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Chasing Unicorns: Chris Harman and the “Marxist theory of stagnation”

"Friesian Unicorn" by Katrina Lasky

As part of my continuing occupation of the Marxist Academy, I have been looking at various Marxist theories of the crisis of neoliberalism. I am now reading the late Chris Harman’s “The rate of profit and the world today”, written in 2007, just prior to the big crash.


Harman appears to be one of a group of the influential Marxist thinkers in the last quarter of the 20th Century, and especially the period leading to this crisis, who helped refocus Marxist academic attention to Marx’s rate of profit theory. In this paper, to some extent an outline of his book, published in 2009, on the same topic in the middle of the crash, Harman presents the result of his research on the rate of profit and offers some ideas to explain his findings.

In Harman’s view Marx’s argument that the rate of profit falls over the life of capitalism has far reaching implications because it argues capitalist crises result, not from some sort of failure in the mode of production, but from its successes:

The very success of capitalism at accumulating leads to problems for further accumulation. Crisis is the inevitable outcome, as capitalists in key sections of the economy no longer have a rate of profit sufficient to cover their investments. And the greater the scale of past accumulation, the deeper the crises will be.

For some reason Harman does not follow up on this very interesting argument — if in fact capitalism’s crises are not a sign of failure but a sign of success, this indicates capitalist crises themselves should not be the focus of attention when studying the mode of production.

Crises are no more than a interval during which the mode of production resolves the contradictions produced by its previous successes. As such, these crises cannot be the reason why Marx labeled the mode of production a relative, historically limited, form of development. While the recurrent crises of increasing scale demand our attention because they momentarily bring economic activity to a near standstill these crises in no way are the source of processes leading Marx to his conclusion regarding the fate of the mode of production.

The conclusion resulting from this realization are pretty staggering: for all of its social consequences, the depression of 2001 is not the harbinger of the demise of capitalism, but an interval during which the mode of production prepares for its further expansion. This may explain why Marxists, when looking at the recurrent explosions of capitalism, see no reason why they cannot continue indefinitely.

They are looking at the wrong thing.

What gives capital its limited shelf-life are not these crises, but capitalism’s success in constantly increasing the rate of extraction of surplus value through the application of improved means of production, science and technology, a success that periodically leads to these crises. Thus Harman concludes:

The crisis, however, is not the end of the system. Paradoxically it can open up new prospects for it. By driving some capitalists out of business it can permit a recovery of the profits of others. Means of production can be bought at bargain basement prices, raw material prices slump and unemployment forces workers to accept low wages Production once again becomes profitable and accumulation can restart.

Focus on the rate of profit, Harman states, leads to a difference of opinion among the Marxists themselves over the fate of capitalism. Some argue there will be a long slow secular decline in the rate of profit; while others argue periodic restructuring can restore the rate. Harman notes some argue there have been periods during which sufficient capital destruction took place to restore the rate of profit. (From my previous posts in this series it seems clear Kliman is a member of this latter group. Kliman argues this level of capital destruction occurred in the Great Depression and World War II, but is not happening now.)

Harman argues this view, if correct, implies Marx was wrong about the limited shelf-life of the capitalist mode of production, but I think he is completely full of shit on this statement — we know, for instance, the rate of profit recovered following the 1930s-1940s; yet, there is nothing about this recovery that implies capitalism can continue indefinitely. Harman is simply engaged in what may be a form of survivor bias.

In a particular crisis, half the existing capital gets wiped out, but the remaining half experiences a rise in the average rate of profit that exceeds even the highs of the previous period — indeed, even the mass of profits exceeds the previous period. However, both of these statements are true only for the survivors. That American profits in the 1940s exceeded both the rate and mass of the pre-World War II period does not in any way prove Marx wrong on the fate of capitalism.

To get around his statement regarding Marx, Harman borrows an idea from Michael Kidron that certain capitals are systemically important. The failure of systemically important capitals may bring the entire house down by creating economic ‘black holes’ in the mode of production. These systemically important capital are marked by circumstances described this way:

Their operation becomes intertwined with those of the other capitals, big and small, around them. If the very large capitals go bust, it disrupts the operation of the others—destroying their markets, and cutting off their sources of raw materials and components. This can drag previously profitable firms into bankruptcy alongside the unprofitable in a cumulative collapse that risks creating economic “black holes” in the heart of the system.

Harman argues this is what took place in the period during the Great Depression, leading to the fascist state. He prefers to call the fascist state “state capitalism”. Okay. Whatever. But he does at least acknowledge this “state capitalism” reorganization of social production essentially arose in both the United States and Nazi Germany at the same time:

Despite their political differences, this was what was common to the New Deal in the US, the Nazi period in Germany, the emerging populist regimes in Latin America or the final acceptance of Keynesian state intervention as the economic orthodoxy in wartime Britain.

State intervention to protect the mode of production from the collapse of systemically important capitals has consequences, however:

It prevented the first symptoms of crisis developing into out-and-out collapse. But it also obstructed the capacity of some capitals to restore their profit rates at the expense of others.

