Marx's Capital : 150 Years and Beyond

Old and New Controversies: A Critical Reappraisal

• Abhinav Sinha

At every such occasion, critics, economists, commentators ask this question: Is Capital relevant today? In
the light of various developments and changes in the capitalist mode of production, should we not rather ask
today: Is not Capital more relevant than ever? This is not just a rhetorical question or kind of a cliché that
are always uttered at commemorations of half-centenary, centenary, bi-centenary of works of such historical
importance. This is a logically and historically valid question to ask today. However, before we answer this
question, it would be interesting to note that interest in Capital too has a cyclical recurrence just like the
capitalist crises, at least in the bourgeois academia that also includes a part of Left intellectuals.

One phase of rising interest in it was the period following the First War War and upto the Great Depression
and the Second World War, during which some major studies based on Capital emerged, even if sometimes,
disagreeing with it. It was the period of crisis for the capitalist world. The next cycle of rising interest in
Capital coincides with the late-1960s global upsurge and crisis of 1970s, when again many serious studies
based on Capital and other economic writings of Marx emerged like Louis Althusser and his students'
Reading Capital and many more. The crisis of 1980s saw the emergence of New Interpretation school. In the
1990s, there was a comparative lull in studies based on Capital due to the decadent capitalist triumphalism
after the collapse of namesake "socialism" in the Soviet Union, its disintegration and also the fall of the
Berlin Wall in 1989. However, even then, a number of scholars continued to study Marx's economic theory.
By 1997, the capitalist triumphalism was dying down and by 2001 it was a dead dog. What has been termed
as the greatest crisis after the Great Depression, ie, the crisis that broke out in 2007-08 (which had been only
delayed by financialization since the late-1990s) has led to a much wider interest in Capital as Callinicos has
pointed out. In such a context, it is pertinent to ask, how relevant is Capital today.

Capital at 150: Capitalism Today and the Enduring Significance of Capital

There are several reasons for the argument that Capital is much more relevant today. In my opinion, Marx is
much more a thinker of twenty-first century than the nineteenth century. Biographers like Jonathan Sperber
(who, by the way, has written a well-documented and interesting biography of Marx) has argued that Marx
was a man of the nineteenth century, as his life, habits, involvements, etc. show. Such biographers simply
miss the point that though even the greatest of the geniuses do not and cannot transcend the limits posed by
the historical epoch in which they are born, yet, it is their contribution to the science, the questions of
approach and method that define their contemporaneity beyond the temporal limits of their historical epoch.
Marxism is not an aggregation of whatever Marx said or did. Marxism is a worldview, approach and a
method. This worldview and method of materialist dialectics is Marx's epochal contribution to science. As
Lenin said, Marx could never write his planned separate treatise on materialist dialectics, but he left us
Capital, which is the application of the materialist dialectics in the arena of economic phenomena.

Marx's Capital is much more relevant in the twenty-first century for a variety of reasons. I will enumerate
only a few here.

When Marx was writing the first volume of Capital, the capitalist mode of production was the dominant
mode of production only in a few countries of North-Western and Central Europe and North America.
Capitalism as a mode of production covered a very small part of the world, demographically as well as
geographically. The rest of the world was still under feudal and other pre-capitalist modes of production;
most of the countries of Asia, Africa, Latin America and even Eastern Europe were still feudal, semi-feudal,
colonial or semi-colonial, some of them witnessing the initial and embryonic beginning of capitalist mode of
production. Capitalist mode of production has emerged as a truly global mode of production with an
integrated world market only after the end of the Second World War, when the process of decolonization
started with force and rapidity in Asia, Africa and Latin America. It continued in the main till the end of the
1980s. It is true that the exploitation by Imperialism remained in most of these countries but it was
transformed. These countries gained political independence though they remained economically partially
dependent on Imperialism in general (not one or two imperialist countries). This dependence was constituted
by their reliance on imperialist countries for capital and technology. These countries adopted a peculiar way
of capitalist development through different variants of Prussian Path of Land Reforms (junker-type
transformation) and industrial development through import substitution and policies of nationalization of
banks, insurance, etc in the initial phase. Once the bourgeoisie in these countries was able to stand on its
feet, the flood-gates were opened; protectionism, welfarism, planning, etc were abandoned and neoliberal
policies were inaugurated. In India, this begins towards the end of 1980s. The bourgeoisie that came to
power in most of the decolonized countries was not a comprador bourgeoisie; nor was it national
bourgeoisie; it is the 'junior partner' of Imperialism in general. One thing is clear: in most of these
countries, capitalist mode of production became the dominant mode of production. Capitalist
development in these countries took a very different path from the British, French, German, Italian or
American paths. These countries today can be characterized as post-colonial relatively backward
capitalist countries. The contradiction between labour and capital has become the principal contradiction;
the capitalist transformation of agriculture is complete in the main; the proportion of proletariat (urban and
rural) in the population has become the largest; the concentration and centralization of capital has fairly
developed; inequality in society due to 'accumulation of wealth at one pole and accumulation of misery on
the other' is glaring; all the symptoms and signs of a capitalist mode of production are so pronounced that
only ideological blindness of certain communists is preventing them from seeing this reality and clinging to
the outmoded semi-feudal semi-colonial orthodoxy. In nutshell, with decolonization of Africa, Asia and
Latin America, capitalism has emerged as a first truly global mode of production, as Marx had
predicted.
The second reason why Capital is much more relevant today than, say the period of the Great Bolshevik
Revolution, is the much clearer polarization of society in most of the countries of the world (though in
different proportions) into the class of wage-earners and capitalists, i.e., owners of means of production and
capital. In Russia of 1917, the working class constituted hardly 10 to 11 percent of total population whereas
the peasantry constituted almost 80 to 85 percent. The class polarization at the time of Marx was developed
to a greater extent only in certain countries of Europe and the United States. Apart from these islands of
advanced capitalist development, in rest of the world, even in some capitalist countries of Europe the class
of wage earners was less than 30-35 per cent. Now we are literally living in a world of workers! The
population of workers increased from 300 million to 500 million in the developed world between 1970 and
2010; however, in the same period the number of workers increased from 1.1 billion to almost 3 billion in
the so-called developing world. Urban population in 2000 was 46 percent of the world; by now it has
crossed 50 percent. In India itself, the share of urban population will become more than half by 2020 as per
government estimates. These statistics are coming from state agencies and we should remember that as far as
counting the workers is concerned, gross under-estimation is always involved.

The third reason for Capital being much more relevant today is the unprecedented centralization and
concentration of capital, much beyond anything imagined by Marx. Data on global inequality has remained
in focus since the publication of Thomas Piketty's book. Notwithstanding the neo-Keynesian understanding
of Piketty, his work has shown brilliantly the unprecedented levels of inequality in the present capitalist
world. Needless to say, the increasing inequality is a function of rising accumulation of capital, which finds
expression in the increasing centralization and concentration of capital.

The fourth reason is the fact that socialization of labour has assumed gigantic proportions. The socialization
of production has transcended the national boundaries. Emergence of a global division of labour and a global
assembly line is nothing but expression of the increasing socialization of labour. Some people have confused
the decline of Fordism and emergence of post-Fordism with narrowing of the scale of production. The scale
of production is not measured by the size of the factory floor but the size of investment and accumulation. In
the Fordist interregnum, size of factory floor had become one of the measure of the increasing socialization
of production. In the post-Fordist period, the expressions of the increasing socialization of production and
labour have changed. We cannot go in the details of this process due to the lack of space here; however, this
much is certain that socialization of labour and production have increased immensely from the time of Marx
and their contradiction with the relations of private appropriation are much more acute today. This is
reflected in the growing anarchy, destruction and waste which, as Mandel had commented four decades ago,
is visible even to the apologetics and defenders of capitalism.

Due to the above reasons, it seems clear that Capital is much more relevant today. It is a funny incident, but
not a co-incident, that one of the neo-con czars of the time, Nicolas Sarkozy was caught reading Capital in
2009, when the impacts of the present crisis were still unfolding! It showed that the bourgeoisie is running a
system that it itself is unable to understand. It was Marx who unravelled the real dynamics and laws of
motion of the capitalist mode of production. Despite the fact that capitalism has outlived the expectations of
Marx, his predictions and prognostications have been confirmed time and again by the history of capitalism
since the time of publication of the first volume of Capital in September 1867. The latest crisis that broke
out in last quarter of 2007 and that has proved to be the most devastating crisis since the Great Depression of
1930s, has proved the validity of the analysis of Capital once again and with much more force.

The Object and Method of Capital

It would not be an exaggeration to say that this book has an incomparable impact on the history. From the
days when it was first published it has remained in the center of controversy. Ernest Mandel has rightly
pointed out that the ideological and political representatives of bourgeoisie has shown sharp class
consciousness in their reactions to this work. It can be added that this has not changed to this day. The
reason for that is the revolutionary character of the scientific analysis of Capital. The object of Capital is to
unravel the laws of motion of the capitalist society, of the capitalist mode of production. It does not deal in
general with all modes of production. Without doubt, Capital offers valuable insights for the study of pre-
capitalist social formations also, especially of pre-capitalist social formations where commodity production
had come into being. It also delves into comparative analysis of different social formations. However, this
comparative analysis is possible only because of the analysis of the specific modes of production. For
example, while exposing the source of surplus value, Marx compares the appropriation of surplus product in
pre-capitalist societies like the feudal society and slave societies and shows how it was physically visible
because necessary labour and surplus labour were separated in space and time. However, with the
emergence of value-form with the development of capitalist mode of production, this reality was hidden
under the veneer of 'honest-to-god' equality of exchange. Various scholars have argued from the early-
twentieth century that Capital has nothing in do to with the laws of motion of human society in general and
it solely focuses on capitalist mode of production. This view, held by the likes of Rubin, Althusser, Colletti
is ahistorical in my opinion. Marx's analysis provides extremely useful insights for the analysis of all human
society in general as it shows the dialectics of productive forces and production relations; in fact, in the first
volume there are illuminating comments about the emergence of exchange relations with the development of
productive forces in the age of communal mode of production. Similarly, Marx in particular focuses on the
societies where commodity production had come into being. He was well aware of the fact that in societies
like Ancient Rome, where commodity production was fairly developed, the law of value had not become
dominant because commodity production was not only intertwined with other modes of production but was
subordinated to them. The law of value began to assert itself in the same proportion in which commodity
production developed. Law of value was not a product of pre-capitalist society but wherever commodity
production developed in a considerable way, we can see the rudimentary forms of law of value. To deny this
is to forget that all the contradictions of capitalism were present in commodities in embryonic form.
Capitalist mode of production came into existence in a non-capitalist context and Marx traces the
development of commodity production and capital from its first forms to its developed form in the age of
industrial capitalism. If we are blind to this historical dimension of Marx's Capital we cannot understand the
origins of capitalism. Therefore, it is essential to understand the historical as well as logical dimensions of
Capital if we intend to comprehend its analysis in totality.

Nevertheless, the particular object of Capital was analysing the capitalist mode of production by applying
the dialectical method, that is, by penetrating the layers of phenomena to unravel the laws of motion of
the capitalist mode of production. Marx claimed that he was the first to apply the materialist dialectical
method to the study of economic problems. The meaning of applying this method was to see the different
aspects of economic phenomena in totality, in their inter-connections and in their motion. It rejects the
metaphysical and mechanical way of looking at these aspects in isolation. Only through the application of
dialectical method the laws of motion of a mode of production can be understood, in other words, the laws
of motion of a mode of production can be discovered.

Materialism of Marx's approach is implicit in the point of departure of his study. It does not start from
abstract ideas or preconceived notions, but from concrete facts; different aspects of phenomena have to be
recorded first, the scientific knowledge about them have to be grasped and only then one can proceed to the
dialectical analysis of these data and scientific knowledge to understand this given totality. Only then can
one prevent the positivist mistake of confusing the appearance with essence. Only then can one penetrate
through the layers of phenomena and reach nearer to an understanding of the essence. This process never
ends because the object of study itself is constantly moving and a scientific endeavor to understand it is a
perpetual exercise of practice-theory-practice, of moving from concrete to abstract and back to concrete
again.

As Marx himself clarified, the method of investigation has to be different from the method of exposition.
While the method of exposition moves from abstract to concrete and then to abstract again, the method of
investigation must start with the concrete and then move to abstract, only to return to the concrete. In
investigation as well as exposition, the dialectics of concrete and abstract is at work. The dialectics between
the concrete and abstract, between the appearance and the essence has to be understood in order to
comprehend Marx's writings in totality. For Marx, appearance or the concrete manifestations of the essence
through complex mediations by many intermediate factors was not an illusion, or unreal thing. For example,
for Marx, wages, the concrete manifestations of the value of labour power are not an unreal or illusory thing.
For him, wages as well as value of labour power are real things though they correspond to different levels of
reality, different levels of determination and abstraction. The issue was to study these appearances and
integrate them with their essence by unraveling the particular kind of mediations involved in their relation.

