Reply to Bill Jefferies & the Permanent Revolution Organization

October 23, 2009 by  

By Andrew Kliman.

In an October 16 article, “ISJ 124: Kliman and Choonara review” published on the website of the Permanent Revolution organization, Bill Jefferies criticizes my recent review of Chris Harman’s new book, Zombie Capitalism. Key points of contention have to do with the current economic crisis and its causes, so my response to Jefferies may be of general interest, and of interest to those who’ve read my new study of movements of profitability in the U.S. corporate sector.

I was very pleased to read Jefferies’ critique, because it was comradely (though in a comment following it that I will discuss below, he made an unsubstantiated and false charge of scholarly misconduct against me), and because he engaged with what I actually wrote. That’s something I’m not used to. I’m used to simultaneist-Marxist and Sraffian critics of Marx who lie about what I write, intentionally distort it, engage in diversionary ploys, and take actions that have threatened to deprive me of my means of earning a living. And I’m used to “Marxist-Humanist” critics who set up strawpeople and knock them down while assidously avoiding the words I’ve actually written.  So a critique like the one that Jefferies wrote is quite refreshing as well as quite commendable.

Also, here’s a big h/t to “mne.”  I’m not aware of whom s/he is, but s/he has said many good and important things about Jefferies’ critique in the comments section following it, though s/he is outnumbered there. S/he is probably the “m” that let me know about the critique by posting a comment on the MHI website yesterday. If not, an h/t to “m” as well.

1.  On my relationship to Harman, the International Socialism journal, and all that

a. Jefferies writes that “Kliman shares the Harman, Choonara and the ISJ’s view that capitalism already existed in the former centrally planned economies of China, Russia and Central Europe.”  Yes, but only in the same sense as I share “their” view that the Sun is the center of the solar system. In both cases, I arrived at my view independently of them. I am a Marxist-Humanist. To borrow a phrase that Marx used to describe his relationship to Hegel, I am a pupil of that mighty thinker, Raya Dunayevskaya, and I am politically active with Marxist-Humanist Initiative, which is endeavoring to renew Marxist-Humanism organizationally in the wake of the disintegration and retrogression of prior Marxist-Humanist organizations. Thus, when Jefferies writes that “Kliman is … from a broadly speaking similar theoretical tradition to that of the ISJ,” he is speaking very broadly.

b. Jefferies seriously misrepresents my review when he alleges that

Kliman claims that the basic problem with those who disagree with Harman is they have not broken completely with capitalist ideology and that therefore they “must always try, as Harman puts it, ‘to pin the blame on something other than capitalism as such”. Some might think that this was an attempt to shut down the debate ….

Nowhere did I say or suggest that those who disagree with Harman haven’t broken completely with capitalist ideology. I wasn’t even referring to his views at that point in the review, but to the fact that the economic crisis has not impelled many on the Left to engage in serious rethinking:

On the left there has been even less rethinking than on the right. This is because the crisis has the “form of appearance”-to use an apt Hegelian-Marxian expression-of being a crisis of free-market, deregulated capitalism and specifically a crisis emanating from the financial sector. In other words, it appears to be a crisis of things the left never celebrated (though those who spoke of a new long upturn tended to regard them as successful), and thus an ideological predicament only for the other guys.

The basic problem is that those who have not broken completely with capitalist ideology must always try, as Harman puts it, “to pin the blame on something other than capitalism as such”.

What is at issue is the lack of rethinking, not “disagreement with Harman.” There is a world beyond the shores of the UK. Thus, consider the views of the US Stalinist economist David Laibman, who I quote in my review. Not long ago, he wrote stuff like

Capitalism … maintains a certain coherence over time. The homeostatic aspects must be balanced against the transformative, crisis-provoking ones. The term “equilibrium” … has different meanings … and some of them are crucial to the Marxist enterprise.

Has there been any serious rethinking of this on Laibman’s part. No. Instead, true to tradition, the only thing that’s happened is that his line’s been changed again:

the Marxist understanding of the inherent instability and progressive unworkability of capitalism has been vindicated!”

(The first quote is from David Laibman, 2004, “Rhetoric and Substance in Value Theory: An Appraisal of the New Orthodox Marxism.” In Alan Freeman, Andrew Kliman and Julian Wells (eds), The New Value Controversy and the Foundations of Economics (Edward Elgar), p. 15. The second is from David Laibman, 2009, “The Onset of Great Depression II: Conceptualising the Crisis,” emphasis in original.)

Of course, some people aren’t even changing their line, since the specific form of appearance of this crisis permits them to continue to think that they can properly pin the blame on “neoliberalism” or “financial capitalism” or “deregulation” or “corporate greed” or anything and everything but capitalism itself. So that’s why, far from trying to “shut down the debate,” I’ve been trying to get one going. But I can count on the fingers of zero hands the number of times I’ve been invited, here in New York or elsewhere in the US, to debate a simultaneist-Marxist economist or any other proponent of the view that the current crisis is purely a financial crisis unconnected to a persistent profitability problem.

2. On the crisis and the persistent fall in profitability

a. Jefferies writes that my review of Harman’s book “re-treads” a “well worn road” according to which

capitalism is stagnant and has been for nearly four decades now. Throughout the period of globalisation …, capitalism has seen declining production and investment, overcapacity and low, stagnant or falling profit rates. The digital age, internet revolution and Nintendo Wii Fit are all manifestations of capital’s inability to revolutionise the productive resources.

Almost all of this is simply false. Neither in my review nor elsewhere do I claim that capitalism is stagnant, that is it unable to revolutionize the productive resources, or that there have been declining production and investment throughout the period of globalization. And “overcapacity” as such is an obvious fact (does Jefferies wish to argue that the capacity utilization rate has been 100%?).

For the same reason, it is also simply false to claim, as he does, that my review “mount[s] a standard defence of the stagnation school” or that it is “a thinly veiled polemic against those Marxists specifically including ourselves in Permanent Revolution (PR), who have demonstrated that the period of capitalist globalisation has been anything but stagnant.”

To his claim that my review is a polemic specifically against Permanent Revolution, he adds the further claim that “Kliman … goes on ‘Even some Marxists spoke of a “new long upturn”‘. Kliman is referring to PR’s 2006 article ‘Capitalism’s Long Upturn.’  Of course he does not admit it.”

Neither of these claims is true. I did not have the views of Permanent Revolution-with which I am familiar only in passing–in mind when I read Harman’s book or when I wrote my review. What was on my mind was the pervasive myth of “capital resurgent” put forward by some academic Marxist economists and, unfortunately, parroted by many on the US left. (Capital Resurgent is the title of a 2004 book by Gérard Duménil and Dominique Lévy, two people who are genuinely “academic Marxist[s]“; I am a Marxist-Humanist who happens to teach for a living.) For example, even well into the current crisis, late last year, after the collapse of Lehman Brothers and all that, the US “radical” economic “journalist” Doug Henwood spoke of the period since the early 1980s as a new long boom, or words to that effect.

And I did not refer to “PR’s 2006 article ‘Capitalism’s Long Upturn,’ which I do not recall having read and doubt that I read. I was quoting the author of the book I was reviewing. The words “Even some Marxists spoke of a ‘new long upturn’” are his, as I indicated in a footnote, though Jefferies does not bother to inform the reader of that fact.

b. Jefferies complains that

Kliman tries to prove too much. By wanting to demonstrate that profit rates have not recovered with globalisation, he actually shows that they rose in the 1970s compared with their levels in the 1960s boom, particularly after the oil crisis of 1973. It effectively destroys profit rates as a guide to the health of the capitalist economy or otherwise.

I have anticipated and responded to this argument in “The Persistent Fall in Profitability Underlying the Current Crisis: New Temporalist Evidence.” See part II, section C. The extremely short version is that the rate of profit and “the health of the capitalist economy” are different things and shouldn’t be conflated.

I also made adjustments for inflation (in the general price level and in the monetary expression of value) in part V, section D of the same paper. Nominal rates of profit did of course rise sharply in the 1970s. That’s exactly what should be expected in a period of rapidly accelerating inflation. But (as I noted in my review of Zombie Capitalism) the rise is entirely or almost entirely attributable to the inflation. The adjusted historical-cost rates of profit did not rise sharply. When a broad measure of “profit” is used in the numerator, my results indicate that the inflation-adjusted historical rates of profit fell during the 1970s.

However, in the period between the trough of 1982 and the last trough before the current crisis, 2001, there was little or no difference between the trends in the nominal rates of profit and the trends in the inflation-adjusted rates.  Depending on the particular measure of profitability, there was a very slight rise in the rate of profit, or a complete failure of the profit rate to recover, or a continuing fall in the rate of profit.

c. Jefferies contends that my way of measuring the rate of profit “is not a Marxist theory of the rate of profit” because I “exclude[ ] wages and circulating constant capital” from the denominator.

I have anticipated and responded to the “Marxist theory” bit in part II, section D of “Persistent Fall.” I do not exclude circulating constant capital, though I didn’t think a review of Zombie Capitalism was the place to go into a long discussion of the various measures of profitability I have looked at. Measures that include circulating constant capital (which are quite unsatisfactory, because they also count output that hasn’t yet been sold as advanced capital) are reported in “Persistent Fall.” One historical-cost rate of profit that includes it rose just a tad between the 1982 and 2001 troughs, while the other continued to fall.

