] □ Frontiers "i of Political d Economy Guglielmo Carchedi 3 Frontiers of Political Economy + GUGLIELMO CARCHEDI v VERSO London ■ New York First published by Verso 1991 © Guglielmo Carchedi 1991 All rights reserved Verso UK: 6 Meard Street, London W1V 3HR USA: 29 West 35th Street, New York, NY 10001-2291 Verso is the imprint of New Left Books British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data A catalogue record for this book is available from the Library of Congress ISBN 0-86091-346-5 ISBN 0-86091-566-2 pbk Typeset by BP Integraphics Ltd, Bath, Avon Printed in Great Britain by Biddles Ltd Contents Foreword ix Chapter 1 A Few Words on Method 1 1.1 An Example 1 1.2 Some Basic Concepts 3 Chapter 2 Production as a Social Process 7 2.1 Marx’s Analysis of the Production Process 7 2.2 Braverman and the Labour Process Debate 14 2.3 Elements of a Theory of Material and Mental Labour 18 2.4 The Dialectics of the Production of Value 28 2.5 Agents of Production and Classes under Modern Capitalism 32 2.6 The Social Production of Knowledge 41 Chapter 3 Social Distribution through Price Formation 55 3.1 Individual and Social Values: Preliminary Remarks 55 3.2 Market Values 57 3.3 Production Prices without Technological Competition 68 3.4 Production Prices with Technological Competition 73 3.5 The Dynamics of the Transformation Procedure 87 3.6 The Transformation Debate 90 3.7 The Complete Notion of Production Prices 98 3.8 Some Further Aspects of a Marxist Theory of Prices 106 3.9 The Law of Value in the National Context 117 Chapter 4 Recent Controversies on the Law of Value 125 4.1 The Formation and Distribution of Value 125 CONTENTS The Reduction of Skilled to Unskilled Labour 130 Joint Production 134 Destruction of Value 137 Okishio and the Fall in the Rate of Profit 139 Productivity, Exploitation and Redistribution of Value 141 Abstract Labour versus Standard of Value 146 Growth, Crises, Inflation and Crashes 153 The Fall in the Rate of Profit: Causes and Nature 153 The Fall in the Rate of Profit, Crises of Profitability and of Realization 161 Crises, Inflation and Stagflation 163 Alternative Marxist Interpretations of Crises 179 The Cyclical Nature of Production Crises 189 Financial Crises and Stock Exchange Crashes 201 The Fallacy of the Multiplier 210 (Neo-)Ricardian and (Neo-)Marxist Views of International Prices, Specialization and Exploitation 217 Ricardo and Comparative Advantages 217 Marx on International Market Values 220 Emmanuel’s “Narrow” Unequal Exchange 222 The Neo-Ricardian Production Prices and Unequal Exchange 225 Production and Distribution as Worldwide Processes 231 Oligopoly Capitalism versus Free Competition Capitalism 231 The International Equalization of Oligopolistic Profit Rates 236 International Wage Zones 240 International Production Prices in Value Terms 243 Rates of Exchange and International Production Prices in Money Terms 246 Depreciation and Appreciation 251 Unequal Exchange between Capitalist and Non-capitalist Systems 259 International (Super-)Exploitation 261 Exploitation, Inflation and Rates of Exchange in the Dominated Countries 263 Two Contemporary Problems 275 International Production Prices and the Current Monetary Crisis 275 vi CONTENTS 8.2 Is the Theory of Comparative Advantages Compatible with Socialist Development? 282 Appendix The Method of Social Research 291 A Dialectics 291 B Laws and Tendencies 299 Bibliography 307 Index 321 vii Foreword There seems nowadays to be an inverse relationship between the degree of mathematical and statistical proficiency reached by our students of economics and their awareness that economic life is a specific form of social life. The reason for this situation is not difficult to find. Mainstream economics has been turned into a byzantine theoretical fabric based on fictional assumptions and obsessed with static equilibria. Dynamics is misconceived as the study of a logical (that is, mathematical) path between two sets of equations. Techniques have been emptied of their social dimen­ sion, as if they had been devised in a world devoid of social content. Empty mathematical formalism, as opposed to concern with the real (that is, social) nature of the economic system, has become the object of inquiry. In short, economics has been turned into a branch (a sort of poor cousin) of mathematics. This work carries a different set of assumptions. Its thesis, in a nutshell, is that production, exchange and consumption, the object of economics, are historically specific social processes; and that the relations in which people engage when they produce, exchange and consume are historically specific social relations. Thus, economics is first and foremost a social science, a science which studies historically specific social phenomena. As such, it must be based on real assumptions (or abstractions of real world phenomena), must be concerned with real world problems, and must study the real (and contradictory) forces which change an inherently dynamic (because contradictory) situation into another one. This is the approach which must be pursued by political economy. Political economy must reappropriate social reality. It cannot but, at the same time, squarely challenge orthodox economics and question its method of inquiry, the relevance of its problems and the usefulness of its results. This work is thus addressed to all those who, disappointed by conventional and formalistic economic theory, wish to turn to a more realistic and substantive approach. ix FOREWORD This reappropriation of social reality, however, is not free from chal­ lenges. To begin with, most contemporary political economists accept the “modern” method of inquiry and frame of reference of orthodox economics. They seem to be unaware that political economy must rely on the dialectical method of social inquiry, rather than on mathematics and statistics. These latter are important tools but should be only auxiliary devices to the former. It is only by adopting a dialectical perspective that insight into the complex and contradictory nature of contemporary economic reality can be gained: from the labour process to the production and commercialization of knowledge; from the production of value to its redistribution through the formation of prices; from the de-skilling of qualified labour to the destruction of value; from joint production to the production of means of destruction; from technological innovations to crises, inflation and stagflation; from comparative advantages to unequal exchange; from international prices to rates of exchange, devalua­ tion and revaluation; from international competition to the current monet­ ary crisis. This book, then, stresses that, in order to understand the economy, and thus society - or better said, in order to understand the economy as society - it is not necessary to have mathematical skills. To understand real social processes, one must understand and apply the dia­ lectical method of social inquiry, independently of whether these processes can be analysed by using mathematical or statistical tools. But the choice of a proper method of social inquiry is not sufficient. This method must be actually applied to analyse present-day social dyna­ mics, the contemporary concrete features of social reality. Of these, three stand out particularly vividly. To begin with, an increasing proportion of economic agents is employed to generate the knowledge needed to produce material goods, rather than being directly engaged in their pro­ duction. Second, under modern conditions, production and distribution are truly international, rather than being activities which cross the national borders only in the form of international trade. Third, in the contemporary economy, the basic units of economic activity are modern oligopolies, rather than free competition capitals. In spite of these macroscopic changes, political economy has been blind to the need to develop a theory of mental labour (and of the conditions under which mental labour is productive of value) and, on the whole, has scored very low in its efforts to extend value analysis both to the international level and to oligopolistic reality. Yet these are the themes which must delimit the new frontiers of political economy and which will allow us conceptually to recompose the seemingly unrelated pieces of the contemporary economic mosaic. The following pages, then, represent an attempt to inquire into the dialectics of value, prices and exploitation in the contemporary world economy. They have been written to be accessible to students of social