The following is a reply to the Aufheben Critique of Remaking of the American Working Class. All quotes from Capitalin the following are from the Vintage editions of vol. I (1976) (Fowkes translation) and vol. II (1981) (Fernbach trans.), and from the Penguin edition of vol. III (1991 reprint) (Fernbach). Italics within Marx quotes are mine unless otherwise indicated.

Dear Aufheben comrades,

Better late than never! A mere two and a half years after receiving your critique, helped by the clarification of our discussion in August, I’m writing a reply. I will try to follow the order of your critique for simplicity’s sake. I should also start by thanking you again (as I did upon receiving the critique in spring 2000) for taking the the time to write it. You did point to some weaknesses in formulation that I can now correct. But, as you know from our summer 2002 meeting, I consider many of your criticisms to be wrong-headed.

To begin at the beginning: “we find Goldner’s simplistic division of Capital into a quasi-Ricardian analysis contained in Vol. I and II and a fully Marxist analysis in Volume III particularly problematic”.

Well, why don’t we take a little question like the determination of the value of a commodity? In Ch. 1, vol. I (p. 129 of Vintage): “What exclusively determines the magnitude of the value of any article is therefore the amount of labour socially necessary, or the labour time necessary for its production”. Or Vol. I (p. 340): “Its (labor power’s) value, like that of all other commodities, is determined by the labor-time necessary to produce it.” Opening Ricardo’s Principles of Political Economy and Taxation (London 1977) we read at the head of Chapter One: “The value of a commodity, or the quantity of any other commodity for which it will exchange, depends on the relative quantity of labor for which is necessary for its production…”

Again (vol. I, p. 129, just above the previous formulation: “How, then, is this value to be measured?. By means of the quantity of the ‘value-forming substance’, the labor, contained in the article”.

Felton, (in The Incomplete Marx, p. 209), is quite right to emphasize that already in pt. 3 , Ch. I , vol. I Marx moves (to use Felton’s language) from a Ricardian “embodied” labor theory of value to an “abstract social” labor theory of value, emphasizing that value is not a thing but a relationship. Nevertheless, that does not yet get us fully out of the “Ricardian” elements of vol. I, and much later in the same volume Marx is still saying : “And how do we measure this value? By the quantity of labor contained in it.”(p. 675)

Now, what does the “fully Marxist” vol. III, which I simplistically counterpose to vol. I and most of vol. II, say about the same question? (p. 238): “The value of any commodity…is determined not by the necessary labor time that it itself contains, but by the socially necessary labour-time required for its reproduction.” (Felton, in Incomplete,mentions this in passing on pp. 402-403 but does not link this shift systematically to the structure of the three volumes of Capital.)

(Before proceeding any further, I want to make it clear that I hardly think Marx was still a “Ricardian” –if he ever was–when he published vol. I in 1867. (he had after all written vols. II and III and Theories of Surplus Value when he published vol. I). What I mean is that he is developing an immanent critique: begin with the terms and concepts of the enemy [i.e. political economy] and explode them from within.)

I will come back to this, and show that this division is anything but simplistic. The vantage point of production of vol. I, what Marx calls “the immediate process of production”, and the total capital vantage point of the end of vol. II and all of vol. III, or that of reproduction, is the fault line of our disagreement. Niels (in our discussion) put it clearly. In effect, he said: “What’s the big deal about expanded reproduction? It’s just an increase of simple reproduction” (or words to that effect, and I don’t think I’m distorting the meaning).

My entire text, and, I believe, the organization of Marx’s Capital, are written against the grain of that comment. In your criticisms of my demarcation of vols. I and II (NB: I mean of course up to the introduction of expanded reproduction at the end of vol. II) you largely miss my point. I mean that vols. I and II are intended as a “closed system” with all kinds of things held constant, and explicitly so. The most important Marxist theoretician after Marx to point this out was Rosa Luxemburg, whom I follow—up to a point. Even Henryk Grossmann, Luxemburg’s arch- critic, said something like (I’m sorry I don’t have the direct quote) “despite her errors, Rosa Luxemburg was quite right to point out that the end of vol. II blows the abstract schema of vols. I and II sky high”. In other words (coming even from her critic), vols. I and II are a “heuristic device” designed to demarcate a pure capital “in itself” (the single firm), permitting us to then jump into the actually existing capital, “in-and-for-itself” so to speak (expanded reproduction) and isolate essential elements. It is my contention that you (pl.), like most readers of Capital, have a reductionist reading of Marx from the neglect of the full implications of this transition, namely the “apples to oranges” leap from simple to expanded reproduction, and all that implies. It’s why you don’t see the full scope of “fictitious capital”. Marx somewhere calls the method of dialectical critique “making the petrified relations dance” and that is exactly what the transition from vol. II to vol. III does.

Using Marx quotes is of course not the most elegant form of argument, but in this case is a useful (and necessary) point of departure.

On the heuristic assumption of vol. 1: from vol. II, p. 565 (first line of Ch. XXI): “We showed in vol. I how accumulation proceeds for the individual capitalist.”

But much more important and substantively, for at least vol. II (and, I will show in a moment, vol. I as well): (the passage I read to you in our discussion):

Vol. II p. 470 (3rd page of Ch. XX): (all italics, once again, are mine) “As long as we were dealing with capital’s value production and the value of its product individually, the natural form of the commodity product was a matter of complete indifference…This was always simply an example…What we were dealing with then was the actual immediate process of production which presented itself at each turn as the process of an individual capital…But this merely formal manner of presentation is no longer sufficient once we consider the total social capital and the value of its product… Simple reproduction on the same scale seems to be an abstraction, both in the sense that the absence of any accumulation or reproduction on an expanded scale is an assumption foreign to the capitalist basis…”

Thus, I was slightly off in saying that in the vol. I and II model there was assumed no increase in the productivity of labor: I should have said that there was an assumption of simple reproduction–which amounts to the same thing.

