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International Socialism, Spring 2000


Judy Cox

Can capitalism be sustained?


From International Socialism 2:86, Spring 2000.
Copyright © International Socialism.
Copied with thanks from the International Socialism Archive.
Marked up by Einde O’Callaghan for ETOL.


David Harvey
The Limits to Capital
Verso 1999, £18

Goodbye to all that

David Harvey is well known as the author of the influential The Condition of Postmodernity and before that as a champion of Marxist economics. The publication of a new edition of The Limits to Capital marks the revival of interest in Marxist accounts of capitalism. Even before 1998, when the crisis which had been developing in the South East Asian economies threatened to submerge the world economy under a tidal wave of bankruptcies and closures, a backlash against neo-liberal free market economics had begun. Neo-liberalism had dominated the 1980s, but ‘Margaret Thatcher, Ronald Reagan and Newt Gingrich now appear as somewhat ghostly figures from some strange era when they held unchallenged power and influence’, while critics of the system have multiplied in number. As early as 1996, the Davos Symposium (the global think-tank of neo-liberalism) worried that ‘free market globalisation was a “brakeless train wreaking havoc” and that the “mounting backlash against its effects” was threatening to disrupt economic activity and social stability in many countries, promoting a mood of “helplessness and anxiety” in the industrial democracies that could all too easily “turn into revolt”.’ [1]

Harvey lists the growing number of influential writers and philosophers who are developing critiques of capitalism and, to differing degrees, rehabilitating Marx. His list includes Pierre Bourdieu, Richard Rorty and Jacques Derrida. Even mainstream publications like The New Yorker could proclaim in 1997 that Karl Marx would be the ‘next great thinker’. Harvey asks, ‘With all this fluttering going on in the wings, can that other spectre – the communist alternative – be far behind?’ His book is an attempt to provide this alternative. In it, he restates some of Marx’s key ideas and defends them from various criticisms, but this is no mere ‘exercise in nostalgia’. Harvey extends the framework Marx developed to include the ever-expanding financial sector and geographical aspects of capital accumulation. This book is a considerable achievement. His analysis has great historical breadth and theoretical depth. In this review I will try to give a flavour of Harvey’s writing and look at some of the particular strengths and weaknesses of his analysis.

It must be borne in mind that this book is at times densely argued and technical but, as Marx pointed out, ‘There is no royal road to science.’ In Capital Marx approaches the economy as a series of interconnected relationships. This approach means that his explanations depend on the introduction of concepts which have not yet themselves been properly explained. Harvey points out how this dialectical method is very different from the bourgeois ‘building block’ approach or the ‘linear’ approach adopted by some Marxists, who search for a straight, well-signed path to economic enlightenment. Harvey follows Marx’s lead and focuses on the intertwined relationships between the diverse elements of the economy. He also follows Marx’s Capital by beginning with an analysis of the labour theory of value, then introducing ever more comprehensive accounts of the economy as a whole.

Commodities, values and prices

Harvey outlines Marx’s insight that the basis of human society lies in the appropriation of nature through production and consumption. Under capitalism this takes place through the production and exchange of commodities, which have two aspects. They have a ‘material side’, the physical properties which enable them to satisfy human, social needs. Human beings produced objects with such use values before capitalism developed, but today use values should not be seen as ahistorical and independent of the economic relations dominating their production.

However, when we exchange commodities on the market we do not swap equivalent use values – rather we buy and sell for money. Thus, commodities have an exchange value as well as a use value. The prices we pay appear to be fixed naturally by the fluctuations of supply and demand. To look beneath this appearance Harvey turns to Marx’s explanation of the origins and role of money. Although we take its existence for granted, money is not some natural product. It emerged out of the social process of commodity exchange which needed one commodity to be a ‘universal equivalent’, a socially accepted measure which could express the relative values of all the other commodities. Potentially, money could be either hoarded or thrown into circulation as a means of balancing the quantity of goods produced with the size of the market for them. However, through competition, capitalists are driven to constantly throw their capital into circulation, however damaging the results are for the system as a whole.