It is essential to understand this dialectical method of Marx if we are to understand Capital in its totality.
This method strives to understand the contradiction between concrete and abstract and between appearance
and essence. This dialectical materialist method is the key to understand Marx's brilliant analysis of
capitalist mode of production.
Early Critics of Capital: A Case of Intellectual Pauperism

Marx's Capital has remained under constant attack right since its publication. By the time the third volume
of Capital was edited and published by Engels, the criticisms from different quarters had been accumulating.
The reason for such prompt response from bourgeois economists of all variety is not surprising. Marx's
economic theory is the only one which does not warrant some kind of reform or adjustments in the capitalist
economic system to prevent crises and destruction. It shows that these crises cannot be averted by reforms or
welfarism because the very laws of motion of capitalist mode of production necessarily lead it periodically
to crises and providence from these crises, unemployment, destruction and anarchy can only come with the
destruction of capitalist mode of production itself, and that these very laws actually lead capitalism to its
inevitable final collapse (not to be confused with the inevitability of socialism). That is why bourgeois
economists and thinkers have always reacted with sharp class instinct towards Marx's theory, one of the
highest achievement of which, is Capital.

That the analysis and prognostications of Capital have remained unbearable for capitalist class and their
lackeys does not need any explanation. However, the theories of Capital have equally invited the ire of the
so-called 'neutral' academicians because of their preference and affinity to commodity production and
market economy as these supposedly correspond to basic human nature and ultimate welfare of human kind.
As Mandel has pointed out Capital has also created problems for the peace-loving humanists and reformists,
who, though indignant at the dehumanization imposed by capitalism on the masses are equally miffed at the
political implications of the analysis of Capital. Their sensibilities are more accustomed to some kind of
adjustments or reform within the ambit of capitalism, to make it more just, humane and egalitarian. All these
varieties of bourgeois and petty-bourgeois academics have been targeting Capital since it was first
published. We will review some of these criticisms in very brief because most of the modern criticisms of
Marx's labour theory of value, his theory of crisis, his solution for transformation of values into prices have
nothing new but are only extensions of these early criticisms.

One of the earliest bourgeois critics of Marx was Eugen von Böhm-Bawerk, who is regarded as the father of
the marginalist school. Böhm-Bawerk was a positivist who did not believe in making any distinction
between appearance and essence. That is why he attacks Marx for "borrowing" his dialectical method from
Hegel which according to him was uselessly mystifying and metaphysical. From this very positivist
understanding he attacks the distinctions Marx makes between different levels of reality and also rejects the
different levels of abstraction that Marx uses to penetrate the layers of phenomena to reach nearer to the laws
of motion of capitalist mode of production. Böhm-Bawerk criticizes Marx for making a distinction between
abstract labour and concrete labour (which is one of the foundations of labour theory of value), between
price and value and contends that these mystifications were useless. However, if we look at history and the
prognostications and vision of Marx it becomes clear that it is Böhm-Bawerk (and other critics of dialectical
method of Marx, who preceded or followed Böhm-Bawerk, like Bernstein and Popper) who needs to
vindicate himself. If one analyzes the history of capitalism with a correct definition and understanding of
what capitalism is, it becomes evident that the dialectical method of Marx enabled him to foresee the
trajectory of capitalism in the long run with considerable accuracy. However, most of bourgeois critics do
not fulfill this condition of correctly defining capitalism. For instance, Paul Samuelson, who first erects an
straw-man of Marxist definition of capitalism and then rains it with his arrows. Samuelson falsely ascribes
theory of 'absolute impoverishment of the working class' and 'ever-worsening crises' to Marx and then
"proves" with empirical data that these predictions of Marx were wrong. The fact that Marx, at least in his
mature phase, never proposed any theory of absolute impoverishment of working class, nor his theory of
crises was a linear one, has no impact on these scholars who have continued to have their moments of
epipheny in analysing the errors and inconsistencies of Marx.

Böhm-Bawerk also argued that Marx fails to explain the short-term price fluctuations (Tugan-Baranowski
and Samuelson repeat this criticism). The fact is that Marx never claimed or intended to explain the short-
term price fluctuations. Marx's task was to discover the axis around which the prices of production and
market prices revolve, i.e., the value of the commodities, which depends on the labour productivity. This is
the hidden key behind price fluctuations, as Mandel pointed out. Evidently, Marx never undertook the
enterprise of explaining the 'how' of short-term price fluctuations but the 'why' of price-fluctuations. Mandel
speculates that he might have touched upon the issue of short-term price fluctuations in the never-written
sixth volume. This speculation might be right but even if Marx never did that, it would not have made any
impact on the scientific worth of his theory of value and its relation to price.

It is understandable why almost all attacks on Marx's theory have targeted his labour theory of value in
particular. Marx's labour theory of value is the cornerstone of his main discovery: the discovery of the
source of profit, the theory of surplus value. It reveals the source of capitalist profit as surplus labour, the
unpaid labour of the wage worker, who has sold his labour-power to the owner of means of production and
capital, i.e., the capitalist. Böhm-Bawerk, too, attacked the labour theory of value when he claimed that
commodities have other things common than labour (he was opposed to make any distinction between
abstract and concrete labour, a belief whose implications are extremely important to understand the birth of
marginalism) like two commodities might be scarce and this scarcity is their common trait. The absurdity of
this objection is evident at the very beginning. For example, a piece of cloth and a Mercedez-Benz might be
scarce but the latter will always be costlier than the former because it has cost more quantity of simple
human labour in abstract. The marginalists have taken refuge in the 'utility' theory of value of commodity.
They argue that it is the property of different commodities to fulfill the particular desires or satisfy the
particular preferences of customers that creates the values of the commodity. Such an approach can never
explain the relative prices of commodities or their uniform value for all consumers. Maurice Dobb has
rightly pointed out that such marginalist logic actually attempts to shift the focus of economic analysis from
'relations of production' to 'the relations of commodities to the psychology of consumers.' The fact is that the
only commensurability that reveals the social relation between the commodities, that enable them to be
exchanged is that, they are products of abstract human labour in general. However, despite this apparent
absurdity, this argument of 'other kinds of commonalities' was later repeated by Schumpeter. The reason is
clear: the labour theory of value must be shown as incorrect or at least inconsistent.

Another attack of Böhm-Bawerk to prove the inconsistency of labour theory of value was his argument that
Marx's theory fails to explain how skilled labour is more productive and gets more wages as compared to the
unskilled labour. Though Marx himself had answered this question, later day Marxists also developed the
answer of Marx in slightly different ways like Hilferding, Hans Deutsch, Otto Bauer and Rubin. The fact is
that Marx never explained the higher value content of skilled labour by the higher wages that he receives,
but by the additional labour costs in producing the skill. Skilled labour participates in the total social labour
of the society not only with his own labour-power but also with a fraction of labour-powers necessary to
produce the skill. Consequently, each hour of unskilled labour multiplied by a coefficient dependent on the
cost of production of skill removes this alleged anomaly. As we said, different Marxists developed this
theory in slightly different directions, but we cannot go in their detail due to the lack of space.

Vilfredo Pareto is another bourgeois economist who attempted a critique of Marx's economic theory. The
principal target of Pareto too was the labour theory of value. To critique Marx's labour theory, Pareto makes
some amusing contentions. For example, he argues that the laws of motion of capitalism discovered by Marx
are incorrect because there can be other laws too. For instance, a seamstress hires her machine and her own
subsistence which would then lead to conclusion that the machine has produced surplus value! In other
words, workers hire their means of production and as a result own the product of their labour, sell it to the
market and thereby appropriate the surplus value. The only problem with such amazing explanation is that
history shows that it has never been the case with capitalism! Apart from this "critique" Pareto like some
other bourgeois economists imputes the theory of absolute impoverishment of the working class on Marx
and points to the alleged inconsistency in labour theory of value when it comes to the question of skilled and
unskilled labour.

Ladislaus von Bortkiewicz was another major critic of Marx's Capital who claimed to have discovered a
basic inconsistency in Marx's solution for transformation problem. He claims that in determination of cost-
price, Marx takes the values of inputs into consideration, whereas in case of output, he transforms the values
in prices of production. This charge is based on a confusion. Marx himself was aware of this and had pointed
out that if values of inputs are not transformed into prices whereas the values of output are transformed into
prices, it will lead to incorrect calculation and result. However, Marx goes on to show that prices of
production of the inputs cannot be calculated in the time span of the current production. The capitalist has
nothing to do with the divergence of prices of production of the inputs from their values once they are
bought because this is an error of the past independent of his current production. In any case, the cost-price
of the commodity will remain less than its value. Once bought by capitalist, there is no feedback impact on
the prices of production of the inputs due to changes in the rate of profit (which take time to change and
impact the prices of production of commodities). Prices of production of inputs are thus given data at the
start of the production of the commodity. As Mandel has shown, it is sufficient to assume that they are
likewise calculated in prices of production and not in value and these prices are determined by the
equalization of profit rates in the previous cycle of production. So Marx is totally consistent in this regard.
Bortkiewicz himself tried to provide a solution which assumes a uniform profit for all products and also only
those equations are needed in his model for a solution which involve commodities entering into production
of other commodities. However, to deny that arms or luxury industry has no impact on the rate of profit is
ridiculous, even if their products do not enter reproduction of capital. Surprisingly, this critique has been
accepted not only by neo-Ricardians like Piero Sraffa but also by Marxists like Paul Sweezy.

Roman Rosdolsky has pointed to another major inconsistency in the critique offered by Bortkiewicz.
Rosdolsky points out that Bortkiewicz and his followers completely miss the point that Marx's prices of
production are nothing but values modified by the intervention of the average rate of profit and so the 'price
calculation' suggested by Bortkiewicz cannot resolve the problem of transformation of values into prices. On
the other hand, Marx actually showed how values are transformed into prices in his Grundrisse as well as A
Contribution to the Critique of Political Economy. Among later day Marxist economists, David Laibman
repeats the mistake of Bortkiewicz. Marxist economists like Andrew Kliman, Guglielmo Carchedi and Alan
Freeman have critiqued Laibman for this mistake.

Fred Moseley in my opinion has offered the most devastating critique of those who see a 'transformation
problem' unsolved by Marx. He argues, just like the Temporal Single System Interpretation supporters like
Kliman, Freeman and Carchedi that Marx's analysis is a single system analysis, ie, a single system of values
and prices. Moseley adds that this system succeeds in explaining the concrete reality of capitalism. He
contends that since Marx starts with money in his analysis of circuit of capital, there is not need for
transforming the values into prices. At the beginning of the circuit of capital, money capital is taken as given
or presupposed. Therefore, total prices equal total value in totality. All that happens in circulation (the many
capitals) is that the surplus value created in each sector will be equalized through market so that rate of profit
is equalized or tends to equalize acroos all sectors. Total surplus value however equals total profit. And the
circuit of capital takes places over real time and is not completed simultaneously in a hypotheical fashion, as
critics of solution of transformation problem offered by Marx, from Bortkiewicz to Sraffa and Laibman.
Capitalist production does not start with certain values in labour-time or physical units of means of
production and labour power. Capitalist starts with a sum of money which is advanced to make more money
over the money paid to workforce (wages or price of labour power) and the seller of means of production
and finishes with a larger sum of money due to the production of surplus value. When we descend from the
level of capitalist totality to the level of individual firms, we see that prices of individual commodities do not
match their values (the so-called transformation problem). Critics claim that Marx tried to solve this problem
but failed because he forgot to transform the values of inputs into prices of production. Moseley responds
that Marx did not 'forget' to transform the values of inputs into prices of production because the inputs of
variable capital and constant capital need not be transformed! Constant capital and Variable capital are taken
as given as the actual quantities of money capital advanced to purchase means of production and labour
power at their market prices, obviously, at the beginning of the circuit. So there is no need at all to transform
the values of inputs. Then Marx shows how the values of output is transformed into prices of production
through the equalization of rates of profit in all sectors and branches of economy. This is perfectly valid
solution of the so-called 'transformation problem'. Therefore the slogan of Moseley and TSSI theorists is:
"don't fix it...if it's not wrecked!"

Piero Sraffa among the Ricardian critics of Marx has probably had the greatest impact on a number of
Marxist scholars like Maurice Dobb, Ronald Meek, Paul Sweezy to name a few. Sraffa critiques Marx's
theory of tendency of rate of profit to fall. He argues that the rise in the technical composition of capital will
decrease the value of means of production and will maintain the value composition of capital and thus
prevent the rate of profit from declining. Firstly, along with increase in the rate of surplus value, Marx
counted this factor as one of the countervailing factors of the law of tendential fall in profit rate. However,
Marx argues that both these factors in the last analysis cannot cancel the law but just transform it into a
tendency for the simple reason that while it is true that independent machines become cheaper but the
system of machinery employed with the rising organic composition of capital becomes of higher value. Ben
Fine and Lawrence Harris rightly argue that Sraffa's argument irgnores the organic composition of capital
where the elements of the means of production and wage goods are valued at their "old values". Since
capital accumulation is a dynamic process developing over real time and does not develop through
simultaneous circuits, when innovaition cheapens the elements of constant capital, a divergence opens up
between the value at which existing means of production were purchased and the value at which capitalists
must now sell their products, due to the reduction of costs caused by technical advance. John Weeks points
out that during this process, it is the organic composition of capital that is relevant since the new decreased
value do not affect capital advanced until the next circuit of capital when it enters the profit calculation.
Moreover, even then, the new values affect only the increments of fixed capital because all fixed capital that
has been bought at previous values does not circulate in its entirety; part of it remains fixed in the machines
and other equipment. As it can be seen, Sraffa's objections to LTFRP are unfounded. Later day Marxists
have shown that Sraffa reduces everything to prices in the end to prove that law of value is redundant. Fred
Moseley too has offered a potent critique of this position held by Sraffa and his followers.

