Michael Roberts on Maksakovsky

Pete brings to our attention the work of Pavel Maksakovsky at that time. As Pete says, he provides us with the most sophisticated version of the anarchy of production theory of crises. As usual, Maksakovsky refers to Marx’s law of profitability, but only to dismiss it as irrelevant to the cycles of boom and slump and instead, like those in debate of the 1920s, focuses on Volume Two of Capital with its reproduction schema. Maksakovksy outlines his theory succinctly in pp136-9 of his book. This is a disproportion theory but with the addition of trying to show that the disproportion between the sectors of means of production gets ‘periodically detached from consumption’. Interestingly, Maksakovsky, correctly in my view, dismisses the idea that excessive credit and financial market busts are the cause of crises (p139), just as Marx did in 1858, but now revived by Jim. They are only at the ‘superstructural level’ of capitalist society and can never eliminate the cyclical developments caused by the ‘anarchy of production’. This is worth remembering in the light of the arguments now being presented by many modern Marxist economists that finance is the real cause of crises now and for the Great Recession (see below).

Does the anarchy of production or disproportion of sectors of reproduction hold up to scrutiny as an alternate theory of crises? I don’t think so. Grossman demolishes it in his book and in a little known essay on Marx’s reproduction schema (recently edited by Rick Kuhn). Grossman shows that Marx’s schema do not show a “widening and deepening contradiction” (Maksakovsky) between production and consumption under capitalism and so cannot be the Marxist explanation of recurrent crises. By assuming in the reproduction schema, accumulation and exchange between the sectors take place at the level of labour values, Maksakovsky makes the same mistake as Luxemburg and others and so finds ‘disproportion’. But Marx’s reproduction schema are at the level of prices of production after the process of competition. Rates of profit are averaged. At that level, there is no inherent disproportion from the reproduction schema.


…I await an empirical justification of the Maksakovksy thesis…

The empirical justification was provided by the very detailed econometric work done by the Harvard school, (later continued by NBER). The book should have included that material repeatedly referenced by the author but it was presumably assumed that its intended audience, who were Bolshevik economists studying the conjuncture, already had copies. See above link. Updating that will require serious work to understand the changes from the form taken by the regular (Juglar) business cycle before the Great Depression and the form taken since. Starting from a “pure” model gives a much better hope of understanding the many complications, as explained in chapter 1 on methodology and at the end in proposing further work.


Sorry, above quote is a complete misunderstanding of what Maksakovsky wrote. One cannot understand the discussion at p136-9 without FIRST reading the core chapter 2.


I strongly recommend also the introduction and chapter 1 first – only postpone the long translator’s introduction.

In fact Maksakovsky explicitly applies production prices to the reproduction schema (as the actual form developed from “value”) and explains HOW the rising organic composition of capital and corresponding falling rate of profit is actualized cyclically. He explicitly rejects Rosa Luxemberg and other ideas that there is any inherent disproportion arising from the reproduction schema. On the contrary he emphasizes that the law of value (in terms of production prices) enforces proportional groth in accordance with the reproduction schema and explains HOW it does so CYCLICALLY and WITH crises as a NECESSARY part of the cycle due to capitalist anarchy.

Maksakovsky’s analysis is based on the actual movement of market prices, which rise and fall above and below values in the course of the cycle, and can only be averaged over the whole cycle to arrive at production prices/values as emphasized repeatedly by Marx. He shows that as well as the fluctuations and turbulence essential for forming wages, values and production prices at all by shifting labor and capital between industries in response to movements of demand, supply and profitability there are also SYSTEMATIC cyclical fluctuations in price levels differing between the two main departments which are central to understanding the role of waves of fixed capital replacement in the cycle.

Anyway, I do think “falling rate of profit theories” show “good taste” compared with the appalling gibberish of ALL the other mainstream, “heterodox” and allegedly “marxian” theories. There is an actual connection with both the empirical data and the fragments of a theory left by Marx, unlike the speculations of “martians”.

I am greatly cheered to see confirmation that the lack of attention to Maksakovsky’s theory can be fully explained as due to not having actually read it. Above is clear confirmation that Michael Roberts had only turned to some concluding pages before getting distracted by some completely different theory refuted by Grossman.

So I am still certain that Michael WILL find it of great interest when he DOES read the book.

I have not yet read the other links, including the article by Pete Green that this post was reponding to. Also only skimmed the comments. Will do so before responding in that thread. Did notice wrong claim that Maksakovsky’s theory was “underconsumptionist”. This will need a separate refutation as it is based on the way Maksakovsky (and Marx) did express some aspects that left them open to misunderstanding. Suffice for now to say that Maksakovsky, like Marx, emphatically rejected underconsumptionism along with all the other “marxian” nonsense.