Harvey argues that the existence of money enabled Marx to draw his unique distinction between the two kinds of labour involved in the production of commodities. The specific labour embodied in every commodity he called concrete labour. In addition to the concrete labour which created it, each commodity represents a portion of the total labour being performed in society. This Marx called abstract labour. In the process of exchange only the amount of labour which is socially necessary to produce the commodity under average conditions, with average levels of skill, will be considered valuable. It is the quantity of socially necessary labour embodied in different commodities, rather than all the diverse types of concrete labour involved, which can be compared and thus provides the source of all commodity’s exchange values. This understanding of how socially necessary labour time creates a benchmark which all capitalists must strive to equal and beat is central to Harvey’s conception of the economy. It is an insight which he extends to other areas of the economy, as we shall see below.

Harvey, like Marx, understands capitalism as a process rather than a thing, a process which involves expanding value through a cycle of investment, production and exchange. Marx’s unique contribution in analysing this process was to understand where profits come from, a factor which his contemporaries stumbled over. The labourer has no independent access to the means of production and therefore has to sell their ability to work for a specified period. However, the magnitude of value they produce is much greater than the value of the labour power the capitalist buys: the worker produces surplus value. Beneath the apparent freedom of individuals in a capitalist society exists compulsion – to produce at competitive speeds, to increase the rate of accumulation. This can be achieved in several ways, such as increasing absolute exploitation by lengthening the working week. Alternatively, capitalists can open up a gap between the socially necessary labour time operating in their industry and their own private costs of production by increasing ‘the productivity of social labour, which becomes the most powerful lever of accumulation’. [2] This opens up the possibility for a conflict between the private interests and the class needs of the capitalist which can destabilise the whole system.

Harvey addresses general objections to Marx’s theory by emphasising that value theory is not an accounting tool to be proved by calculations. He acknowledges other effective defences of the theory – by Rubin, Rosdolsky, and Fine and Harris – but he argues that even these sympathetic accounts fall short of capturing the true revolutionary significance of Marx’s theory. Value theory is nothing less than a mechanism for understanding how the ‘living life-giving fire’ of labour becomes objectified into the fixed form of commodities and exchange rates by the iron discipline of capital. [3]

At every stage of his account of capitalism Harvey assesses the continuing relevance of the labour theory of value and answers detailed criticisms levelled against it. One such criticism relates to the way the growth of monopoly capitalism enables ‘price fixing’. Marx explained how the law of value was modified when commodities were sold on the market. Competitive mechanisms tend to equalise prices and the rate of profit across different sectors of the economy, as investment flows into more profitable sectors, increasing production and so lowering the prices and profits generated there. Consequently, some have argued that the development of large monopolies that can ‘fix prices’ represents a movement away from the ‘authority’ of competition and therefore a movement away from the law of value. However, Harvey argues, capitalism was never a system of perfect competition, and competition takes many forms besides those that attach to price competition in the market. Rather, capitalism is constantly opening up new areas of competition, for example in state institutions, ‘that permit the law of value to operate in diverse but ever more effective ways’. [4]

Another detailed criticism has been raised in relation to what happens during the process of production itself: fixed capital (machinery, factories, transport) transfers the value it embodies to the commodities it produces. Yet, critics have argued, the quantity of value in the fixed capital varies because improvements in production may make it quicker and easier to produce the same type of machines, thus decreasing the value of those already in operation. Thus, it is argued, the value of fixed capital transfers cannot simply relate to the labour value the fixed capital embodies. However, as Harvey points out, the concept of socially necessary labour time was always central to Marx’s theory – he expected ‘revolutions in value’ to occur during production. So, Harvey concludes, ‘Marx’s comment that the law of value asserts itself like a “a law of nature” under capitalism was not a chance or flippant remark’, and can be sustained. [5]

