This is an ambitious book attempting, as it does, to elucidate Marxist economic theory within a framework that reaches from pre-historic times to the anticipated socialist society. In any case, this has nothing to do with Marxist economic theory, which restricts itself to a critique of political, or bourgeois, economy and which, in Mandel’s view, too, is bound to disappear with the disappearance of capitalist society.
Historical materialism is more and something else than economic theory. There is the division of labour into necessary-labour and surplus-labour, the evolution of the market economy, the use-value and exchange-value relations, the theory of value and surplus-value, the transformation of surplus-value into capital, the accumulation process, both primitive and advanced, the rising organic composition of capital, and the various contradictions of capitalism which find their expression in its susceptibility to crises and in the tendential fall of the rate of profit. From there Mandel proceeds to monopoly capital, imperialism, and to the present epoch considered as one of capitalist decline. At any rate, what is of special interest to socialists are not so much the various mechanisms of the capitalist market economy, such as the money and credit functions, the role of competition, and so forth, but the system’s historical boundaries which are the result of its internal contradictions. The latter are reducible to the exploitative capital-labour relations and therewith to the contradictions of use-value and exchange-value, from which follow all other contradictions that beset capitalism down to the falling rate of profit as just another expression of the accumulation of capital. Disregarding all points of agreement, we will catch Mandel’s ‘ball in flight’ only where we disagree with his interpretations of Marxism and of present-day reality.
Marx intended to discover the laws of capitalist development. The general historical development has to work through the specific capitalist production relations with respect to both their real nature and their fetishistic appearances in the capitalist market and money economy. Marx’s analysis yielded the conviction that capitalist development, as the accumulation of capital, has definite limits beyond which it ceases being a progressive social system. Attempts to maintain it nonetheless would find their reflections in political struggles which would finally bring capitalism to its end.
In economic terms, capitalist production is the production of surplus-value, that is, of unpaid labour power. Capital formation is the accumulation of surplus-value. In the process of accumulation, less and less labour will be employed relative to the growing mass of capital. This is characterized by Marx as the rising ‘organic composition of capital,’ i.e., more capital is invested in means of production, or constant capital, than in labour power, or variable capital. Because only variable capital yields surplus-value, while the rate of profit is measured in total capital – variable and constant capital combined – the rate of profit must fall unless this fall is compensated for by a rising rate of exploitation, or surplus-value. Actually, so long as capital accumulates, the rising organic composition of capital implies a growing rate of surplus-value so that the decline of the rate of profit exists only in latent form.
However, for Marx as well as for Mandel, ‘an equivalent increase of the rate of surplus-value and of the organic composition of capital is in the long run impossible to achieve.’ But Mandel’s reasons for this capitalist impasse differ from those of Marx. Whereas Marx derives them from the strict application of the labour theory of value to the accumulation process, Mandel thinks that ‘with the increase in the productivity of labour there often comes an extension of workers needs and a corresponding increase in the value of labour power, which in turn encourages the development of the labour movement, thus restricting the growth in the rate of surplus-value.’ Mandel mistakes the growth in real wages for ‘growth’ in the value of labour power. But real wages can rise even with a ‘decline’ in the value of labour power, and, in fact, generally do rise in this manner, which is to say that a growth in real wages presupposes a still faster increase in the rate of surplus-value. The very fact of capital accumulation despite increasing wages indicates an increase in the rate of surplus-value, even though this increase may not suffice to guarantee a rate of accumulation that assures conditions of prosperity.
Because real wages have risen, Mandel holds that Marx’s theory of accumulation is not a ‘theory of impoverishment’ and that to assert the contrary would discredit Marxism. By being based on the labour theory of value, on the assumption, that is, that labour always receives the value of its labour power, i.e., its reproduction costs, there is indeed no increasing impoverishment as regards the labouring population. But this does not alter the fact, as Mandel himself points out, that the decreasing number of workers relative to the growing capital implies a growing number of unemployables and therewith an increasing pauperization – not to speak of the increasing misery in periods of depression and the enormities of capitalist warfare. At a time when even the bourgeoisie has to recognize these facts, it is rather strange that Marxists should find it necessary to deny that capital accumulation is also the accumulation of misery.