Our disagreement is not about the distinction between the individual and the total social capital; it is about the heuristic nature of vols. I and II, the “merely formal manner of presentation” of everything up to that point, with which the end of vol. II constitutes a fundamental break, and which you don’t seem to recognize. You concede some of this on p. 2 of your critique when you say “Of course it is true that much of the argument in Vol. I, at least, is illustrated in terms of the ‘single capitalist enterprise”.

Marx, however, is even clearer on this point, as regards vol. I (cf. above) and vol. II: “What we were dealing with in both Parts One and Two, however, was always no more than an individual capital, the movement of an autonomous part of the social capital.” (vol. II, p. 429)

I am also perfectly aware that (as you go on to say in italics at the bottom of p. 2) “that the vantage point of the individual capitalist enterprise emerges as something distinct from that of capital as a whole”. That is an important part of my basic point. To put it the dialectical way, we know the individual enterprise only by locating it in the totality (in this case the total social capital)

Let’s pursue my simplistic division farther. In the introduction to Ch. 23 on simple reproduction in vol. I, Marx writes (p. 710): “We shall therefore begin by considering accumulation from an abstract point of view, i.e. simply as one aspect of the immediate process of production.”(The “immediate process of production” once again, is the sole focus of vol. I, and this remark anticipates the formulation on the “merely formal method of presentation” quoted above.) A few pages later (p. 714), Marx again refers to “our present viewpoint”, (which is actually a mistranslation from the German “von unserem bisherigen Standpunkt”, “bisherigen” meaning “from our standpoint up to now”, i.e. the guiding assumptions of vol. I):

“From our present viewpoint it therefore seems likely that the capitalist, once upon a time, became possessed of money by some form of primitive accumulation…” i.e. once again our temporary assumption of the viewpoint of the individual capital.

Marx drops the outlook of the individual capital in vol. II in the Introduction to Part Three (vol. II, p. 427ff): “the immediate process of production” (i.e. the outlook of vol. I-LG) “is its process of labor and valorization…”the process of capital’s reproduction includes, on top of this immediate production process, the specific process of circulation with its two phases” (i.e. the outlook of Parts I and II of vol. II-LG); “but each individual capital forms only a fraction of the total social capital…” (i.e. the outlook of the remainder of vol. II and the entirety of vol. III).

It is perhaps unfair to use Felton’s book as a proxy for what you as a group think, but it is of course the most elaborate statement of at least one of your views on these matters I have. (Correct me if I am unaware of disagreements among yourselves on these questions.) Felton’s presentation of the end of vol. II is generally consistent with Niels’ remark cited earlier: you don’t seem to see that the transition to expanded reproduction in “apples to oranges” terms. In a book with such a title, given all the ink that has flowed over the question since Luxemburg (e.g. Bukharin, Grossman, Sweezy), it is more than a little surprising to find no discussion whatever of this, particularly in light of Engels’ statement (which I also read in August in the preface to vol. II), describing the difficulties of editing vol. II (from p. 86 of the Vintage edition of vol. II): “the third part, on the reproduction and circulation of the social capital, seemed to him strongly in need of revision. In Manuscript II, for example, reproduction was treated firstly without regard to the money circulation that mediates it, and then once again taking this into account.” (I quote this in reference to the connection I draw in “Remaking” between expanded reproduction, the total social capital, and fictitious capital.) In short, chapter 21 of vol. II is one of the most incomplete parts of Capital. As Luxemburg says in The Accumulation of Capital (Routledge edition, 1963, pp. 139-140):

“This brings us back to the old question: How, and by whom, is the accumulated surplus value to be realized? Marx was well aware that his seemingly water-tight scheme of accumulation did not cover this point adequately, and he himself kept reviewing the problem from various angles…”

And then:

“After the breakdown of all conceivable attempts at explaining accumulation, there, after chasing from pillar to post, from A I to B I, from B I to A II, we are made to fall back in the end on the very gold producer, recourse to whom Marx had at the outset branded as “absurd”. The analysis of the reproductive process, and the second volume of Capital finally comes to a close without having provided the long sought-for analysis to our difficulty.” (p. 154)

“chapter 21…of the whole book is the most incomplete. It comprises thirty-five pages of print in all and breaks off right in the middle of the analysis” (p. 169).

At this point let me make it clear that I don’t fully agree with Luxemburg’s solution to the problem of accumulation, though (as the following will show) I fully agree with her demonstration that Marx did not finish the book, and that this incompleteness centered on the question of expanded reproduction, the total social capital and money (pointing to the credit system).

Where Engels says that Marx felt that Part III of vol. II was “strongly in need of revision”, and where Luxemburg says that the chapter on expanded reproduction “breaks off right in the middle of the analysis”,

Felton sees no problem whatever. He says (p. 343 of Incomplete) “We need not examine any further Marx’s analysis and illustration of the “schema of expanded reproduction”…What is important is that it can be clearly seen that the exacting and complex conditions of proportionality that arise with the ‘schema of simple reproduction’ become further compounded in their expanded form which applies to the normal development of the capitalist mode of production”.

In other words,, once again, you, like most 20th century Marxists, see no problem whatever. (And indeed, there is no insuperable problem of proportionality in capitalism or in Capital; our disagreement lies elsewhere) This is what allows you (following Niels’ remark) to think that “expanded reproduction is just an increase of simple reproduction”: in other words, completely linear thinking. (The link to fictitious capital generated by the firm will become apparent later.)

