery starting in 2010: in 2012 and the two following years the corporate rate of profit hovered around 27 per cent.

Michael in his reply did not question my data in Figure 1.  But he suggested that his argument would still stand if we looked not at annual data but at the quarterly breakdown of profits which the Fed publishes.  And we should look specifically at the non-financial industrial sector and not, as in Figure 1, at the whole corporate sector (which includes banks and other financial companies). Michael writes:

Annual figures from the rate of profit are not very helpful on the timing here.  In my original work which Jim is quoting from, I also used the quarterly figures provided by the US Federal Reserve. The Fed data can give us the non-financial corporate sector rate of profit by the quarter.  According to that data the US NFC rate of profit started  falling in Q3-2006.  Indeed by the time of the credit crunch in mid-2007 (before the start of the Great Recession) the NFC rate of profit had fallen 20 per cent.

Before looking at the quarterly data, as Michael recommends, I should mention that he and I are also in dispute about the trend of profits since the crisis period of 2007-9. Michael had said, as I noted above, that the US rate of profit ‘reached a peak in 1997, which has not been since surpassed’.  But, as Figure 1 indicates, the 1997 peak was under 27 per cent, and the profit rate made a rapid and sustained recovery from a low of 22 per cent in 2009 to slightly higher than 27 per cent in 2012 and 2014.  Michael suggests that, ‘if we look at the Fed’s quarterly data for the non-financial sector we find that the [post-crisis] peak was as early as Q3 2010 and is now [2016] some 20 per cent below that peak’.

I have recalculated profit trends for the non-financial sector from 2002, using the same Federal Reserve quarterly data on which Michael bases his conclusions. Figure 2 summarises my results and they do not support his case.   


[Note that rates in Figure 2 cannot be directly compared with those in Figure 1 as the definitions which Michael Roberts uses are quite different. But trends within each Table are consistent. For a clear explanation of the quarterly Fed data which Michael recommends, and which I have tracked in Figure 2 – see a paper by the Swedish researcher Anders Axelsson

There was no appreciable fall in the non-financial rate of profit in 2006. There was a drop in Q1 of 2007, but a recovery in Q2. Only from Q3 was there a fall through until the beginning of 2009, though with a mini recovery in the middle of 2008.  It is really not plausible that these not very sizeable variations in profit rates can have played much direct role in the economic cataclysms of this period.  Also, though it is useful to look at quarterly rates, we have to recognize that profit estimates in any given quarter can be distorted by variations in the timing of profit declarations.

It is the case that the rate reached a temporary peak in Q3 of 1997 of 9.6 per cent.  It is true that this was not surpassed in the recovery of 2005 and 2006, but did reach 9.8 per cent in Q3 of 2010.  The average rate in the 4 quarters of 1997 was 9.3 per cent – but 9.5 in 2010.

Apart from a glitch in Q1 of 2011, a rate of profit of over 9 per cent was maintained right through to the start of 2013. A definite downward trend began in mid-2014 and continued until nearly the end of 2016. Since Figure 2 was prepared, it has been reported that in Q3 of 2016 there was a small recovery in the rate of profit, from 7.1 to 7.4 per cent. It in possible that this is the start of a more sustained upswing. The financial markets certainly think it is, and equity prices have soared, especially since the advent of Trump.

Could the quite sharp fall in the profit rates of non-financial companies in the Q2 and Q3 of 2007 be in any way responsible for initiating the financial crisis that began to unfold in the autumn of 2007?  In Michael’s view the mechanism involved would be that non-financial companies respond to a fall in the average rate (and mass) of profit by cutting investment, which in turn leads to reductions in employment, wages and consumer demand. He writes:

I have argued ad nauseam that it is the profitability of the capitalist sector of economies that is the driver of investment and thus employment and incomes.  A sustained fall in profitability and in the mass of profits will eventually lead to a fall in investment after a year or so and then deliver a slump in the productive sectors of a capitalist economy, triggering in turn, a financial (credit) crisis.

The difficulty with this line of argument is that there is simply not enough time for such a causal sequence to take effect in 2007-8 – and Michael only claims here that the reaction of investment to a fall in profits will only happen ‘eventually’.  As I show below unemployment was rising sharply from the start of 2008.

In any case the factual evidence about investment in this period does not support his analysis. Figure 3 shows how investment levels evolved between 1998 and 2015 (annual data only, quarterly figures are not available).


What Figure 3 shows is that in the recovery from the downturn of 2000-1, investment climbed steeply right through until 2007, rising by 45 per cent, from $900 billion to $1.3 trillion.  Even in 2008 investment was slightly higher than in the previous year.  Not until 2009 did investment fall, and it then quickly rose once again from 2010 through to 2015.  To control for the effects of inflation and of growth, in Figure 4 the same data for investment in fixed assets by non-financial companies are shown as a percentage of GDP.


Figure 4 shows the exceptionally high investment levels in the late 1990s in the lead-up to the dotcom crisis of 2000-2, generally recognised as having been caused by over-investment. But, again, there no evidence that a fall in average investment was one of the causes of the 2007-9 crisis.  Investment climbed from 2004 through to 2007, and levelled out in 2008. The fall came in 2009.

We can be confident that the fall in the rate of profit and investment by non-financial companies which eventually came in 2009 did play a part in deepening and generalising the crisis in its later stages. But the evidence suggests that until 2009 US the non-financial rate of profit could not have been in any sense a direct cause of the US financial crisis which started in a rather mild form in the autumn of 2007, became more serious when Bear Stearns had to be rescued in March 2008, but did not become critical till mid-September 2008 when Lehman Brothers collapsed and major banks had to be saved by state intervention.

But as Figure 5 shows, large numbers of jobs were being lost right from the start of 2008, though with a huge acceleration after September.  But if falling investment is the mechanism which translates a decline in profits into a rise in unemployment – then it cannot be a lower rate (or mass) of profits which caused the loss of jobs in 2008.  As I have noted, it is true that profits were lowish in 3 of the 4 quarters in 2007.  The crucial point however is that, investment was rising in 2007, then again in 2008 and only started to fall in 2009.

In my next post I will argue that the 2007-9 crisis in the US had two phases. (1) A collapse in house prices which started early in 2007 and led to a sharp contraction in consumer demand, as households reacted by cutting back on borrowing and began to repay debt.  (2) A separate, though connected, crisis in the banking system which did not have a major impact on productive economy until the autumn of 2008.

Figure 5 was published in the Economic Report of the President 2010, p. 28.



Figure 1 – Definitions and Sources:

Profit = Net Gross Value Added MINUS Annual Depreciation MINUS Employee Compensation.

Corporate sector (Financial and Non-Financial Companies, Domestic Economy only).

GVA Domestic Corporate Business – BEA Table 1.14. line 1.

Employee compensation – BEA NIPA Table 1.14, line 4.

Fixed asset annual depreciation (historical cost) – BEA Fixed Assets Table 4.6, line 17.