Maksakovsky moves beyond Marx, however, by dropping the assumption which Marx retains in his analysis of the relationship between Departments 1 and 2, namely that market prices always correspond to values (or indeed to the prices of production introduced in Volume 3). As Maksakovsky shows, starting from the ‘depression phase’ of the cycle, demand for investment goods will revive with the need for replacement of existing fixed capital which is worn out or has become obsolescent with technical change. If the available capacity in Department 1 has been reduced during the previous crisis with the shutdown of mines, oil wells or steel plants etc., the revival in demand will tend to raise prices above values in those sectors. Whilst the supply of such products takes time to come on stream, employment increases immediately generating an expansion of demand for consumer products. Profits will tend to rise with rising prices encouraging even more expansion in both Departments.
But towards the peak of the expansion phase the new investment begins to result in extra supply being thrown into the circulation process. Now just a slowdown in demand for additional machinery from Department 2 will generate excess capacity in Department 1 (here Maksakovsky anticipates the accelerator of Keynesian business-cycle theory without the rigid formalism). Prices and profits will fall and the process goes into reverse. The law of value begins to prevail (i.e. relative prices fall to the new lower values set by socially-necessary labour-time) but only after a “prolonged interval of time”. The cyclical fluctuations Maksakovsky suggests will occur independently of what happens in the world of finance and are driven by changes in investment, as the evidence stressed by Michael Roberts confirms and which is not in dispute. But only when the overaccumulation of capital is fuelled by an overextension of the credit mechanism and fictitious capital does the turning-point from boom to depression take the form of a crisis or a financial crash.
The previous two paragraphs provide only a brief sketch of a sophisticated but highly abstract analysis of the cyclical pattern which has characterized capitalism since the early 19th century when fixed capital became a significant component of the production process. …
Continues with reference to Preobrazhensky which I have not studied yet (was not at all impressed by idiocies in Preobrazhensky’s chapters of “ABC of Communism” with Bukharin).
Above is the first, and so far the only example I have seen of anybody actually “getting” Maksakovsky. Better succinct summary than I have been able to do so far, and has helped improve mine as response to subsequent discussion with Michael Roberts.
Also correctly defends Maksakovsky against claims of underconsumptionism in above thread. I will do a separate post on underconsumptionism later.
I would not highlight capacity reductions in Department I but that doesn’t matter much.
My only quibble with above summary concerns this:
“…replacement of existing fixed capital which is worn out or has become obsolescent with technical change…”
Unfortunately that is fairly accurate as regards what Maksakovsky explicitly said. But what needs to be brought out is something implicit, which I think Maksakovsky probably took for granted, but needs to be spelled out explicitly because so many “marxians” and anti-marxists just don’t get it.
It is not necessary for “technical change” to follow “new inventions”. There is always a range of technologies available (replenished of course by new inventions). Even before writing the Communist Manifesto, Marx stressed the introduction (not discovery) of machinery (with a higher organic composition of capital) as the mechanism that responds to wages being driven up due to accumulation of capital soaking up reserve army of labor. Has quoted Ricardo et al on already existing inventions of machinery remaining unprofitable while labor is too cheap but used for shedding workers when necessary.
The endless debates about whether there is a bias towards capital saving or labor saving technology misses what Maksakovsky demonstrated. As I emphasized above Maksakovsky explained how the cyclic divergence between prices and values makes existing fixed capital technologies obsolete at current prices when they were not obsolete at the prices prevailing during earlier phases of the previous cycle. This then results in the next cycle starting with a higher organic composition of capital than the previous cycle. (Also increased centralization and concentration assisted by crisis bankruptcies etc).
The “novelty” of Maksakovsky actually discussing cyclic divergence between current market prices and underlying average values/production prices (which are emergent averages over a cycle) reflects the fact that “marxian” discussions have had no connection with what Karl Marx repeatedly emphasized.
It simply isn’t possible to get anywhere without grasping that picture of values emerging from the fluctuations in demand and supply.
This also highlights the importance of Maksakovsky’s introduction and first chapter on methodology. The empirical work already done is way ahead of the models. Since the Great Depression there have clearly been major changes. Grasping these needs to start from the “pure model” Maksakovsky described (including his chapter 3 on finance) and develop the changed role of the state and finance. Staring at graphs of the data won’t substitute for that theoretical work (which can only be tested against data after there is a theory to test).
See my discussion of essence and appearance. Blog posts I have been looking at strike me as the sort of things astrologers would have been writing about improving astrological models before Kepler thought of trying ellipses.
Anyway, it is an enormous relief to see that somebody out there among the marxians does actually “get” Maksakovsky so can help refine explanations of it.
My focus will be on getting towards a mathematical restatement and getting it into the mainstream bourgeois literature (where I am more hopeful that a future generation of revolutionaries studying economic theory will find it). But it is certainly also necessary to spread the concept among “marxians”, as even if they don’t get it, when new forces start looking for theory some are bound to at least check out the marxians and could come into contact that way before giving up on Marx in disgust.
Should follow up on Peter Green’s other work eg:
Also many others on current marxian crisis theory here: