A tour de force. This Marxist analysis is both a significant addition to the literature on Marx's theory of value and an accessible introduction to why it is essential to understanding the multiple crises of twenty-first century capitalism' The alternative theory to Marx’s labour theory of value is utility theory, which argues that each individual’s personal estimate of use value or utility should be somehow aggregated to get the total utility of the products of human labour. This is impossible. How can the use value of a product that is estimated by one person be measured against another’s? As capitalism develops, new labour-saving and productivity-increasing ­technologies replace the old ones, and the amount of constant capital rises in relation to variable capital (outlay on wages). Because labour power hired with variable capital is the only part of capital that produces value (and thus also surplus value), the amount of value (and thus, other things being equal, of surplus value) falls relative to total capital invested. This depresses the rate of profit—unless there is a faster increase in the rate of surplus value, among other counter-tendencies. However, Marx contends that the law will assert itself sooner or later, that is, when the counter-tendencies can no longer counter the tendency. 14

In a capitalist economy, due to competition among the many producers of the same commodity, a commodity sold on the market may not realise the value contained in it and so not all the labour which has been needed for its production. Competition on the market decides the socially necessary labour time required to produce and realise the value of a commodity. Profitability varies for different producers, but through competition there is a tendency towards an average profitability. So the price of a commodity will tend to be set by the cost of production plus the average rate of profit across the economy. The value contained in a commodity is thus modified into a price of production. Carchedi and Roberts do see China as being in transition, but this is not a transition towards becoming a global superpower. Rather, it is a transition from capitalism to socialism. The term “transitional economy” is used to describe not just China, but also the economies of North Korea, Vietnam and Cuba.The law of profitability has a host of implications, but to return to inflation, it provides the basis for the authors to construct a new Marxist theory of inflation. To begin with, they show that, due to the long-term rise in the organic composition of capital, there is in fact a tendency towards disinflation. This is because the mounting accumulation of total value in the economy increases relative to the total purchasing power of labour and capital (wages and profits) combined. Carchedi and Roberts convincingly show how Marx’s value theory is essential to understanding contemporary capitalism, finds Dominic Alexander Carchedi, Guglielmo, and Michal Roberts, 2023, Capitalism in the 21st Century: Through the Prism of Value (Pluto). Nature also has value (to us) in that, without air, the planet, trees, forests, water etc., there would be no human life. So it has (use) value to humanity. But it requires the exertion of human labour to turn this intrinsic use value of nature into other use values for humanity: from forests to timber to houses involves the exertion of human energy (and thus labour).

We define imperialist exploitation as a persistent and long-term net ­appropriation of surplus value by the high-technology imperialist countries from the ­low-technology, dominated ones. This process is placed within the secular ­tendential fall in ­profitability, and not only in the imperialist countries, but also in the dominated ones. 25 The most essential element of Marx’s economic theory is his concept of value. Its absence from mainstream economics, whether neo-classical or Keynesian, is at the root of the discipline’s failures. Many left-wing economists have deliberately abandoned value, viewing it, like the left-Keynesian Joan Robinson, as merely a metaphysical abstraction. It is not, however, as Roberts and Carchedi point out at the outset of Capitalism in the Twenty-First Century. Value is the direct physical result of the exertion of human labour on nature’s use values, turning them into other use values (p.1). Carchedi and Roberts argue that modern capitalism is increasingly no longer dominated by the production of things, but rather increasingly by the production of knowledge. 21 The product of mental labour is knowledge, which has to be commodified and sold. Knowledge commodities can include commodified data, computer software, chemical formulae, recorded music, films and patented information. Both tangible objects and mental objects require the expenditure of human energy and can be productive of value: The authors reveal that most in the top 1 percent work for their income. It is only when you reach the top one-tenth of 1 percent that capital income overtakes labor income. Contemporary capitalism is always evolving. From digital technologies to cryptocurrencies, current trends in political economy are much discussed, but often little understood. So where can we turn for clarity? As Michael Roberts and Guglielmo Carchedi argue, new trends don't necessarily call for a new theory.

Counter-tendencies temporarily dampen or reverse the tendency of the rate of profit to fall. When they have exhausted their action, the tendency emerges once more. The operation of the counter-tendencies mean that crisis is temporary, and the accumulation process takes the form of periodic cycles. A crisis or a slump in production is necessary to correct and reverse the fall in the rate of profit and, eventually, any fall in the mass of profit. The graph below shows the changes in the rate of profit for the G20 countries between 1950 and 2019.

