Marx’s Capital – Philosophy and Political Economy. Geoff Pilling 1980
Chapter 2. Marx’s Critique of Classical Economics

The philosophy of empiricism

In criticising what he saw as the formal nature of Ricardo’s abstractions and his neglect of a study of the development of economic forms, Marx is, by implication, pointing to the fact that on the philosophical plane, the outlook of political economy was dominated by empiricism. This empiricism derives from John Locke whose ‘philosophy served as the basis for all the ideas of the whole of subsequent political economy’ (Marx, Theories of Surplus Value). This empirical outlook is seen in William Petty, considered by Marx as the founding father of political economy. In his Political Arithmetic Petty makes his empiricism clear:

Instead of using only comparative and superlative words, and intellectual Arguments, I have taken the course ... to express myself in terms of Number, Weight, or Measure; to use only Arguments of Sense, and to consider only such Causes as have visible Foundations in Nature. (Petty, quoted by Roll)

The essence of empiricism is that as a theory of knowledge it holds that sensory experience is the only source of knowledge and affirms that all knowledge is founded on experience and is obtained through experience. One reflection of this philosophical method is that it takes a series of facts as ‘given’ (by experience), that is, takes them uncritically, accepting them as fixed and natural phenomena and using them as the basis on which an analytical structure can be built. According to this conception, a general law – such as the law of value – is taken as given, as a point of departure. Such a general law, argues the empiricist, can be upheld only when it can be established as an immediately given principle under which all the facts being considered can be directly subsumed, without contradiction. The ‘general’ for the empiricist is mechanically constructed out of a series of ‘concrete’ experiences and in this way all dialectical relations are set aside, since the universal is merely analysed from the empirically concrete. Engels characterises this method – this starting with so-called ‘principles’ or ‘laws’ which are tested against ‘the facts’ as ideological – as a method which inverts the true process by which knowledge develops.

The general results of the investigation of the world are obtained at the end of this investigation, hence are not principles, points of departure, but results, conclusions. To construct the latter in one’s head is ideology, an ideology which tainted every species of materialism hitherto existing. (Engels, Anti-Duhring)

And Engels immediately points out the roots of this ideology: it rested on a lack of understanding of the origin of thought in definite historical-social conditions. ‘While in nature the relationship of thinking to being was certainly to some extent clear to materialism in history it was not, nor did materialism realise the dependence of all thought upon the historical material conditions obtaining at the particular time.’

This method of starting from principles (instead of abstracting them in the course of theoretical work) was essentially the same as starting from abstract definitions, into which the facts are then ‘fitted’. (An example of such a method would be that commonly used to ‘prove’ that the USSR is ‘capitalist’. A fixed definition of capitalism is erected – one involving wage labour and commodity production for instance. Certain ‘facts’ are then taken from the USSR – where undoubtedly wage labour and commodity production exist, and on this basis the USSR is ‘shown’ to be capitalist.) Engels replied to this sort of method when commenting specifically on Capital; reviewing the treatment by various writers of the transformation of values into prices he says that several mistakes made by one writer

rest upon the false assumption that Marx wishes to define where he only investigates, and that in general one might expect fixed, cut-to-measure, once and for all applicable definitions in Marx’s works. It is self-evident that where things and their interrelations are conceived, not as fixed, but as changing, their mental images, the ideas, are likewise subject to change and transformation; and they are not encapsulated in rigid definitions, but are developed in their historical or logical process of formation. This makes clear, of course, why in the beginning of his first book Marx proceeds from the simple production of commodities as the historical premise, ultimately to arrive from this basis to capital why he proceeds from the simple commodity instead of a logically and historically secondary form – from an already capitalistically modified commodity. (Engels, Preface to III; author’s italics)