To return to pp. 1-2 of your critique. I might have been clearer about what I meant by the nonexistence of other classes and parts of the world outside of capitalism in Ch. I of “Remaking”. I was not referring, as you seem to infer, to landowners who collect capitalist ground rent. I was referring to peasants and petty producers (artisans, shopkeepers, etc.) with whom the “closed system” of the capital-relationship interacts, as well as to the “parasitic unproductive appendages to the capitalist class”. I was making the point, to which most contemporary Marxists pay little or no attention, that “capitalist classes” for Marx are the bourgeoisie and the proletariat, and that many strata both within capitalist countries and in the rest of the world being pulled into full-blown capitalism stand (for purposes of the dynamic of the system) outside of the capital relationship. This includes unproductive wage laborers in capitalist society, who consume surplus value and do not produce it (to choose an example on which we can agree, state civil servants). They have the status of “capitalist house servants”; today we are more apt to call them “civil servants”. (You recall the already (in 1867!) massive unproductive “service class” mentioned in Vol. I, pp. 574-575). While they might well, as wage-laborers, become part of the revolutionary class, it is necessary to underscore (for understanding accumulation) that they occupy a different relationship to the valorization process from that of productive workers. Similarly, peasants pulled from petty production in Latin America and Africa to work in the metropolis (i.e. U.S.,Europe) come “free” to capitalism in a form of primitive accumulation, i.e. capital does not pay for their reproduction prior to their insertion into wage labor., or after their expulsion from it (and usually not even really while they are in it).

Vol. I and most of vol. II, once again, are a “closed model” consisting of only proletarians and capitalists. I was making the point, which I do not encounter very often, that this “capital relationship” between the two capitalist classes is an important heuristic device for understanding how the “open model” (expanded reproduction and the total capital) interacts with all people outside that relationship. How many Marxists today even pose the question in this way? Not many, in my experience.

But the point goes much further. You don’t make much of the fact that capitalism, for Marx, is by definition an incomplete system, one that is “synchronically” in relationship to non-capitalist strata and populations today, as well as being “diachronically” a transition from feudalism to socialism. This is not to get into a debate, once again, about Luxemburg’s specific solution to the problem of accumulation (although I presume you would agree that capitalism does interact forcefully with such populations “outside” the system). It was classical political economy that tried to conceive of capitalism (in practice) as a pure, closed system, “eternalizing” it: “only a socialist can really solve the problem of the reproduction of capital. Between the Tableau Economique and the diagram of reproduction in the second volume of Capital there lies the prosperity and decline of bourgeois economics, both in time and in substance” (Accumulation, p. 106). Do you disagree?

Stepping back from your critique, Felton’s book, and our discussion, I see in your approach a “textbound” relationship to the functioning of capitalism, which does not look at how it operates historically, either in the past or particularly in the present (as we shall see when we get to fictitious capital). Luxemburg in her Anti-Critique(Monthly Review, 1972) refers to many of the critics ofAccumulation in the same way. “Capital accumulation as the historical process develops in an environment of various pre-capitalist formations, in a constant political struggle and in reciprocal economic relations. How can one capture this process in a bloodless theoretical fiction, which declares this whole context, the struggle and the relations, to be non-existent?” (pp. 61-62). The answer to expanded reproduction “cannot come from any arithmetical operations with fictitious numbers on the paper, but only from an analysis of the socio-economic relations of production” (p. 67). She cites the hypothetical case of a capitalist who is proposing to start a railroad and who presents charts and graphs to demonstrate that it will be profitable: “ Now, what would one say to a man who exclaimed: You ask, where will the profit of the line come from? I beg your pardon, but that is down in black and white in the costing.

In sober circles one would probably indicate…that he belonged in the lunatic asylum or the nursery. But among the official custodians of Marxism such know-alls form the ‘supreme court’ of ‘experts’ who give reports on whether other people have simply completely misunderstood the nature, aim and significance of Marx’s models’!” (p. 70).

I’ll say it loud and clear, as I said it (perhaps not quite so clearly) in “Remaking”: primitive accumulation is a permanent feature of capitalism, and further, this permanence is intimately related to fictitious capital. Capitalism began with centuries of primitive accumulation off the petty producers (peasants, artisans) of Europe, and continues that process in various parts of the world today. But I’ll go even further: the same phenomena, which might be enlarged into the broader term “exchange at nonreproductive levels”, (in more vernacular terms, looting), occur both inside and outside the system: in “unequal exchange” in international trade, in non-replacement of fixed capital plant, in non-replacement of infrastructure, in the destruction of the environment (i.e. non-reproduction of nature), and finally in driving wages even within the capital relationship below levels that reproduce labor power, all serving to shift C and V to S to prop up capitalist titles to wealth. Do such phenomena exist? There is only one way to know, which does not consist in text-bound readings of Capital but in looking concretely at whether or not they occur in historical or contemporary reality.

I may say more on this, but let’s move on to your p. 3.

First, the quote (from me) at the top of the page, while I still consider it to be true, is not how I would put it today. Today I would say that the fundamental contradiction of capitalism is that it requires the cost of reproducing labor power (i.e. of V) as the “numeraire”, the standard of value for exchange, but that at the same time the competitive actions of individual capitals to increase labor productivity is constantly expelling living labor from the production process, tending to abort the reproduction cost of labor power as the standard of value. But since that is not what I say in the text of 1981, let’s leave it at that. (I definitely don’t consider the falling rate of profit to be the main contradiction of capitalism.)

That said, I still think that the process of “technodepreciation” described in the quote at the top of the page is an important, though not paramount expression of the contradictions of the system. Titles to wealth (which is what stocks, bonds, deeds, leases etc. are) do outrun total surplus value in every capitalist cycle, for lawful reasons, ultimately tied to the increased productivity of labor.

To jump ahead for a moment to another issue that captures our disagreement in a nutshell. Felton’s book refers quite concisely to what I call “technodepreciation”, i.e. fixed capital assets seriously devalued by technological innovation (the issue raised by my admittedly flawed—but not ultimately incorrect for this question—10-firm model), where capitalists have to pay off the historical costs of an investment which seriously exceed its current replacement (i.e. reproductive) cost, and you also (both in your critique and in Felton’s book) discuss fictitious capital. The difference between you and me is that you do not connect the two. You don’t because Marx doesn’t explicitly connect the two in his (yet again) incomplete book. That’s another version of the “nub of the matter, and another aspect of your “text-bound” reading of Capital.

