zarnr2023, 15.44 te Poltcl Criss of US. Captalism -A Critque of Cris Theory A Critique of Crisis Theory From a Marxist perspective The Political Crisis of U.S. Capitalism On September 7, ABC News online edition reported, “More than a dozen presidential centers got together to warn about the fragile state of American democracy heading into 2024.” The phrase “fragile state of democracy” means that the traditional form of class rule by the U.S. capitalist class is in real trouble, The center of this developing political crisis is the upcoming presidential election in November 2024 As the election approaches, for the first time in U.S. history, a former president faces felony charge: four venues, In New York and Georgia, involving election fraud; in South Florida, involving classified documents allegedly stolen and held illegally after leaving the White House; and in the District of Columbia, where he’s charged with attempting to defraud the United States by stealing the 2020 election, Trump is not just a former President. He's also the current leading candidate for the Republican presidential nomination in the 2024 election. Attempts by the “Party of Order” (https://critiqueofcrisistheory.wordpress.com/law-and-bonapartisi ppolitics/#in4) to build up a rival Republican candidate have so far not gone anywhere. Polls show that as the downpour of felony indictments descends, his lead in the polls for the nomination over the other declared candidates has widened. At the same time, polls show President Joseph Biden remains unpopular. According to ABC News, “Biden's job approval rating among all voters stood at 39% with 58% stating they have an unfavorable impression of him, according to the CNN poll conducted by SSRS.” Public perception of economic conditions runs counter to the claims of the Party of Order and most capitalist economists who celebrate what they see as a “soft landing” from the inflationary excess of the COVID aftermath boom (hitps://critiqueofcrisistheory. wordpress.com/2023/01/02/2022-covid- crypto-downfall/). Advertisements REPORT THIS AD bitpsiertiqueotrisistheory.wordpress.comithe-poltical-crsis-of-s-captalism’ sezarnr2023, 15.44 te Poltcl Criss of US. Captalism -A Critque of Cris Theory The economists claim that with inflation fading and recession avoided, real wages (as opposed to money wages) are beginning to rise slightly after years of falling. On cue, Biden has taken victory laps and personal credit for the supposedly improved economic prospects. But U.S. workers know better. Even if real wages are up slightly for a month — a dubious claim — it hardly makes up for the fall in real hourly wages that’s so far dominated the presidency of “Corporate Joe.” As for the record increase in jobs that Democrats keep boasting about, the lion’s share represents the snapback from the very low levels of employment and mass unemployment of the COVID shutdowns. With Trump seemingly having the Republican nomination sewed up and with an excellent chance of defeating Biden in the electoral college (if not in the popular vote), the Party of Order is beginning to consider other means to keep Trump out of the White House in the event he can’t be persuaded to take a plea deal and drop his campaign in return for having felony charges withdrawn. One possibility being floated is that Trump isn’t legally qualified to be president because he either organized the January 6, 2021, insurrection against the U.S. government or gave aid and comfort to it. The U.S. Constitution’s 14th Amendment has a clause that bars from federal or state office people who, after taking an oath of loyalty to the United States, participate in an insurrection against or give aid and comfort to such an insurrection unless a two-thirds supermajority in Congress votes to remove the legal disability against them. This was made part of the Constitution to prevent the organizers and supporters of the 1861-18 slaveholders rebellion from returning to federal or state offices, many of whom did return despite the 14th Amendment's clause. The clause was forgotten after the end of Reconstruction, and its position within the Constitution seemed no more than a relic of a distant past. But now not only are some progressives such as “Democracy Now” host Amy Goodman, “Young Turks” host Cenk Uygur, and Ralph Nader but even Party of Order figures such as Democratic Michigan Secretary of State Jocelyn Benson and Hillary Clinton’s running mate — Virginia Senator Tim Kaine — indicate they're open to considering using the 14th Amendment if all else fails. They think that if the events of January 6 are considered an insurrection, then Trump could be prevented from running. If he runs and carries the electoral college, he could be prevented from serving as president. Trump took an oath to uphold the U.S. Constitution on January 20, 2017 but then organized, participated in, or gave aid or comfort to the insurrection four years later. But what body decides he’s legally unqualified, and who will enforce that decision? Would the military step in? What happens if the military splits? What happens if he wins the popular vote majority — of those who actually vote — and carries the electoral college, but Corporate Joe remains president because of the 14th Amendment? Isn't this what Trump is accused of trying but failed to do in 2020-217 Or what happens if Trump wins the Republican primary, is nominated by the Republican Convention in 2024, but is not put on the ballot in crucial battleground states because he’s not legally qualified under the 14th Amendment? Corporate Joe would then win the election, but what legitimacy would such an election have in the eyes of the American people, who are accustomed to having a choice of two candidates? Their methods and ours The moves by Democratic Party prosecutors to hold Trump and his supporters accountable for his attempt to steal the 2020 election after he'd clearly lost it can be seen defending the traditional capitalist-imperialist democracy (such as it is) against Trump's Bonapartism. For example, during the bitpsiertiqueotrisistheory.wordpress.comithe-poltical-crsis-of-s-captalism’ 2212ari12023, 15:44 he Poltical Crisis of U.S. Captalism - A Cruque of Crisis Theory Spanish Civil War (1936-1939), Marxists of all factions supported the Spanish bourgeois republic in its attempt to put down the fascist-monarchist insurrection by General Francisco Franco. Advertisements REPORT THIS AD This has also happened in U.S. history. Karl Marx's supporters who'd emigrated to the United States after the defeat of the German revolution of 1848 strongly supported, some with arms in hand, the suppression of the slaveholders’ rebellion of 1861-1865. To defend the working class's right to organize, we sometimes have to defend a bourgeois constitutional republic, if necessary with arms in hand, against any attempt to establish a dictatorship that would crush the right of the working class and its allies to organize The moves by Black prosecutor Fani Willis, District Attomey of Fulton County, Georgia, to indict Trump and his collaborators for forming a corrupt organization designed to suppress especially the African-American vote, as well as Hispanic other voters, who are part of the majority of the American people who are vehemently opposed to Trump, has an obvious democratic content. But it also holds dangers for the working class. Since its beginning, suppressing the vote, especially of African Americans, has been a time-honored feature of U.S. politics. During slave times, there was no question of any African American, free or enslaved, having the right to vote. After the defeat of the Slave Owners Rebellion — the Civil War — African-American men won the right to vote. But the reaction spearheaded by the U.S. Democratic Party soon took that right away in the Southem states as Jim Crow replaced Reconstruction. It was won back — this time including women — only due to the 1950s and 1960s Civil Rights movement. Asa result of the realignment of the Democratic and Republican parties — a result of the industrial union movement represented by the Congress of Industrial Organizations (CIO) and then the Civil Rights movement — the Republican Party became heir of the racism of the