What drives capital’s global crises?

Mike Macnair reviews: Guglielmo Carchedi, 'Behind the crisis: Marx’s dialectics of value and knowledge', Haymarket Books, 2012, pp303, £20

This book’s subtitle is a better guide to its contents than the main title: it is primarily about the philosophical underpinnings of Marx’s critique of political economy, and only secondarily - in part of chapter two and in chapter three - about the immediate origins or explanation of the ‘great crisis’ of 2008-09 and the relative stagnation which has followed it in the central imperialist countries. This point is not meant as a criticism - or, rather, at most it is a criticism of its marketing. It is an important work which should be widely read, though not uncritically.

The book has four chapters. Chapter 1, ‘Method’, offers Carchedi’s reading of the dialectical reasoning found (he argues) in Marx, as an alternative approach to Hegelian versions of Marx’s dialectic. Chapter 2, ‘Debates’, concerns fundamental theoretical issues in political economy - especially the labour theory of value, ‘abstract labour’ and the tendency of the average rate of profit to fall. Chapter 3, ‘Crises’, is addressed to the general theory of crises, connected, Carchedi argues, to the tendency of the average rate of profit to fall; to the ‘subprime debacle’ or crisis of 2008-09; and to the question whether Keynesianism offers a way out. Chapter 4, ‘Subjectivity’, addresses the theory of knowledge, its production and - he argues - its necessary ‘class content’. Along this road a critique of Hardt’s and Negri’s work is offered.

The structure of the book thus moves from the abstract (the dialectic) to the concrete (the crisis), to return to the abstract (the theory of knowledge and its class constitution), although there is a ‘concrete’ aspect in the last chapter in Carchedi’s critique of fashionable ideas of the ‘knowledge economy’ and of Hardt and Negri. However, for the purpose of grasping the interconnections of the argument, it is probably most convenient to work in a different direction: from the treatment of the crisis and the theory of crises, to the class constitution of knowledge, and from there to the issues of the fundamentals of the critique of political economy and Carchedi’s version of the dialectic. This review will be in two parts: this first part will cover the first two issues, the second will focus on Carchedi’s interpretation of ‘abstract labour’ and on the dialectic.

Crisis and crises

Chapter three of Behind the crisis offers a ‘falling rate of profit’ (FRP) explanation of the tendency of capitalism to produce crises, and in particular of the present crisis. This general approach will be to some extent familiar to regular readers of this paper from Hillel Ticktin’s critique of it published in 2011, from 2012 my own review of Paul Mattick’s Business as usual, Nick Rogers’ review of Andrew Kliman’s The failure of capitalist production and later interview with Kliman.1 Carchedi is closer to ‘temporal single system interpretation’ (TSSI) authors like Kliman than to Mattick, but unlike them places a heavy emphasis on dialectics.2

At its core, Carchedi’s account of crisis holds that the falling average rate of profit in productive industry leads to state stimulus by increasing the quantity of money, and movement of capital into unproductive sectors, especially financial speculation, leading in turn to a bubble which has to burst, because the growth in asset values is accompanied and, indeed, results from declining real purchasing power. The bursting of the bubble makes a new expansion possible if sufficient capital as social relation - meaning capital invested in productive industry - has been destroyed in the crash phase: this allows a fall in wages, in the prices of means of production, and in total debt, and bankruptcies allow both means of production to be acquired below value, and an increased market space for survivors (pp144-51, especially 150-51).

The bulk of chapter 3 is, however, not elaboration on this scheme, but critique of alternative views. It contains four sections. Section 1, ‘Alternative explanations’, criticises arguments that crises are to be explained by policy failures; underconsumptionism; the ‘profit squeeze’ argument (most associated, in this country, with the names of Andrew Glyn and Bob Sutcliffe). The ‘disproportionality’ account most associated with Hilferding is not discussed. Section 2, ‘The cyclical movement’, begins with a critique of the idea that crises are caused by falling productivity, before moving into the version of FRP which I have summarised in the last paragraph.