You raise the question of military production. Yes, military production is mainly unproductive, except for the technological spinoffs that may enter the civilian economy. Here again you are trapped in a failure to distinguish between the closed vols. I and II model and the open expanded reproduction model, tied as it is not to the “single firm” (closed model) but to the total social capital. What might be a “profit” locally for one firm may not be a profit at the level of the total capital. Here I reiterate a part of the quote above which I previously omitted. This is, once again, from vol. II, p. 470: (and once again, my italics) “As long as we were dealing with capital’s value production and the value of its product individually, the natural form of the commodity product was a matter of complete indifference for the analysis, whether it was machines or corn or mirrors….In so far as the reproduction of capital came into consideration, it was sufficient to assume that the opportunity arose within the circulation sphere for the part of the product that represented capital value to be transformed back into elements of production, and there into its shape as productive capital…But this merely formal manner of presentation is no longer sufficient once we consider the total social capital and the value of its product. The transformation of one portion of the product’s value back into capital, the entry of another part into the individual consumption of the capitalist and working classes, forms a movement within the value of the product in which the total capital had resulted; and this movement is not only a replacement of values, but a replacement of materials, and is therefore conditioned not just by the mutual relations of the value components of the social product but equally by their use-values, their material shape.”

Marx makes a similar point in vol. I (pp. 726-727): “Accumulation requires the transformation of a portion of the surplus product into capital. But we cannot, except by a miracle, transform into capital anything but such articles as can be employed in the labour process (i.e. means of production), and such further articles as are suitable for the sustenance of the worker (i.e. means of subsistence)…In a word, surplus-value can be transformed into capital only because the surplus product, whose value it is, already comprises the material components of a new quantity of capital.” (These “material components” are another way of saying what Rosa Luxemburg said, namely these issues cannot be settled by textbook exegesis but by a concrete investigation of the material conditions of accumulation, which is nowhere in your critique or in Felton’s book.)

There it is, at any rate, in a nutshell,. If you don’t see a break in the final chapter of vol. II, you not only miss the qualitative leap from the single firm model to the total social capital model, but you also miss the link between expanded reproduction in its concrete material form and the total social capital. When Marx says in Theories of Surplus Value that anything that produces surplus value for a capitalist (a prostitute in a brothel, a teacher in a private school, etc) is productive labor, he is speaking in terms of the closed model, the single firm. Step back and think for a moment. What is capital? It is “value valorizing itself”, a valorization process (sich-selbst verwertendes Wert, in German). It is, in vols. I and II a circuit (German: Kreislauf; in expanded reproduction it becomes a spiral; the use of “circuit” throughout vols. I and II is yet another sign that we are in simple reproduction) that acts on itself. In terms of the total social capital, productive labor is labor producing something which is “productively consumed” either as expanded means of production or expanded productive labor. So: in what Department are tanks and guided missiles? Certainly not Dept. II. Are they then Dept. I: means of production? Production of what? How does a tank return to means of production, like a transport vehicle might, and continue to function as capital? The production of tanks, like that of the consumer goods used by state civil servants, are in their concrete form deductions from surplus value, not additions to it.

This idea is anything but “Smithian”, as you say (p. 4),; Smith had no clue about the self-acting, selfexpanding character of the total social capital (a concept he totally lacked), and your own definition of productive labor is stuck in in “the merely formal manner of presentation” single-firm perspective Marx abandons at the end of vol. II. Productive labor for a vol. III total social capital reading of Marx is labor whose product can be consumed in expanded reproduction in either Dept. I or II. (At the bottom of your p. 6, you concede the “grain of truth” in my analysis of military production (without any reference to the problematic above) by saying it occurs against revenue. It also occurs against the state debt, which Marx identifies as totally fictitious in vol. III. Given that state expenditure (at all levels) is about 40% of US GDP, that’s a pretty big “grain of truth”. But it’s still secondary to the more fundamental analytical point.)

Back to your critique. Thus, yes, the profit realized by the capitalist producing tanks begins to circulate as part of the total paper claims on wealth to which no surplus value (which, once again, always appears in the material form of either Dept. I or Dept. II) corresponds. It becomes a fictitious title to future wealth.

The capitalist class as a whole has in practice no means for distinguishing between these two types of profit, which appear to it only as money prime in the M-C-M’ process of valorization. Periodic crises are needed to destroy the growing gap between total paper claims and actual surplus value. The gap can, as indicated earlier, be mitigated by the different forms of non-reproduction that shift C and V to S; to recognize this, however, one requires the concept of the total capital and of the open system which interacts with various “free” inputs from non-reproductive exchange (looting of nature, of non-capitalist populations, of capital plant and infrastructure, of working class reproduction).

But let’s get to the main point: the link between the devalorization of fixed capital and fictitious capital.

You say (last paragraph of p. 5) that fictitious capital does not “necessarily” arise from the devalorization of capital, as I often seem to imply. This “not necessarily” implies that it sometimes does, but you don’t ever follow that up.

The nub of the matter is in your italics in the middle of p. 8, and where we left things in our August discussion, namely that fictitious capital only arises in the financial and credit system. You say “if we abstract from finance and credit we cannot talk about fictitious capital!” First of all, that is false on the face of it, and secondly, once again, the introduction of the credit system in the open model (vol. III) is intimately linked to the circulation of fictitious capital generated by the firm itself. None of your exegeses of vol. II/closed model examples of the firm on pp. 7-8 get to the heart of the matter.