old Democratic Party. Today, Republicans increasingly attempt to restrict again, if not nullify, African American's right to vote in the South as well as other parts of the U.S. If this drive is defeated, this will be a major gain for democracy in the United States. And if, as a result, the modern Republican Party of racism and reaction wilts, that will be no loss. Advertisements REPORT THIS AD One result of African Americans regaining the right to vote in the Southern states due to the Civil Rights movement was the rise of a layer of African-American Democratic Party politicians. Fani Willis is one example of these bourgeois politicians representing the ruling capitalist class (white, African American, and others). Membership in the capitalist class isn’t defined by skin color but by the ownership of capital. To remain in office, these African-American politicians must defend the right of African Americans to vote. If this right is lost, African-American bourgeois politicians like Fani Willis bitpsiertiqueotrisistheory.wordpress.comithe-poltical-crsis-of-s-captalism’ 3242ari12023, 15:44 he Poltical Crisis of U.S. Captalism - A Cruque of Crisis Theory will be finished, just as their Reconstruction era predecessors were when Reconstruction was defeated. We would be unworthy of the title of Marxists if we failed to defend the right of African Americans to vote. We defend this crucial democratic right by our own methods. Ms. Willis, as district attorney of Fulton County, Georgia (like all other U.S. district attorneys), is part of the repressive apparatus of the capitalist state. She's trying to hold Trump and other Republicans responsible for their attempts to take away African-Americans’ right to vote, won through centuries of struggle and at the cost of many lives. But, her methods are defined by the class she represents and her position within the repressive capitalist state apparatus designed to hold down the working class. She's obliged to make use of laws that can easily be turned against working-class organizations, such as Georgia’s particularly broadly drawn RICO Act — “Racketeer Influenced and Corrupt Organizations Act.” The Georgia Republican Party has wasted no time in drawing attention to the dangers this law holds for the working class and its allies. On September 6, the Associated Press reported (https://apnews.com/article/atlanta-cop-city-protests-rico-charge: 3177a63aclbd31a1594bed6584¢9/330) that using the same Georgia RICO law that Fani Willis is using, against Trump and his gang, the Republican Attorney General of the State of Georgia has just had “sixty-one people have been indicted in Georgia on racketeering charges following a long-running state investigation into protests against a proposed police and firefighter training facility in the Atlanta area that critics call ‘Cop City.” The movement against Cop City, an outgrowth of the Black Lives Matter Movement, is a movement we must wholeheartedly support. Advertisements REPORT THIS AD Many liberals and traditional conservatives wish for the return of the “good old days” when rival US. political factions were willing to settle differences through the “political process” and elections rather than trying to throw each other into prison. Trump faces the danger of going to prison while promising that if he returns to power, he'll throw Corporate Joe and his “communist supporters” into prison. Trump's definition of who’s a communist is pretty broad. Of course, even in those good old days of U.S. bipartisan democracy, labor and African-American rights fighters were often thrown into jail while others were murdered. We don’t have to look any further than Dr. Martin Luther King, who spent a lot of time in jail and, in the end, was murdered. But now, with the decline of American capitalism, as is reflected in the ever-sharper contradictions between the capitalist minority living off the surplus value produced by the global working class, even major political figures up to and including former and would-be future presidents face the possibility of imprisonment. One sign of the growing class contradictions is the revival of the U.S. labor union movement. The second largest U.S. city, Los Angeles, California, is the epicenter of a growing strike movement. The online edition of the “Peoples World” (https://www.peoplesworld.org/article/workers-turning-los- angeles-into-the-epicenter-of-national-strike-wave/) newspaper reports: “Two strikes have been going for months: The Association of Motion Picture and Television Producers forced their 11,500 screenwriters of the Writers Guild of America out in May, followed by the same drill against the 168,000 members of SAG-AFTRA nationwide in July. bitpsiertiqueotrisistheory.wordpress.comithe-poltical-crsis-of-s-captalism’ 424zarnr2023, 15.44 te Poltcl Criss of US. Captalism -A Critque of Cris Theory “Then the city’s hotels refused to talk with Unite HERE Local 11 about paying their staffers enough to live on in high-cost L.A. That forced 32,000 hotel workers to walk. They usually clean guest rooms, serve in eateries and bars and handle janitorial tasks, among other duties. They're still out.” Advertisements REPORT THIS AD “The fourth forced strike was forecast on Labor Day, with a strike authorization vote pending among the 85,000 union workers nationwide at Kaiser hospitals and clinics.” On September 15, the United Automobile Workers went on strike against “the big three.” This rising resistance of the labor unions points the way forward. But unlike in the past, the new generation won't be able to keep advancing for long if they remain on a purely labor union level. The current relatively low level of unemployment — the result of the COVID aftermath boom (https://critiqueofcrisistheory. wordpress.com/the-phony-crisis-the-real-crisis-and-the-whip-of- hunger/whip-of-hunger-part-2/) — encourages strikes and union organizing. US. workers are right, and it's their duty to take advantage of this favorable situation for as long as it lasts. But these conditions are temporary, as financial indicators show a major recession and sharply higher unemployment in the not-too-distant future. No moderation by labor unionists will prevent or even delay the onset of recession and mass unemployment. Mass movements such as the Black Lives Matter protests and the protests against Trump's reactionary policies during the first days of his administration point the way forward on how to fight him and all he stands for, but it won't be enough. If we rely on Democratic Party politicians and prosecutors and the movement is tied to them, no matter how progressive they may be on some issues, the movement will be doomed to defeat. Democrats, like the anti-Trump Republicans, as well as Trump and his gang, remain tied to U.S. monopoly capitalism, a.k.a. U.S. imperialism. Even beyond the limits of what I call the Party of Order and regardless of their subjective desires, such politicians are part of the broader party of capitalism, imperialism, war, unemployment, and climate change. The only solution is for the mass movements, including the reviving labor union movement, to organize themselves into a great party of the working class. Their aim is to transfer political power from the capitalist minority to the working, class majority. That alone can defeat racism, misogyny, homophobia, war, climate change, and fascism and open the door to the communist future of humankind. Advertisements REPORT THIS AD This month, I bring to a close my examination of the work of the extraordinary Marxist economist Anwar Shaikh. No such summary can do his work justice, but this is the best I can do here. I will doubtless be obliged to return to him in coming posts; he’s still alive, working, and hasn’t said his last word. bitpsiertiqueotrisistheory.wordpress.comithe-poltical-crsis-of-s-captalism’ 5212art12023, 15:44 he Poltical isis of US. Captaism ~A Critique of Crisis Theory What is called neoclassical economics — sometimes called microeconomics — dominates the university economics departments, even though the 1960s Cambridge Controver (https://critiqueofcrisistheory.wordpress.com/commodity-money-versus-non-commodity- money/#fn3) mathematically disproved key contentions of the