THE BASIC THEORY OF CAPITALISM The Forms and Substance of the Capitalist Economy

THE BASIC THEORY OF CAPITALISM The Forms and Substance of the Capitalist Economy

Also by Makoto Itoh VALUE AND CRISIS THE VALUE CONTROVERSY (with Ian Steedman, Paul Sweezy and others) In Japanese CONTEMPORARY CAPITALISM MARXIAN ECONOMICS TODAY (and other works)

The Basic Theory of CapitalisiD The Forms and Substance of the Capitalist Economy Makoto ltoh Professor of Economics University of Tokyo M MACMILLAN PRESS

Makoto Itoh 1988 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright Act 1956 (as amended), or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 33-4 Alfred Place, London WC1E 7DP. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. First published 1988 Reprinted 1988 Published by THE MACMILLAN PRESS LTD Houndmills, Basingstoke, Hampshire RG21 2XS and London Companies and representatives throughout the world British Library Cataloguing in Publication Data Itoh, Makoto The basic theory of capitalism: the forms and substance of the capitalist economy. 1. Capitalism I. Title 330.12'2 HB501 ISBN 978-0-333-37285-2 ISBN 978-1-349-19107-9 (ebook) DOI 10.1007/978-1-349-19107-9

Contents Preface Editor's Note PART I ECONOMIC SCHOOLS AND IDEOLOGIES 1 The Birth of the Theoretical System of Capitalism 1.1 Mercantilism 1.2 Physiocracy 1.3 The Classical School Its Formation Adam Smith David Ricardo 2 The Dissolution of the Classical School and the Diversification of Schools 2.1 The Dissolution Anti-classical Theories Utopian Socialism The Revisionist Succession to Classical Theory 2.2 The Historical School 2.3 The Neo-classical School 3 The Marxian Theory of Capitalism 3.1 Historical Materialism and Marx's Economics Hegel, Feuerbach and Marx The Role of Historical Materialism Political Economy in the Manifesto 3.2 The Scope of the Theoretical System of Capital The Formation and Structure of Capital Marx's Initial Plan and the Scope of Capital How to Locate and Complete Capital v ix xiii 3 3 6 11 11 12 16 22 22 22 24 26 27 30 39 39 39 43 47 51 51 55 59

vi Contents 3.3 The Tasks of Marxian Studies after Capital 62 The Controversies on Revisionism and Imperialism 62 The Tasks of the Basic Theory 65 PART II VALUE, LABOUR AND CAPITAL 4 The Forms of V aloe- Commodity, Money and Capital 73 4.1 Commodities and the Mystery of the Price Form 73 The Forms and the Substance of Value 73 The Value-Form of Commodities 78 4.2 Money and the Circulation of Commodities 87 The Measure of Value 87 The Means of Circulation 91 Money as the Absolute Form of Value 95 4.3 The Transformation of Money into Capital 97 How can Money be Transformed into Capital? 97 Another Transformation Problem 102 5 Capitalist Production and the Law of V aloe 109 5.1 Labour as the Universal Economic Condition for Societies 109 The Labour Process 109 Abstract Labour 113 Surplus-Labour 122 5.2 The Law of Value and the Valorisation Process 127 The Labour Theory of Value for Commodity Products 127 The Value of Labour-Power 136 Production of Surplus-Value 141 6 The Extension of the Theory of the Substance of Value 149 6.1 Skilled Labour in the Value Theory 150 The Origin of the Problem 150 The Recent Technological Analyses 154 The Historical and Universal Basis for a Solution 158

Contents vii 6.2 The Joint Production Problem 169 Steedman's Critique of Marx 169 Anti-Critiques 171 An Alternative Solution 174 6.3 The Reproduction Schemes and the Law of Value 178 Marx's Reproduction Schemes 178 The Form and Substance of Value in the Reproduction Schemes 182 The Social Foundation ofthe Law of Value 191 PART III THE MOTION OF CAPITALS AS A CONCRETE MECHANISM 7 Competition among Capitals 199 7.1 The Law of Value and Prices of Production 199 Marx's Theory of Prices and Production 199 The Transformation Controversy 210 The Theory of Prices of Production Reconsidered 220 7.2 The Market Prices of Production 226 7.3 Ground-Rent and Landed Property 235 The Capitalistic Form of Landed Property 235 Differential Rent 237 Absolute Rent 246 8 The Mobilisation of Capitals 250 8.1 Commercial Capital 251 8.2 The Credit System 257 How to Approach it 257 Commercial Credit 260 Bank Credit 264 The Rate of Interest 273 8.3 Joint-stock Capital 278