First, though, an aside. I want to link fictitious capital to devalued fixed capital in the “immediate process of production” as a counter to all the non-Marxist theories of fictitious capital today: e.g. the neo- Austrian Richebacher, the Left-Keynesians Minsky and Doug Henwood (in Wall Street), various theories of “casino capitalism”, etc. None of these theories see any lawful relationship between the “immediate sphere of production” and fictitious capital. Marxists must, or fall into some version of monetarism.

What strikes me as important is to show how an increment of fictitious capital begins in the “immediate process of production” and is THEN discounted by the operations of the credit system and the central bank. It is important because it flows from the anarchy of production (the existence of multiple firms) and it has implications for the global fate of the system.

First, the anarchy of production. The concept of the total social capital is known only to Marxists and has no practical existence in capitalist practice itself: capitalism is by definition a system of what Kant calls “heteronomy”, where each isolated fragment (the individual, or the firm) following its own self-interest , most of the time manages to arrive at a result (a totality) that is qualitatively different from a mere “sum”of these individual “maximization principles”, a result regulated by the law of value. That “result”, in normal times, is the expanded material reproduction of the world simultaneous with the accumulation of capital. In abnormal times, i.e. times of crisis, the absence of a practical vantage point on the total social capital is “compensated” by breakdown crisis, a form of retrospective (‘post festum”) “planning” that eliminates the excesses that come directly from the anarchy of production. By wiping out fictitious claims on wealth of all types, including the value of fixed capital devalorized by increases in the productivity of labor, by depressing the price of labor power below its reproductive value, the “retroactive planning” of a crisis reequilibrates conditions for a new expansion, on a new numeraire set by higher labor productivity, in which an acceptable rate of profit again becomes possible.

Now, on the related point of the global fate of the system. Once again, I agree with Rosa Luxemburg up to a point when she said “Although (capitalism) strives to become universal…it is immanently incapable of becoming a universal form of production.” (Accumulation, p. 467). This is, once again, why the concept of the “closed model” (only capitalists and workers) is so important: capitalism interacts with the “free inputs” that come from different types of non-reproductive exchange from outside the system. (The latter, once again, are realities to be determined by concrete research; they don’t exist in the abstract schema.)

Luxemburg’s flaw was not in asserting the importance of this interaction or in the many examples she gave of it (in the final historical chapters of The Accumulation of Capital) .Her error was rather in failing to recognize that the “unsaleable surplus” on whose realization Marx floundered in Ch. XXI of vol. II was solved (for a time) by capitalism through the extension of credit, both inside the closed model (i.e. to capitalists and more recently to workers) and outside it (i.e. imperialism). Luxemburg tended to view the interaction between the closed model and non-capitalist strata (peasants, artisans) and non-capitalist regions (colonies) as a sale of goods through the system of international loans, that pulled the non-capitalist strata and zones into primitive accumulation (non-reproduction through exchange) and therefore propped up the system. But as far-reaching as her model was, a subordinate error was not to recognize how far credit both inside and outside the system could circulate not merely real goods but fictitious values generally, as long as this was compensated in the ways I have indicated.

Now let’s look at your assertion that “if we abstract from finance and credit we cannot talk about fictitious capital!” I agree that my “10 firm model” is problematic and poorly elaborated. Its first error was to focus on only one sector and not the way expanded reproduction and increased labor productivity had an impact throughout the entire economy. Thus, for example, the advent of the automobile wiped out the capitalized value of even the most advanced technology for producing buggy whips. Thus, a great advance in public transportation and maglev train transport infrastructure would wipe out the value of a lot of fixed capital for automobile and truck production (and oil). Thus, if (hypothetically) thermonuclear fusion power one day proved feasible and clean, it would wipe out massive fixed capital in fossil fuel (oil, coal) production and use. Most generally, if Marxism is right in asserting that the cost of reproducing total V is the numeraire for all value, then any cheapening of the material content of V by greater productivity ultimately cheapens all commodities.

But it is not necessary to look at such multi-sector examples, or hypothetical general ones: we have extreme cases of the creation and wiping out overvalued (and hence fictitious) fixed capital within sectors right in front of us.

a) In the late 1990’s, changes in the design of switches increased the through-put capacity of fiber-optic cables by 100 times, making 98% of all such cables previously laid worthless. b) In the mid-1990’s, Texas Instruments spent $500 million building a new chip plant that never opened because while it was under construction a more powerful chip was developed elsewhere. c) as we speak, Intel has $5 billion sunk in the development of its new Itanium super-chip. Already the head of Google, anticipated as one of the main potential customers, has said the entire project may be wrongheaded and that computing might be headed in a completely different direction. A rival company, Advanced Micro Devices, is coming out next year with Opteron, which may completely undercut Itanium. Unless Intel’s bet on Itanium pays off profitably, it will be sitting on a mass of sunk fixed capital costs as worthless as the old fiber-optic cables. d) finally, (New York Times, 10/16/02), it is “the rapid pace of the technology development driven by Moore’s law—the doubling of computing capacity every 18 months—that has created the industry’s financial crisis. …Taking on huge debt burdens during the telecommunications industry build-out of the 1990’s was out of sync with the rapid depreciation and obsolescence of computer-based equipment.”

All of these are cases of fixed capital being rendered worthless or near-worthless by increases in productivity by some other firm. These, combined with the broader and more general cases mentioned earlier, are all examples of fixed capital assets being rendered fictitious by technological advance, generating a fictitious value that has (at this point) nothing to do with the credit system, up to the moment when massive devalorization wipes it out.