Another major early critic of Marx's economic theories as presented in Capital was Tugan-Baranowski
who belonged to the 'legal' Marxists school of Struve, but later became a revisionist and critic of Marxism.
Tugan-Baranowski, following Böhm-Bawerk, argued that Marx could not explain the short-term price
fluctuations. We have already mentioned the fitting reply that Marx and later day Marxists gave to this
misplaced objection. But the most important distortion of Marx by Tugan was done in the sphere of Marx's
reproduction schema.

Tugan actually began the trend that later came to be known as harmonist and neo-harmonist explanations
of Marx's reproduction schema. Marx's reproduction schema, that he presented in Volume 2 of Capital
actually present the basic preconditions of equilibrium or proportionality (between Department-I and
Department-II). Marx shows the theoretical possibility of such an equilibrium (Rosa Luxemburg denied the
very theoretical possibility itself and presented an argument which stands close to underconsumptionism);
however, Marx demonstrates that such an equilibrium can only be an exception in capitalist reproduction
and actually it will be unsettled by the basic laws of motion of capitalism. However, Tugan and later
Marxists like Hilferding, in a different way, used the reproduction schema to prove that capitalism can
achieve proportion and prevent the occurence of crisis indefinitely. They failed to understand how Marx
follows the contradiction inherent in commodity, that is the contradiction between use-value and exchange-
value, in these reproduction schema and showed the inevitability of disproportionality between departments.
Tugan goes as far as attempting to show through 'mathematical' models that Department-I could develop
completely autonomously from Department-II, to the point where the output of consumer goods would tend
to fall towards zero, without causing any crisis!

Another early-twentieth century critic was Joseph Schumpeter, who was not hostile to Marxism and was in
some ways also influenced by it, but who remains within the liberal tradition. However, Schumpeter
repeated a number of oft-repeated bourgeois criticisms of Marx's economic theory, for example, the critique
that commodities have other bases of commensurability than human labour in abstract, like scarcity. We
have already cited the Marxist reply to this absurd criticism. Similarly, Schumpeter presents his own version
of Nasau Senior's "abstinence theory". He argues that the "fund" of the capitalist is an exchange against a
"flow" of production -- the abstinence for which he is being paid, and which enters into his "fund". There is
no additional payment for refraining from it even in cases in which this would be physically possible.
Schumpeter does not bother to tell from where this "fund" comes if not from the "flow" itself! As we can see
it becomes a way to hide the fact of exploitation and source of profit. Due to this very conception,
Schumpeter believes in the surplus profit of Marx which arises out of temporary monopoly of a new
advanced technique or machinery, which Schumpeter terms as 'entrepreneurial profit' (because according to
him, all innovations come from the entrepreneurial spirit of the entrepreneurs!). However, such surplus
profit is temporary and when the technological differential is finished, the profit is gone. According to him,
in capitalism, there is no permenent profit, without this surplus profit; production, without such differential
created by monopoly, "flows" without profit.

Marx's concept of capital is another favoured target of bourgeois economists. Schumpeter joins the party by
claiming that any stock of wealth or any means to increase the productivity of labour is capital. As Mandel
has rightly pointed out, from this definition, even the stick used by a chimpanzee to get at bananas would be
regarded as capital! Capital is a social relation that presupposes production not for consumption but for
exchange, a social division of labour, production of commodities, value form, money and money circulation,
ownership of money by a certain class whose members operate as owners of value looking for increase in
their value. If we abandon this scientific definition of capital, it would be impossible to differentiate between
different social formations and different historical epochs of human history. Another objection of
Schumpeter to Marx's economic theory is that Marx gave a theory of reproduction of capital but did not
explain the origin of capital. Whoever has read Capital knows that nothing can be further from truth. Marx
clearly mentions that production of surplus-value by capital and production of capital by surplus-value is a
circular logic and does not explain the origin of capital. Marx devotes and entire part (the eighth part) to a
theory of 'primitive accumulation', the original sin of capitalist mode of production and explains how the
basic preconditions of emergence of a properly capitalist society were fulfilled and there is no need to go
into the detail of that entire process here. Secondly, Marx made a distinction between capital and capitalism.
Capital is independent value, initially and generally in the form of money, that becomes an independent
entity and operates in the pores of the pre-capitalist society or non-capitalist society; it assumes the form of
mercantile or usury capital and it cannot produce surplus value. It only apportions and appropriates a part of
surplus product produced by non-capitalist producers who own their means of production and also by
appropriating it from the non-capitalist ruling class who has appropriated this surplus product from
producers. It cannot in and by itself lead to industrial capitalism through manufacturing and factory system.
It can only lead the precapitalist society to crisis and sharpen its internal contradictions. Capitalism on the
other hand is a system in which capital has really subsumed labour and production. It has seized the means
of production, the production and labour process. There are various stages through which this real
subsumption is completed. As is evident, Schumpeter's critique is beside the point.

Schumpeter also repeated Böhm-Bawerk's critique that labour theory of value cannot explain the high wages
and high productivity of skilled labour. We have already mentioned the counter-critiques presented by Marx
(anachronistically!) himself and later day Marxists.

Another critique of Schumpeter is based on Marx's theory of inevitable collapse of capitalism. He argues,
and again he follows Böhm-Bawerk in this, that capitalism has shown much more adaptability and flexibility
than Marx had imagined and it can survive by adapting and reforming itself as it is an extremely dynamic
system based on "creative destruction". This criticism has been repeated by a number of bourgeois
ideologues and academics ad nauseam. This can be rebutted on many levels.

In my opinion, such argumentation lacks a historical view. Marx's chronological predictions aside, all the
logical predictions of Marx about capitalism have been proven correct by the global history of capitalism for
past 200 years or more. If, according to Marx, capitalism means increasing accumulation of capital, relative
impoverishment of working class, recurrent and increasingly serious crises, rising inequality and
polarization of world between the wage workers and capitalists, ever-greater monopolization through
increasing concentration and centralization of capital, the threat of destruction of nature, wars; then, are not
we witnessing all these symptoms continuously since the heyday of capitalism, and especially since the
1970s, that is, the end of the brief interregnum of welfarist, Fordist era following the Second World War,
also known as 'the Golden Era'? Are not we seeing glimpses of barbarism in Syria, Palestine, Ukraine and
elsewhere? Are not we faced with the threat of irreparable environmental destruction and threat of an
apocalyptic imperialist war? Can we describe all these developments as the healthy survival of capitalism by
its remarkable "adaptability" and "flexibility"? Obviously, Marx never proposed the inevitable victory of
Socialism, though towards the end of their lives, both Marx and Engels were more optimistic about the
realization of this possibility.
The second level at which this argument can be answered is the fact that we mentioned earlier: Marxism is
an approach and method; it is not a simple aggregation of whatever Marx said but an organic distillation of
the approach and method that Marx developed during and as a result of his social, economic and political
enquiry. Marx's predictions and statements about the time frame of capitalist mode of production, about the
so-called Asiatic mode of production, etc could be wrong. This does not have anything to do with Marx's
scientific analysis of capitalist mode of production and its ultimate collapse due to its own internal
contradictions. The victory of socialism is result of a conscious political act on the part of the working class
under the leadership of its vanguard. Whether such a possibility can be realized depends on a lot of factors.
It is not an automatic thing, as Marx himself had clarified.

Thirdly, as Mandel has pointed out, such arguments about failure of Marx's predictions about the final
collapse of capitalism, try to prove too much. So in the process of proving the incredible adaptability and
survival of capitalism, they end up proving that the system we are living in is not capitalism! For example,
the theory of 'mixed economy' (Samuelson), 'managerial capitalism' (Robin Morris), 'technostructure rule'
(Galbraith), etc. In nutshell, the time dimension of Marx's prognostications should not be taken too
seriously; he himself changed such predictions during his life-time a number of times.

The most classic case of the intellectual Popperism (er...pauperism!), however, among Marx's critics is Karl
Popper. Popper too belongs to the positivist school and shares Böhm-Bawerk's disdain for the dialectical
method that Marx, in their opinion, simply "borrowed" from Hegel and which unnecessarily led Marx to
useless mystifications and metaphysics. We have answered this criticism above and there is no need to
repeat it. One of the most amusing criticism of Marx by Popper is that Marx has turned man into a
commodity by saying that labour-power is a commodity! It just needs to be said here that it is not Marx but
capitalism that turned man into a commodity. Marx actually condemns capitalism for that! It is a psuedo-
ethical standpoint assumed by this positivist philosopher plagued with scientism. Popper goes on to claim
that Marx was wrong to differentiate between human labour and animal labour and while it can be correct
from a moral point of view, moral judgements should not become the basis of economic theories. This
argument, again, is a new level of absurdity. Karl Popper himself opposes slavery, a system under which the
slave labour was equated to intrumentum vocale and labour of beasts of burden. Would he call his
condemnation of this degradation of human labour as just a moral judgement devoid of any scientific value,
as Mandel has rightly asked? Obviously, when men will form production relations to produce and reproduce
their lives, they will certainly consider human labour, as the basis of their social organization, quite
differently from animal labour and other natural processes. From man's point of view there is nothing
metaphysical about it. Secondly, human beings are the only species which consciously engage in productive
activity. Their productive labour is a conscious social labour not an unconscious life-activity or species-
activity. The mechanical materialism and positivism of Popper is at full display here.

Popper repeats many old claims to deny Marx his due credit. This has been done by many bourgeois
commentators in the past, right since the publication of Capital. In fact, Engels has answered one such claim
in his introduction to the second volume of Capital when it was claimed that Marx's theory of surplus value
has been plagiarised from Rodbertus. Engels methodically dismantles this baseless claim and demonstrates
the qualitative leap constituted by Marx's theory of value. What is most interesting is that Popper quotes this
very introduction of Engels to repeat the claim that Marx borrowed his theory of surplus value from Ricardo
and Ricardian socialists like Rodbertus -- that is, the same introduction by Engels which dismantles this
claim! Like many before him and after him, for instance Pareto, Schumpeter, von Mises and W. Arthur
Lewis, Popper also falsely attributes the theory of absolute impoverishment of the working class to Marx. A
number of Marxist scholars besides Marx himself have repeatedly shown that Marx gave no such theory.
Instead, Marx argued for the relative impoverishment of the working class, which means the declining share
of wages in total income, which might accompany an increase in the real wages.

Then, finally, Popper criticizes Marx for speculative excursions into the realm of 'prophecy' and denies the
scientific character of the laws of motion of capitalism discovered by Marx by arguing that all scientific
theories are falsifiable in the sense that they can be empirically tested; but, according to Popper, Marx's
theories cannot be scientifically tested. This claim holds no water as evident from the fact that at the instance
of every crisis from 1930s to 1970s and now the latest crisis that broke out in 2007-08, even various serious
non-Marxist academics are obliged to accept the validity of Marx's analysis of laws of motion of capitalism
and its predictive power. We are not talking about the vulger bourgeois economists here who have a moment
of epiphany after every crisis about the particular cause that particular crisis, rather than understanding the
general laws of capitalism that lead to periodic crises of capitalism.

Another major economist, who was sympathetic to Marxism, who attempted a critique of Marxism was
Joan Robinson. She sees a contradiction between Marx's observation that decline in value of labour power
due to increase in labour productivity in Volume-I and his observation in Volume-III that real wages can
increase and the rate of profit can decrease with the rising productivity and declining value of labour power.
Evidently, she fails to understand the different levels of abstraction at which Marx's analysis is operating in
Volume-I and Volume-III. The former deals with the relation between Capital and Labour in general,
whereas, the latter deals with the relation between many capitals competing with each other. The former
shows how surplus value is created in the process of production and the latter shows how the total surplus
value is redistributed between the many competing capitals through the equalization of rate of profit. For the
particular task that Marx undertakes in Volume-I, he assumes a stable subsistence wage to show how surplus
value is produced, appropriated, accumulated and capitalized. In Volume-III he considers the competition
between many capitals and its impact upon the rate of exploitation. It is possible for real wages to increase
while the value of labour power decreases due to increased productivity and cheapening wage goods,
because real wage refers to the basket of wage goods that the worker can buy with his wage. As can be seen,
the positivist method of Robinson along with her Keynesian and Fabian affinities, prevents her from
distinguishing between the appearance and essence. It would be useful to mention here that Robinson shared
Böhm-Bawerk's and Popper's disdain for Marx's 'Hegelian stuff and nonsense'!
The principal object of Robinson's criticism, as one can guess, is the labour theory of value. As Roman
Rosdolsky has shown, she has totally misunderstood Marx's theory of value and makes such claims that
Marx on the one hand argues that value is something social and on the other that it is intrinsic to or inherent
in commodities. Robinson argues that if value is social it cannot be intrinsic to or inherent in commodities
and then it must be accepted as a technical or natural characteristic like weight or color. Similarly, Robinson
claims that Marx, like Ricardo searched for an 'invariable measure of value'. Again, nothing can be further
from truth as Marx insisted time and again that value is a historical category which came into existence only
with the exchange of commodities. The exchange automatically equated the common social substance
embodied in different commodities, which is nothing but average social human labour in abstract. Any
measure of value (money) must itself be a product of this abstract human labour and therefore it cannot be
invariable. Rosdolsky has shown the absurdity of the assumptions of Robinson which are based on simple
misunderstandings due to the ideological blindness of the Keynesian and positivist "insight". We need not
go in the detail of critique presented by Rosdolsky and one can refer to his critique.