To be sure, Mandel is not inclined to minimize the contradictions of capitalism. ‘At the peak of the boom,’ he writes, ‘if full employment is actually achieved, the demand for labour greatly exceeds the supply, and the workers can bring pressure to bear to push wages up, the reduction in the rate of profit which results being one of the causes of the outbreak of crisis.’ Actually, however, at periods of high prosperity prices rise faster than wages, so that the declining profitability cannot find a cause in the supply-and-demand relations of the labour market. Marxism does not derive its crisis theory from supply-and-demand relations but from underlying changes in the organic composition of capital and the changing productivity of labour.
Mandel’s whole concern with Marx’s law of the falling rate of profit was clearly wasted as far as he himself is concerned, for he is not able to bring it in any meaningful connection with the crisis-cycle of capitalist development. The capitalist crisis, according to Mandel, ‘is due to inadequacy not of production or physical capacity to consume, but of monetarily effective demand. A relative abundance of commodities finds no equivalent on the market, cannot realize its exchange value, remains unsaleable, and drags its owners down to ruin.’Although Mandel holds that the increase in the organic composition of capital and the downward tendency of the average rate of profit are the general laws of development of the capitalist mode of production, he also says that ‘they create the theoretical possibility of general crisis of overproduction, if an interval between the production and sale of commodities is assumed.’ According to Marx, however, the crisis results from the general laws of capitalist development even if there were no interval between the production and sale of commodities. Rather, it is to say that the final source of all capitalist difficulties must be looked for in the sphere of production and not in that of the market, even though the problems of profit production do appear as market problems. The ‘interval’ between production and sale is based on the difference between the actual rate of profit and that rate of profit which would be required for an accelerated capital accumulation.
In Marx’s theory, the crisis-cycle finds its explanation in a discrepancy between the organic composition of capital and the rate of profit associated with it, as soon as the latter precludes an accelerated rate of accumulation. While he is correct in insisting that ‘capitalist production for profit’ and that ‘the variations in the average rate of profit are the decisive criteria of the actual conditions of capitalist economy’, and while to him ‘the cyclical movement of capital is nothing but the mechanism through which the tendency of the average rate of profit to fall is realized,’ the crisis remains for him nevertheless a crisis of overproduction, due mainly to disproportionalities between the two great sectors of production, ie, the production of capital goods and of consumption goods. ‘The periodical occurrence of crisis,’ Mandel writes, ‘is to be explained only by the periodical break in the proportionality (of the two sectors of production) or, in other words, by an uneven development of these two sectors.’ Although Mandel knows all about the competitive equalization of profit rates, he links ‘the periodical disproportion between the development of the capital goods sector and that of the consumer goods sector with the periodical difference between the rates of profit in the two sectors.’ In a great effort to concreticize Marx’s abstract crisis theory, Mandel finally accepts in some measure elements of almost all existing crisis theories, Marxist or other, and even spurious concepts such as ‘the multiplier’ and ‘the acceleration principle,’ while at the same time berating their authors for their failure to consider the factor of the ‘uneven development of different sectors, branches and countries drawn in the capitalist market,’ which, to his mind, is not only ‘a universal law of human history’, but also the key to the proper understanding of the capitalist crisis mechanism. The facts presented speak for themselves, of course, yet they would be even more eloquent if they were brought in closer contact with Marxian theory, which makes it clear that monopoly and imperialism are not capitalist aberrations but the inevitable consequences of capital production. What appears to some as a further expansion and extension of capitalism, and as the consolidation of the system through a direct merger of business and government, seems to Mandel sufficient proof that capitalism finds itself in a state of decline, because ‘the increasing practice of intervention in the economy by the state is an involuntary homage rendered to socialism by capitalism.’
Mandel points out, of course, that state interventions operate within the framework of capitalism in order to consolidate capitalist profit; The ‘unused resources’ in capitalism, that is, constant and variable capital, are capitalist property and will be set in motion only when profits are promised and capital is augmented. A progressively increasing non-profitable production implies a declining rate of accumulation and eventually its demise, thus destroying the rationale of capitalist production.