To cut to the chase: most pass-through income at the upper end accrues to working-age owners of midmarket firms in skill-intensive industries.

References

However, when it comes to empirically validating their theory with data, Carchedi and Roberts calculate a “value rate of inflation” by combining the purchasing power in value terms with money quantities. Yet, it is unclear why the combined purchasing power can be used to measure the amount of new value created. In my opinion, the work on inflation needs to be presented with much greater clarity and transparency. The view of Carchedi and Roberts is that neither mainstream nor Marxist theories of inflation have adequately explained changes in price inflation in economies with fiat currencies. 12 Unfortunately, this still appears to be the case. 13 Crises, robots and knowledge Applying all this to the post-war period, the inflationary period of the 1970s was therefore not caused by a ‘wage-price spiral’, as the mainstream insists. Rather, the cause lies in the interaction of constant capital growth and combined purchasing power growth (CPP, including profits and wages). While ‘total value rises at 8.7 per cent, constant capital grows by 19.2 per cent and the CPP by 8.5 per cent … Thus, the CPP falls as a percentage of total value, but given that total value grows strongly, the CPP rises percentage-wise. This explains inflation’. Whatever form money takes, a major issue of concern is the return of inflation and the rise in the cost of living. Inflation, Carchedi and Roberts contend, is the result of the interplay of two factors: the combined purchasing power of wages and profits, and the quantity of money in circulation. They argue that, due to the ­labour-shedding nature of technological innovations, the share of constant capital (outlay on fixed assets, such as plant and machinery, and on raw materials) in total capital grows, leading to a rising organic composition of capital and the tendency of the rate of profit to fall. However, the rising share of constant capital in total capital also leads to the share of wages and profit in total capital falling. If inflation is determined by the combined pressure of wages and profits on prices, then the theory of inflation is tied to the theory of the tendency of the rate of profit to fall. Now, however, we have to perform a task never even attempted by bourgeois economics; we have to show the origin of the…dazzling money form… When this has been done, the mystery of money will immediately disappear. 4 In every US recession since the war, it is broadly the same. The rate of profit falls before and during each recession by between 4 and 18 percent, and the mass of profit drops by between 6 and 26 percent (with the exception of the early 1990s recession). 15

First, the idea that state ownership does away with the capitalist nature of the productive forces is false. Were it true, large parts of the Global North would already count as non-capitalist, since big sections of the workforce in many such countries are employed by the state. Indeed, Carchedi and Roberts appear to partially agree with this point. Writing about China, they argue: Capitalist imperialism grows out of the accumulation of capital as the ­intersection of competition between capitalist states and capitalist firms. It is a global system of powerful states competing for domination of the world system using all the economic, military and political means at their disposal. Lenin, analysing capitalism at the start of the 20th century, explained the origins of the First World War as the outcome the conflict between rival imperialist powers. 23 The speed at which things are changing is remarkable. The Financial Times recently reported that physical money accounted for 60 per cent of transactions in Britain as recently as 2008, but now makes up only 15 per cent. 10 States are ­responding by considering creating their own digital currencies, and there are already moves in the United States, China and Britain to explore the use of digital currencies. A digital dollar would, more than likely, drive out much of the competition. Explaining changes in the inflation rate involves combining the measures of purchasing power, including both profit and wages, as well as the quantity of money. For monetarism, the latter is the active factor: if there is more money, then prices go up. However, Carchedi and Roberts argue that in fact, ‘the prices of commodities, that is, their value, determines the quantity of money in circulation and not vice versa’ (p.84). Money isn’t just a token, produced by governments at will, as MMT theorists will have it (p.52), but ‘is the manifestation of value’ and so ‘a certain quantity of new value, to realise itself, needs and determines a certain quantity of money’ (p.85). A sweeping, authoritative and accessible overview of major issues in the global economy from a Marxist perspectiveThe subtitle of this book, Through the Prism of Value, is very apt, since the authors are able to use Marx’s value analysis to explain and illuminate a huge range of the economic and technological issues of the present, from recurring crises and global inequality, through capitalism’s inability to deal with climate change, to robotics and AI, digital currencies and more. Perhaps the most startling failure of the different schools of orthodox economics lies in their inability to explain the pattern of the rise and fall and rise of inflation over the last fifty years. Here, Carchedi and Roberts offer their own theory of inflation, based on Marx, while showing the one-dimensional nature of the standard explanations.