theory. If this had occurred to a theory in natural science, that theory would have been considered disproved. But sixty years after the Cambridge Controversy, neoclassical economics is more entrenched than ever in the universities. There are still strands of opposition, called heterodox economics, that are still weakly represented. Heterodox economics is defined here as any economic theory that’s neither neoclassical nor the closely related Austrian school. Heterodox theory is dominated by what's called post-Keynesian economics. This takes the more radical aspects of Keynes’ “General Theory” and takes them a little further. Post-Keynesians advocate an activist policy by the central government in dealing with economic and social problems ranging from chronic unemployment and poverty to global warming. (1) In contrast, neoclassical economists support so-called market solutions where the government does essentially nothing. John Maynard Keynes began as a neoclassical economist who was more realistic and flexible than most neoclassical economists. He aimed not so much at overthrowing neoclassical economics as reconciling it with the reality of the 1930s Great Depression and mass unemployment. Advertisements REPORT THIS AD Keynes wrote in “General Theory,” (https://wwwmarxists.org/reference/subject/economics/keynes/general-theory/ch24.htm) “To put the point concretely, I see no reason to suppose that the existing system seriously misemploys the factors of production which are in use. There are, of course, errors of foresight; but these would not be avoided by centralizing decisions. When 9,000,000 men are employed out of 10,000,000 willing and able to work, there is no evidence that the labor of these 9,000,000 men is misdirected. (2) The complaint against the present system is not that these 9,000,000 men ought to be employed on different tasks, but that tasks should be available for the remaining 1,000,000 men. It is in determining the volume, not the direction, of actual employment that the existing system has broken. And even more clearly, “But if our central controls succeed in establishing an aggregate volume of output corresponding to full employment as nearly as is practicable, the classical theory comes into its own again from this point onwards.” bitpsiertiqueotrisistheory.wordpress.comithe-poltical-crsis-of-s-captalism’ 621zarnr2023, 15.44 te Poltcl Criss of US. Captalism -A Critque of Cris Theory By classical theory, he means the neoclassical theory. Even in “General Theory,” Keynes merely modified but didn’t reject the neoclassical s Keynes blamed the 1930s capitalist stagnation on a declining shortage of capital that wasn’t fully reflected in the rate of interest because interest rates become “sticky” at very low levels, as well as the “stickiness” of money as opposed to real wages. Unlike more radical post-Keyensians and the “Monthly Review” school, Keynes did not blame monopoly for the stagnation and mass unemployment of the 1930s (and in Britain, the 1920s). Shaikh claims that Keynes held to the theory of “real competition” found in Adam Smith, David Ricardo, Karl Marx, and, of course, Shaikh himself as opposed to neoclassical perfect competition. Advertisements REPORT THIS AD I find this dubious in light of Keynes's claim, “the classical theory comes into its own again from this point onwards.” If the neoclassical system comes back into its own, this implies perfect competition. More importantly, Marx's concept of competition rests on his theory of value, surplus value, and the commodity character of money, none of which are found in Keynes. Shaikh is correct in his view that post-Keynesian economics and the closely allied Monthly Review school take neoclassical perfect competition as their starting point. These schools build a radical critique of capitalism on neoclassical foundations. They conclude that the neoclassical system breaks down with the growth of monopoly, defined as a situation where individual capitals have a larger market share than a share approaching the mathematical limit of zero. This means that unlike with perfect competition, how much a firm (capitalist) chooses to produce a particular commodity of a given use value and quality has a measurable effect on the price of that commodity. According to the neoclassical critiques — post-Keynesian and Kaleckian (Monthly Review) — under competitive conditions, capitalists have one variable to worry about in setting individual levels of production and employment — marginal cost. Meanwhile, monopolistic capitalists have two variables to worry about: marginal costs and price. These two variables are their costs and the selling price of their commodities. Under perfect competition — the neoclassical, the Monthly Review, etc. schools — assume individual capitalists worry only about their costs since their selling price appears to them as given. According to the post-Keynesian-Monthly Review school, an individual firm can sell more of its commodities if it lowers its prices under monopolistic but not competitive conditions. The conclusion is that while the competitive firm seeks to minimize its marginal costs, the monopolistic one seeks to equalize marginal cost with marginal revenue. This means monopolistic firms set production levels lower than the level that will minimize marginal and, therefore, average costs. At these lower production levels, what the monopolistic firm loses in terms of higher costs, it more than makes up for in higher selling prices Advertisements bitpsiertiqueotrisistheory.wordpress.comithe-poltical-crsis-of-s-captalism’ 7212ari12023, 15:44 he Poltical Crisis of U.S. Captalism - A Cruque of Crisis Theory REPORT THIS AD While under perfect competition, individual capitalists utilize their capital in the most efficient way possible under prevailing technical conditions of production, under monopoly, firms allow a portion of their productive capacity to lie fallow. In the absence of state intervention, this leads to excess capacity, stagnating investment, and chronic mass unemployment. While Keynes himself saw the declining scarcity of capital relative to population as the underlying cause of chronic stagnation and unemployment of the Great Depression, post-Keynesians and the Monthly Review school see monopoly as the source of stagnation and chronic mass unemployment that then must be counteracted by increased central government spending. (3) Closely related to post-Keynesian economics is Modern Money Theory. Indeed, MMT is not post- Keynesian at all since Keynes himself insisted on establishing non-commodity money in place of gold money. He was obsessed with proving the truth of the chartalist theory of money, as shown by his so- called “Babylonian madness.” (4) The chartalist theory of money and Keynes The chartalist theory, of which present-day MMT continues, insists that money arises from taxes levied by the state. The State, according to chartalism, creates money by putting its subjects into debt to itself by levying taxes on them and then providing tokens to pay the taxes. Individuals need these tokens to stay out of jail. They're therefore forced to sell their products as commodities to cam the tokens — money — necessary to pay the taxes. According to this theory, the state creates money, money creates trade, and thus commodity production. Instead of simple exchange evolving into a money-commodity economy that divides society into classes, giving rise to the state, chartist theory reverses the cause in effect. The state comes first; it then creates money that producers must obtain to pay taxes to the state; the producers are then forced to sell their products or commodities to obtain the money needed to pay taxes. Advertisements REPORT THIS AD Chartalists (MMT from a century ago) say that under modern capitalism, the state can create any amount of demand it desires — as long as the state can issue its own currency without having to redeem it in another currency or commodity — up to the limits of the physical capacity to produce. The emphasis of MMT is on fiscal theory — the spending and taxing policies of the central government, not on monetary policy — central banking. According to MMT, the central bank is obliged to monetize government