However, Mandel mistakes the lack of private investments, due to a deficient profitability, for an ‘abundance’ of capital relative to the ‘effective demand,’ and holds with the Keynesians that government-induced ‘effective demand’ acts as a ‘stabilizer’ of the economy. it tends toward a reduction in cyclical fluctuations, resulting above all from the increasing intervention of the state in economic life.’
To describe this state of bliss by way of government interventions and arms production as an ‘epoch of capitalist decline,’ is understandable only on the basis of Mandel’s assumption that the enlargement of the government-induced sector of the economy is a step towards socialism – seen as a state-controlled economy. In this respect, of course, government ownership would be even better than government control and Mandel does not fail to point out ‘that nationalization of sectors of industry … can constitute a veritable school of collective economy, provided that the compensation payments to capital are reduced or cancelled, that it is not limited to sectors run at a deficit, that the representatives of private capital are removed from the management, that workers’ participation in the management is ensured, or that this management is subject to democratic workers’ control, and that the nationalized sectors are used by a workers’ government for the purpose of all-round planning, especially to achieve certain objectives of high priority, either social or economic.’In view of the relative stability achieved by state interventions, Mandel foresees a change of objectives for the proletarian class struggle. ‘Socially and politically,’ he writes, ‘the period of capitalist decline educates the working class to interest itself in the management of enterprises and the regulation of the economy as a whole, just as “free competition” capitalism educated the working class to interest itself in the division of social income between profits and wages.’
Workers’ control of production presupposes a social revolution. This brings us to the last parts of the book, dealing with socialism and the Soviet economy.
According to Mandel, all the contradictions of the capitalist mode of production ‘can be summed up, in one general and fundamental contradictions, that between the effective socialization of production and the private, capitalist form of appropriation.’ The latter is a consequence of the private ownership of the means of production. Recent history has shown that capitalist relations of production can exist without private ownership of the means of production and that, with regard to the working classes, a centrally-determined appropriation of surplus-labour by government will not lead to a ‘socialist appropriation’ of the products of labour. If they continue to be separated from the means of production, that is, if the control of the latter remains the priviltge of a separate social group organized as the state, the social relations of production – continue to be capitalist relations of production, even though individual capitalists no longer exist. Still, for him, ‘the Soviet economy does not display any of the fundamental aspects of capitalist economy,’ it is merely marked ‘by the contradictory combination of a non-capitalist mode of production and a still basically bourgeois mode of distribution.’
According to Marx, the relations of production determine those of the distribution of both labour and its products. It may be considered as such only on the false, non-Marxist assumption that its new ruling class (or caste, according to Mandel) will of its own accord, and by a series of ‘revolutions from above,’ eliminate its own privileges and therewith the ‘basically bourgeois mode of distribution’ in favour of a form of appropriation more akin to its ‘non-capitalist mode of production.’ Because the Bolshevik rulers failed to do so, Mandel maintains that they have ‘betrayed’ socialism and the working class, have ceased being real communists, and should be replaced by more consistent revolutionaries. The Bolshevik Party did not understand in good time the seriousness of this problem, despite the many warnings sounded by Lenin and by the Left Opposition.’
When Mandel speaks of Russia’s bureaucratic distortions and the state’s brutal, arbitrary, and terroristic methods of rule and exploitation, he blames them not on Bolshevism and its concept of authoritarian party-rule, but on Stalinism and the Russian working class itself, ‘which began to show less and less interest in direct management of the state and the economy.’ He tries to make believe that he is unaware of the fact that it was the Bolshevik Party under Lenin and Trotsky which deprived the working class of both control and management of production, and replaced the rule of the soviets by that of the party and the state. ‘The contradiction between the non-capitalist mode of production and the bourgeois norms of distribution,’ he writes, ‘is the fundamental contradiction of every society transitional between capitalism and socialism.’ And this is so, because ‘a shortage of use-value prolongs the life of exchange-value,’ for which reason commodity production cannot be abolished but can only ‘wither away’ through the growing mastery of ‘scarcity.’ Therefore, the economic categories of capitalist economy, value, price, profit, wages, money, etc., will have to be retained to be utilized in a ‘planned economy’ which ‘must make full use of the market, without yielding passively to it.