Thanks for having got me going! More below and I will follow up later.

Have also read attached file:

Click to access presentation-to-the-third-seminar-of-the-fi-on-the-economic-crisis.pdf

Coloured diagram at top p11 “The periodic cycle…”. Has mysterious arrow at top right down to orange box “Rate of profit falls eventually”. Similar mystery in arrow at top left up from orange box “Rate of profit rises”.

These rises and falls in the rate of profit are pretty much the definition of the “business cycle”. They correspond to rises and falls in levels of relative prices with profits rising when the prices of outputs increase relative to inputs and profits falling when opposite. This is what has to be explained. It cannot be given as the explanation.

Key point is that these are changes in prices, NOT changes in underlying values, which change more slowly and less cyclicly. Maksakovsky brings the scattered fragments of Marx’s theory together to explain clearly why and how the disproportions between the two departments arise inevitably as accumulation proceeds and result in these disproportions between price and value (based on lag during which investments in fixed capital resulting from high profits only increase demand for inputs without adding to supply until they actually get installed thus further intensifying the price distortions that lead to more such investments. Credit enables this to go on for long after there is clear overproduction but eventually snaps as the law of value requires re-establishment of connection between prices and values. Liquidations of capital in the crisis and low prices make old labor intensive plant obsolete and enable a wave of replacements with plant that will be profitable at the prevailing price and wage levels.

THIS is the mechanism by which EXISTING technologies with a higher organic composition of capital become viable and get implemented. They weren’t viable when profit rates were higher and labor was cheaper. They BECAME viable when profits fell and wages did not fall as far. Consequently plant replaces labor and generates larger reserve army as described by Marx as early as 1847 (MECW9 “Wages” and MECW6 “Wage Labour and Capital”) with higher organic composition of capital and therefore tendency to lower underlying value rate of profit, higher rate of surplus value, larger mass of profit, larger “real” wages and bourgeois consumption and larger mass of surplus value accumulated in the turnovers of the next cycle. Also the mechanism by which concentration and centralization are both accelerated immensely by two steps forward in the crash (wiping out small capitals and shifting to larger scale enterprises), both of which tend to fall back by one step in the boom (growth of smaller businesses and “capitalists” overly dependent on easy credit).

New phenomena since Marx and Maksakovsky’s time is that with inflation these are not also seen connected with rises and falls in the overall price level expressed in monetary gold but in the context of overall inflation as “demand pull inflation” when profits rising and “cost push inflation” when falling. Actual outbreak of “deflation” and full scale crisis has been successfully postponed since the Great Depression but there is currently great puzzlement about the lack of inflation despite zero interest rates and fears of deflation and collapse.

This is what needs to be explained. Maksakovsky only provides some hints as he expected the cycle described by Marx to continue in that form. Hilferding argued that monopoly capitalism could organize production without crises (including Keynesian fiscal and monetary measures). Maksakovsky in chapter 3 said this was only theoretical since in practive the long term result would only postpone but also intensify the crisis. My conjecture is that is what happened. The “Keynesian” stuff has indeed postponed crisis for far longer than Maksakovsky could have anticipated and it looks like each attempt to postpone it further results in bigger underlying disproportions that must eventually be resolved by a much bigger crash than the Great Depression.

Problems with “falling rate of profit” theory of crisis include:

1. Confusion between cyclic rises and falls in prices and secular trend in values.

2. Leaves open to the usual bourgeois theories for actually transforming the falling rate into a “crisis”.

3. No satisfactory account of “recovery”.

4. Rests on misconception that only “new discoveries” of labor saving technologies (higher organic composition) are relevant. The failure of capitalism to devote far more resources to fundamental science and R&D in order to accelerate new technology is an important but separate question. We only need the EXISTENCE of uninstalled higher organic composition technologies (including basic infrastructure – roads, rails links etc as needed throughout developing world) to see that they will become viable as accumulation uses up the labor reserves and so pushes up wages. “Keynesian” management has successfully smoothed this with rising real wages and stable rate of surplus value for many decades. But cycles with crises are the normal process by which the organic composition rises sharply based on EXISTING technical possibilities that have BECOME viable following a crisis in order to prepare the conditions for a new phase of capitalism in the following cycle.

See also “Making Capitalism Work”

Michael Robert’s post and paper also have many links to explore before returning to complete this initial response.

Mentions empirical work from Kliman, Carchedi and others as well himself and Anwar Sheikh.

Has refs

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