securities, acting in effect as the state's cashier. Taxes are levied not to raise funds for the state but to remove excess money from circulation. If the central government creates more demand than can be produced by the industrial capitalists, the result is a rise in prices. If the central government wants to end the inflation, the only way to do it is to levy taxes, removing some of the money the state created from circulation. According to MMT, state fiscal policy is about regulating the level of demand, not raising revenue for the state. bitpsiertiqueotrisistheory.wordpress.comithe-poltical-crsis-of-s-captalism’ 821zarnr2023, 15.44 te Poltcl Criss of US. Captalism -A Critque of Cris Theory There isn’t much difference between the analysis of post-Keynesian economics — MMT and the Monthly Review school. This is shown by the fact that the digital version of Monthly Review Magazine features a link to “Money on the Left,” a website devoted to MMT. Unlike post-Keynesian economics, Monthly Review calls itself Marxist, occasionally referring to Marx's categories of value and surplus value. The Marxist category of surplus value is often replaced by the “the surplus.” The surplus is defined as the markup on the cost price — profit upon alienation — that monopoly firms can make over their costs due to their monopoly pricing power. Shaikh, price, and value Advertisements REPORT THIS AD Post-Keynesian economists are not interested in Marx's value theory or perhaps any value theory. The situation is more complicated with the Monthly Review school; it considers itself Marxist and upholds the law of labor value. When analyzing prices, the MR school pretty much ignores value, pleading that they're analyzing “monopoly capitalism” while Marx analyzed “competitive capitalism.” The MR school bases itself not on Paul Sweezy’s 1942 book “Theory of Capitalist Development,” but rather on the Paul Baran and Paul Sweezy book “Monopoly Capital,” which Monthly Review editors have elevated to the level of a classic beyond criticism. “Monopoly Capital” never discusses value or surplus value — as opposed to “the surplus.” Shaikh has shown that the unstated assumptions of “Monopoly Capital” are neoclassical. Capitalism worked well through the first three-quarters of the 19th century when firms were small and competition perfect or close to it, and prices never moved far from marginal costs. However, by the late 19th century, individual firms began to gain enough market share to influence prices directly. According to “Monopoly Capital” and the Monthly Review School, competition (meaning neoclassical perfect competition) prevailed through the middle of the 19th century. Individual capitalists controlled a percentage of the total market that approached the mathematical limit of zero. ‘Asa result, the decisions of a capitalist of how much to produce or even to produce at all of a given commodity had almost no effect on the price of the commodity. In those days, businesses operated at optimum capacity, defined as the level where marginal costs, therefore, and total costs were lowest. It made no sense for a business to operate at a lower level because then they'd have higher costs and be prevented by perfect competition from charging a higher price. Advertisements bitpsiertiqueotrisistheory.wordpress.comithe-poltical-crsis-of-s-captalism’ 9212ari12023, 15:44 he Poltical Crisis of U.S. Captalism - A Cruque of Crisis Theory REPORT THIS AD Asa result, during capitalism’s “competitive stage,” there was a tendency to optimize capacity utilization and full employment of both means of production and workers. There was no need for large-scale state intervention. According to the MR school, that changed as monopoly capitalism replaced competitive capitalism. By the 1930s, the situation had gotten so bad that massive government spending was required to keep the wheels of industry turning and hold unemployment in check. Unfortunately, because of the opposition of individual groups of capitalists to social spending, the government spending that keeps depression and mass unemployment at bay is military spending. Shaikh rejects the fundamentally neoclassical analysis of the MR school and instead takes Marx seriously. Because of this, MR supporters call Shaikh and his followers the “fundamentalist school.” Shaikh’s starting point is that Marx’s law of value dominates market prices. ‘The most naive form of the law of value holds that market prices equal or fluctuate around values. Shaikh, of course, is aware that due to differences in the organic compositions of capital and different turnover times of capital in different industries, prices that directly reflect values are transformed into prices of production, Market prices fluctuate around production prices, not direct prices. Competition tends to move the economy toward a state where capitalists of equal size earn equal profits in equal periods of time. Shaikh emphasizes that under real competition, market prices are constantly moving around production prices rather than equalizingthem. He stresses that despite all the attempts by generations of Marx critics eager to explode his theory of value and surplus value, production prices are actually close to direct prices. Shaikh agrees with Ricardo that prices of production are within about 7% of direct prices. It is value that rules prices of production that form the axis around which market prices fluctuate. Since Ricardo did not distinguish between prices of production and value, he was left with a theory that value is determined mostly by the quantity of labor necessary to produce a commodity of a given use value and a given quality, but not entirely. Ricardo’s critics call his theory of value theory a “93% labor theory of value.” Ricardo didn’t like this. He wanted a 100% labor theory of value but admitted that he was unable to resolve the contradiction. Advertisements REPORT THIS AD bitpsiertiqueotrisistheory.wordpress.comithe-poltical-crsis-of-s-captalism’ 102122112023, 15:45, he Poltical Crisis of U.S. Captalism - A Cruque of Crisis Theory Shaikh and the transformation problem ‘A.100% labor theory of value can be arrived at by distinguishing between value determined by the quantity of labor, both direct and indirect, that's socially necessary to produce a commodity of a given use value and quality and prices of production that express the value of the commodity in money terms. This doesn’t entirely resolve the relationship between the mass and rate of profit calculated in terms of values or direct prices and the mass of profit calculated in terms of prices of production. Many of Marx's critics have seen an opening here to refute his theory of value and surplus value. The most important of these was Ian Steedman’s 1977 “Marx After Sraffa (http://ecocritique.free fr/steedman77.pdf).” Shaikh, in “The Poverty of Algebra (https://www.anwarshaikhecon.org/sortable/images/docs/publications/political_ economy/1981/1- Shaikh%20-%20The%20Poverty%200f%20Algebra.pdf),” effectively answered Steedman. (6) To summarize this more than century-long debate, in Marx's draft of Volume III of “Capital,” he produced a mathematical model where he transforms values — expressed as direct prices — into prices of production. The model shows that once direct prices are replaced by prices of production, profits — surplus value expressed in money form is equal whether we measure the values directly — direct prices — or in prices of production. Marx shows that surplus value arises only in the sphere of production and not in circulation, Circulation just redistributes the surplus value that's already been produced among capitals of different organic compositions. At this point, Marx’s critics pounce. Marx's example wasn’t published in his lifetime. His critics point out that Marx's model did not transform the input prices from direct prices to prices of production. The text shows that Marx was aware of both the problem and the solution. It’s possible to produce a model where the inputs are expressed in terms of production prices and the mass and rate of profit are identical both in terms of the mass of profit and the rate of profit. For these models to work, one must assume that all commodities enter