Let us review Ricardo’s method in the light of this statement by Engels. As we have seen, his starting point was the definition of value by labour time. According to him, this was a general abstract category which encompassed the characteristics of all those economic phenomena (money, capital, rate of profit, etc.) which he was seeking to analyse. For Ricardo, that is, the relationship between the concept of value and those of money, capital, profit, rent, wages, interest, etc. was that between genus and species. Or, putting the matter another way, money and capital were no more than mere forms of value, all having a common source, namely labour. Here lay the formalism of Ricardo’s abstraction, for which Marx took him to task; he sought to discover the similar and identical in all the phenomena he examined. But this he did in an entirely formal manner- the general concepts (money, capital and so on) were merely an aggregation of the particular (value, measured by labour). For Marx, capital could not be considered as merely ‘stored-up’ labour as with Ricardo. Capital was, for Marx, a definite social relation in which the labour process took on a determinate historical form, the form of a value-creating and a fortiori a surplus-value-creating process. Labour, for Marx, was the technical basis (and thus an indispensable basis) but not the social basis for capital. Capital could never be understood by seeking within it an element which it shared with lower forms of economic relations (value, money); it could only be understood by a concrete investigation of the path whereby it had grown out of these lower economic relations. This involved a theoretical study of its real birth and evolution. ‘Theory’ and ‘history’ could not, therefore, be considered separately; to ‘define’ capital was to understand the process which had brought this social relation into being. Science then had to reproduce this process theoretically in the form of adequate notions. This was the essence of Marx’s dialectical method, one which separated him sharply from political economy. Writing of his notion of capital, Marx says:

To the extent that we are considering it here, as a relation distinct from that of value and money, capital is capital in general, that is the incarnation of the qualities which distinguish value as capital from value as pure value or as money. Value, money, circulation, etc., prices, etc. are presupposed, as is labour etc. But we are still concerned neither with a particular form of capital, nor with an individual capital as distinct from other individual capitals, etc. We are present at the process of its becoming. This dialectical process of its becoming is only the ideal expression of the real movement through which capital comes into being. The later relations are to be regarded as developments [author’s emphasis] coming out of this germ. But it is necessary to establish the specific form in which it is posited at a certain point. Otherwise confusion arises. (Grundrisse)

We shall consider later some further methodological implications of this and similar passages. But let us note at this stage that Marx brings out very clearly his conception of the relationship between value and capital. The value concept was arrived at by Marx not through aggregating the abstract general attributes that experience detects in all its special forms (capital, rent, interest, etc.) as the method of empiricism would demand. Marx arrives at the notion of capital in a quite different manner; namely through a thorough examination of one single, quite concrete, actually existing relation between people, that is, the exchange of one commodity for another. In the analysis of the commodity, the universal determinants of value are abstracted. These determinants are later reproduced at higher levels of development and analysis as abstract general determinations of money and labour-power and capital.

The problem of value and profit

In order to look more closely at the ‘confusion’ which must arise when this method is not followed and to take forward our investigation of the consequences of empiricism for political economy, we can look at the manner in which Ricardo grappled with the problem of the relationship between value and profit. According to Ricardo the law of the average rate of profit – which established the dependence of the scale of profit on the quantity of capital as a whole – and the law of value – which established that only living labour produced value – stood in stark contradiction to each other. Nevertheless both laws determine one and the same phenomenon (profit)! It was this antinomy which Malthus seized upon with such delight and made the basis of his attack on the Ricardian school.

Now here was a real problem. For it had been discovered by Ricardo that there was in fact no direct relationship between the law of value and its immediate appearance. As soon as he tried to grasp the nature of profit theoretically (that is to understand it on the basis of the law of value) it led to an apparently absurd conclusion. If the law of value was universal as Ricardo insisted that it was – then profit was in principle impossible, a proposition clearly denied by immediate experience. All Ricardo’s difficulties arose from the fact that he attempted to resolve what was in fact a real material contradiction by means of a definition of his concepts. Political economy wanted to subsume the appearances of bourgeois economy directly under what it took to be its basic law. As Marx observed, when dealing with the disintegration of Ricardo’s school, in trying to make the laws which determine value agree directly with those determining the rate of profit, political economy presented itself with a ‘much more difficult problem to solve than that of squaring the circle which can be solved algebraically. It is simply an attempt to present that which does not exist as in fact existing’ (Marx, Theories of Surplus Value).

In political economy’s endeavour to overcome the paradox of law of value and rate of profit, by attempting to make its concepts more precise, was the belief that the supposed error resulted from an earlier error in thought; it could not see, thanks to its formal method, that the paradox arose from the actual contradictory nature of the phenomena under investigation. In connection with this type of method, one based on formal logic, Marx notes:

Here the contradiction between the general law and further developments in the concrete circumstances is to be resolved not by the discovery of the connecting links but by directly subordinating and immediately adopting the concrete [the average rate of profit] to the abstract [the law of value]. This moreover is to be brought about by a verbal fiction, by changing the correct name of things. (These are indeed ‘verbal disputes’, they are ‘verbal’, however, because real contradictions, which are not resolved in a real way, are to be resolved by phrases.) (Marx, Theories of Surplus Value)

This comment by Marx serves to bring out another aspect of the empiricism of political economy, that is its adherence to a purely formal method of thought. If there was a contradiction between the law of value and the law by which the rate of profit was formed, then one or other of the terms had to be redefined to solve the problem. If the notion of contradiction can be said to lie at the heart of dialectical thinking, its elimination is certainly the main concern of positivist thought. As Karl Popper says in his widely known ‘What is Dialectic?’ ‘A statement consisting of the conjunction of two contradictory statements must always be rejected as false on purely logical grounds’ (Popper, Theories of Surplus Value). And elsewhere the same writer says, ‘all criticism consists in pointing out some contradiction or discrepancies, and scientific progress consists largely in the elimination of contradictions wherever we find them’ (Popper). In other words, the existence of a contradiction is an indication of an as yet unresolved error, an error which must be got rid of if scientific progress is to be made. On this view the unearthing of a contradiction and its elimination involve, in principle, a formal operation performed on the theory, or part of it, in order to bring it into accord with another theory, or part of a theory, that has been accepted as true. If we do not succeed in this, we must get rid of the contradictory theory (or that theory that stands in contradiction to the theory we hold to be true) and seek a new solution.

On this view the contradiction of the Ricardian system would be its real weakness. And this was the view of Ricardo’s disciples. James Mill, who did more to popularise Ricardo’s views than anybody else, was guilty of exactly this conception. Mill started with Ricardo’s work as a purely abstract system of thought, ignoring the (contradictory) reality which this system expressed. Driven on by the criticism of Ricardo’s opponents (the leading one of whom was Malthus) and also sensing that Ricardo’s work was in contradiction with reality, Mill tried to eliminate the contradictions of Ricardian political economy. What he tried to achieve, says Marx (Theories of Surplus Value), was ‘formal, logical consistency’. Mill was caught in a dilemma – on the one hand he wanted to demonstrate that the bourgeois mode of production was the absolute form of production ‘and seeks therefore to prove that its real contradictions are only apparent ones’ (Theories of Surplus Value). However, ‘On the other hand, [he seeks] to present the Ricardian theory as the absolute theoretical form of this mode of production and to disprove the theoretical contradictions, both the ones pointed out by others and the ones he himself cannot help seeing’ (Theories of Surplus Value).

Now Marx’s attitude to the undoubtedly real contradictions of the Ricardian system was quite different. In the first place, he grasped the true source of these contradictions. It lay not in the error of Ricardo’s thought, but expressed the contradictory economic and social phenomena which Ricardo in his theory was seeking to express. Speaking of Ricardo, and contrasting him directly with Mill, Marx says, ‘with the master what is new and significant develops vigorously amid the “manure” of contradictions out of the contradictory phenomena!’ (Theories of Surplus Value). Following from this, Marx also held that the further, more deeply, Ricardo investigated the bourgeois social relations, the more openly the contradictions were inevitably revealed in his theory. For Marx, an opponent of metaphysical and purely formal thought, contradiction was the form taken by all development. Thought, if it was to be truly scientific, must consciously aim to express the contradictions in the phenomena it was investigating. Mill tried to eliminate the contradictions he and others detected in Ricardo’s system. In this sense his work, although it aimed at defending Ricardo and although Mill continued the fight of industrial capital against its outdated landed forms, signified the beginning of the ‘disintegration’ of political economy. In contrast Marx recognised that the contradictions of Ricardo’s system ‘expressed with social validity’ the maturing contradictions of bourgeois economy. This being the case, it was necessary to grasp how these contradictions were n practice, in reality, finding their solution. This Marx did and sought to express this solution conceptually – in the theory of production prices the conception of the organic composition of capital, the tendency of the rate of profit to fall, etc.

What was involved here was nothing less than the opposed conceptions of formal logic and dialectical thinking. Formal logic could never resolve successfully the crisis of Ricardian economics. It required dialectics to ‘go beyond’ Ricardo, and in this sense materialist dialectics is at the very foundation of Marx’s successful critique of political economy. For dialectics, far from abhorring contradiction, says that contradictions inevitably arise in the course of scientific progress; the scientist must resolve such contradictions (that is demonstrate how they appear in a higher, more richly contradictory unity), not attempt to sweep them away by formal logic. Marx saw in the contradictions of Ricardo’s Principles the great strength of that work, not a weakness, an indication of deep-going changes in the reality with which Ricardo was grappling; a reflection of the fact that in the scientific investigation of bourgeois economy a decisive turning point, a ‘nodal point’ had been reached with Ricardo’s work.