Similarly, Robinson totally misreads and misunderstands Marx when she tries to pit Volume-I against
Volume-III. Again, she fails to comprehend the different levels of abstraction at which the analysis functions
in these two volumes. Due to confusing the relation between values and prices, the average rate of profit and
rate of exploitation, she makes such absurd claims like the one that Marx maintained that if the relative
prices correspond to the relative values then the rate of exploitation is equal in all industries. She also makes
the labour-time as a measure of value dependent on rate of exploitation, which can only be called a gross
misunderstanding. It is neither possible nor necessary here to cite all the inconsistencies, misreadings,
misunderstanding and decontextualization of Marx by Joan Robinson. The basic point is that despite her
sympathies for socialism, her Keynesian and postivistic method prevented her from understanding the work
of Marx. Rosdolsky has rightly commented, "It has often been stated that the differences between the two
opposed schools of politcal economy - the 'academic' and the Marxist - have grown so large that the
adherents of one school can scarcely understand the language of the other. A striking example of this gulf is
provided by Joan Robinson." One cannot agree more.

Another very important critique of Marx's crisis theory came from within the communist movement. This
critique was offered by Rosa Luxemburg and it continues to be influential in certain underconsumptionist,
left Keynesian, world system theory circles even today. The thesis put forward by Rosa Luxemburg has been
criticized by a number of leading Marxists like Henryk Grossman, Otto Bauer, Ernest Mandel, Anwar
Shaikh and many more. Ernest Mandel has rightly pointed out that Rosa Luxemburg's critique of Marx's
reproduction schema as presented in Volume-II of Capital in her The Accumulation of Capital is the most
important controversy that has arisen in connection with volume-II.

Though Rosa Luxemburg critiques Marx's theory on a number of points, her critique is mainly based on one
simple argument. Here we will present that argument in brief and the internal inconsistency of the argument.
Luxemburg's argument is based on a simple question: How can the part of commodities representing the
accumulated portion of the surplus value be realized? How the expanded reproduction is possible? How the
expanded reproduction is realized? Who are the new potential customers with purchasing power to realize
this extra set of commodities produced by expanded reproduction? For Luxemburg, they cannot be workers
since their purchasing power originates with capital because wages are part of the initial capital advanced by
the capitalist for valorization; and expanded reproduction only to satisfy the needs of additional workers
would be inconceivable for capitalist class as a whole, in its totality. Similarly, the new consumers cannot be
the cronies and lackeys of the capitalist class because they only get a part of the surplus appropriated by the
capitalist class and the capitalist class cannot enrich itself by spending its own money to buy this surplus
product. From these assumptions, Luxemburg concludes that this surplus product, which creates a 'demand
gap', can only be realized by the non-capitalist classes within the pores of capitalist system as well as the
non-capitalist periphery (non-capitalist nations), which would ultimately lead to their ruin. And in this way,
capitalism will ruin the non-capitalist milieu which is the basis of its survival and thus lead to its own
destruction. Mandel has pointed out that the idea that a non-capitalist milieu is essential for the survival of
capitalism was first developed by a certain Heinrich Cunow and later defended by the likes of Kautsky and
Louis Boudin. One important inference of the idea of Luxemburg is that within pure capitalism, the very
logic of capital precludes any possibility of increase in the organic composition of capital and expanded
reproduction.

It is important here to understand the basic weaknesses of the argument of Luxemburg because it has
influenced many modern Marxist theorists like Sweezy and Baran, or the Monthly Review school in general.
There is a major methodological error in Luxemburg's analysis. She poses the problem of realization at the
level of 'capital in its totality'; but this problem cannot be answered at this level of abstraction but only at
another level of abstraction, i.e., at the level of competition between 'many capitals'. Mandel has rightly
pointed out that an analysis that functions simultaneously on both the levels is bound to be fraught with
contradictions. The argument that capitalist class cannot buy its own surplus and fill the 'demand gap' forgets
that in a capitalist system the total capital is not owned by one capitalist. The very logic of competition
allows for the possibility of capitalists buying one another's 'surplus product' and grow richer as a class. This
logic is not only incorrect on the spatial level but also on the temporal level. Anwar Shaikh has effectively
argued that one important dimension of Marx's study of the 'realization problem' is the dimension of time.
Shaikh gives an example. Suppose the production process in each department takes an year to complete. The
producer goods produced in the current year cannot be bought off and used up in this year of production
because they will be available only at the end of the year. Similarly, workers (as well as capitalists) cannot
buy the consumer goods produced in this year for their current survival needs because the consumer goods
of current production will only be available at the end of the year. At the beginning of the current production
cycle, the capitalist invests capital based on his assessment of level of production based on his profitability
expectations. He will buy means of production and hire workers and will also buy his necessaries of life (as
well as luxury goods). The workers in turn will buy their necesssaries of life, the wage goods. It is
noteworthy that the effective demand originates only from within the capitalist class because the
consumption of working class is a function of capital investment as wages form a part of the invested capital
and therefore it is erroneous to treat investment and consumption of workers as separate things. Who is
selling these means of production and the wage goods? Obviously, the capitalist class. But not from the
current year's production, which will be available only at the end of the year, at the end of the current
production cycle. It sells these production goods and wage goods from the last production cycle that are
available at the end of the previous year and the end of the previous production cycle. Thus last year's
production supplies the capitalists with production and consumer goods for this year's production and
consumption. This mechanism functions in a complex fashion and as a possibility; because the capitalists do
not plan this whole thing as a class; but the possibility of proportionality required for reproduction cannot be
ruled out, as done by Luxemburg for whom the 'demand gap' can only be filled by the non-capitalist milieu.
It can be shown that steady growth is possible without any non-capitalist periphery, that is, within the ambits
of 'pure capitalism'. Shaikh also rightly points out that Luxemburg forgets the basic formula of circulation of
capital, i.e., M-C-M', rather than C-M-C. The capitalist invests in production not for supplying the
consumption needs of the society but for making profit, making more money out of money. The investments
by capitalists are not motivated by consumption, but by profits, rather their expectations of profit. Marx only
shows that if their anticipation of profits and consequest investments are appropriate, then they would be
successful in selling their products and make profit. In this process the consumption would expand because
the capitalists will buy more means of production and hire more workers. However, it must be noted that this
consumption would be an effect of these proceedings not the cause, in other words, increase or decrease in
consumption here is function of the accumulation of capital, profitability and investments.

It is important to understand that there is a context to which Rosa Luxemburg's theories were responding,
notwithstanding the fact that they were incorrect. Marx's reproduction schemas were (mis-)used by the likes
of Tugan-Baranowski to show that capitalism can grow unhindered by maintaining the proportionality
between departments. There will be no underconsumption, no overproduction and even if the law of
accumulation and rising organic composition assert themselves, the equilibrium will be maintained. Rudolf
Hilferding too referred to this possibility in which the monopolization will lead to formation of one
monopoly cartel which then will maintain the proportionality between departments (organized capitalism).
Needless to say that these theorists had turned Marx's reproduction schema (which only showed the
possibility of equilibrium and the fact that capitalism can create its internal markets) into a recipe for
uninterrupted growth of capitalism forever! Tugan-Baranowski develops this thesis to absurd ends.
Luxemburg, a committed revolutionary, was not ready to accept these conclusions. However, rather than
showing the immanent inconsistency of these 'harmonicist' misinterpretations of Marx's reproduction
schema, she attacked the reproduction schema of Marx itself and arrived at underconsumptionist conclusions
and a theory of imperialism whose theoretical tenets resembled the Hobsonian theory of imperialism, though
the conclusions drawn from this theory were completely different from those drawn by Hobson. Also, it
must be admitted that as compared to 'harmonicist' and 'neo-harmonicist' theorists, Luxemburg's theory is on
much more solid ground because capitalism has been experiencing recurrent structural crises even in the age
of monopolies and is far from the cherished dream of steady and permanent growth. It is just that the point
of departure of Rosa Luxemburg is incorrect which leads her analysis to the immanent contradictions of
under-consumptionism. Still, the thesis of Luxemburg has been influential especially till the 1970s. It was
Paul Sweezy who revived the underconsumptionist thesis in the 1940s and then again in 1960s, along with
Paul Baran. The thesis of Monthly Review school relies heavily on Luxemburg's underconsumptionist thesis
as well as Hobson's underconsumptionist thesis.

In his The Theory of Capitalist Development (1942) Sweezy argued that demand for consumer goods
regulates the entire production, just like the traditional underconsumptionist argument. As Shaikh has
argued, he builds a vertical model of Department I and Department II in which Department II determines the
production in Department I. Sweezy argues that as capitalism develops the larger portion of capital
investment takes the form of constant capital and the share of variable capital declines. This increases the
productive capacity of the consumer goods department, whereas the workers' consumption decrease due to
decreasing expenditure on wages. Thus, a 'demand gap' is created. Capitalists' personal consumption can fill
this demand gap but it does not due to their tendency of investing more and proportionately consuming less.
Thus the consumption falls behind the productive capacity of Department II and it leads either to crises or
stagnation or both. The basic weakness of Sweezy's argument is that Department I has become a totally
derivative discourse of Department II and its role is not more than an "input" for Department II. The increase
in the production of Department I is solely for increasing the productive capacity of Department II.
However, this is theoretically as well as empirically incorrect. The demand for producer goods that produce
producer goods also increases with the rising organic composition of capital. This fact was missed by Rosa
Luxemburg too. Shaikh argues, "Contrary to Sweezy's reasoning, it is perfectly possible to have a rising
ratio of machines and materials per worker and a proportional growth in the outputs of both Departments,
while still having expanded reproduction."

In his magnum opus with Paul Baran, Monopoly Capital, Sweezy moves a little forward and says that it is
not only the outstripping of consumption by the productive capacity of Department II but, the total
productive capacity increases in general in a capitalist economy for which internal effective demand cannot
be created and therefore an external source is necessary for realization of surplus product and growth. The
periods of long booms are explained by the external factors of major innovations like steam engine,
imperialist expansion and wars and stimulation of demand by advertising, government policy, etc. Further,
Sweezy and Baran argue that monopoly over-expands the productive capacity and thus drive the economy
towards crises or stagnation. In other words, the productive capacity will outstrip the effective demand and
the system will be faced by 'realization crisis'. Potential surplus expands faster than the system's capability to
absorb it. However, surprisingly, they lay the blame for this on the monopoly capitalism and do not make
clear why the monopolies would persist in over-expanding the productive capacity if they are faced with
increasing 'demand gap'. Thus the very assumption of the thesis of Sweezy and Baran is without any
explanation.
We discussed the theory of Rosa Luxemburg and Monthly Review school because despite being refuted
effectively time and again it continues to dominate in certain Left intellectual circles in many countries,
especially in the developing world, including India. Secondly, the resonance of Luxemburg's theory can be
heard in certain formulations of many contemporary theorists like David Harvey as we shall see later. For
this very purpose, this detour to discuss the theories of Luxemburg and its heirs was important.

There are many other non-Marxist critics who raise similar questions generally targeting the revolutionary
core of Marxist theory, i.e., the labour theory of value as propounded by Marx. Besides, most of these
criticisms play on the incompleteness of Marx's project of Capital that left a number of intricate questions
unclear if not unanswered, in order to disprove and discredit Marx's economic theories. Undoubtedly, Marx
did not and could not have answered all the questions he himself raised. However, what we have today in the
shape of three volumes of Capital, Grundrisse,four volumes of Theories of Surplus Value and a number of
manuscripts that are yet to be published in English, a dynamic enquiry of a dynamic mode of production like
capitalism. It gives cues to resolve the unresolved questions if the these writings are interpreted in correct
way. As Andrew Kliman has succinctly put it, "The economists have changed Marx in various ways; the
point, however, is to interpret him - correctly!"

Present Crisis and Marx's Capital : New Controversies pertaining to the Theory
of Crisis

Rosa Luxemburg insisted that once we reject the underconsumption logic we will be oblige to accept the
'harmonicist' logic of unhindered steady growth of capitalism, that is the indefinite expansion of
accumulation of capital. Consequently, we would be compelled to accept the indefinite expansion of
capitalism. In my opinion, it is what Gilles Deleuze called a 'dysjunctive synthesis', a binary of false
opposites. Marx believed that limits to capital are immanent to capital itself. In words of Marx, "The real
barrier of capitalist production is capital itself."

There has long been a debate among Marxists, what is the Marxist theory or Marx's theory of crisis? Or, is
there any Marxist theory of crisis? If yes, is it complete? Also at stake are some controversial issues of
Marxist economic theory like the so-called 'transformation problem' and its solution given by Marx. These
issues have remained in the centre of the debate right since the late-1890s itself in different forms. The
debate on these issues has been renewed after the 1970s and especially after the publication of Michael
Heinrich's works first in German and then in English and also the works of David Harvey as well as the likes
of Andrew Kliman, Alan Freeman, Guglielmo Carchedi, Michael Roberts, Fred Moseley, etc. In the context
of this debate we will also discuss in brief recent important works on Capital like the works of Alex
Callinicos, Fredric Jameson, etc. Let us begin with the debate over Marx's theory of crisis.