I did not include wages, because data on the turnover time of wage payments are unavailable. The turnover time is important because, although the total wage bill is large, the turnover of wage payments is rapid, so little capital is advanced in the form of wages. As an exercise, I have just assumed that wages turn over twice a month on average and have thus included 1/24 of the annual wage bill in the denominators of the rates of profit. The trends in the rate of profit are scarcely altered. (My data are in a spreadsheet available to all on my website, in the same location as “Persistent Fall,” so you don’t have to take my word for it.)

d. Jefferies writes, “leaving [circulating constant capital and wages] out of the equation means that an accurate measure of profit rates cannot be established.” I have anticipated and responded to this argument in part II, section C of “Persistent Fall.”

e. Jefferies also objects to my use of historical-cost rates of profit (the only genuine rates of profit there are):

There is also a debate amongst Marxists economists, as to whether to use historical or current cost of fixed assets when determining the value of assets in the calculation of the rate of profit. Kliman thinks it is correct to use historical cost. Marx on the other hand explained that as the socially necessary labour time required for the cost of capital production changed so would the value of fixed assets. If a capitalist buys an expensive machine it may be working fine, but if a new cheaper machine is invented that is no consolation to him (probably it’s a bloke). He cannot insist that his machine cost him hard money and he wants it back. The capitalist will simply be unable to sell his now expensive and out of date product. Instead the cost of the capitalists historic investment will be devalued immediately to the level of the most efficient competitor i.e. its current replacement cost. Historic investments will be written down to their present cost of reproduction, i.e. the socially necessary labour time they cost now.

Yeah, I know. I’ve read Marx, too, and well enough to know that this is irrelevant at best. (Actually, the devaluation of the capital causes the rate of profit to fall, not rise, when the loss is written down, which is a hugely important phenomenon in this crisis.) Jefferies is simply confusing the value (or price) of means of production with the capital that was advanced to acquire them. A rate of profit is the ratio of profit to advanced capital, not the ratio of profit to the value or price of means of production. [Two irrelevant sentences in original post removed by me on 10/24/09--AJK]

A fuller critique of current-cost “rates of profit” can be found in “Persistent Fall,” especially part V, and in my 2007 book, Reclaiming Marx’s “Capital”: A refutation of the myth of inconsistency.

… Speaking of which-and speaking of inconsistency-I believe that it was Bill Jefferies who not only published a favorable review of the book on the Permanent Revolution site, but also specifically endorsed its repudiation of physicalism and simultaneous valuation:

Marx’s critics assert that it is the physical quantities of things, the amount of useful things produced in excess of the initial quantity of inputs that create exchange value.

This is known as “physicalism” and it runs alongside two other key propositions, “simultaneism” … and the idea of a “dual system”….

Physicalism could only be correct in a static world, where production does not take place in time, i.e. it is not temporal, and where inputs and output are priced simultaneously.

… of course Marx’s account does produce a difference between input and output prices, but far from this being an inconsistency in his account, it is absolutely consistent with his explanation of the derivation of prices from values.

In other words Marx had a temporal, single system method.

Was the author of these excellent passages unaware at the time that current-cost “rate of profit” is inherently physicalist, or that it is an inevitable by-product of simultaneous valuation?  Hardly. I repeatedly stressed this in my book. Also, at the end of the review of the book in Permanent Revolution, we find the following:

profit rates are measured against the actual cost [historical cost] of fixed capital … rather than its notional cost [current cost or replacement cost]. … If the rate … of profit is measured against the new notional value i.e. its value if it had to be paid for at present prices [i.e., at the current cost of fixed capital], then it is possible to show that rates of profit are low or falling, even when they are high and rising. [Bracketed material inserted by me-AJK]

So why has Jefferies now defected to the side of the physicalist-simultaneist academic-Marxist critics of Marx-basically the same people who use their simultaneous-valuation model to “prove” that Marx’s value theory and law of the tendential fall in the rate of profit are internally inconsistent and therefore false?  Why does he no longer understand that a rate of profit is the ratio of the profit of one moment to the sum of capital that was actually advanced at earlier moments, not the amount that would have been advanced if the means of production “had to be paid for at present prices”?  Might it have something to do with the fact that he suddenly doesn’t like the conclusions that flow from temporalism?

Ironically, it is “bill j” who accuses me of choosing a particular concept of profitability in order to get the conclusions I want! “The reason Kliman prefers the historic fixed cost measure is because it reduces profit rates now” (22 Oct, 2009, comment on his article). He does not substantiate this extremely serious allegation of gross scholarly misconduct.

The allegation is completely false. I first criticized current-cost “rates of profit” publicly more than two decades ago, in a 1988 conference paper that was then published in a journal (“The Profit Rate Under Continuous Technological Change,” Review of Radical Political Economics 20:2, Summer 1988). This is publicly available proof.