the process of reproduction as inputs. In Sraffa’s terminology, all commodities in the model are “basic commodities” because they all appear as production inputs to produce other commodities. Under these assumptions, one capitalist’s gains are another one’s loss, so both the mass and rate of profit are the same whether we calculate in terms of direct prices — values — or prices of production. But what about luxury goods — commodities that are consumed only by the capitalists or military means of destruction consumed only by the state? These non-basic commodities play no role in reproduction. Once we introduce non-basic commodities, the exact equality between the mass and rate of profit between the direct prices model and the prices of production model breaks down. It seems that contrary to Marx, surplus value — profit — is being either created or destroyed in the sphere of circulation after all. British economist Ian Steedman (1941-) argues in his book “Marx After Sraffa” that since the mass and rate of profit are different when we calculate in value terms — direct prices — and prices of production terms — Marx's law of value and surplus value should be abandoned. Steedman used a lot of matrix algebra that made it largely inaccessible to the non- mathematical reader. Shaikh, who loves algebra, ironically titled his answer to Steedman “The Poverty of Algebra.” “The Poverty of Algebra” distinguishes between the circuits of capital and the circuits of revenue. Suppose the industries selling luxury goods operate at a below-average organic composition of capital. To equalize the profit rate, they'll have to sell their commodities below their value — below their direct prices. They'll make less profit in terms of prices of production than in terms of value/direct prices. The process of equalization of the profit rate the luxury item producers suffer will be distributed to all capitalists, reducing the total mass of profit and lowering the profit rate. A bitpsiertiqueotrisistheory.wordpress.comithe-poltical-crsis-of-s-captalism’ wai2arr2023, 1545 te Poltcl Criss of US. Captalism -A Critque of Cris Theory portion of the surplus value is destroyed in the process of circulation. As a result, it appears that the size of the surplus value is being determined by something other than the unpaid labor of the working class. In “The Poverty of Algebra,” Shaikh explains that capitalists who've lost surplus value in their role as producers get it back as consumers when they purchase these commodities for their personal consumption — when they spend their realized profits as revenue instead of capital. The capitalists lose when they sell their luxury commodities at prices below their value but regain it as buyers when they purchase them for personal consumption at prices below their values — or direct prices. The converse is also true. When the capitalists who produce luxury items have a higher-than-average organic composition of capital, they sell their commodities at prices above their value — direct prices. When we convert the system from a direct price system to a prices-of-production system, the mass and rate of profit are higher in production prices than in values or direct prices. Now, it seems that contrary to Marx, surplus value is being created in the sphere of circulation. What the capitalists gain as sellers — capital circuits — they lose as consumers — revenue circuits. Incither case, the surplus value capitalists gain or lose in selling luxury, non-basic commodities at production prices that differ from direct price are lost or gained back when capitalists purchase these commodities as consumers. Not an electron of value is either created or destroyed in circulation. In my mind, this should lay the transformation problem to rest once and for all. Many Marxist economists, notably Ernest Mandel, did not accept Shaikh’s explanations and came up with the most convoluted attempts to prove that profit’s rate and mass must be exactly equal — not just approximately — whether they’re calculated using the value-direct price model or prices of the production model. In my opinion, they all fall into Steedman’s trap. Since this involves the theory of money and the nature of profit, I'l return to this subject below. Another area in which Shaikh’s done notable work involves Marx's law of the tendency of the profit rate to fall. Capitalism’s supporters are alarmed by Marx's law of the tendency of the rate of profit to fall because they realize that its production motive is profit, only profit. If the system’s development undermines profit, this implies its evolution to a higher mode of production. Therefore, the law of the tendency of the rate of profit to fall is a central target for Marx's critics. These critics claim capitalism will last forever and is the final form of human society. Some Marxists also criticize the theory, including the Monthly Review school. In his 1942 “Theory of Capitalist Development,” Paul Sweezy claimed the direction of the profit rate was indeterminate as. it’s an open question where the upward pressure on the rate excreted by the rise in the surplus value rate would compensate for downward pressure on the profit rate caused by capital's rising organic composition. In “Monopoly Capital,” Baran and Sweezy went further, replacing the falling profit rate with the tendency of the surplus value to rise. Under competitive capitalism, the law of falling profit rate prevails, say Baran and Sweezy. But, under monopoly capitalism, the profit rate rises due to the monopoly pricing power of the corporation as long as the surplus is fully absorbed. The absorption can be arranged through suitable state intervention, mostly through war spending There are two other arguments against Marx's falling profit rate theory. A distinction must be made between capital's technological and its value composition. Technological progress cheapens the elements of constant capital, so its value composition increases more slowly than its technological composition. One line of attack is that constant capital's value might fall faster than variable capital's, lowering its organic composition and increasing the rate of profit therefore making the profit rate’s evolution indeterminate. Shaikh doesn’t deny this as an abstract mathematical possibility. But he doesn’t believe productive forces can develop in this way in reality. New machinery is produced by bitpsiertiqueotrisistheory.wordpress.comithe-poltical-crsis-of-s-captalism’ rat2arr2023, 1545 te Poltcl Criss of US. Captalism -A Critque of Cris Theory the existing methods, and only later will the new methods be used to produce new machinery. Shaikh believes that a correct examination of government statistics shows that organic composition has increased through the lifetime of the capitalist system and continues to do so today. Another attack on Marx's theory is the Okishio Theorem, which holds that assuming the real wage remains constant, capitalists only adopt new production methods that raise the profit rate. The profit rate falls only when the real wage rises. Marx didn’t try to prove the profit rate falls when the real wage is constant. He said the profit rate will tend to fail if the surplus value rate — the value wage — is constant. Shaikh holds the Okishio Theorem as false whether real wages remain constant or fall. The Okishio model assumes “perfect competition,” where capitalists act rationally to increase the profit rate on total social capital. In reality, “real competition” means the capitalist prevails in producing commodities of a given quality and value at the lowest cost price — the lowest quantity of paid labor — not the highest profit rate, negating the Okishio theorem. At one price level, a capitalist with a higher cost price might have higher profits than one with a lower cost price because they economize on the fixed capital that is part of constant capital. Shaikh points out that as selling prices fall toward the cost price, the profit will remain positive the longest for the capitalists with the lowest cost price. The capitalist with the lowest cost price, not the highest profit rate at some arbitrarily high price, emerges the victor in real, not neoclassical perfect competition. The