Production and exchange

Harvey moves from discussing the production of value to the realisation of that value through exchange. He criticises Say’s Law, which stated that the supply of commodities automatically creates sufficient demand for them. While production and consumption are intertwined, as completing one involves creating the other, this does not necessarily create a match between sales and purchases. Rather, each act of buying and selling is part of a network of similar movements, each being an independent transaction, ‘whose complementary transaction ... does not need to follow immediately but may be separated from it temporarily and spatially’. [6] Capitalists seeking to sell their goods must do more than fulfil a social need – they must find effective need, need backed up by the ability to pay. However, production is driven to the limit of the productive forces without regard to the size of the market. This creates the potential for a crisis of overproduction. The ‘merry-go-round of perpetual accumulation is not an automated or even a well-oiled machine’. [7]

Capitalism has a ‘turnover’ time, which is the time taken both to produce the commodity and to realise its value through exchange, but again this is not necessarily a smooth process. If capital is halted at any stage of its circulation, if goods go unsold or money lies idle, capital is frozen and becomes devalued. [8] As Marx pointed out, the optimum for capitalism is to move from production to exchange, from commodity to money, ‘at the speed of thought’. Therefore, Harvey argues that just as there is a socially necessary labour time which provides the basis of commodity’s value, so there is a ‘socially necessary turnover time’ which capitalists must strive to match. This means that their drive to reduce the time and costs of circulation of capital is a crucial part of their drive to accumulate.

Over-accumulation and crises

’We have, Marx asserts, built a vast social enterprise which dominates us, delimits our freedoms and ultimately visits upon us the worst forms of degradation. The irrationality of such a system becomes most evident at times of crisis’. [9] The potential conflicts and unevenness between different aspects of production and exchange which threaten crises, and the impossibility of regulation are constant themes of Harvey’s book. In formulating his analysis of economic crises, Harvey builds a model based on three different levels of analysis.

First cut theory of the crisis: To accumulate capital, the capitalist must invest in both raw materials, plant and machinery, fixed capital, and in employing a workforce, variable capital. The drive to increase the productivity of labour fuels an accelerating spiral of technological change which means that the ratio of fixed capital to variable capital varies across different units of capital. The productivity of labour, measured in terms of raw material used and goods produced, Marx called the technical composition of capital. The relationship between the technical composition of a unit of capital and the value embodied in it Marx called the organic composition of capital. [10] As individual capitalists seek to beat the socially necessary labour time for producing commodities in their sector, they invest in more and more technology and the organic composition of capital rises. As labour, the source of surplus value, is squeezed out, the rate of profit for the whole capitalist class tends to fall.

Marx called this the most important law of political economy, yet Harvey does not accept its centrality. I will return to the implications of this below, but Harvey nevertheless explains how Marx’s theory reveals other reasons for the recurrence of economic crises under capitalism. For example, he suggests that the constant revolutionising of the methods of production means that balanced accumulation becomes impossible. Marx’s investigations of the falling rate of profit reveal a fundamental contradiction between the forces of production and the social relations of production. This contradiction arises as individual capitalists seek to improve their position relative to others in a way which is detrimental to the overall ‘technological mix’ necessary for the balanced accumulation of capital. Harvey argues that the concept of the organic composition of capital combined with the labour theory of value express this contradiction.

In addition, the falling rate of profit convincingly demonstrates that accumulation creates a surplus of capital relative to opportunities to employ that capital, the over-accumulation of capital. This can be mitigated for the system as a whole through the devaluation of capital which can occur when, for example, technological change involves the premature, involuntary retirement of the now obsolete machinery. Devaluation may counter over-accumulation in the system, but it is dangerous for the individual capitalist, who is driven to finish the cycles of production more and more quickly to avoid the risk. Thus, machinery or fixed capital, ‘one of the chief means employed to increase the productivity of social labour, becomes, once it is installed, a barrier to further innovation’. [11] Devaluation can also be the result of high inflation, ‘the social form of devaluation in modern times’, [12] but it cannot provide a smooth, painless antidote to over-accumulation. Crises, which Harvey calls the irrational rationaliser of the economic system, can effectively devalue chunks of capital through bankruptcy and takeovers. Crises can prepare the way for a new round of accumulation but they are very dangerous for the individual capitalist.