What I find a bit irksome in your critique is that this very phenomenon is articulated quite nicely by Felton in The Incomplete Marx. This occurs on pp. 402-403 (I unfortunately do not have the book form in front of me, only notes from a reading of it; in the printout from your attachment these passages are on 195- 196; I’m almost positive they’re identical): “ A machine purchased ten years ago may have taken 1000 hours of social labour to build; but now, as a result of an increased productivity of labour, it may be possible to purchase a similar machine which has taken only 500 hours of labour to build… Yet it was this old value that the capitalist reckons as part of her advance of money capital and which she seeks eventually to recover, together with the requisite amount of profit, over the lifetime of the machine through the depreciation charges added to the value of the commodities it serves to produce. “ Is this so different from what I say in section g. of Ch 1 of Remaking?: “Whatever the historical value (original cost) of the constant capital (NOTE: yes, I should have said fixed capital) of the nine other enterprises, whatever the rate of amortization, its reproductive value has been reduced…However these competing firms react, the accounting of their constant capital (yes, once again, I should have said fixed capital) henceforth contains a fictitious element: a capitalist representation, expressed in terms of price,, which no longer has any counterpart in terms of value, which is to say in costs of reproduction.”

We both—whatever the shortcomings (and I admit they’re there) of my 10-firm model and saying constant capital when I was talking about fixed capital—see this phenomenon, which I call technodepreciation. The difference in our approaches in that you don’t link this to fictitious capital.

Before I pursue that particular point, which is basically the point, I want to step back again and question the tone and approach of your entire critique. Let me just say that I find it, after reading Felton’s book (once again, using it as the best proxy I have for your (pl.) point of view) and a comparison with Remaking, to be ungenerous in the extreme. You focus mainly on one question, (which is indeed the central question), rightly going for the jugular. Indeed, if I’m wrong about the link between technodepreciation and fictitious capital, the entire text is fatally flawed. You pointed out (when you first sent the critique in spring 2000 and in conversation in August) that your tone expressed frustration with my admittedly lapidary style of presentation, and in our August discussion you said that you hadn’t said anything about what you “liked” about the text. As to the latter point: and how! I’m not trying to exaggerate our agreement—we disagree fundamentally about fundamental issues—but your critique, in my opinion, does not even mention in passing some fairly wide and not terribly common overlap relative to other viewpoints out there. Yes, you acknowledge that in 1981 I was still dealing with the dying (but not yet dead) horse of “monopoly capital” theory. Just picking at random, how many other texts 1) start out by mentioning that Capital was an incomplete book, 2) insist on a continuity between the “early” and “late” Marx, not stopping (as do the Situationists and ‘Western Marxists’) at the first chapter of vol. I, but encompassing all three (or four) volumes of Capital? 3) How many other texts see Marx’s critique of the “inversion of subject and predicate” extending from his 1840’s critique of religion right through the entirety of Capital? 4) How many texts attack the Ricardian and neo-Ricardian fallacies of so many “orthodox Marxists” precisely because of their ignorance of (not to mention their contempt for) the importance of 1) and 2)? And 5) because one of the major flaws of Ricardo is to treat money as a mere “veil”, how many Marxists (particularly in 1981, but even still today) treat money and credit as extensively as Remaking does, avoiding the error of reducing money “to nothing more than a mere numeraire”? (as Felton points out on p. 166 of the printout version). (You can certainly acknowledge that I, in contrast to the “analytic Marxists”and the “Sraffian Marxists”, don’t ignore the credit system!) 6) How many other texts have a dialectic of valorization and devalorization, as Felton puts it in the concluding part of Incomplete (or even refer to devalorization)?

But the flaws in your critique of “Remaking” go deeper than in exegesis from vol. II about capital turnover. My first general thought upon reading your critique in spring 2000 was: “these people don’t understand capitalization”. And that is your fundamental error. You never once mention this basic capitalist accounting concept, which is the way in real capitalist practice the market price of all capitals is determined. Capitalization is, moreover, what actually links the closed vol. I and II system to the credit system, but it is not yet the credit system. It is here that attention to what capitalist practice actually does, as opposed to the pure model of the individual capital developed in vol. I and II, is decisive.

Moreover, as you know, Marx specifically discusses capitalization, in vol. III, Book Four, Ch. 29, p. 597 and ff of Penguin edition: “The formation of fictitious capital is known as capitalization.” You might be tempted to point out that this subject is first approached in the discussion of the credit system, but you’d be wrong. The important point for our discussion is that Marx here presents the capitalization of shares, i.e. equity, which are not from the credit system but the paid-in capital of the firm. Yes, Marx mentions shares as only one among many types of capitalist paper that are discounted in the operations of the credit market, but there is already a direct link between the credit system and the sphere of production.

We already agree that Marx discusses fixed capital devalued by technological innovation. He also uses the notion of “capitalization” long before getting to the credit system, as the very definition of capital accumulation: “all capital…is transformed into accumulated capital, or capitalized surplus-value” (vol. I, p. 734). In vol. II he makes the link between this capitalized surplus-value and the credit system: “This latter cases shows us how not only the capital accumulated, but also a part of the capital originally advanced, can be simply capitalized surplus-value.

Once the development of credit intervenes, the relation between the capital originally advanced and the capitalized surplus-value becomes still more intricate.” (vol. II, p 395).

This is as far as the exegesis of Marx quotes from this incomplete book (and incomplete in many ways that Felton misses) will get us. I just want to drive home two points, the question of capitalization in the context of expanded reproduction, and the question of the specific material content of production in the circuit of self-expanding value (i.e. your entrapment in vol. I and II, single-capital notions of unproductive labor and your lack of attention to expanded social reproduction).