This debate has been there right since the crisis of 1970s, but at that time there was a broad consesus on the
reason of the crisis to be the declining rate of profit. In the early-twentieth century different explanations of
crises dominated at different moments. Sometimes the Marxist underconsumptionism was dominant, at
others the disproportionality theory and the overaccumulation and profitability theory. Since the decline of
the capitalist triumphalism in the late-1990s with the East Asian Crisis and its definitive end by the time of
2001 Crisis, the debate on the real nature and causes of capitalist crisis renewed. Basically, the positions on
the real cause(s) of crisis can be summarised as follows: (a) Is Marx's law of tendential fall in the rate of
profit (LTFRP) explains the recurrent crises of capitalist system and is it the main or underlying reason of
crises? (b) Can capitalist crises be explained by such a "monocausal" interpretation or do we need to develop
a multicausal explanation? (c) Do each crisis have different causes or set of causes that we need to
understand separately? (d) Is LTFRP indeterminate, invalid or obsolete and did Marx really drop this law
towards the end of his life, which once he claimed as the most important law of capitalim? (e) Did Marx
provide a satisfactory solution to the so-called 'transformation problem'?

There are other issues also involved in the debate that are related to the above issues such as what is the
relation between LTFRP and other expressions of crises such as overproduction, underconsumption,
disproportionality, etc; how do we understand the cycles of financial boom and bust from the perspective of
LTFRP, underconsumptionism, overproduction, or disproportionality theorists? However, these issues can
be discussed as part of answering the above five main questions.

Let us begin with Michael Heinrich's reading of Capital and the controversial issues that it raises. Before we
discuss the controversy over the LTFRP it is useful to discuss his views on value and exchange value.
Heinrich criticizes the substantialist interpretations of Marx's concept of value, stemming from neo-
Ricardians, Sraffians and Marxists influenced by this perspective like Maurice Dobb and Ronald Meek.
Heinrich argues that while being obsessed with the magnitude of value these substantialists forget to analyse
and understand the value-form. In the process of critiquing the substantialism of these interpretations
Heinrich falls prey to what Alex Callinicos has called 'etherealism'. A non-dialectical focus on the value-
form has prevented Heinrich and the likes from developing a quantitative theory of capitalism, which was
one of the project of Marx. Callinicos rightly comments that the common error of both these extremes is that
they miss the relationality of capital. Heinrich argues that value first exists in exchange and that the
substance of value is not inherent to individual commodities, but is bestowed mutually in the act of
exchange. A similar idea was developed by I.I. Rubin in his Essays on Marx's Theory of Value. He argued
that Marx's concept of abstract labour is not a physiological concept and abstract labour is not just a
theoretical abstraction to arrive at a measure of value. Abstract labour is a result of social equalization of
concrete labour which happens only through the act of exchange. It has been pointed out by many scholars
that law of value comes into full operation only when commodity production becomes generalized, that is,
when capitalist mode of production comes into existence. The problem with Rubin's argument is that he
cannot visualize social equalization of labour without the act of exchange. Lucia Pradella and Alfred Saad-
Filho as well as others have shown that the social equalization of labour takes place in capitalist mode of
production even before the act of exchange. Because this argument of Rubin ultimately leads him to the
conclusion that value comes into existence only in the act of exchange. The fact that this phrase 'average
social labour necessary for production of a commodity' itself expresses a social equalization and it is not
totally ex-post but becomes a real thing before exchange. It keeps changing through the repeated acts of
exchange. Secondly, if we take this factor into consideration we cannot simply reject the physiological
concept of abstract labour. Marx himself defined abstract labour as such. Again, in a way of contradicting
himself Rubin accepts that abstract labour does have a quantitative side but the equality of these quantities
can only be established by exchange; however, Rubin continues, even before the act of exchange quantities
of labour can be measured by four material-technical and physiological properties: the length of labour
expenditure or the quantity of work time, the intensity of labour, the qualification of labour and the quantity
of products produced in a unit of time. The last two yardsticks are certainly wrong. The qualification of
labour does not really affect the determination of value according to labour time because all labour can be
reduced to universal social labour. The last yardstick too is incorrect because the quantity of use values
produced in the same time has nothing to do with value determination because the same value (embodied
labour time) will be spread over a larger mass of use values and the production of total value will be the
same. It seems that after too much de-substantiation of the concept of value, he was obliged to add an
arbitrary list. Still, he admitted the measurement of abstract labour before exchange within certain limits.

Heinrich differs from Rubin here and argues that abstract labour cannot be measured in labour time. Only
concrete labour can be measured in labour time. Abstract social labour for Heinrich is a relation of social
validation which is constituted in exchange. Heinrich continues, "In exchange the concrete acts of expended
labour count as a particular quantum of value-constituting abstract labour, or are valid as a specific quantum
of abstract labour, and therefore as an element of the total labour of society." However, Marx believed that
abstract labour is expediture of human labour power. Marx in a late writing 'Notes on Wagner' writes: "This
duality of the commodity there persents itself as the dual character of labour whose product it is: of useful
labour, i.e., the concrete modes of the labours which create use-values and of abstract labour, of labour as
expenditure of labour power, regardless of the 'useful' way in which it is expended..." Heinrich's argument is
'etherealization' of the concept of value which tantamounts to the rejection of Marx's concept of value which
understands the value-form as a social relation that came into existence at a particular moment in history and
will diminish at a particular moment, and also as a quantity that can be measured. Therefore, the very theory
of value is at stake in this criticism by Heinrich.

Christian Fuchs asks a question that in my opinion is the Achilles Heel for all etherealist interpretations of
value-form. Fuchs comments, "The problem that I see is that Heinrich's approach implies that no
exploitation has taken place if a commodity is not sold."

Michael Heinrich also critiques Marx for arguing that the universal equivalent or money must assume a form
of money commodity. According to Heinrich money takes the form of money commodity in a particular
phase of capitalism and it has nothing to do with general logic of capitalism. First of all, Dimitric Milonakis,
Ben Fine, Fred Moseley etc have refuted this argument by saying that Marx's theory does not preclude the
possibility of fiat money. It allows for the possibility of money commodity being replaced by symbols of
money and symbols of value. Marx was firm that it is only Gold that can play the role of world currency for
the final settlements of accounts between the central banks of different nations. Marx rejected any thoery
which 'explains' the value of money by convention or state compulstion. It would require a world
government, which is not possible under capitalism. However, Marx recognized the role of the state in the
establishment of an accepted international means of exchange and payment, credit, etc. ie, international
money. Marx believed that paper money with a fixed rate of exchange can be imposed by state authority
within given limits. It seems to me that with the collapse of the optical illusion of 'unipolar world' which
emerged after the collapse of Soviet Union, this prognosis of Marx has been proven correct.

The third and possibly the most important target of Heinrich's 'new reading' is Marx's theory of LTFRP. In
fact, Heinrich argues that Marx actually did not develop a complete or finished theory of crisis and he
certainly dropped or was about to drop LTFRP towards the end of his life. On the one hand, Heinrich's
claims have found supporters in the form of Monthly Review school as well as the likes of David Harvey,
and on the other, his approach has been severely criticized by Andrew Kliman, Michael Roberts, Guglielmo
Carchedi, Alan Freeman, Fred Moseley etc. Kliman and Freeman have argued that LTFRP is discarded at
the very door by Heinrich; it is not tested empirically or discussed with logical rigour. Presenting alternative
theories or critiquing Marx's theories (howsoever, "fragmentary" or "incomplete" they are) is totally
acceptable. Then one can test the relative merits or demerits of the different alternative theories. However,
the LTFRP is trashed and disqualified at the very opening door of discussion, which is what Kliman calls the
"suppression".

Kliman and Freeman argue that the very assumptions of Heinrich are manufactured in a way to dismiss the
LTFRP. These assumptions raise incorrect questions and make illogical demands. Heinrich, for example,
claims that Marx failed to prove this law because he could not show that the rate of profit must, under all
circumstances, fall in the long run. Kliman et al correctly argue that the law is not a prediction of what must
inevitably happen, but an explanation of what actually does happen. From the times of Adam Smith and
David Ricardo it was empirically seen that the rate of profit actually falls. Marx was not the first one to
notice it. It was already there. Marx only rejected the interpretations offered by Smith (increased competition
and increased wages lead to fall in the rate of profit) and Ricardo and Malthus (the law of diminishing
returns and rising population) and gave a correct interpretation of the fall in the rate of profit. Marx also
showed that this law is essential to understand the transitory nature of the capitalist mode of production; any
other interpretation of crisis is insufficient to do so. Marx, of course, showed that there are countervailing
factors that counterbalance the fall of profit but in the long run they cannot overcome the law; what they do
instead is transform the law into a tendency. Thus, Marx's LTFRP was not a prediction of what must happen
but an explanation of what does happen. Heinrich's demand that Marx must show that the rate of profit must
fall in the long run under all circumstances, is childish and inappropriate.

Second assertion of Heinrich that the 'law as such' (law in its simplest form) is a failure because Marx
included the increases in the rate of surplus value in the 'law as such' instead of considering them as
countervailing factors. So for Marx increase in the rate of surplus value due to rising organic composition of
capital is not a countervailing factor but was in-built in the 'law as such'. He argues that Marx could not
prove that the increasing rate of surplus value cannot stop the decline in the rate of profit because he could
not prove that (c+v) must increase faster than (s). So the law becomes indeterminate. And even before we
consider the countervailing factors, the 'law as such' falls apart. Heinrich later argues that Marx did include
increasing rate of surplus value in the countervailing factors but he was actually referring to the absolute
surplus value not the relative surplus value, not caused by increasing organic composition but by
lengthening of the working day or intensification of labour. However, Kliman et al show that this is a simple
misreading of Marx on the part of Heinrich and Marx actually included the increasing relative surplus value
in the countervailing factors. They also show that even if the rate of surplus value increases due to the rising
organic composition, the mass of surplus decreases and this can lead to decline in the rate of profit even
when the rate of surplus is increasing. Secondly, as Michael Roberts has shown Marx had clearly shown that
there is a limit to the increase in the rate of surplus value by increasing relative surplus value (24 hours). Let
us see what Marx has to say on this, "two workers working for 12 hours a day could not supply the same
surplus-value as 24 workers each working 2 hours, even if they were able to live on air...In this connection,
therefore, the compensation of the reduced number of workers by a rise in the level of exploitation of labour
has certain limits that cannot be overstepped; this can certainly check the fall in the profit rate, but cannot
cancel it out." In the long run, ultimately the rate of surplus value cannot increase faster than the rising
organic composition. Heinrich argues that this does not prove that (c+v) will increase faster than (s) and it is
possible only if (c+v), ie, the advanced money capital, necessary to employ the two workers in Marx's
example is of an amount at least as great as that required to employ twenty four workers before. Kliman et al
show that the very assumption here is that accumulation of capital has been reversed because only then
advanced capital needed to employ the two workers will be less than the advanced capital needed to employ
twenty four workers. Thus, Heinrich here is assuming disaccumulation of capital, which is opposite to one of
the basic assumptions of LTFRP.

There are also other countervailing factors. The other immanent countervailing factor is decrease in the price
of means of production due to increasing productivity. However, as Marx demonstrated that the machines
become cheaper than the old machines by unit but the new system of machines is always of more value than
the older system of machines. Secondly, the rise in productivity and thus decline in the value of machines
affects the next turnover of capital, not the current turnover. Moreover, such a logic does not take into
account the law of capitalist accumulation and expanded reproduction.

Heinrich has claimed that the proof of the fact that LTFRP is valid and actually the underlying cause of the
recurrent crises are logical errors and absurd assumptions. However, on this point Heinrich is certainly
incorrect. Excellent empirical studies by Anwar Shaikh, Andrew Kliman, Guglielmo Carchedi, Michael
Roberts, and many others have shown by well-researched empirical data from the US, UK as well as the
world economy that the rate of profit does actually fall and is the main underlying cause of the recurrent
crises for past at least seventeen decades! Okishio Theorem once claimed to have disproved the LTFRP but
it has been demolished time and again by leading Marxist economists.

Another point on which Heinrich is criticized by Kliman et al is his (any many other's) claim that Marx did
not have a theory of crisis, or it was incomplete. Kliman argues that the theory of LTFRP is complete in the
theoretical sense. Heinrich's claim that Marx was having serious doubts about the validity of LTFRP
towards the end of his life, especially from the 1870s, has been systematically refuted by evidence from
Marx's writings and correspondence from that period. Heinrich also blames Engels for editing the third
volume in such a way that LTFRP looks as the most important law of capitalist accumulation for Marx.
However, subsequent research based on the manuscript by many scholars has shown that Engels did a solid
editing job and this editing was only stylistic, not content-editing. Secondly, Kliman et al are totally justified
in arguing that it does not make any difference even if it was not Marx's but Engels' law or even if it was
Andrew Kliman's law. The point is to refute the law on its logical basis. In this, Heinrich has miserably
failed.

Nobuo Okishio's theorem (famous as Okishio Theorem) was a polarizing event on the question of Marx's
LTFRP. On the basis of Okishio's theorem three positions on LTFRP emerged. The first was represented by
J. Roemer and S. Bowles who simply argued that Okishio's theorem is right and LTFRP is disproved by it.
The second position was represented by the likes of D.Foley, Dumenil and Levy, that though the assumption
of Okishio that real wages are fixed is unrealistic, yet the LTFRP is indeterminate. And the third position
was represented by Shaikh, Kliman and before that, R. Rosdoslky who proved that Okishio's theorem itself
is incorrect. We cannot go into the detail of Okishio theorem and its effective refutation but we shall focus a
little bit on the interpretation of crisis, especially the most recent one, by Dumenil and Levy here because it
has been extremely influential in Left circles.