Section 3, ‘The subprime debacle’, gives a narrative of the crash of 2008-09 with a certain amount of explanation of the particular financial devices which triggered the form of the crash. This is a conventional element of books and articles on the crisis, but is a little dislocated from the rest of the discussion. In a sense, it is analogous to providing a detailed explanation of the functioning of the ‘accommodation bills’ and similar devices which were implicated in late 18th century and early 19th century crashes. The section does not include, as such, a theorisation of the relationship between the productive sectors - where the explanatory driver is found in Carchedi’s account - and money and finance, or of the recurrent tendency to baroque financial elaborations, which is expressed in different ways in ‘accommodation bills’ around 1800 and in ‘collateralised debt obligations’ around 2000.

Section four, ‘Either Marx or Keynes’, is an argument for the ineffectiveness of Keynesian policies, which is also available online elsewhere.3 The substance of the argument is that Keynesian policies at best postpone crisis in the very short term. The workers’ movement should fight for policies which redistribute in favour of the working class and for state investment financed by takings from capital - not from the perspective of Keynesian claims, but on the basis of fighting for social relations based on “cooperation, equality and solidarity” (p181).

I made the point in my review of Mattick that there is a problem with FRP theories, in that they tend to be methodologically nationalist: ie, rely very heavily on single-country data, particularly US data. Hence, what may be shown is not a crisis caused - at a level standing immediately behind the financial crash - by an overall fall in the global average rate of profit, but one caused - at this level - by relative US decline. The same is true of Carchedi’s account.

This problem may be partially assisted by Michael Roberts’ 2012 paper, ‘A world rate of profit’,4 but it should be noted (a) that Roberts is considerably more cautious with ‘pure’ FRP reasoning than Kliman, Mattick or Carchedi, and (b) that even Roberts’ ‘world rate of profit’ data are for the G7 countries (US, UK, France, Germany, Japan, Italy and Canada) plus the Brics (Brazil, Russia, India and China), not for the whole global economy. So a couple of very different examples - Amazon’s EU profits (for tax reasons, supposedly all made in Luxembourg) and the real growth of mining in Australia - will both be out of the picture. The construction of Roberts’ data sharply illustrates the difficulties pointed to by Ticktin in his critique of FRP theory.

The problem of the theoretical relation of the productive sector to money and finance is also relevant to the critique of Keynesian policies. Carchedi’s argument that these merely postpone crisis rests on the supposition that debts must be repaid. Hence, stimulus policies can only be at the expense of capital through taxation, or at the expense of the working class. But Bill Jefferies, in a critique of an earlier article by Carchedi in International Socialism, sharply makes the point that printing money - at negligible cost to the issuing state - has the effect that non-floating debts denominated in that money are partially defaulted, with a result which is, characteristically, redistributive between states.5 At the end of the day, both the question of money and that of methodological nationalism are posed.

Relatedly, Carchedi in a footnote on p148 criticises Kliman for including unpaid debts in the destruction of value, because there is “only a transfer of value from the creditor to the debtor”. But, of course, the normal case of unpaid debts is that the debtor is bankrupted and his/her/its goods sold at distress prices below current market level (though the effect may be to drive current market prices down) in the hope of paying a dividend of some sort - say, 5p in the pound - to the creditor. The monetary loss is usually a real loss - or, more exactly, the realisation of losses made earlier.

In fact, Carchedi’s account at p151 of how the crisis creates the conditions for the next recovery includes these effects, which a Keynesian would argue can be produced by inflation as an alternative to full crash: falling real wages, acquisition of means of production at distress prices net of amortisation, and a lower debt burden. The account itself is in a certain sense paradoxical. If what drives the crisis is simply the tendency of the rate of profit to fall, one might expect that a reduction of the population of capitals, the money valuation of their assets and nominal debts, would be sufficient to promote an upturn without either falling wages or (Carchedi’s second point in his list on p151) falling prices of the means of production due to technical innovations; and, conversely, that falling wages and technical innovations cutting the cost of machinery would not provide the basis for an upturn without disappearance of firms and devalorisation of capital assets.