First, I just want to note here the congruence of this argument with Galton’s eugenics argument of the late 19th and early 20th Century. In the Galton’s argument, the state somehow prevents “natural laws” from weeding out weak competitors in society. There seems to be enough similarity to horrify a discerning reader. I also think there are sufficient pronounced similarities with Schumpeter in this argument to reject this argument out of hand. Having abandoned Marx almost unnoticed within just a few paragraphs of his paper, Harman was now making a law of the jungle argument in a vain attempt to make his way back to Marx. Clearly Kidron’s argument that capitalism “ages” has to be rejected since it leads to conclusions that are incompatible with Marx’s theory.

Apparently paraphrasing Kidron’s argument, Harman says state intervention did not immediately create problems because of the massive destruction of capital during the Great Depression and World War II. Okay, fine. But explain this to me: If there was massive destruction during the period, why did we arrive at state intervention? And if the fascist state intervenes to prevent destruction of systemically important capital, did this intervention fail? Harman and Kidron are full of shit on this: the fascist state does not arise to prevent destruction of capital but to accelerate it.

Capitals did not turn to the state for protection, but to destroy their rivals: the capitals of other nations and their own working classes. This is where almost all variants of Marxist academic argumentation goes wildly wrong: fascist state intervention does not occur to prevent the destruction of capital, but because only the fascist state can achieve the sufficient destruction of capital.

As Grossman points out just prior to the Great Depression, after the breakdown of capital it becomes necessary to continuously devalue both constant and variable capital in order to restore the rate of profit. If in fact capitalism was hit by an inability to “to restructure sufficiently to restore those rates” of profit after the 1960s, it is not because, as Harman writes, “…they prevented the system restructuring sufficiently to overcome the pressures that had caused the threat of bankruptcy”, but because the fascist state succeeded in devaluing constant and variable capital all too well.

Remember our starting point in this post: Harman makes the insightful argument that capitalist crises arise not from of the failures of the capitalist mode of production, but from its successes. This would imply the fascist state proved exceptionally good at destroying capital in order to restore the rate of profit.

This, I think, raises a question of definition of what Harman refers to as “[a]n overall tendency to stagnation”. The Dictionary of Revolutionary Marxism defines stagnation as

The failure of an economy to grow, or for it only to grow at a very slow pace. This is often an early indicator of a developing overproduction crisis that is only being kept somewhat in check for a time through the expansion of government or consumer debt but on an insufficient scale to create a more solid rate of growth for the economy.

Again we are presented with definitional problems: What is an “economy”? What is meant by “growth”? What is “government or consumer debt”? According to the dictionary, the stagnation “thesis” is,

The claim that stagnation is the normal state of a capitalist economy in the monopoly capitalist era. This thesis seems to have been originated by Alvin Hansen, an American follower of John Maynard Keynes, but has been strongly adopted, elaborated and promoted by the eclectic “Marxist-Keynesian” economists of the Monthly Review School, especially Paul Sweezy, Paul Baran, Harry Magdoff, and John Bellamy Foster.

Hansen’s book, Full Recovery or Stagnation? (1938) argued that—contrary to standard economic dogma—capitalism does not always stabilize at the level of (more or less) full employment. Indeed, at a time when the partial recovery during the Great Depression of the 1930s was faltering, Hansen raised the suggestion that the economy might be pretty much stuck in stagnation, and implied (at least) that this might be the permanent situation unless very strong and determined Keynesian deficit spending was carried out.

Sweezy and Baran took this idea and ran with it, especially in their 1966 book, Monopoly Capital. Sweezy, Magdoff, and more recently John Bellamy Foster, then continued arguing along these same lines. This stagnation thesis has in fact become the core idea of the Monthly Review School’s understanding of modern capitalism.

The dictionary adds,

However, this stagnation thesis is still essentially a Keynesian theory, and thus still a theory which remains within the bounds of bourgeois political economy…

Why Harman chose to import this bourgeois “thesis” into his argument is really quite puzzling, since there is absolutely no basis for it within Marx’s theory — despite references to Engels in the dictionary entry. As I stated in the Kliman piece,the term “economic growth” has not been mapped to any concept in Marx’s theory; the same is true for the term “stagnation”. They are inventions of Keynesian pseudo-science with no place in Marx’s historical materialist analysis of the capitalist mode of production.

Simply stated: There is no such thing as “economic growth” and there is no such thing as “stagnation.” It is a fucking nonsense phrase invented by this guy Hansen to justify fascist state management of the total social capital. For Marxists to then attempt to offer an explanation for this imaginary malady, “stagnant economic growth”, is the same as offering an explanation for the absence of unicorns. However, not one to be bothered by unimportant things — like the complete lack of evidence for the existence of this bourgeois chimera — Harman described the unicorn, its mating habits and its social behavior:

State intervention to mitigate the crisis can only prolong it indefinitely. This does not mean the world economy is doomed simply to decline. An overall tendency to stagnation can still be accompanied by boomlets, with small but temporary increases in employment. Each boomlet, however, only aggravates the problems of the system as a whole and results in further general stagnation, and extreme devastation for particular parts of the system.

Since the term “crisis” appears in his description, it probably doesn’t take a rocket scientist to figure out where Harman takes this silly argument next: if stagnation is caused by state intervention to mitigate the crises, stagnation must begin with Marx’s law of the tendency toward a falling rate of profit. I will examine how successful Harman is in making this link in my next post.

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