Let us first summarise the views of Dumenil and Levy. They argue that capitalism passes through many
phases and neoliberalism is its latest phase characterized by its aggressive and violent attacks on labour
(Thatcherism, Reagonomics, etc). The US became the locus of neoliberalism because it is the centre of
financialization which is the core feature of neoliberalism. Dumenil and Levy contend that capitalist crises
can be caused by many reasons and it would generally be different every time. They identify four major
structural crises in the history of modern capitalism, of which the latest is the crisis of neoliberalism. They
are structural crises because they were crises of the prevailing capitalist social order, not just ordinary
recessions. These four crises are the crisis of 1890s, the Great Depression of 1930s, the collapse of 1970s
and the early 21st century crisis. The first was caused by the lack of profitability (LTFRP), the 1930s crisis
was a financial crisis because the rate of profit was rising till 1929; the 1970s crisis was one of profitability
again and the latest, ie, the early 21st century crisis is the collapse of neoliberalism because the rate of profit,
again, was rising till 2006. Thus, profitability is not always, not even often the cause of crisis. They argue
that Marx did not talk about profitability crisis in The Communist Manifesto where they talk about credit
crisis. However, Dumenil wonders why structural crises have a pattern of occuring every 30 or 40 years,
though every time they challenge the prevailing capitalist social order. The crisis of neoliberalism occured
when the capitalists lost control of the credit system. That is why, according the Dumenil and Levy, the
crisis of 1970s took the form of a "collapse" whereas the present crisis has assumed the form of an
"explosion".

As pointed out earlier, Dumenil and Levy opine that the US became the centre of neoliberalism because the
US capitalism was uniquely placed for financialization and its spread globally. This made the US economy
disbalanced which was reflected in the trade deficits, relying on capital flow from the rest of the world,
excessive consumption and inadequate productive investments. Debt was increasing whereas savings were
decreasing. That meant slow accumulation of capital in the productive economy and need for more
financialization for raising the profits. It was this imbalance of financialization which finally led to the crisis
of 2007-08 not the rate of profit which continued to grow between 1982 and 2006. The trigger of the crisis
was the residual subprime loans and spread of toxic loans to the world through devices like collateral debt
obligation (CDO). Dumenil argues that the social order is comprised of the capitalist class, the popular
classes (workers and low salaried employees) and the managerial class. This managerial class sides at
different moments with the capitalists or the "popular classes". In 1930s, it sided with the "popular classes"
and that is why we witnessed the inauguration of welfarist policies, state regulation of finance, etc. In 1970s
crisis, the managerial class sided with the capitalists which led to the beginning of the neoliberal era and
pushed the "popular classes" on the backfoot. In the 2007-08 crisis, this managerial class is returning to the
"popular classes". Dumenil concludes that this shift might lead to the restructuring of the capitalist social
order. However, this will not solve the crisis of neoliberalism. Among major scholars Costas Lapavitsas has
whole-heartedly supported the interpretation of Dumenil and Levy by arguing that they have conclusively
shown that LTFRP is not the cause of the crisis because decline of rate of profit after 2005-06 was too short
to cause a recession like 2007-08 crisis. Moreover, the idea of LTFRP is comparatively new one and
between the two wars the major interpretations were either underconsumptionsim (R. Luxemburg) or
disproportionality (Hilferding and others). Lapavitsas also commends Dumenil and Levy for showing how
capitalism passes through different phases and social orders and the latest phase was neoliberalism. In this
phase finance controls production and we need to return to Lenin and Hilferding to understand it properly
and also comprehend the fact that the reason for crisis now must be searched for in the arena of circulation
and distribution rather than production.

Andrew Kliman and Michael Roberts have criticized the positions of Dumenil and Levy. Kliman points out
that Dumenil and Levy, focusing on neoliberal policies and financialization, arrived at the conclusion in
2004 that capitalist system has been successful in averting crisis through its neoliberal offensive. However,
they admit in their new book published after the crisis of 2007-08 that this very neoliberal policy of
financialization which seemed to them the successful strategy of capital to avert crisis in 2004 has actually
caused the crisis of 2007-08. So they try to find the reason of the crisis in the same factor that actually led
them to conclude that capitalism was resurgent. The reason for this is that they are looking at the wrong
place for the causes. They focused on the sphere of circulation and distribution (finance) to account for a
crisis whose reasons lie in the sphere of production: the falling rate of profit. Since their diagnosis is based
on financialization, their solution is at best reformist: financial regulation and a demand for a 'new New
Deal'. They have confused the proximate cause of the crisis, which of course change with every crisis, with
the main underlying cause of crisis that only acts indirectly and whose phenomenal expressions keep
changing. Michael Roberts, in the main, agrees with the critique offered by Kliman.

Roberts argues that Dumenil's reliance on the example of The Communist Manifesto to prove that Marx did
not believe in the LTFRP to be the sole explanation of all capitalist crises is ahistorical and incorrect;
namely, their invocation of Marx's quote to show that even Marx did not consider LTFRP to be the cause of
the crisis but crisis of the credit system was identified as the reason. However, we must not forget that it is
only towards the mid-1850s that Marx's economic views assumed a concrete shape as a number of Marx
scholars have clearly shown.

Roberts argues that the question is not whether to offer a monocausal or multicausal interpretation but to
understand that there is an underlying cause and there are other proximate causes (we will come to this
bifurcation later). Guglielmo Carchedi critiques the opponents of the so-called monocausal interpretation
based on LTFRP in these words, "some Marxist authors reject what they see as “mono-causal” explanations,
especially that of the tendential fall in the rate of profit. Instead, they argue, there is no single explanation
valid for all crises, except that they are all a “property” of capitalism and that crises manifest in different
forms in different periods and contexts. However, if this elusive and mysterious ‘property’ becomes
manifest as different causes of different crises, while itself remaining unknowable, if we do not know where
all these different causes come from, then we have no crisis theory”. Carchedi argues further “if crises are
recurrent and if they have all different causes, these different causes can explain the different crises, but not
their recurrence. If they are recurrent, they must have a common cause that manifests itself recurrently as
different causes of different crises. There is no way around the "monocausality" of crises.” One cannot agree
more.

Roberts is right in arguing that neoliberalism is definitely a new ideological offensive of the bourgeoisie.
However, Dumenil and Levy do not answer what was the crisis in response of which the new policy of
neoliberalism was introduced? Is it not the crisis of profitability? Roberts argues further that Dumenil's
theory of three classes ("popular classes", the capitalists and the managerial class) smacks of Weberian kind
of sociologism. I would add that the influence of Laclau also cannot be ruled out here who gave the theory
of "popular -democratic" classes whose drift to the bourgeoisie or proletariat determines the relative weight
of reaction and progressive forces. Though, there are intermediate classes in a capitalist society between the
working class and the bourgeoisie, their constitution is not independent but derived from the contradiction
between labour and capital; secondly, they are in the process of constant bifurcation and do not have
relatively higher permanency in their internal structure like the proletariat or the bourgeoisie. In terms of
political economy, we cannot talk about the three classes that Dumenil and Levy have talked about.
Therefore, the argument of Roberts that an alliance between the "popular classes" and the managerial class is
a fiction and there is nothing to ally with is correct.

Whether the rate of profit actually increased between 1982 and 2006 as Dumenil and Levy and also others
have argued, is an issue of contention and Kliman, Carchedi, Roberts and many others have shown in their
different ways, that it was not so. Their is a consensus between them that the rate of profit certainly did not
rise till 2005-06 if calculated correctly with Marxist yardsticks. Let us see the data and the facts calculated
with different assumptions in the context of the position of Sam Gindin and Leo Panitch and the rebuttal by
Roberts and Kliman.

Gindin and Panitch has presented their views regarding the recent crises in their book The Making of Global
Capitalism: The Political Economy of American Empire and some articles. According to Gindin and
Panitch, the reason for the crisis was wage stagnation, rising mortgage debt and then collapsing housing
prices causeinga dramatic fall in the consumer spending. Their interpretation too focuses on the factor of
financial crisis. They argue like Dumenil and Levy that profitability increased since the early 1980s and it
continued to increase till 2 years before the outbreak of the latest crisis. Only after the outbreak of the crisis
that the profits began to decline. Gindin argues that there was no crisis in the 'real economy'. Kliman argues
that had financialization been the main cause of the crisis of 2007-08, we should have witnessed a recovery
by 2009-10. But we did not see any recovery. Gindin ignores the factor of government borrowing on a large
scale, increase in easy money and other expansionary monetary policies introduced by the State like loose
credit standards. These factors were artificially stimulating production, demand and employment. However,
even the establishment economists like Summers agreed that the expected boom is still elusive. Kliman
argues that this shows that stagnation has become the new normal even before the crisis of 2007-08 erupted.
Secondly, the claim of Gindin and Panitch that wages had stagnated does not hold water. Real income of the
working class had increased, even if their share in national income might have declined.

Michael Roberts argues that to show that profits continued to rise between the early 1980s and 2005-06,
Gindin uses the after-tax rate of profit because that affect the business decisions of corporates. However,
while analysing the capitalist economy in totality, it is the before tax profits that should be taken into
consideration. If we take the before tax rate of profit we find that between 1946 and 2012, the US has seen a
secular decline in the rate of profit. It increased between 1982 and 1997 but not to the previous high of
1960s. From 1997, the rate of profit has been flat or in slight decline except when they rose between 2002
and 2006. Roberts goes on to show that from the 1960s to early 1980s, the decline in the rate of profit is due
to the fact that the organic composition of capital continued to rise faster than the countervailing factors like
increasing rate of surplus value and decreasing cost of the fixed capital. From 1980s to late-1990s, the rate
of profit increased because the above-mentioned countervailing factors dominated the decline in the rate of
profit. This was the heydey of the neoliberal era, ending with the 1997 crisis. From 1997 onwards, the rate of
profit has continued to fall because the countervailing factors were too weak to counterbalance it. It has been
shown that the increasing profit rate between 2002 and 2006 was due to the fictitious profits. If we subtract
the fictitious profits we will find that the rate of profit was either stagnant or increased very slightly. This
fictitious capital only delayed the occurence of the crisis, that was caused by the fall in the rate of profit in
the productive economy. The 2008 crisis was triggered by huge expansion of fictitious capital that collapsed
when the real value expansion could no longer sustain it. The underlying cause was the LTFRP.

Gindin and Panitch argue that investments did not fall till 2008. Roberts responds that it is natural because
the GDP and rate of investment follow the rate of profit. Some scholars have also shown that irrespective of
the measure that we use to calculate the rate of profit (historical cost or current cost, after-tax or before-tax)
it can be shown that there has been a secular tendency of decline of rate of profit between 1946 and 2011.
The increase in the rate of profit between 1982 and 1997 can be explained by the drastic cuts in tax and
interest rates after the inauguration of the neoliberal policies. So the argument of Gindin that the real
economy was healthy is misleading if we look at the state of things more closely. These faulty foundations
lead not only Gindin but other Marxists too, like Dumenil and Levy, Harvey, Wolf, etc to conclude that
every crisis has a different reason. As we mentioned earlier, this method fails to distinguish between the
immediate causes of crises and the underlying cause of capitalist crises in general. To stop at the
immediately recognisable immediate and proximate causes cannot lead us to a theory of crisis, but a
description of crises. It is positivism and methodological pragmatism. Such descriptions have no
predictive power and it is difficult to test them empirically.

This brings us to another major and celebrated Marxist scholar David Harvey whose interpretations have,
even if I disagree with them, raised important questions and important areas of discussion. Here I cannot go
in a detailed criticism of the approach and method of Harvey which leads him to the conclusion that Marx
was a deductivist who one-sidedly deduced everything from the sphere of production; and consequently
though he (Marx) focuses on the 'generality' (production), but misses out on the 'particularity' (circulation)
and 'singularity' (consumption) and the universality (man's interaction with nature); or we cannot go into a
detailed criticism of Harvey's historical-geographical materialism or his idea of 'accumulation by
dispossession'. To deal with all these issues is not possible here and requires a separate research on the
problematic and thematic of Harvey's Marxism in general, a critique of Harvey's approach and methodology.
I will, therefore focus simply on Harvey's ideas about the current crisis and its correlation with Marx's
method.

David Harvey in clear terms argues that the LTFRP is not the only, not even the main cause of occurence of
capitalist crises. Harvey rather favours a multi-causal analysis of capitalist crises. However, it must be noted
that his multiple causes dump the LTFRP in the very beginning because he says that he shares Heinrich's
skepticism about the LTFRP even being a law and that Marx was about to abandon it towards the end of his
life. So, in Harvey's multicausality the LTFRP seldom finds a place. He criticizes those whom he calls the
monocausal theorists (but almost always the targets are those who favour LTFRP to be the underlying
cause). Harvey contends that the LTFRP theorists downplay or underestimate the role played by the
countervailing factors. He argues that the piles of data about the operation of LTFRP does not prove
anything; that the business press shows that if not the rate of profit then mass of profits is definitely growing.
Harvey in his own analysis of crisis prefers other factors like the impact of credit, financialization, the
devaloriazation of fixed capital and most importantly the limits on consumer demand imposed by holding
down of wages relative to capitalist investments and profits. Harvey's focus is not on the circuit of
production but on the secondary circuit of circulation. In response to Andrew Kliman's criticism that in
Harvey's rejection of monocausal theories in general he is actually targeting the LTFRP interpretation of
crisis since he is ready to consider all other explanations except the LTFRP; Harvey has argued that he
considers capital as an 'organic whole' integrating the spheres of production and circulation. He is against
giving primacy to the sphere of production because causality does not function in this whole in one-sided
manner. He even quotes Marx from Grundrisse for his support. However, Kliman has shown that the same
quotation actually shows Marx's idea of the primacy of the productive sector. Every type of production
engenders a particular type of circulation and consumption. It is true that circulation and consumption act
back upon the sphere of production and together they form a totality. However, this totality is not
characterized by homogeneity and we cannot shy away from determining the factor which is principal in the
last analysis. Michael Roberts argues that in this quote Marx actually says that production of a definite kind
determines distribution and cosumption and there is a definite relation between these moments, but
circulation has a feedback impact on the sphere of production, especially in times of crisis. Andrew Kliman
explains that he does not ignore other factors that affect the occurence of crises but there is a need to
determine the underlying cause.