Second cut theory of crisis: The crisis rooted in the arena of production must be integrated with the crisis which occurs in the financial system. Today, the organised power of the financial system is ‘mysterious because of sheer complexity’ and its independence from democratic control. Harvey suggests that finance capital can be understood as the movement of all capital involved in providing credit, ‘a contradiction-laden flow of interest-bearing capital’. [13] Such money capital can take many different forms – coins, paper currencies, credit monies – which can best be interpreted as ‘an outcome of the drive to perfect money as a frictionless, costless and instantaneously adjustable “lubricant” of exchange while preserving the quality of the money as a measure of value’. [14]

The credit system unites those with capital and no outlet for investment with those who have a plan for production but lack the wherewithal to implement it. Harvey invokes the image of a ‘central nervous system’ which can co-ordinate the activities of individual capitalists. The credit system appears to have the potential to overcome imbalances between production and consumption, and production and realisation, but there are restrictions to this happening in practice. So, for example, powerful independent financiers are also subject to the laws of competition and the credit system can itself become a site of intense factional struggles. Furthermore, the credit system creates the possibility of insane bouts of speculation on interest rates and future profits. The fictitious values exchanged on the stock market increasingly diverge from the real values existing in the economy. Thus, while credit helped accelerate the material development of the productive forces and world market, it also accelerates the onset of crises. The financial sector remains incapable of dealing with fundamental questions of over-accumulation.

The ‘second cut’ theory of crisis integrates contradictions in financial and monetary aspects of the system with production, and distinguishes between temporary cyclical crises and long term decline resulting from internal contradictions. Furthermore, as crises embrace legal institutional and political frameworks of capitalist society, their resolution depends increasingly on deployment of naked military power.

Third cut theory of crisis: The accumulation of capital takes place during particular time scales in specific geographical locations. In order to explore the implications of this, Harvey embarks upon a theoretical discussion of the concept of rent which indicates the importance of spatial organisation to capital accumulation. Just as faster than average production times can create excess profits, so more favoured locations, those closer to raw materials or markets, can attract excess profits. Geographical locations are altered by human agency, by the building of new urban areas and transport systems, for example. The stimulus to build new environments and to revolutionise transport relations arises out of the need to shorten the circulation time of commodities and accelerate the turnover time of capital.

Harvey argues that spatial organisation is not just a reflection of accumulation processes, but rather is fundamental to the ‘linking of commodity production in different locations through exchange’. The socially necessary transport costs form part of the value of the commodity, but this depends not on physical distance, but the speed with which distance can be travelled. Marx wrote how capital must ‘strive to tear down every spatial barrier to ... exchange, and conquer the whole earth for its market’ and ‘annihilate this space with time, to turn over capital in the “twinkling of an eye”.’ [15]

There are, however, barriers to speeding up the turnover time. Changing the location of production to a more favourable site requires the mobility of labour. Yet workers are subject to contradictory pressures in relation to immigration, and legal restrictions can stop labour moving to meet capital’s needs. Similar contradictory requirements apply to the movement of money capital. Credit monies roam the world as fast as information can move, but they too encounter social barriers posed by the existence of different currencies of varying quality. It can be necessary to place restrictions on the movement of money to protect currencies and maintain the quality of the money.