I of course had no way of knowing way back in the 1980s that current-cost “rates of profit” would rise while historical-cost rates of profit would level off or continue to fall into the current decade. And I’veconsistently (a term I use advisedly here) put forward and developed my critique of current-cost “rates of profit” over two decades.

In “Permanent Revolution – our way forward,” Permanent Revolution says that “Our starting point is that we are an organisation that tells the truth.” But their “bill j” has not done so.

f. Jefferies does not like the fact that I assess trends in profitability by means of trough-to-trough comparisons:

Kliman would claim that he ends his series in 2001 as this was the trough of the last recession. The problem with that is we are attempting to establish the reasons for the recession in 2008 not 2001. If we want to know why there was a recession in 2008 we need to know the direction of profit rates then not seven years before.

… [We need to know about] the period after 2001 … The period which preceded the present crash and which explains it …

First, I do not “end the series.” I make trough-to-trough comparisons when assessing trends in profitability, but I provide all of the data through 2007 and do not ignore it (though again, my review of Zombie Capitalism didn’t go into all the details of my study of profitability). Second, Jefferies is guilty here of cherry picking peaks and troughs, a procedure I criticize in Persistent Fall, part IV, section B. To avoid such cherry-picking of the years one prefers, one must look at comparable points in any series of data, such as profit-rate data, that exhibit pronounced short-run cyclical fluctuations. Third, “I measure trends in the rate of profit by comparing one trough to another … in order to ascertain whether a sustainable recovery in profitability took place” (“Persistent Fall,” p. 4, emphasis in original). A short-term cyclical spike in profitability, driven by a huge asset bubble, that ends in the worst crash since the Great Depression (or worse-time will tell) is not a sustainable recovery.

As for Jefferies’ belief that what occurs immediately prior to an event is what explains the event, I wonder whether he would maintain that when a chronically and terminally ill person is taken to the hospital and then dies, the cause of death is that she was cared for by the medical staff? Let me also note that I anticipated and responded to this line of reasoning in “Persistent Fall,” part III, section B, where I discuss intermediate links between falling profitability and crisis, and I explain why time lags are to be expected and why they pose no problem for Marx’s law of the tendential fall in the rate of profit but are, instead, part and parcel of it.

3.  Other points

a. Jefferies quotes the following passage in my review of Harman’s book:

The title Zombie Capitalism reflects Harman’s focus on capitalism itself. Taking seriously Marx’s theory of the “fetishism of the commodity”, he characterises the system as a zombie, an undead creature[,]

He then comments that the relationship between “Return of the Living Dead” and “Marx’s theory of alienation has been until now an undiscovered quality.”

Maybe it hasn’t been discovered by Jefferies, but it was Marx himself who wrote, in an essay that–significantly–bears the title “Alienated Labour,”

The worker puts his life into the object, and his life no longer belongs to himself but to the object . . . . The alienation of the worker in his product means not only that his labour becomes an object, assumes an external existence, but that it exists independently,outside himself, and alien to him, and that it stands opposed to him as an autonomous power.  The life which he has given to the object sets itself against him as an alien and hostile force.

Nor was this only the view of the “young Marx,” the “philosopher” rather than the “mature” “economist.” In Capital, Volume I, Chap. 25, which deals with capitalist accumulation, he wrote,

Just as man is governed, in religion, by the products of his own brain, so, in capitalist production, he is governed by the products of his own hand. [end of section 1]

Is Jefferies really unaware of this?

b. My review noted that when Harman started work on Zombie Capitalism, well before the current crisis erupted, he wanted “to criticise … the belief that ‘capi talism had found a new way of expanding without crisis.” Later I noted that he “was convinced, before the crisis erupted, that another capitalist crisis was inevitable.” In a third reference to this point, I wrote that “he predicted the current crisis.” Jefferies takes the last phrase out of the above context in order to argue that “Harman did not predict the crisis.” What he apparently means is that that Harman didn’t predict the timing of another crisis, but “only” the fact that there would be yet another capitalist crisis–as if that were somehow an insignificant matter! In any case, I said nothing about him predicting the timing of the crisis, and what I meant  should have been clear from the context.

c. I also wrote that Zombie Capitalism endeavors to “account for the major economic events and trends of the past 90 years, booms as well as busts.” Jefferies responds: “As for Harman explaining booms and busts from the last century on in his little book, well he does not do that either.” But he provides no evidence or argument in support of this claim, so there is nothing of substance here for me to address.

[the above is the revised version of Oct. 24]

2 Comments on “Reply to Bill Jefferies and the Permanent Revolution organization”

  1. 1bill j said at 6:56 am on October 24th, 2009:Hi Andrew

    we are going to do a more thorough review of your longer piece in our next journal. Hope that’s ok?


  2. 2Richard Brenner said at 5:39 pm on January 5th, 2010:My critique of Bill Jefferies and the PR group’s position from July 2008 is here:


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