Michael Roberts and Andrew Kliman argue that Harvey's contention that the mass of profit is rising has
nothing to do with the fall in the rate of profit. In [s/(c+v)], the increase in the numerator itself does not tell
anything about the ratio. The rate of profit is explained by the mass of profit as a share of the investment of
capital. Harvey does not give any data about the increase in the denominator being lower than the numerator
and the data on mass of profit itself does not tell anything about the rate of profit. Harvey is actually backing
the claim of Heinrich that LTFRP is not a law or at least it is indeterminate and Marx dropped this law. We
have already answered to these claims.

To support his argument further, Harvey gives the metaphor of a human body. He opines that a human body
can die for a variety of reasons. Old age is one of them. But it can die due to sickness of various kinds.
However, such an argument tantamounts to a contingency theory of crises. Contingent factors cannot be
predicted, calculated or tested beforehand, as a matter of law. A theory of crisis cannot be substituted by
such a contingency theory. Harvey on the basis of the above metaphor concludes that crises can be caused
by 'a chaotic mish-mash of possible factors'. However, this also is a description of the intertwining of variety
of proximate causes and does not differentiate these immediate causes from the main or underlying cause.
Such an analysis is metaphysical and positivistic in the garb of being non-mechanical. Harvey argues further
in his response to Kliman that the LTFRP as a law functions at the interstellar level of capitalist mode of
production just like the fact that Sun one day will run out of gas. However, such a law cannot explain the
regular day-to-day phenomena of capitalism. Paul Mattick in his review of Harvey's book says that such an
argument was put forward by Rosa Luxemburg too who argued, "there is still some time to pass before
capitalism collapses because of the falling rate of profit, roughly until the sun burns out!" Bukharin gave an
excellent response to Rosa Luxemburg, "It would be ridiculous to demand that the process should reach its
logical conclusion. The objective tendency of capitalist development towards this end is quite sufficient.
Long before the 'end', this tendency will sharpen the struggle for any possibility to gain an additional profit
to such an extent, and will be accompanied by such a centralization of capital and sharpening of social
relations, that the epoch of low rate of profit will become the epoch of catastrophes." Even if one does not
agree with everything that Bukharin says in this statement, it is true that it is a tendency which cannot be
demanded to bring the collapse of capitalism by itself. This tendency will give rise to different conjunctures
of contradictions that will create new possibilities and space for revolutionary praxis. It cannot by itself lead
to immediate collapse of capitalism. The LTFRP has been given a very reductive definition by Luxemburg
to trash it.

David Harvey also argues that the turnover cycle of fixed capital is an important factor in the occurence of
crises as it determines the business cycles. He wonders why nobody is undertaking empirical research on
this dimension. However, first of all, a number of scholars have done such empirical research. Secondly, the
turnover cycle of fixed capital is not an independent variable but it is determined by the fluctuations in the
rate of profit. Harvey focuses on everything except the law of accumulation of capital, the resultant rising
organic compostion and fall in the rate of profit. For examlple, he also talks about the role of 'accumulation
by dispossession' and redistribution of value through this process, where wealth is accumulated by force or
seizure and not by exploitation of wage labour as in fully developed capitalism. This logic is highly
problematic. First of all, the concept of 'primitive accumulation' is not a chronological but a logical concept.
The moments of advanced capital accumulation have almost always comfortably co-existed with the
moments of the so-called 'primitive accumulation' even in the 'fully developed capitalism'. Secondly, the
process of 'primitive accumulation' is constitutive of the formation of proletariat and the contradiction
between labour and capital. Thirdly, such processes of 'primitive accumulation' that are going on in 'fully
developed capitalism' in America as well as in countries like India and Philippines where capitalist mode of
production is the dominant mode of production now, cannot explain the occurence of crises as such.

Harvey also argues that limits to profitability can be caused not only by rising organic composition of capital
but due to the neoliberal policies that have suppressed wages and promoted fictitious capital. This eventually
leads to decline in effective demand and thus collapse of profitability. Thus low wages and financialization
due to neoliberalism also might be a cause of decline in profitability.

Following this brief review of different Marxist positions of multicausality, we can argue that there is one
thing that they share. Their diagnostics always makes some kind of reform within the ambit of capitalism
possible to get rid of crises: underconsumptionism (increase the effective demand by increasing real wages),
disproportionality (planning through state intervention or monopolies), financialization (state regulation of
finance), inequality (progressive taxation a lá Picketty). All these theories see the root of crises in the sphere
of circulation and consumption, whereas the real roots of crises lay in the capitalist production itself. As
Marx said, the limits to capitalism is capital itself.

Ernest Mandel also gave a theory of multicausality. So did Alex Callinicos recently in his book Deciphering
Capital. We will come to Callinicos a little later. First let us consider the propositions of Mandel regarding
the multicausality of crises.

First Mandel accepts the validity of the LTFRP as far as the long waves are concerned. He argues that the
increase in the rate of surplus value slows down as the capitalist development progresses because there is a
physical limit to increasing the rate of surplus value. He systematically dismantles Okishio Theorem and
shows that any countervailing factor in the long run cannot overcome the tendency of the rate of profit to
fall. In the post-war Long Boom, many Marxist theorists like Sweezy, Baran, Gillman were confused and
agreed finally that LTFRP did not work. However, their arguments were shattered by the crisis of 1970s.
Mandel then refutes all the arguments put forward by neo-Ricardians to disprove LTFRP. However, in the
end Mandel argues that howsoever tempting it might be to see in LTFRP the mainstay of Marx's crisis
theory as David Yaffe, Paul Mattick, etc have done, it is harmful to do so. Such a monocausal explanation
somehow ignores the sphere of circulation and forgets the nature of capitalist mode of production as a
generalized commodity prodution. It somehow assumes that realization is not a problem. Mandel finally
presents a critique of Yaffe's insistence on LTFRP as the principal reason of crisis, however, it must be
acknowledged that it is a very poor critique and does not answer the basic questions raised by Yaffe. Mandel
argues that he is not in favour of any monocausal theory and every capitalist crisis is at the same time a crisis
of overproduction (as different from underconsumption) and overaccumulation (that leads to rising organic
composition and declining rate of profit). It is only pure underconsumptionist theory that Mandel rejects in
unequivocal terms but at the same time accepts that disproportionality between production and consumption
can be avoided only theoretically and in practice capitalism does need exogenous sources of consumption to
avoid underconsumption, as Luxemburg has argued. So, even Luxemburg's underconsumptionism has some
grains of truth!

Mandel first discusses the three monocausal theories: the pure disproportionality theory (Tugan-Baranowski,
Hilferding, etc), the pure underconsumptionist theory (Rosa Luxemburg, Paul Sweezy) and the pure
accumulation theory (the LTFRP which is here represented as a theory which resembles the "profit squeeze"
theory). Then he presents his own theory of multicausality by arguing that all the monocausal theories have
some elements of truth in it. His inclination is more towards the relative weight of LTFRP but he is cautious
enough not to sound like what some people have called 'monomaniac'! However, it must be noted that his
theory of multicausality is not like Harvey's or Dumenil's theory and he determines an order of succession
between the three different factors, namely, realization problem, disproportionality and LTFRP. He accepts
that Marx in Volume-III gives primacy to LTFRP and therefore the above three explanations should be
integrated by distinguishing between the forms taken by capitalist accumulation in the different phases of
capitalism.
In the first phase, that is of boom, demand is high, business is brisk, rate of profit is high resulting in
investment boom. Department I by nature responds in a much lazier fashion to these developments. As a
result additional investments flow to Department I which leads to accumulation of capital in this department
on increasing scale. Consequently, more means of production have to be produced to produce more means
of production for production of consumer goods. So a shift of investment towards Department I takes place
in a big way leading to problem of disproportionality.

In the second stage, when the increased productivity due to additional means of production comes into play,
production outpaces the capacity to consume by the workers and capitalists even if production grows less
rapidly in Department II than Department I. As a result, the disproportion between production and
consumption arises, i.e., relative underconsumption due to overproduction or the realization problem. With
massive increase in the organic composition due to large-scale introduction of machinery the rate of profit
tends of decline because in the period of boom it is not possible to increase the rate of surplus value in a big
way. Consequently, the new accumulated capital cannot be reinvested at an average rate of profit or not
invested at all. This accumulated capital then is pushed into the sphere of financial speculation.
Overproduction now tends to spread from Department II to Department I. The disproportionality that earlier
emerged now reappears in an inverted form. Now Department I instead of being over-extended becomes
under-developed. Investment falls more rapidly than current output. The result is a crash leading to
devalorization of existing stocks and fixed capital, decline in investments, deline in employment and decline
in wages until the rate of profit is restored and to use Marx's words, the same crap begins all over. In this
way, crisis plays its cathartic role in the capitalist economy. For Mandel, thus, LTFRP is less of a direct
explanation of crises than a revelation of the basic mechanism of the industrial cycle. It uncovers the
disharmonious uneven character of capitalist production which unavoidably leads to successive phases of
decline in the rate of profit and then revival. Here Mandel is almost accepting that the underlying main and
indirect cause of crises is definitely the LTFRP. However, he still calls his scheme a multicausal explanation
of crises.

This scheme is neat and it is difficult to find any immanent logical inconsistency in it. However, there is one
problem: the different causes are analyzed in a metaphysical fashion and even if their interrelation is probed,
it is not probed in a systematic manner. We will come to this later. First let us briefly discuss Alex
Callinicos' recent work on Marx's Capital.

Callinicos refers to Mandel's model of multicausal explanation and agrees that crises can only be explained
by multicausality. He presents his own model of multicausality. In the process, he rightly critcizes various
scholars like S. Clarke (who argues that towards the end of life Marx had abandoned the idea of crisis as a
cataclysmic event and rather focused on crisis as a permanent tendency which keeps the life in a bourgeois
society destabilized) and Reuten and Thomas (who contend that still at the time of Grundrisse Marx did not
have a proper economic theory of crises and it was more like a political rhetoric). Callinicos argues further
that Marx had a multi-dimensional theory of crises in which LTFRP played a decisive role. Following D.
Bensaid, Callinicos argues that Marx's analysis functions at different levels of determinations and
consequently he arrives at a multi-dimensional theory. According to Callinicos there are six determinations
of crises in Marx: two of them are formal possibilities of crises inherent in commodity exchange and modern
capitalist credit system, and, the possibility of disproportionality inherent in the exchange between the
departments. These two are enabling conditions of crises. Then there are factors of fluctuations in wage rates
and in the size of reserve army of labor and the turnover of fixed capital. These two factors are conditioning
factors. And finally there is the interplay between the LTFRP and the cycle of bubble and bust in the
financial crises that are the decisive causal mechanism at work in crises. On the basis of these six
determinations, Callinicos identifies four crisis theories of Marx: first is overproduction (competitive
accumulation drives production beyond the possible limits of consumption). Marx never abandoned this
theory though he accepted that overproduction itself is a manifestation of deeper contradictions, as
Callinicos himself shows by quoting Marx from the 1861-63 Manuscripts; second is the theory that
Callinicos finds in Volume I of Capital, that is fluctuations in the reserve army of labour regulates the
business cycle. It seems to me that the causal relation here has been made to stand on its head. It is the
fluctuations in the accumulation of capital that determine the fluctuations in the wages along with reserve
army; wages can never fluctuate so much as to transcend the limits of accumulation.

The third theory that is implicit in the second volume of Capital is the turnover and reproduction of capital.
Here according to Callinicos the determining factor is the turnover period of fixed capital. Howeer, as we
have shown the turnover of fixed capital itself is determined by the fluctuations in rate of profit. The second
important factor affecting crises is disproportionality which according to Marx was the general law of
capitalism, rather than equilibrium. The fourth theory inherent in Marx's economic writings and the most
important theory according to Callinicos is LTFRP and its connection with boom and bust in the financial
markets.

However, in explaining the LTFRP Callinicos talks about three types of organic composition: technical,
organic and value. This is a misreading of Marx. Marx talks about the organic composition of capital which
has two aspects, first the technical composition which is the physical composition of means of production
employed per worker, and second, the value composition that is the ratio between variable capital and
constant capital. Marx makes it clear that the technical composition might rise while the organic
composition remains the same or even decreases (due to decrease in the value of means of production owing
to increased productivity) or it can decrease while the value composition increases. However, in the long run
these divergences cannot continue in a one-sided way.