What is, or should be, visible from these picky queries is that Carchedi’s interpretation of the crisis is a part of a much larger debate among Marxists, which involves both complex questions about the use of the data and equally difficult questions about how to read (or use) Marx. A recent example of the latter point is an article by German value-form theorist Michael Heinrich in the April 2013 edition of Monthly Review.6

Heinrich argues that we can see from Marx’s manuscripts a series of distinct projects in his work on the critique of political economy, which each involved very substantial revisions of his ideas: the first project was the Grundrisse; the second the Contribution to the critique of political economy of 1859 and the manuscripts of 1861-63, intended to be in six books of which ‘capital’ would only be the first; the third project was ‘Capital in four books’, but even within the latter project, a first draft of 1863-65, a second draft in the form of Capital Vol 1, as published and manuscripts of 1867-71, and a third draft making substantial further changes represented by the second German and French editions of 1873 and 1875, and by manuscripts of 1874-81.

Within this framework, Heinrich argues that Marx sought a fully logical derivation of the idea that the tendency of the rate of profit to fall is the law - ie, the dominant tendency - and the ‘counter-tendencies’ are merely counter-tendencies, but failed to achieve it, and recognised in around 1865 that he had so failed. The appearance of a FRP theory of crisis in Capital Vol 3 resulted from Engels selecting the 1865 manuscript, rather than a later one, as the basis of his edition, and further editorial changes which Engels made to add coherence of presentation to what were merely rough drafts as he found them. On the contrary, Heinrich argues, the manuscripts of the 1870s, and Marx’s research activities in this period, show that he had come to recognise that it was not possible to theorise crisis simply on the basis of the FRP (even if this could be proved), but that an analysis of the credit system was a necessary precursor stage. Heinrich adds that, given the role of central banks, this, in turn, would require theorising the state in the economy.

I am not entirely persuaded by Heinrich’s objections to the logical necessity of a secular, long-run tendency for the rate of profit to fall (which involve hypotheticals that are at most remote possibilities). But I bring his article in because it seems to me that he must be right that an account of the cyclical return of crisis in capitalism will necessarily involve theory of money, and hence of the credit system, and hence of the state. Carchedi’s account, I think, moves too immediately from FRP in productive industry to the cyclical return of crisis.

Carchedi, however, has two answers to alternative views of Marxist crisis theory. The simpler, though treated second in the book, is one which played a central role in the debates on crisis theory in the 1970s. It is to argue that alternative views are to be rejected because they are opposed to the interest of the working class in the supersession of capitalism. The more complex, treated earlier in the book, are Carchedi’s readings of fundamental categories in terms of his interpretation of Marx’s dialectic.

Class and science

Chapter 4 of Behind the crisis, ‘Subjectivity’, begins (section 1) with a critique of the ‘information society’ and ‘service society’ ideas, which is very useful both in distinguishing the different kinds of ‘information’ and ‘services’ (productive, unproductive and, indeed, destructive of value as well as of use-values), and in flagging up the continued presence of an imperialist-organised global division of labour. Section 2, ‘Individual knowledge’, proceeds to criticise the unhelpful idea of a division between mental and manual labour (‘manual’ work involves thought; less significantly for ideology, mental work involves both the consumption of energy by the brain and - in most cases - activity by the hands). He replaces this distinction with a distinction between subjective mental transformations (changing ideas subjectively held, aka research or learning) and objective transformations (eg, building a car). The first of these two has to be distinguished between individual mental transformations - of individuals’ ideas - and social mental transformations - of “the knowledge shared by the members of a social group” (p195).

In this context, Carchedi offers a polemic against Lenin’s Materialism and empirio-criticism (MEC) as leading to a “theoretical cul-de-sac” inconsistent with modern neuro-science (pp200-02). There is a point of importance here. Carchedi is, of course, correct that mental phenomena are neither immaterial nor simple ‘reflections’ of exterior ‘material’ phenomena. The point that brain states are material had already been made by Dietzgen when Lenin was writing (and in a limited sense reaches back to Spinoza), so that it is not dependent on modern neuro-science. What Carchedi omits is the political context of MEC, which was a debate between the political voluntarism of the group round Bogdanov, Lunacharsky and others, and the ‘Engels-Kautsky-Plekhanov’ idea that “freedom is the recognition of necessity”,7 in the sense that real choices are made more possible by the recognition of objective limits to these choices: eg, you can build road bridges, but not out of papier-mâché.