Moreover, capitalism’s chase of favoured locations carries its own inherent contradictions. In creating ‘built environments’, places with the material resources necessary for accumulation, larger amounts of capital are embedded in particular landscapes and areas. The fear of this fixed capital becoming devalued can become a barrier to revolutionising technology. Thus ‘both capital and labour can become more geographically mobile at the price of freezing a portion of the total social capital in one place.’ [16] Harvey argues that financial arrangements, the advancing of credit, can shape built environments according to the requirements of capital, but at the cost of the growth of property markets which exacerbate bouts of insane speculation. However, here as elsewhere, crisis can restore the health of the system: ‘Rampant speculation and unchecked appropriation, costly as these are for capital and life-sapping as they may be for labour, generate the chaotic ferment out of which new spatial configurations can grow.’ [17]

Some debates

The falling rate of profit: There is much that is fascinating and useful about Harvey’s account of capital, the contradictory role of money and credit, the imbalances between production and consumption, the impact of the devaluation of fixed capital, and much more that is beyond the scope of this review. However, like some other Marxists, Harvey dismisses the tendency of the rate of profit to fall too abruptly. After all, Marx argued that just as the search for profits was central to capitalism, so a fall in the rate of profit threatened the whole basis of production.

Harvey suggests that Marx was too strongly influenced by his fellow political economists in his acceptance of the tendency of the rate of profit to fall. He levels other criticisms against the theory and the ‘motley array’ of countervailing factors which Marx argued could temporarily prevent the rate of profit falling. Perhaps his most important objection is his argument that the falling rate of profit cannot be treated as a historical or empirical proposition: ‘We cannot, for example, assemble data on corporate profits in the United States since 1945 and prove or disprove the law by appeal to that particular historical record’. [18] This is mistaken on two counts, empirically and theoretically. Firstly, it is possible to examine the rate of profit, and those that have have found that, while the organic composition of capital has not risen continually since Marx’s day, it has once again begun to rise. [19] Secondly, Marx did not suggest that the rate of profit would fall inexorably until capitalism collapsed. On the contrary, he argued that competition generated a constant downward pressure on the rate of profit which could be eased by countervailing tendencies, sometimes for prolonged periods. These countervailing tendencies were a central element of Marx’s theory. He argued that they were built into the structure of capitalism, rather than being the superficial, secondary factors which appear in Harvey’s account. Some countervailing tendencies, such as increasing the rate of exploitation, rationalising the system through bankruptcy and spending on arms, which do not feed back into the organic composition of other sectors of the economy, are all operating in the world economy today, although with decreasing impact on maintaining the rate of profit. It is only with reference to the falling rate of profit that we can understand why economic crises tend to get deeper and more prolonged as the system ages. In addition, a decline in the rate of profit generates intensified competition among the capitalists, leading to instability and conflict. It is this theory which explains why the very holy grail the capitalists seek, the increasing productivity of labour, also sows the seed of their downfall, as it lowers the rate of profit for the capitalist class.

The revolutionary working class: ‘The violent destruction of capital, not by relations external to it, but rather as a condition of its self preservation, is the most striking form in which advice is given for it to be gone and to give room to a higher state of social production,’ wrote Marx. [20] But what force is capable of driving capitalism from the stage? Harvey writes with great feeling about the madness of the system, but he seems to be less confident that the working class can break free of capitalism. In fact, he asks whether increasing material living standards in advanced capitalist countries have actually increased workers’ dependency on capitalism. He correctly notes that ‘the undoubted revelatory power of Marxian theory does not by itself guarantee its absorption by the proletariat as a guide to action’. [21] However, he makes the theoretical possibility of such a transformation less likely by suggesting that Marx believed workers are doomed to fail in their struggles against the impact of exploitation.

To develop this theme Harvey interweaves Marx’s account of the labour process with that put forward by Harry Braverman in Labor and Monopoly Capital (1973). The production process involves workers’ subjection to capital through the division of labour and specialisation, which makes capital richer in production power by making the individual worker poorer. It is a process which involves hierarchical, despotic scientific management, Fordism and Taylorism, which, Braverman reveals, ‘penetrate within the very psychological makeup of the workers themselves’. [22] Harvey discusses criticisms of Marx and Braverman which accuse them of treating workers as hopelessly alienated, uncritical absorbers of capitalist ideologies. Here, some further weaknesses in Harvey’s analysis emerge. He suggests that Marx dismissed workers’ daily experiences as ‘false consciousness’, and that Marxist theory has never adequately resolved the duality of the worker as an ‘object for capital’ and a ‘living creative subject’. [23]