viii Contents 9 Business Cycles and Crises 290 9.1 Three Sources of Confusion to be Cleared up 9.2 The Law of Capitalist Accumulation 9.3 Regular Business Cycles and Crises Prosperity Crisis Depression 9.4 Business Cycles and the Law of Value 9.5 The Metamorphoses of Business Cycles and the Long Waves 290 295 303 303 313 318 325 333 PART IV SOCIALISM - AN ADDENDUM 10 On Socialism 347 10.1 Historical Materialism and The Necessity for Socialism 347 10.2 The Implications of Value Theory for Socialism 354 The Theory of Forms of Value for Socialism 354 The Concept of Labour-Substance for Socialism 362 10.3 Accumulation and the State in Socialism 368 Notes 376 Bibliography 417 Index 427

Preface We are living in a peculiar and uncertain age- a fin de siecle. After a century in which the historical evolution of capitalism increasingly strengthened the economic role of the state, the capitalist world seems suddenly to have lost any sense of progress as it experiences the great depression which began in 1973. There has spread an overall disillusion with views that state policies of either a Keynesian or Monetarist sort can prevent or mitigate economic instability and distress. Indeed, it is asked whether they are not rather aggravating the disasters. Such serious doubt and disillusion are combined in economic theory with the damage to the analytical foundation of neoclassical price theory given by both the so-called capital controversy and recent Marxian critiques, and thus present a deep crisis for orthodox marginalist economic theories. This constitutes an important element of the general crisis and distrust in the conventional social sciences, within the framework of bourgeois ideology, which regards the capitalist social order as natural. As a result, an irrational nationalism and militarism has tended to gain ground, often alongside a general indifference to substantial socio-economic problems even among young students. It is ironic to see that despite all this, in the very process of the great depression in our age, capitalism seems to be strongly reasserting the workings of its intrinsic and violent law of motion rather than weakening itself. What has been weakened is rather the social position of workers and their trade-union organisations. The economic position of the 'third world' countries has also generally been worsened. The actions of capitalist firms to increase the efficiency of the valorisation process through 'rationalisation' and restructuring are so much facilitated. 'The social structure of accumulation' of capitals seems to be under reconstruction in full scale throughout the capitalist world. In spite of the actual deep crisis in the capitalist economy, as well as in bourgeois social thought, the socialist movement is not gaining, but rather suffering with the weakening social position of workers. Moreover, added to it, there have been problematic situations in the existing socialist countries, including international conflicts - even wars and military invasion- among them. The process of the cultural revolution in China, the weak social position of workers expressed in ix

X Preface the Polish solidarity movement and the role of orthodox Marxian theories which tend uncritically to legitimise the status quo in those countries are some of these issues. The gap between the ideal and the reality of socialism generally seems great. Socialism, including Marxism, as an alternative to capitalism is thus also in crisis. This element was not present in the preceding historical crises during the great depressions in the late nineteenth century and in 1930s. The feeling of proceeding along the blind alley of the capitalist world at the end of our century must thus be heavier. We have to recognise that human history as a whole, across the West and the East, as well as the North and the South, is on serious trial. What can we do for the future? Even if it may seem roundabout, one of the surest ways intellectually to overcome the sense of the impasse of human history at this time, must be in our attempt non-dogmatically to revive the potential of Marxian theory as a sounder social science. It is indispensable not merely for a proper and systematic understanding of the workings of capitalism, which is actually being restrengthened, but also for our re-examination of what socialism can do as an alternative to capitalism. The revival of the Western Marxian economic school since the 1970s must incorporate this intention. Let us co-operate internationally and strive further to push forward in this direction. Due to the basic character of a capitalist economy itself, as we shall discuss in this volume, our analytical understanding of its working cannot be satisfactory as fragments and separated theories. Marx's Capital, if with not a few incompletenesses, convinces us among others of the necessity for a systematic and consistent method of treating the working of the capitalist economy. Through fervent controversies on, and studies of, Marxian theories of value, skilled labour, joint products, the transformation problem, business cycles and crises - which are still vividly proceeding - we have to reconsider from time to time both the implications and the location of each topic concerned in the light of the whole conceivable system of the basic theory of capitalism. We may lose a sound sense of our orientation without such reflection. After so many years of theoretical Sturm und Drang in the process of the recent revival and growth of the Western Marxian school in political economy it must be high time for us to attempt to materialise such a total theoretical system anew. While lecturing and giving seminars in various universities in Europe and North America from 1974, I began to be convinced of such a necess-