I addressed this issue in 2008 in the second part of my polemic against John Robinson, ‘Against philosopher kings’. To repeat a point I made there, material forces in the real world vary in power. The power of the ideas in my head, or the words I write, is very limited. Using the methods of the sciences requires us to presuppose the real existence, or more exactly the recalcitrance, of the material world outside our heads. If I had the idea that I could walk on water, it would not prevent me getting wet. It is this fundamental point which Bogdanov and his co-thinkers in effect denied, and which Lenin defended in a muddled way in MEC.8

What is involved here is replacing a deterministic, causal approach, as in MEC, to the relation of ideas to the external ‘objective’ or ‘material’ world (the ‘reflection theory’) with an approach based on limits or constraints of the ‘objective’ or ‘material’ world on the power of ideas. The point bears on the issues of the foundations of the critique of political economy, and the dialectic, to be discussed later.

Towards the end of the section Carchedi begins the analysis of the next section, ‘Social knowledge’, with a formulation which is quite problematic: “each concrete individual belonging to a social group shares potentially a common view of reality which becomes realised as and through the knowledge of its intellectual representative” (p202, emphasis added). The problem is the idea of the “intellectual representative”, which carries a deeply unhelpful burden of misleading overtones about the role of intellectuals (and, at that, individual intellectuals). “If all concrete individuals develop different forms of social knowledge, only some expand their knowledge into forms of knowledge that represent the interests of social groups ... in the case of the intellectual representatives, the knowledge produced is, as it were, the representative knowledge, the knowledge accepted by other members of that knowledge-group ...” (p204, original emphasis).

The struggle of social knowledges thus becomes an element, and, indeed, the central element, of the struggle of classes. A result is that “radically antagonistic movements (for example, women, racial, student, ecological) are indeed elements of labour as a class ... inasmuch as they express an anti-capitalist social content, one based on equality, cooperation and self-management” (p206).

A peculiar corollary of this approach is that “Women’s oppression is the outcome of the successful attempt by capital to change the social content of the social relation between male and female workers”, but “Similar considerations hold also for those social relations which have pre-existed the capitalist system, like racism” (both at p207). In the concrete history, the oppression of women under capitalism perfectly clearly grows out of oppression of women in prior class societies, and modern racism is a novelty which emerges with capitalist imperialism in the ‘age of discoveries’. Carchedi’s account of class struggle in terms of the struggle over knowledges inverts this history.

Section 5, ‘Labour’s knowledge’, identifies labour’s class rationality with the “superseding tendency” (pp209-10) which appears in capitalist society episodically and partially, interpenetrated with pro-capitalist ideologies. Carchedi offers a brief critique of the ‘analytical Marxist’ approach of Erik Olin Wright, which he argues is actually Weberian, static and individualistic. He proceeds to use as an example the idea of the labour aristocracy, coming in the end to the (correct) conclusion that, while labour aristocracies exist, they remain a segment of the working class and the phenomenon is not consistently in capital’s interests.

Section 6 then addresses briefly the production of knowledge as a form of productive labour within capital’s terms (productive of surplus value). It is followed by section 7, ‘The general intellect’, which is addressed to criticising the theory of Italian workerism, or operaismo, and the more recent version of this school represented by Hardt and Negri.

Egalitarian future

With section 8, ‘Science, technique and alien knowledge’, we return to the core of the issue of the class determination of knowledge production, this time in relation to the physical sciences and the choices of technique made by capital with a view to controlling the working class.

Carchedi provides a series of examples of ways in which capital’s control of choices about technology and research programmes, and the internalisation of capitalist ideas by scientists, produce pro-capitalist science and technology. Section 9, ‘Trans-epochal and trans-class knowledge’, attempts to rebut the argument that these forms of knowledge are an objection to class determination of knowledge by using examples such as the ontology of the number one and the medieval invention of the mechanical clock and its early modern development as affecting the concept of time. Carchedi does, nonetheless, recognise a class of knowledge “that has been conceived by mental labourers to be used both by capital and labour and to the advantage of both capital and labour”; this knowledge “contributes to reproduce capital and its rationality even when it is used by labour to resist capital’s domination” (both p262, original emphases removed). This conception almost certainly overstates the coherence of “capital and its rationality”.