What is capitalization? It means, as we know, that a stock paying 5% annual dividends or a bond with a 5% annual rate of interest, in an environment in which the general rate of profit is 5%, is “worth” $100. Nothing controversial there. What is, however, controversial between us is that you seem to pay no particular attention to the fact that capitalization is how capitalists determine the market value of all forms of income. A hundred-year old tenement in a New York slum producing a stream of rental income is “worth”a capitalization of the profit over maintenance costs, taxation, etc; a decrepit factory, whose fixed assets have long since been fully depreciated, and whose workers for good measure are paid below the reproductive wage, can be run into the ground and still be “worth”a capitalization of the cash flow generated minus expenses, etc.; a municipal bond paying the general 5% annual rate of return with a cash flow coming from taxing the working class below reproductive levels and eliminating various parts of the total social wage is “worth” $100, etc. You seem to think (like most text-bound Marxists) that, all other things being equal, this average 5% rate of profit expressed in cash generated as rent, or profit, or interest, necessarily has its counterpart in some equivalent surplus value, as indeed profit does in vols. I and II (obviously not rent or interest income). But that is exactly where, without concrete attention to the real accumulation process, abstract formulations from Capital will not take you very far. Yes, the average rate of profit within in the framework of the total social capital determines the real rate of profit specific to that decrepit individual factory, except that the factory’s “value” in reproductive terms is zero or less than zero. Its market value—its capitalization– is totally fictitious. Its “profit” in terms of cash flow is actually a drag on the profit determined at the level of the total social capital. Its fictitious character is a claim on the surplus value produced by other capitals. All the above-mentioned cases, in fact, constitute paper claims on wealth that have no correspondance in surplus-value and therefore circulate asfictions. In all the high tech cases cited earlier, as long as those firms continue to pay dividends (not even considering the kind of inflated profitreporting that has recently come to light) at current rates of capitalization and manage to conceal their largely or fully devalued fixed assets, their capitalized market values are fictions relative to the total social capital. Only their elimination through bankruptcy or a generalized systemic crash eliminates the fictitious component of capitalized market values.

Further, the claims on wealth represented by these fictitious titles (on this I presume we agree) can be circulated much farther through the operations of the credit system, as long as, on a world scale, there is sufficient surplus value generated to continue valorizing them, i.e. allowing them to complete the M-C-M’ circuit. This surplus value can come from “inside” the immediate production process through the normal functioning of the system , and it can come from primitive accumulation and what I call “exchange at nonreproductive levels” both inside and outside the immediate production process: looting of fixed assets, nonreproductive wages for workers, primitive accumulation of the classical type, incorporation of “unpaid labor” (unpaid in the full reproductive sense) of peasants into the wage-labor work force, and looting of nature. To see this, however, requires looking beyond the reproduction schema to actual accumulation: is capitalist valorization actually expanding the reproduction of society and nature or is it cannibalizing society and nature?

Further, typical (e.g. heteronomic) capitalist accounting methods compel (as Felton says) individual capitalists to show a profit against the historical costs they paid for their fixed capital in the past when its current value is determined by the cost of reproducing it today. What has caused this devalorization except increased labor productivity, i.e. expanded reproduction? And does this expanded reproduction proceed in a linear fashion, as Niels says, as just an increase of simple reproduction? I think not, and at any rate that can only be determined by looking at real conditions. That has certainly not been the case in high tech, as even the capitalists and their press (e.g. the NYT article of 10/16/02) have been compelled to admit. That is certainly not the case if we consider how different “clusters” of new technologies and resources over the past 200-odd years have periodically rippled through the whole system in the “apples to oranges” way, e.g. the system-wide impact of the dynamo, or of petroleum, or improved transportation. There is no meaningful linearmeasure of the social productivity of labor from the 1820’s to the 1920’s to today, and the same would be true for any linear valuation of fixed capital over such periods. The idea that expanded reproduction is something qualitatively distinct from simple reproduction is only visible when we move from the individual capital to the total social capital, a distinction about which I have provided ample documentation in the three volumes of Capital.

Why do we even have to argue about this? Because the book Capital is incomplete, and not simply, as Felton argues, because it lacks a theory of class struggle or a full theory of crisis. We have to argue about it because Karl Marx nowhere writes in black and white in Capitaland Theories of Surplus Values that “the capitalized market value of devalorized fixed assets is fictitious”, and “that in real-world expanded reproduction the credit system circulates these fictitious values far beyond their origins”. (I claim no originality whatsoever in developing this “reading” of Marx; all I did was start with the “total capital rigor” of Luxemburg and its development by some people who took up and modified that problematic in the critical direction I previously indicated.) But, on the crucial points about which we disagree, Marx did indeed say things that you take into account either inadequately or not at all. I’ll reiterate them one last time: 1) the shift in perspective between vols. I and II on one hand and vol. III on the other as the shift in perspective from the individual capital in “the merely formal mode of presentation” (including, most of the time, simple reproduction) to the total social capital approach in the framework of expanded reproduction; 2) following from the latter, the question of unproductive labor, as linked to the concrete material form of commodities and their suitability to return to the circuit of capital as either Dept. I or II goods; 3) capitalization as the bridge between the immediate sphere of production and fictitious capital.

To conclude. I will, for purposes of this “letter” to you (if not for a more public version) not take up the question of the periodization of formal and real domination of capital, about which we seemed to broadly agree in Brighton, namely that the lengthening of the working day (absolute surplus value) peaked ca. the 1850’s or 1860’s and that from then onward, until the 1940’s and 1950’s, intensive accumulation was (in the West) shortening the working day; beginning in the 1970’s and 1980’s, absolute surplus value made a comeback and the average work day began to increase again.

Let’s turn, finally, to your pp. 14-16. Here, once again, the virtual non-existence of expanded social reproduction for you as a serious category shows up clearly. I agree that “Remaking” does not place much emphasis (and certainly not in Ch. I which you are critiquing) on subjectivity in the sense you mean, and that is a flaw. I can certainly argue that I was taking on a lot of other reified forms of Marxism, and that one cannot do everything in one text, but you are still putting your finger on a weak point. I was after all trying to focus attention on a whole series of questions and realities which most Marxists never or rarely discuss (for starters, fictitious capital, the credit system as a whole, formal and real domination as periodizations of class struggle,, the shift from vols. I and II to vol. III), and discussed even less in 1981. I also was reacting to all kinds of 1970’s lyrical (“Western Marxist”) huffing and puffing about subjectivity which in that period (not to mention since) were showing their vacuity, not to mention their utter indifference to the issues I was dealing with. Subjectivity was then rife in what I call the “left wing of devalorization”, and subjectivity among Marxists who are deeply bored by the critique of political economy, and who usually harbor all kinds of middle-class notions of what subjectivity means, interests me only as ideology in the worst sense. But—once again—I was “piling on” a very different kind of approach and subjectivity in the best sense did get short shrift.