Similarly, while describing the way in which the law acts as a tendency due to the countervailing factors,
Callinicos quotes Ben Fine and Lawrence Harris to demonstrate his point. Fine and Harris, taking under
consideration the contradiction between the law of fall in rate of profit and the countervailing factors
conclude that 'The law in its broad definition is in fact 'the law of the tendency of the rate of profit to fall and
its counteracting influences.'' This is gross misunderstanding as this argument is purely tautological. The law
acts as a tendency precisely because of the counteracting influences. Therefore, when we talk about the
tendency of rate of profit to fall, it is understood that the counteracting influences have already been taken
into account. Callinicos also quotes Fine and Harris in an affirming way that LTFRP functions only as an
abstract tendency and it is 'a proposition developed at a certain level of abstraction which by itself yields no
general predictions about actual movements in the rate of profit.' This argument is inherently flawed. It is
true that LTFRP is a law that functions at the most general level; however, precisely for this reason, in the
long run and indirectly, it not only plays the role of the main underlying factor but also enables us to broadly
predict the future movements of rate of profit.

Callinicos' model of multicausality in my opinion is much more arbitrary and descriptive than Mandel's. The
factors that he counts as six determinations are mostly linked with each other and all of them are closely
related with problem of profitability. However, they are studied in a metaphysical fashion, not revealing
their interrelations. In comparison, Mandel's model of multicausality (which in reality comes closer to what
Kliman, Roberts etc are proposing: differentiating between the underlying factors and the proximate factors
or different expressions of the underlying factor). Callinicos also refutes the 'breakdown theory' in a way
which leaves breathing space for the possibility of Capitalism surviving indefinitely by the cathartic
mechanism of crisis. Recurrent crises do not reset the counters to zero. Crisis cannot simply be reduced to a
violent mechanism to restore equilibrium ad infinitum (Callinicos does not say that it will happen ad
infinitum, but his logic leads naturally to this corollary). The fact is that the occurence of crises does not only
happen in cycles, but in a spiral. And this is a downward spiral. Mandel has rightly pointed out that arguing
for the 'inevitability of collapse' is not equivalent to arguing for the 'inevitability of socialism'. The recurrent
crises of ever greater magnitude periodically create conjunctures of social and political contradictions
through a complex mediation of historical, economic and social factors, which lead to a crisis of capitalist
economy, society and politics, ie, a total crisis, when, to borrow from Lenin, 'the ruling classes are not able
to extend their rule'. Such a situation of class struggle might lead to a socialist revolution but it might also
lead to barbarism. Therefore, every crisis is pregnant with dual potential: the progressive potential as well as
the reactionary potential. Which potential is realized depends on the relative preparation of the vanguard
forces of proletariat and the bourgeoisie. Callinicos is right in arguing that crises do not affect the questions
of revolutionary organization of proletariat directly. He is totally correct in emphasizing the relative
autonomy of constitution of revolutionary subjectivity. Revolution and revolutionary organization of
proletariat is a conscious political act.

Despite these serious problems, Callinicos however has done a commendable job in critiquing the
multicausal model of Harvey as well as in critiquing Heinrich's claim that Marx was abandoning LTFRP. He
has also presented a brilliant critique of Negri's misreading of Marx which led him to his theorization of
immaterial labour. Similarly, he effectively refutes Fredric Jameson's argument that Capital is not about
labour, or the existential experience of labour. Wherever and whenever Callinicos drifts further from the
domain of pure political economy into the domains of political and social theory, he is much more correct
and balanced. For example, while analysing production and exchange in chapter 4 on 'Value', Callinicos
badly confuses individual value (the value determined by quantity of labour contained in it), market value
(socially necessary average labour contained in it), prices of production (socially necessary quantity of
labour modified by equalization of rates of profit between different branches, ie, average costs of production
+ average profit of all branches of production), intrinsic market prices of commodities (prices of production
of a given commodity expressed in quantities of money) and fluctuating market prices of commodities
(intrinsic market prices modified under very short-term fluctuations of supply and demand, ie, fluctuating
around the intrinsic market prices). First Callinicos claims that Marx talks about individual value in Volume
I and it would have been better had he talked directly about market value. In fact, Marx is actually talking
about market value in Volume I and not individual value, though he uses the term 'value' for it because it
was demanded by the level of abstraction at which Volume I is operating. Secondly, Callinicos confuses
market values with market prices when he argues, "But demand plays a necessary explanatory role in
determining the market value of a particular type of product." It can be reminded here that it is market price
that fluctuates due to supply and demand, not market value. There are other such mistakes also and we
cannot discuss each one in detail.

In the end I would briefly summarize my views on the controversy over the LTFRP and Marxist theory of
crisis. In my opinion, any multicausal model is methodologically non-Marxist, metaphysical,
descriptive, positivist and empiricist. A Marxist cannot content herself with describing the immediate
phenomenal expressions or proximate causes or triggers of the crises and would penetrate the layers of
phenomena to reach the underlying factor; secondly, a Marxist cannot be satisfied with listing the different
proximate causes and saying that a combination of these causes led to crisis without determining the
principal contradiction and fundamental contradiction; she must explain their interrelations and in turn their
relation with the main underlying cause. Most of the factors represented by these multicausal theorists
actually are derived from the law of accumulation and the LTFRP. However, they fail to see the
interrelations between these and present a laundry list of causes of crises. This approach is mechanical and
metaphysical and lacks the Marxist dialectical method.

Anwar Shaikh seems to me one of the rare exception to this trend, at least to a certain extent. He first of all
recognizes that LTFRP is the underlying cause of recurrent capitalist crises. Secondly, he has shown in his
earlier writings as well as his latest book, his magnum opus, Capitalism: Competition, Conflict, Crisis which
is a product of 15 years of labour and it shows. One might not agree with every proposition that Shaikh
makes, yet any serious student of Marxism must agree that it is a must read. It refutes the
underconsumptionist, harmonicist and neo-harmonicist, Keynesian, neo-Keynesian and post-Keynesian
arguments effectively as well as old orthodoxies and their new versions, like the Say's Law. He has shown in
his earlier writings also (like 'A Brief History of Crisis Theories') that as far as crises are concerned, the
master discourse is LTFRP; underconsumption, disproportionality, financialization, the turnover cycle of
fixed capital, are the derivative discourse. For example, in his latest work he has successfully argued that
profitability drives the cycles of growth and these are expressed in business cycles as well as the turnover of
fixed capital. Evidently, considering turnover of fixed capital as a separate factor in the crises by the likes of
Harvey is a faulty understanding that does not see the link between profitability and the turnover of fixed
capital. Again devaluation of fixed capital or existing assets too is a function of fluctuations in profitability
contrary to what Harvey believes. Dumenil and Levy have focused on financialization as one of the main
causes of crisis of neoliberalism. It can be shown logically that the financialization too is linked with
profitability, as Callinicos has argued. Similarly, the disproportionality too is a function of profitability as
Marx has himself shown: "The periodic devaluation of the existing capital which is a means immanent to the
capitalist mode of production for delaying the fall in the profit rate and accelerating the accumulation of
capital value by the formation of new capital, disturbs the given conditions in which the circulation and
reproduction process of capital takes place, and is therefore accompanied by sudden stoppages and crises in
the production process..." (Capital, Volume-III)

Similarly, Shaikh has shown that underconsumption is definitely a fact of capitalist society but it is not the
cause of crises but a symptom. Actually, it is a variable dependent on the crisis of profitability. He opines,
"...it is worth noting that, when as a consequence of declining profitability, capitalists curtail their
investment expenditures, part of the product available will not be sold and it will appear that the crisis is
caused by lack of effective demand, by "underconsumption". But in fact this "underconsumption" is only a
reaction to the crisis in profitability. It is a symptom, not a cause."

In brief, it can be showed that underconsumption, disproportionality, financialization, credit crisis, turnover
of fixed capital and most of the other "causes" of crises as mentioned by multicausality theorists are not
unrelated to profitability and in fact they are closely linked with profitability and determined by it in the long
run. I called the approach of the multicausality theorists metaphysical and mechanical precisely because they
fail to see the inter-connections between these factors which prevents them from transcending the arena of
what Marx called "recording and systematizing the facts."

On the other hand, barring a few exceptions, those Marxists who clearly see in LTFRP the underlying, main
and indirect causes of capitalist crises have either not revealed these inter-connections between various
phenomenal expressions of LTFRP and other factors, or at least, they have not done it in a satisfactory
manner. The core of their argument is much more potent as compared to the descriptive analysis of the
multicausality theorists; however, in my opinion, their argument will assume a much more complete form if
such inter-connections are revealed in a more systematic way.

Conclusion

From the above discussion, a few things clearly emerge. First, most of the new "readings", new criticisms
and new objections to Marx's economic theory as presented in the three volumes of Capital, Theories of
Surplus Value and Grundrisse in particular, actually hardly have anything new in them. Most of them are
actually rehashing of the old misreadings, misunderstandings, misrepresentations of Marx's work done from
the mid-1890s till the Second World War. Despite their weak intellectual content, the older criticisms can at
least be regarded original. The claims of inconsistency in Marx's treatment of the so-called 'transformation
problem', the LTFRP, his reproduction schema, the labour theory of value have been effectively refuted time
and again since the time such claims were made. In other words, as Mandel has argued, the bourgeois
economists have shown sharp class instinct in attacking the core of Marxist economic theory, even if they
come from reformist or welfarist circles 'sympathetic' to Marxism. This is not to suggest some kind of
intellectual dishonesty on part of all such bourgeois critics. This is how class struggle in the ideological
arena takes place. I have just discussed some of the central issues of the debate in order to show the false
claim to novelty on the part of the "new" criticisms.

Secondly, it does not in anyway mean that Marx's theories do not need further development in line with the
major changes in the modus operandi of capitalism; in fact, Marx himself saw Capital as a continuous
project. Lenin, Luxemburg, Bukharin, Grossman attempted to take this project ahead in congruence with the
trajectory that capitalism took since the last quarter of the nineteenth century, even if we do not agree with
everything that they said; Dobb, Mandel, Meek, etc and then Shaikh, Kliman, Roberts, Carchedi and many
others have tried to develop the Marxist economic theory according to the changes in captilist system in their
own ways, often not agreeing with each other. Such debates and disagreements have only enriched our
understanding of capitalism and therefore have equipped us in a better way to fight against it. Even today
there is a need to develop the understanding of the system by continuing the project of Capital.

Thirdly, in defending the theories of Marx, the aim is not to prove that everything that Marx said was
correct. Marx's early assessments of 'Asiatic mode of production', or the role that peasant communities (mir)
of Russia could play were not correct. His observations might be incorrect about some other things also.
However, as we have pointed out earlier, Marxism is not a simple aggregation of everything that Marx said.
It is an approach and method. One must understand this approach and method to understand Marxism as a
revolutionary theory of praxis.

Fourth, present world in some ways is much more closer to the description of capitalism in Marx as
compared to the period between 1945 and 1973, as Mandel asserted in 1978 and Callinicos asserted in 2014
for different reasons. Some who cannot answer Marx's economic theory on logical basis argue that present
capitalism is very different from what Marx described in Capital. In fact, the world in which Marx lived was
far more different from capitalism described in Capital and Marx was fully aware of this fact. He analysed a
mode of production that had taken root in a very small portion of the world. However, Marx's analysis of
capitalism clearly saw in capitalism the most dynamic mode of production in the history of humanity and the
first global mode of production. The basic logic of capital accumulation was such and Marx's scientific
analysis revealed this fact. The maze of present capitalist phenomena, what Harvey calls 'maelstrom of
conflicting forces,' often overwhelms the observers and makes them wonder how a 150 years old text can
explain this muddle? However, that is how scientific analysis works. As long as, capitalist mode of
production is there or as long as capitalism is capitalism (!), despite its constantly changing and complex
phenomenal expressions (which is not at all surprising given the dynamic nature of this mode of production),
the basic analysis of Capital will be valid. And history, spirally developing has reached a point where this
validity has become even more clearly visible.

Finally, some people question the validity of the analysis offered in Capital from an infantile and deductive
perspective: if Capital is valid, why did not revolutions take place? Well, Marx never believed in the
'inevitability of socialism'; he believed that recurrent crises will keep occuring as long as capitalism survives
because crises are immanent to capital and these crises will become deeper and more serious in the long
term; every crisis will create the dual potential, the progressive one and the reactionary one. Whether the
progressive potential is realized or not, is not a question that can be decided automatically. Revolutions are
conscious political acts of the working class under the institutionalized leadership of the vanguard.
Marx understood this fact clearly and that is why, while being optimistic about the prospects of revolution
and the revolutionary organization of proletariat ('optimist of will'), clearly reminded that revolutions are not
inevitable and the crises of capitalism and resultant class struggle can lead to a destruction of the warring
classes, or to a state of barbarism ('pessimist of intellect'). Rosa Luxemburg put it eloquently: "either
transition to socialism or regression into barbarism." Her prognosis proved correct when failures of
revolutions in Europe led to the rise of Fascism and Nazism, that showed glimpse of barbarism to the world
watching in horror; the punishment for letting the moment of Socialism pass, to quote Daniel Guerin. In
view of the irreparable environmental destruction, mayhem in the Middle East, threat of a suicidal war due
to sharpening imperialist rivalry, today we can say that humanity is faced with two choices : Socialism or
Annihilation. And it is this historic ordeal of humanity that iterates and re-iterates the continuing or even
increased relevance of Marx's Capital after 150 years of its publication.