My friend Rosa asked me to read this essay. I did and started to write a reply and it got long enough that I thought what the hell I’ll just slap it up here. Bam! Blog post!

hi Rosa,

Thanks for this, and sorry for the delayed reply. I like it, and because I;m in a rush I;m not gonna talk about what I like, just what I disagree with. I wrote this fast while I was reading. Apologies for rambly-ness and wordiness. General comment on the front end, I like this sort of piece a lot and think they’re valuable. At the same time, I think that this piece implies a problematic mindset (one I have too), which is that it largely trades in general models drawn from/or parallel to the discipline of economics and to a lesser extent philosophy. That is: the piece is about “capitalism 101”, so it covers some of the basics of capitalism. From reading the piece, it sounds like the basics of these issues about profit rates could be understood with general models and without any history. I totally have this same impulse, and developing doubts about it is a new thing for me, maybe in the last year or two. I wonder what it would look like to try to include material on economic history and business history (not ‘a sense of history’ but knowledge of actual events) as part of our basic understanding of capitalism.

That aside getting into the piece… I don’t find fictitious capital an illuminating category. It’s a key point that finance captures surplus value produced by workers, but beyond that, I don’t see what ‘fictitious capital’ as an idea helps us understand. All capital is a sort of social fiction (like race) in the sense that it’s a social practice that was made up by people and could be done away with and yet has real effects. Maybe a little more concretely – Marx talks in v1 of Capital about how the value of any particular commodity at any given moment is (roughly, in general) equal to the labor time necessary to make that commodity at that time. This standard of value is a sort of fiction and yet is very real. Marx discusses hand-loom weavers in a time when machine weaving has taken off. They work ten hours yet their product is only worth five hours. Value is a sort of fiction, with terrible effects; productive capital isn’t more real than finance capital, it’s just more immediately related to the immediate point of exploitation. And I’d want to qualify that too… capitalism is a social system, its discrete parts play roles in the total system, and those roles change over time. Productive capital doesn’t exist in isolation from finance capital, and in certain moments finance capital plays important roles for productive capital — for instance, financial innovation made the rapid construction of the railroads in the late 19th century US possible (and the terribly deadly labor practices involved in that). The meaning of these inter-capitalist relationships depend a lot on what industries are most profitable and who is politically hegemonic in the capitalist class.

I’m rambling now, getting back on track – I don’t think it’s true that “there isn’t enough value to back up these fictitious symbols.” Value isn’t a substance (Harry Cleaver criticizes this as ‘the phlogiston theory of value’), it’s a social relationship. I don’t think the real vs fictitious value makes sense. I think financial firms profits are real, they’re complicated processes for capturing shares of wealth that ultimately derive from surplus value, primitive accumulation/dispossession, or nature.

About the falling rate of profit. A *rate* of return is different from the *mass* of return. Declining rates of profit are compatible with increases in absolute wealth.

About declining value of individual commodities alongside technologically induced output gains. That doesn’t automatically mean crisis, unless commodities go unsold (value advanced goes un-recovered). A key piece of US economic policy from the 30s (including the Wagner Act, by the way) was to boost wages in order to keep consumption rates up for this reason. More efficient production in terms of total quantity of goods produced tends to go in tandem with companies laying people off or otherwise restructuring labor processes and workforce. In a time of general upswing (rapid accumulation and expansion of production) this approach works fine, because firms are expanding quickly enough that they can keep unemployment levels low. Without rapid accumulation, the scenario plays out as this piece suggests — crisis! — as there aren’t enough new jobs created relative to layoffs, which leads to problems of overproduction and underconsumption. That’s a tendency but in certain periods there have been successful counter-tendencies. (The US was pretty close to full employment during WWII and for a few years in the early 20s, despite these same dynamics.)

Capitalists’ decisions as anarchic, this too is historically variable. Monopolistic/oligopolistic firm structures in the late 19th and early 20 century US (US Steel, Standard Oil, etc) were precisely ways to introduce planning. Both world wars saw extensive planning of the economy as well. Generally there’s an oscillation historically between periods of more planned/regulated accumulation and less planned/regulated.

Final thought, the notion of “enough profit” is pretty key I think. This is historical and elastic, it’s not fixed.