It was dialectics that enabled Marx to transcend political economy. Yet it is precisely this dialectic that many writers on Capital aim to ignore or reject. One writer, seeking to show that Marxism can be ‘enriched’ by the incorporation of the results of recent theoretical work associated with the Sraffa school, argues that only on the basis of this work can Marx’s work be made logically consistent. Following exactly the same method as Popper, he says:

Perhaps some will argue that we must reject formal logic and adopt ‘dialectics’. Presumably ‘dialectical logic’ allows one to contradict oneself. In fact, the inevitable result of abandoning formal logic for the purposes of theoretical exposition is to descend into pure nonsense. (Hodgson)

We have shown that purely formal logic proved unable to resolve the problem of the relationship between the law of value and the rate of profit. Let all these critics, such as Hodgson, who reject dialectics in favour of formal logic consider another little problem, far more significant than the much vaunted ‘capital controversy’, namely the problem of the origin of capital. Marx’s analysis of the origin of capital – and it is only through a grasp of the origin of capital that we can hope to arrive at an adequate definition of this phenomenon – provides one of the clearest examples of how he consciously seeks to bring out the contradictory, that is dialectical, development of all economic forms. Let our adherents to formal logic ponder the following well-known statement:

Our friend, Moneybags . . . must buy his commodities at their value, must sell them at their value, and yet at the end of the process must withdraw more value from circulation than he threw into it at the start. His development into a full-grown capitalist must take place, both within the sphere of circulation and without it. These are the conditions of the problem. (I, author’s italics)

And immediately before this: ‘It is therefore impossible for capital to be produced by circulation, and it is equally impossible for it to originate apart from circulation. It must have its origin both in circulation and yet not in circulation’ (I). It was the prejudice of mercantilism that surplus value arose only in circulation, ‘upon alienation’. The later development of political economy, starting with the Physiocrats, turned attention towards production. Yet mercantilism did contain an element, a side, of the truth. It was this: a simple commodity owner, considered in relation to his own commodity, can never be a source of self-expanding value, but only of value. It is therefore not possible that a producer, outside the sphere of circulation, can, without coming into contact with other commodity-owners, expand value, annex surplus value, in short convert commodities or money into capital.

Yet surely, the formal logician, following Popper, will retort: to say that surplus value has its origin both in circulation and yet not in circulation is patent nonsense, an indication of some fault in thought which must be corrected if science is to progress. Marx shows that the ‘solution’ is not made in this way at all – by some redefinition of the terms ‘production’ and ‘circulation’ for example. On the contrary, the basis of the solution arose by grasping that the worker sold his labour-power and not his ‘labour’ (as political economy imagined). Now the use-value of this commodity labour power possessed the property of being a source of value; it was a commodity whose actual consumption is the materialisation of labour, that is to say the creation of value, and whose circulation is therefore production. In other words the conversion of money and commodities into capital arises in the sphere of the circulation of the commodity labour-power, the very circulation of which is the process of production! No doubt such a conclusion will offend if not outrage our formal logician, and for Hodgson it must surely be nothing if not ‘pure nonsense’. According to the canons of formal logic, production and circulation are mutually incompatible – surely everybody knows that to be circulated a commodity must first be produced! Yet it is such rigidity of thought which in fact always comes up eventually against the inexplicable.

While we are dealing with the production-circulation problem let us note in passing the treatment given to this question by Cutler et al. In the course of rejecting Marx’s value theory, the following occurs in a passage purporting to summarise Marx:

Value analysis can analyse the exploitation in capitalist production because of the concept of the value-creating power of labour and the assumption that commodities despite divergence ‘represent’ values. This means that for the purpose of analysis of exploitation the differences between production and circulation are obliterated, or rather, that categories of exchange are interiorised within circulation. (Cutler, et al)

Of course Marx far from ‘obliterating’ the difference between production and circulation, grasps these categories in their real unity; shows how these two opposites actually become ‘identical’ and how their identity-opposition provides the only basis for explaining the nature of capital as ‘self-expanding value’.

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