That said, your treatment of what I say on pp. 14-16 is pretty much a caricature and shows again your lack of attention to the significance of expanded social reproduction: this also emerged in our discussion, at the end. It is exactly the case that for Marx, capital is the reified inversion of human creative powers, and self-valorizing value, value relating itself to itself, is the inversion of labor power as a selfreflexive “relationship that it relates itself to itself”. Felton has some things to say about the influence of Hegel’s Logic on Capital inIncomplete, but he completely misses this one. You should go beyond Hegel’s Logic to the Phenomenology of Mind. The social relationship capital is so to speak Hegel’s World Spirit, i.e. human powers as a whole seemingly moving by themselves independent of the activity of real men and women, and labor power is the direct materialist supersession of Hegel’s World Spirit, in which those powers are “re-appropriated” consciously. To demonstrate this adequately would require a longer look at the 1840’s Marx than either you or I have time for, but I will just hit the relevant high points. This does relate to your lack of attention to capitalism as an inherently incomplete and unstable system, as a transition between feudalism and socialism, and to its interraction with the non-capitalist world. Or as Luxemburg says, once again, “Although (capitalism) strives to become universal…it is immanently incapable of becoming a universal form of production.” What this means concretely is that there is, in capitalism, concrete “universality” has no practical existence for any class or individual. Universality exists only as the “something else” that makes a partially coherent result (the reproduction of the world) out of everyone blindly pursuing his or her individual interests. It is what makes the whole “greater than the sum of its parts”. It exists, in capitalism, only as the total social capital, of which the capitalists as individuals or as a class are unaware and on which they cannot act, and as the “mass strike” class-for-itself existence of the working class, pointing beyond capitalism. Rosa Luxemburg was right in saying that only a socialist could solve the problem of expanded reproduction, and discover the concept of labor power, because only a socialist looks beyond capitalism to conceive of a society in which universality would have a practical concrete existence for individuals (e.g. the quote from p. 325 of the Grundrisse I read to you).

Very briefly, Marx looked at Feuerbach’s critique of religion, in which Feuerbach had showed that the infinity of God was the inverted form of the infinity of human powers. But—as I’m sure you know– Marx rejected Feuerbach’s “contemplative” materialist alternative of Man, “squatting outside the universe”, and replaced it with the “sensuous human praxis” of the ‘Theses on Feuerbach”, where he breaks with “all previous materialism” (including Feuerbach’s) which “did not understand that activity is objective” (I quote from memory). That is precisely where the “subjective side”enters. And, yes, as you say on p. 15, “Goldner attributes to human behaviour the objective mechanism of capital, which then appears universal and ahistorical, as a natural human behaviour occurring in any society, and in particular in the future communist one”. Let’s translate that caricature into the language I would use: human activity (“behaviour” being a reified concept out of some vulgar 19th century psychology) is inverted into value and capital in this transition between feudalism and socialism, and, yes, creative human activity (labor power as a relationship that relates itself to itself) existed before capitalism and will be the means and the goal of communism: “the multiplication of human powers as its own end”, as Marx says somewhere. This is hardly, as you say demagogically, to transform human creativity into an ‘objective mechanism”; it is a description of how creativity is mechanically alienated in capital. When I say (p. 10 of Remaking) that “What is inverted (NB: in the valorization process) are human creative powers in their totality”, what else could I be talking about except subjectivity, in your terms? I never heard of creativity without subjectivity.

What Marx does in the concept of labor power is to realize practically, as potential universal labor, the abstract and alienated universal “labor” of Hegel’s Prussian monarch. There was expanded social reproduction before capitalism (otherwise, as Luxemburg points out in her critique of Lenin (Ilyin) in Accumulation, “we would never have progressed beyond the Paleolithic scraper”), and there will be expanded social reproduction in communism, focused once again on the “production for production’s sake”, not in the Ricardian sense but (as I say) of creativity. It is, once again, demagogy to assert (as you do) that by this I mean that the communist world will intensify the “frantic activity” (p. 15) of capitalism. It is further quite false to say, as you also do (p. 16) that I propose to “quantify” human creativity or that the value of labor power can be quantified. That is certainly true in a reductionist vol. I and II reading of Capital, where the value of labor power would be determined by “the quantity of labor time embodied in it” but absolutely wrong for vol. III, where its value is determined the by cost of its reproduction, which is in constant flux (even as it remains a very real tendencial force). In the context of expanded reproduction, the universal labor of society as a whole that moves the productive forces “from apples to oranges” is non-linear and unquantifiable in its totality, as indicated previously (though of course important subordinate parts of the process can be quantified). .

To conclude. The “thread” that links Marx before he began the critique of political economy to the Marx of CapitalTheories of Surplus Value and beyond is the fate of individual creativity in bourgeois society. In such a society, creativity is contingent, is only mediately social, by turning its production into commodities. Its “realization” is incidental to the “goal of production”, namely accumulation. This is another way of saying that universality has no concrete practical existence in capitalism. In communism, the goal of production (and reproduction) will be creativity, and the latter will become immediately social. That is Marx’s project from beginning to end, to fuse the creative powers of the individual with the social, to bring (1844 Ms.) the “abstract citizen” back into the concrete existing individual. When I say that (p. 11) that “capital is labor power in contradiction with itself” it is that same schism, critiqued in the 1840’s writings, now relocated in the heart of the critique of political economy.