Finally, section 10, ‘Knowledge and transition’, attempts to cash these arguments in a concept of the transition from capitalism to socialism, which takes its starting point in the rejection of both Lenin’s arguments for the socialist use of ‘Taylorism’ (the assembly line or ‘scientific management’), and the early Gramsci’s argument for socialist compulsion at work (p267). Carchedi states that socialism, in contrast, is based on egalitarianism, cooperation and self-management: this requires reorganisation of the material division of labour, so that “all positions (jobs) are ‘balanced’ in the specific sense that they all, while requiring different tasks, offer roughly the same possibility for self-realisation (including a balanced ‘mix’ between objective and mental labour)”. He adds to this flexibility of jobs the facility for individuals to move between jobs, and “constant requalification of labour” (both p269).

In response to arguments that reducing specialisation will reduce productivity, he responds with the (not uncommon left) argument that increased self-realisation will increase productivity; in addition, socialism will do away with forms of capitalist waste (advertising, weapons production, crises/unemployment and speculation (pp269-70). In response to Taylor’s argument (much more widely maintained by pro-capitalist ideologues) that specialisation increases self-realisation, he responds that Taylor’s example of a surgeon is inapposite, since most division-of-labour specialisation produces deskilled, repetitive tasks (p270). In response to the argument that even in an egalitarian society there will always be undesirable tasks, requiring someone to do them, even if on the basis of rotation, he responds with “balanced positions” (above), but also with “a type of social interaction, to begin with at the level of production, based on altruism, as opposed to the egoism inherent in the capitalist production-relations (p271).

The main body of the text curiously reaches a conclusion which includes a ‘socialism in one country’ and ‘national roads’ statement: “The specific features of this radically alternative system cannot be forecast. They will emerge from each country’s specific history, including the history of its struggle to move from a capitalist society to an egalitarian one. However, just as there are general principles of capitalism which apply to all specific capitalist countries, so there are general principles which should apply to all egalitarian countries” (p271). I say ‘curiously’, because the logic of Carchedi’s recognition of the international material division of labour in connection with the earlier discussions of the labour aristocracy and of ‘information society’ and similar ideas should be plainly inconsistent with such a perspective.


To begin at the end with the image of ‘socialism’ (CPGB usage is to call this society of cooperation and self-management ‘communism’, reserving ‘socialism’ for the period of transition which will immediately succeed capitalism). Carchedi is plainly right that the nature of communism is fundamentally different from capitalism: the ‘social aim’ is not the maximisation either of profit, as in capitalism, or of material output, but the maximisation of human development. He is also clearly right that this involves the supersession (Aufhebung in the language of Hegelian Marxism) of the individual specialisation of productive function, which is commonly called ‘division of labour’: a point made by Marx and Engels both in The German ideology early in their work and in the Anti-Dühring late in it.

Within this framework, he is probably mistaken to argue against the ‘Taylorists’ that self-realisation will increase productivity. This is an unnecessary wager, since a society whose aim is to maximise human self-realisation will not have a necessary aim of maximising productivity, which is an aspect of the specific dynamics of capitalism and connected to capitalism’s inability to cope with the metabolic relation of humanity and nature (ecological destruction in various forms). It is also an unnecessary wager to argue that increased altruism will remove the need for social compulsion in relation to disagreeable tasks: social compulsion (if only in the form of exclusion) is not absent from hunter-gatherer societies, and it is sufficient to make the point (as he does) that the rotation of employments makes disagreeable tasks no more than periodic chores.

Missing in the account is, strangely, the fact that the tendency of the productivity of labour to grow has already produced as its obverse a tendency towards large standing unemployment and underemployment: that is, relative growth of part-time work. Hence not only the rotation of employment and “constant requalification of labour” are posed, but also radical shortening of the working day or week to share out the necessary work - which also creates space for human social action and creativity outside the sphere of necessary work.

Carchedi is right to argue - not fully explicitly - that for the working class to be emancipated it needs to pursue these goals rather than goals of increased ‘growth’, ‘efficiency’ or whatever, which remain within the logic of capital. In this respect Carchedi’s approach is massively superior not only to the advocates of a revival of Labourism or 1950s-60s ‘social democracy’, but also to all those concepts of socialism which leave untouched the ‘division of labour’ between the managers and the managed, technical specialisation or incentive structures to drive growth.