Preface xi ity. Capital or P. Sweezy's The Theory of Capitalist Development (1942), for example, would no longer suffice, though they must surely serve as classical foundations. I also intended, in preparing this book, to explore my possible contributions to the basic theory of capitalism by attempting systematically to solve a series of recent controversial problems in the West from the view of Japanese Uno theory. As I described in my previous book, Value and Crisis (1980), there is a rich tradition in Marxian economic thought in Japan, dating back to the First World War. Upon such a historical basis, K. Uno's works of the post-second World War period were distinguished and influenced our generation to form the Uno School. The separation of the task of Marxian social science from the role of ideological thought; the methodological distinction of the levels of research in Marxian political economy into the basic principles, the stages theory of capitalist development and the empirical analyses of the current situation; and the extensive study of Marx's Capital as the principles of political economy are the main characteristics of the Uno School. In the area of the basic principles the importance of the forms of value and commodity economy for capitalism to organise its substantial socio-economic activity, based on the labour process, is much emphasised as a kernel of Marx's original theory clarifying the historical specificity of capitalism. As we shall see in Part I of this book, these viewpoints are all very relevant to the clarification of the fundamental orientation and tasks of Marxian political economy against the long historical development of various other economic schools. The basic theoretical meanings of current controversies and conflicts between neo-classical, neo Ricardian and Marxian schools, or among Marxians themselves, as we shall discuss in Part II and 111, then become more consistently and easily understandable. Especially a deeper and sharper analytical concern about the form and substance of the capitalist economy is essential for our proper understanding of the basic character and working of capitalism, as well as for the solution of the recent controversies. While dealing with the recent Western theoretical debates and complications I had naturally to re-examine and extend my own positions as a Uno theorist. I also felt it rather fortunate to have an opportunity to reconsider systematically such topics as the importance of the development of economic theories along the lines of

xii Preface neo-ricardians and its impact on Marxian theories; the contents of the law of value including the elasticity in the distribution of surplus labour; the perplexed issues on skilled labour, joint production and the transformation from values to prices of production: the basic theory of regular business cycles and long waves; and some theoretical implications for conceivable socialism which are deducible from our basic theory of capitalism. Since ready-made answers for these were either not given or remained unsatisfactory, I had to strike out from Uno's own theoretical treatments, often consciously as Japanese readers might well and easily notice. Just as Uno did to Marx, I tried to think by myself what Marx and Uno would argue on these issues today. It must be left to the reader's judgement how far the author has successfully achieved the initial intentions stated above. I shall look forward to critiques and comments for the further development of our common theories. I can just hope that this book is properly oriented and of some use for the further theoretical growth of Marxian political economy as a sound social science, which would at least enable us intellectually to surmount irrational reaction and conscious or unconscious nihilism towards human social progress. It happens to be exactly twenty years since I began continuously to give lecture courses and seminars on the principles of political economy in our Department of Economics, at the University of Tokyo. I have been fortunate in having excellent forerunners, colleagues and good students here in Japan, to whom my debts are obvious. In particular, communications and discussions with Nabuo Okiskio, Tsuyoshi Sakurai, Shigekatsu Yamaguchi and Michiaki Obata among others have been encouraging and helpful in the writing this book. Since my previous book, Value and Crisis, served as a good preparation for this volume, my acknowledgements stated in its Preface to comradely friends in the West should remain, though I will not repeat all of their names again. Among them, Andrew Glyn and Bob Rowthorn read the whole manuscript of this book, and continuously provided useful advice. By happy chance both of them separately visited me here in Tokyo recently, and directly discussed with me portions of the manuscript. Though I could not follow some of their advice, this book is deeply indebted to them. Let me also state my thanks for arranging my visits to, and my teaching at, the New School for Social Research in 1978 to Anwar Shaikh; at New York University in 1978 to Jim Becker; at Cambridge University and Queen Mary College in the University of London in 1980 to Bob Rowthorn,

Preface xiii Simon Mohun and Sue Himmelweit; and at the University of Manitoba in 1985 to John Loxley and Cy Gonick. All these opportunities were most helpful to me in preparing and writing this book. Last but not least, my gratitude to Paul Bullock who with his thorough understanding of the issues discussed, and a firm grasp of my arguments carefully and perseveringly edited my English and prepared the index. Though I am certairtly responsible for whatever imperfections this book may contain, I feel with some satisfaction that it incorporates not just my individual views but the broader associated achievements in the subject in the recent decades, both in Japan and in the West effecting in its contents, as in the process of its birth, international co-operation and communication in the field of Marxian political economy. MAKOTO ITOH EDITOR'S NOTE In correcting the manuscript of this book I have endeavoured to ensure that the arguments of the author are presented as he intends. Our friendship over thirteen years, and our own understanding of the differences between us on the issues discussed, have helped me in this task. PAUL BULLOCK