profit rate is calculated on total capital, while the cost price is calculated only on capital used up in the production of a commodity. “Real competition” ensures that the capitalist producing with the lowest cost price becomes the “regulating capital.” In value terms, regulating capital is when individual value coincides with social value. Unless some monopoly factor interferes, the lowest individual value becomes the new social value. Shaikh writes, “If lower unit operating costs are generally achieved through higher unit capital cost (capital-biased technical change in which the capital-cost ratio rises), then the fact that price- and cost-cutting firms select lower cost methods will imply a falling average rate of profit even at a given real-wage. By contrast, the conventional (Okishio) selection criterion of the highest profit rate at the ‘given’ price relies on the assumption that firms are passive price-takers, as required in perfect competition, and this implies that the average profit rates rise at a given real wage.” (Anwar Shaikh, “Capitalism: Competition, Conflict, Crises” (https://global.oup.com/academic/product/capitalism-97801993906322ce-uséelang-ené#) p 16) Shaikh also makes exceptional contributions in the area of world trade, World trade theory is dominated by “comparative advantage” or “comparative costs.” This theory goes back to David Ricardo and has been integrated into modern neoclassical theory. Within nations, Ricardo showed that capitalists who produce a commodity of a given use value and quality with the least amount of labor win the battle of competition. In today’s language, the capitalist who produces most cheaply wins the battle of competition. Ricardo’s take on world trade (https://critiqueofcrisistheory. wordpress,com/ricardos-theory-of- international-trade/) says it’s not absolute but comparative advantage that determines who comes out on top. The nation that's first in producing a particular type of commodity will be the one producing with less labor, not absolutely but relative to the world average. A nation producing with more labor than the world average in all production sectors prevails internationally with the commodities where it lags least behind the world average. A nation producing more cheaply in all lines loses out in those lines where it produces least cheaply relative to the world average. Ricardo concluded that all nations benefit equally from world trade regardless of their degree of development. Thus, all nations are advised to follow free trade policies. Today, the claim that comparative advantage dominates world trade is central to the modern neoclassical school of economics and the ideology of neoliberalism. bitpsiertiqueotrisistheory.wordpress.comithe-poltical-crsis-of-s-captalism’ 13212art12025, 15:45 he Poltical isis of US. Captaism ~A Critique of Crisis Theory Marx didn’t agree with Ricardo on world trade but didn’t develop a full-scale critique. Marx's writings against the currency school and the 1844 Bank Act (https://critiqueofcrisistheory.wordpress.com/ricardos-theories-challenged-by-the-crises-of-1825-and- 1837/) hinted at what his critique would have been if he’d had the time to develop it fully. Shaikh fills the gap, pointing out that capitalist nations don’t trade with one another — individual firms do. The law governing trade between individual capitalists within a nation also governs the trade carried out by firms in different nation-states. On the national level, the law of absolute advantage prevails — capitalists producing commodities of a given use value and quality with the least amount of paid labor — cost price — prevail nationally. Contrary to Ricardo, the same law holds true internationally. A nation underdeveloped by imperialism is well advised to impose a wall of protective tariffs to enable its national industries to catch up with world standards. The failure of free trade policies justified by Ricardo’s theory of comparative advantage and its modern neoclassical versions to work as advised is not the result of a monopolistic transformation of neoclassical “perfect competition” into “imperfect competition” but is inherent in the operations of capitalist production and real-world competition. Shaikh shows that comparative advantage depends on the quantity theory of money and thus falls with the quantity theory of money. If the comparative advantage were true, international trade would tend to balance. No nation would run a significant surplus or deficit in their foreign trade accounts for long. In reality, international trade surpluses and deficits can persist for decades. For example, the United States has run foreign trade deficits since the early 1980s — forty years. Before that, it enjoyed surpluses for decades. Nations that run chronic trade surpluses accumulate large quantities of money. Instead of leading to higher prices relative to the world market (that would quickly reverse the trade surpluses), these countries have lower-than-average interest rates. Money capitalists in surplus countries, in search of higher interest rates, lend money to deficit countries, dividing them into creditor and debtor nations. Anwar Shaikh and the law of the value of commodities Shaikh’s economic theory is based on labor value, in the tradition of Ricardo and Marx. Unlike the Monthly Review school that often banishes Mary's value theory to the bygone “competitive phase” of capitalism, Shaikh employs value theory consistently, which is his strong point. Like Ricardo, but unlike Marx, he has limited himself mainly to quantitative value analysis, not qualitative analysis. Here, we find the source of Shaikh’s weaknesses and mistakes Unllike Ricardo, Shaikh understands the difference between the price of production and value. He’s never adequately studied value qualitatively. The qualitative value analysis is perhaps the most difficult part of Marx’s economic theory. Classical political economy distinguished between the use value and the exchange value of commodities. Marx also made this distinction in his early writings, inherited from classical political economy. In his mature writings, Marx went further. Unlike classical economists, Marx differentiates between value determined by the quantity of labor socially necessary to produce a commodity — the essence of value — and its form — exchange value. In the marketplace, the value of a commodity is measured in terms of the use value — not the value — of another commodity. Value consists of embodied abstract labor and must be measured in some unit of time. The necessary form of value is exchange value, Exchange value is measured in the unit appropriate to the use value — for example, some unit of weight of gold — of the commodity that acts as the commodity that, in terms of its use value, acts as a measure of value. Once a specific commodity emerges as a universal measure it becomes money. The use value of the money commodity is thus the independent existence of exchange value. This means that we can carry exchange value in the form of gold coins in our pockets. Shaikh misses this. If he'd bitpsiertiqueotrisistheory.wordpress.comithe-poltical-crsis-of-s-captalism’ aie2arr2023, 1545 te Poltcl Criss of US. Captalism -A Critque of Cris Theory studied value qualitatively, including the relationship between value and its value form — exchange value — he would have realized that the notion of non-commodity money (he calls it “pure fiat money”) makes no sense at all Despite this, Shaikh is still superior to most academic Marxists, not to mention bourgeois economists, even in monetary theory. Shaikh realizes that the circulation or circuit of commodities C-M-C can break. Just because somebody has sold C-M doesn’t mean that they will buy. If they don’t buy (or not immediately), the circuit breaks. But why would somebody sell but then not buy? Here, we come to the circuit of productive capital M-C....P...C’-M’. While the simple circulation begins with C, the circulation of capital begins with M. The industrial capitalist begins as a money capitalist [M] but then uses the M to purchase means of production and labor power. The industrial capitalist then engages in acts of production [P] during which the commodities being produced