It is a paradox of his argument that the conception of the production of social knowledge precisely does instantiate, in a way which is not dependent on the capitalist context, a division of managers and managed in the form of the role of the “intellectual representative” of a class. The construction of a body of ‘political ideas of a class’ is necessarily a collective product, and one which involves clashes of ideas between individuals and groups, dialectic in its pre-Hegelian sense. In this context it is certainly true that individuals necessarily play, at particular points, leading roles; but this is by no means the same thing as acting as “intellectual representatives” of the class.

This issue leads into the more general problems of the idea of the necessary class content of knowledge. Carchedi’s arguments here are substantially weaker and dependent on examples, which need not be examples of logical necessity, as opposed to tendency in a more limited sense. Or, perhaps, to put it another way, while these ideas are given necessary limits in chapter 1 (in relation to logical and empirical support for arguments) and chapter 4 (in relation to knowledge “that has been conceived by mental labourers to be used both by capital and labour and to the advantage of both capital and labour”), they are overstated in their application to disagreements on concrete questions of political economy in the rest of the book.

We will return to chapter 1 in the second part of this review. My point here is that there is a partial conflict between two approaches in the book. Much of what Carchedi does is criticise theories on the ground of their logical coherence and predictive power (or lack thereof). But he also repeatedly treats as a ‘trump’ argument, at several points, that the consequence of adhering to a rival theory is to abolish the logical necessity of the supersession of capitalism, and thus to undermine the (potential) confidence of the working class in its own mission.

The problem is that we are unavoidably involved in arguing about what the interests of the working class are. Suppose, merely momentarily, for the sake of argument, that the marginalist crap was true: it would follow that workers’ real objective interests would not include the collectivism and collective organisation to which - in marginalist eyes - workers are regrettably prone. Carchedi makes anti-capitalism so much the centre of workers’ class interests that the class includes self-identified cross-class groups like women’s and oppressed-race movements as long as they are anti-capitalist. This would just be wrong. Equally, suppose momentarily that Keynesian economics was right: it would be in the objective interests of the working class to pursue Keynesian solutions.

In the case of the debate between FRP and competing accounts of the tendency of capitalism to cyclical crisis, and of the larger secular tendency of capitalism to decline, what is at stake is not even whether the interests of the working class require collectivism, collective organisation, and an aim to replace capitalism. It is not even whether capitalism tends to decline: though it is certainly true that some opponents of FRP theory have used this opposition to argue that capitalism does not tend to decline, this is certainly not true of all such opponents: for example, Ticktin (cited earlier).

What is really in question in the debate over the drivers of crisis is the form of the decline of capitalism, and the strategic consequences for working class politics which follow from this form. But, once we see this, we see that this is not - as Carchedi tends to present it - a debate in which only one side can express the interests of the working class as a class. True, in the test of events, only one side in the debate - or, indeed, none - can be proved to be right. But that is not the same thing. Reducing it to a question of the class-representative character of ideas tends to produce merely sectarianism. The book would, I think, be more coherent without this type of argument.



1. Ticktin: Weekly Worker September 8 2011; Macnair: February 22 2012; Rogers: July 5, September 27 2012.

2. Carchedi’s own point: p113, note 139.

3. Eg, in ISJ No136, autumn 2012: http://www.isj.org.uk/?id=849#136carchedi_1.

4. http://thenextrecession.files.wordpress.com/2012/07/roberts_michael-a_world_rate_of_profit.pdf.

5. www.permanentrevolution.net/entry/3375, responding to Carchedi and Choonara in ISJ No132, autumn 2011 (Carchedi at http://isj.org.uk/index.php4?id=761&issue=132). The PR entry does not identify the author, but I deduce that it is Bill Jefferies from the content and style; if this is mistaken, my apologies.

6. http://monthlyreview.org/2013/04/01/crisis-theory-the-law-of-the-tendency-of-the-profit-rate-to-fall-and-marxs-studies-in-the-1870s.

7. An interesting take on this issue by Davie Maclean can be seen at www.marxists.org/reference/archive/hegel/txt/davie07.htm.

8. Weekly Worker December 11 2008.