Harvey suggests that this weakness may be remedied by the integration of Marxism with psychological theories. Yet the resolution of these issues can be found in the dialectical possibilities of Marx’s theory of alienation and Lukács’s development of the concept of commodity fetishism. Workers are atomised and made to feel powerless by the organisation of capitalist society, their lack of control over the processes of production, and the way in which social relationships are experienced as relationships between physical objects outside the control of human beings. However, at the same time there exists a constant pressure for workers to organise collectively and struggle against capitalism, creating a constant tension between the experience of alienation and the experience of exercising real collective power. Even struggles for basic improvements, such as that to shorten the length of the working day, involve a potential challenge to the laws of the market in which the true, social nature of production can be laid bare. Lukács wrote how ‘this is the point where the “eternal laws” of capitalist economics fail and become dialectical, and are thus compelled to yield up the decisions regarding the fate of history of the conscious actions of men’. [24] The tension between the alienated condition of workers and their potential power to remake society frequently erupts in class struggles, but it can only be finally resolved by the political and economic victory of the working class.


The fact that Harvey’s book has been reprinted is itself testimony to the revival of interest in Marxist economics. Some of the ideas in this book were developed in The Condition of Postmodernity, which moved away from Marx’s economic theories in favour of cultural change and exploring the ‘time-space compression’ of modern society. But The Limits to Capital is an important book, albeit one which is not, as may by now be obvious, designed for those who are new to Marxist economics. For those who want to develop their understanding of key Marxist concepts, to engage with original ideas about the spatial organisation of our world, and to confront challenges to and debates about Marx’s theory of crisis, this book is recommended.


1. D. Harvey, The Limits to Capital (Verso 1999), p. xvi.

2. Ibid., p. 159.

3. Harvey provides some very important comments on two of the great controversies that have arisen from Marx’s analysis of value. The first relates to how wages are distributed among members of the working class who have varying degrees of skill, a process Harvey roots in the development of the wage labour system. He later suggests that skilled labour, which Marx reduced theoretically to a standard unit of unskilled labour, is today reduced in practice through the division of labour in the workplace. The second controversy focuses on how the tendency for the rate of profit to equalise across the economy transforms the labour values of commodities into prices of production when they are sold on the market. Harvey argues that these prices of production are still based on values rather than market prices. Capitalists tend to respond to these prices of production, rather than obscured real requirements for surplus value, which means they act in a way which can threaten the basis of their own social reproduction. Ibid., p. 68fn.

4. Ibid., p. 153.

5. Ibid., p. 141.

6. Quoted ibid., p. 85.

7. Ibid., p. 96.

8. Ibid., p. 85.

9. Ibid., p. 203.

10. Chris Harman gives the following definition of these concepts: ‘Marx called the ratio of the physical extent of the means of production to the amount of labour power employed on them the “technical composition of capital”, and the ratio of the value of the means of production to the value of the labour power employed the “organic composition”.’ C. Harman, Explaining the Crisis (Bookmarks 1984), p. 18.

11. D. Harvey, op. cit., p. 123.

12. Ibid., p. 197.

13. Ibid., p. 317.

14. Ibid., p. 251.

15. Ibid., p. 377.

16. Ibid., p. 398.

17. Ibid., p. 398.

18. Ibid., p. 181.

19. See J. Geier and A. Shawki, Contradictions of the “Miracle” Economy, International Socialist Review 2, Autumn 1997; C. Harman, op. cit., ch. 3.

20. Quoted in D. Harvey, op. cit., p. 197.

21. Ibid., p. 113.

22. Ibid., p. 110.

23. Ibid., p. 114.

24. Quoted in J. Rees, The Algebra of Revolution (Routledge 1998), p. 222.

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