absorb unpaid labor — surplus value. The commodities that have absorbed unpaid labor [C’] must then be converted into [M’]. The circuit of capital begins with money and ends with money. The difference between M’ and M is the profit. What happens if the production of surplus value P breaks down? This happened during the COVID shutdowns. It can also happen if a shortage of workers causes wages to rise so high that an insufficient amount of surplus value is produced. If this happens even if the capitalist can carry out P, the difference between C’ and C (if it doesn’t disappear completely) isn’t worth the risk. The capitalist then turns miser and holds onto M because M is a means of safety. The result is the accumulation of unsold commodities in warehouses and mass unemployment. Increased unemployment combined with the natural population growth increases competition for jobs among the workers, once again increasing the rate of surplus value. Asa result, the quantity of surplus value is again sufficient to carry out capitalist reproduction on an expanded scale, and the crisis is overcome. This was Shaikh’s early theory of crisis, and it remains his chief theory in “Capitalism.” Unlike his carly work, in “Capitalism,” he’s aware that the gold discoveries of 1848 in California and 1851 in Australia that significantly increased gold production accelerated the production growth rate — expanded capitalist reproduction — that’s characteristic of capitalism. The gold discoveries also falsified the quantity theory of money. The quantity theory predicted that the accelerated increase in the growth rate of the money supply would increase prices but not the increased production rate or the level of employment since, according to the quantity theory of money, there is always full employment. But in the years following the gold discoveries, the increased production rate accelerated, contrary to the predictions of the quantity theory of money. While prices also increased, they did so less than would have been predicted by the quantity theory of money. Money was not neutral, and recognizing this takes a big step forward. In “Capitalism,” Shaikh concludes that an increase in the money supply growth rate, contrary to the predictions of the quantity theory of money, increases the economic growth rate and, therefore, employment. The result is a decline in the unemployment rate. Declining unemployment makes it increasingly difficult for capitalists to increase the surplus value rate, As the organic composition of capital rises and the rate of surplus value remains more or less unchanged, the tendency of the profit rate to fall is converted into an actual fall. At some point, as the profit rate falls, capitalists turn misers and hold on to M, thus breaking the circuit of commodity circulation. They'll sell but not buy, resulting in an economic crisis with lower production and higher unemployment. As long as money remains a commodity — commodity money — the growth in the quantity of money will be governed by the relative profitability of the production of money material to other branches of industry. Now, we get to a crucial difference between Marx and Shaikh. For Marx, money remains a commodity as long as capitalist production lasts, and capitalist production is characterized by periods of overproduction of non-money commodities relative to the commodity serving as bitpsiertiqueotrisistheory.wordpress.comithe-poltical-crsis-of-s-captalism’ 181242arr2023, 1545 te Poltcl Criss of US. Captalism -A Critque of Cris Theory money. Relative overproduction has to be periodically rectified by a period of reduced production of non-money commodities while the production of the commodity that serves as money has to be increased. Shaikh disagrees. During these periods of crisis/stagnation in non-money commodity production and the resulting high unemployment, global capitalist society rebuilds its collective balance sheet just as individual enterprises must to rebuild their balance sheet. During these periods, mass unemployment continues until the combination of running down the supply of overproduced commodities — including elements of fixed capital — combined with the increased production of the commodity that serves as money makes it possible for capitalist expanded reproduction to surge forward again. This production surge represents overproduction, and the cycle repeats. Because Shaikh has not qualitatively analyzed value, he incorrectly believes that the state can create non-commodity money. This mistake badly throws off his analysis of interest rates, the stock market and other financial markets, and most importantly, the industrial cycle and crises. He correctly holds that historically, money begins as a definite commodity produced by private producers. But he wrongly concludes that it ends up as state-issued pure fiat money. According to Shaikh, there’s no limit on the amount of pure fiat money the state can create, and the problem of the value and surplus value realization, overproduction, disappears. Shaikh reasons the alleged success of pure fiat money in solving the realization problem only increases the problem of producing surplus value, No matter how much money and purchasing power the state creates, surplus value that hasn’t been produced cannot be realized. Unlike the Monthly Review school’s concept of “the surplus,” Shaikh realizes that surplus value cannot be produced in the sphere of circulation. Crises occur not because of periodic relative commodity overproduction, as Marx and Engels said, but because of periodic insufficient surplus value production. Shaikh reasons that as the state pumps up demand, unemployment falls below the level necessary to maintain the rising surplus value rate necessary to overcome the profit rate lowering effect of the rising organic composition of capital. At some point, the profit rate falls so low that capitalists turn miser, causing the circulation of commodities to break down, At this point, the crisis appears to be an overproduction crisis, but it is actually a crisis of the insufficient production of surplus value. According to Shaikh, during the 1970s, the state tried to pull the capitalist economy out of crisis by increasing the rate at which it created pure fiat money. This didn’t work because the problem wasn’t commodity overproduction relative to the monetarily effective demand for them but insufficient surplus value production. In real terms, there was insufficient quantity of additional means of production, and subsistence was being created to prevent a rise in unemployment. Under these conditions, Shaikh reasons the creation of additional pure fiat money only accelerated the inflation rate. In this respect, his analysis isn’t far from the Reagan-era supply-side economists who claimed the problem was not on the “demand side” but instead on the “supply side.” Shaikh and his “fundamentalist” school is strongly criticized for sounding like Republicans — or British Tories — by the MR school supporters. Shaikh believes that gold retains one monetary function as a means of safety. When capitalists turn miser due to an insufficient surplus value production, they fear the depreciation of paper money by the state. They turn to gold as a means of safety. As a result, commodity prices calculated in gold (Shaikh’s “golden prices”) fall under “pure fiat money” as they did during earlier stagnation/depression periods when money was still a commodity. bitpsiertiqueotrisistheory.wordpress.comithe-poltical-crsis-of-s-captalism’ 16212arr2023, 1545 te Poltcl Criss of US. Captalism -A Critque of Cris Theory For Shaikh, a rising dollar price of gold under the present dollar-centered international monetary system is a sign of an approaching crisis caused by insufficient surplus value production. During the crisis, production and employment growth is stymied not due to lack of demand but to an insufficient quantity of social surplus product. Shaikh doesn’t understand that profit M’ — M must be measured in terms of the use value of the money commodity. Instead he believes that “real” profits are measured in terms of the various use values of the commodities making up the social surplus product. For both Shaikh and right-wing “supply-side” economists, the only way under capitalism out of the crisis of insufficient surplus value production is to increase workers’ exploitation and, in real terms, produce more surplus product to be consumed by the capitalists at the expense of wage goods. Ronald Reagan and his supply-side economists correctly realized this. It was the supply-side policies, helped by the Reagan administration and other capitalist governments, along with high unemployment, that finally pulled the world capitalist economy out of the 1980s crisis. Shaikh’s answer to the MR school and post-Keynesian critics is that he doesn’t like these facts, but this is how capitalism works and must work. Shaikh is somewhat vulnerable here. Even if his analysis that the 1970s crisis was due to an insufficient production of surplus value rather than relative overproduction — and I dor’ think it was — it doesn’t explain the crisis of 2007-2009 and the decade of slow growth and high unemployment that followed. The combination of the counterrevolutionary destruction of the Soviet Union and its East European socialist allies, combined with China’s opening up to international capitalist investment after 1978, meant that hundreds of millions of actual and potential surplus value-producing workers were made available for exploitation by capital. On page 60 of “Capitalism,” Shaikh produces a graph showing that in the U.S. between 1889 and 1979, the growth in real wages and productivity were roughly equal. But between 1979-2009, real wages hardly changed while the productivity of labor continued to grow. This is powerful empirical evidence against the claim that the 2007-09 crisis and the decade of slow growth and high unemployment that followed were caused by insufficient surplus value. The evidence shows that it was not by a lack of surplus value-producing workers but a relative overproduction of commodities relative to money material. Between 2001 and 2007, world gold production declined primarily due to the exhaustion of the South African gold mines. After the 2008 crash lowered commodity golden prices, new gold mines were opened in the United States, Africa, China, Russia, and other countries, making it possible for the global capitalist economy to rebuild its collective balance sheet. New money thus created and accumulated during the years of crisis and slow growth between 2007 and the COVID shutdowns made possible the accelerated capital accumulation that has followed COVID shutdowns. Contrary to Shaikh’s analysis, the crisis of 2007- 08 and the years of slow growth that followed were caused not by the problems of producing surplus value but of realizing surplus value in money form. Shaikh is correct that if the problems of realizing surplus value could be solved under capitalism (I don’t believe it can), the problem of producing surplus value would come to the fore. Periodic overproduction crises thus are necessary to stave off what, for the capitalists, would be a far more profound crisis of the insufficient production of surplus value. When the global COVID pandemic struck, the capitalists were horrified that it would dramatically reduced the size of the working class, bringing about a crisis of the insufficient production of surplus value, a.k.a. absolut roduction (https://critiqueofcrisistheory.wordpress.com/the-phony-crisi the-re nd-the-whi wanger/) of capital. This explains the panicky attempts by capitalist governments to stamp out COVID within a few weeks by state-enforced production shutdowns, which drastically reduced surplus value production, and then their rapid reopenings that then accelerated the pandemic. bitpsiertiqueotrisistheory.wordpress.comithe-poltical-crsis-of-s-captalism’ aie2arr2023, 1545 te Poltcl Criss of US. Captalism -A Critque of Cris Theory Shaikh’s failure to realize that non-commodity money is impossible in a capitalist economy leads him into a series of errors, and his analysis of capitalism and capitalist competition begins to break down. He doesn’t understand that capitalist central banks such as the U.S. Federal Reserve System don’t have the power to determine the interest rate(s) and supports a false theory of interest (https://critiqueofcrisistheory.wordpress.com/three-books-on-marxist-political-economy/three-books- on-marxist-political-economy-pt-5/) as the production price of providing finance Shaikh believes that the low rate of interest in the years after the 2008 crash reflects the decision of the Fed and other central banks to drive interest rates to near zero when, in fact, it represents the enormous accumulation of money capital relative to real capital that occurred during this period of semi-stagnation following the 2007-09 crisis. It was the greatly accelerated accumulation of real capital that unfolded after the COVID shutdowns and not the policies of the central banks that have again raised the interest rate(s). Shaikh’s discussion of stock market prices, where he sees them as functioning as just another place to invest capital and, therefore, is governed by the equalization of the profit rate, is also incorrect. I think the view supported by Marx that stock market prices are governed by the capitalization of dividends — or expected dividends — at the long-term interest is correct. What is profit? Earlier, I mentioned Shaikh’s solution to the transformation problem. He solved it by distinguishing, between circuits of capital and circuits of revenue. But this takes up the notion of what profit is and its relation to surplus value on one side and surplus production on the other. Let’s return to the example of capitalists selling luxury commodities — Sraffa’s non-basic commodities — below value and, therefore, make fewer profits and realize a lower profit rate in production prices than they make in direct price terms. The same capitalists recoup their losses by buying luxury items for personal consumption at prices below their values — direct prices. They consume only the quantity of surplus value that is produced. But part of their surplus value is realized in the form not of money but of luxury commodities purchased relative to values at bargain prices of production. Surplus value realized this way does nol count as profit. Profit must be reckoned in money, and as money must be a commodity, profit is measured in terms of the money commodity’s use value; for example, gold measured in some unit of weight. This crucial fact has escaped Shaikh, Money material — for example, gold — therefore mediates between surplus value — the unpaid labor contained in all commodities regardless of use value and who is the ultimate consumer, and the surplus product, the commodities whose use values are consumed either productively or as items of personal consumption by the capitalists and their hangers-on. This difference is crucial in crisis theory because if surplus value cannot be realized in money form or is realized in inadequate amounts of money, the whole process of expanded capitalist reproduction and the circulation of commodities breaks down. Even if the workers were so servile they were willing to put up with an increased exploitation rate, contrary to Shaikh’s analysis, periodic economic crises would still not be avoided. Capitalist society has no choice but to periodically rebuild its collective balance sheet to ensure that an adequate amount of money material is produced to realize the surplus value in the form of profit measured in terms of the use value of the money commodity. As prices are the necessary form of value, so is profit the necessary form of surplus value. If Shaikh had only realized this, his work would have risen to an entirely different level. Shaikh puts Marx's value theory at the center of his analysis, but he hasn't fully mastered it (few have). He makes the mistake of thinking that non-commodity money is possible and forms the basis of modern money. He assumes that since modern money is not a commodity, in essence, profit is the surplus product. He believes that as long as an adequate quantity of surplus product is produced, there will always be an adequate mass and rate of profit for capitalist expanded reproduction. bitpsiertiqueotrisistheory.wordpress.comithe-poltical-crsis-of-s-captalism’ 18121