Value and Crisis:
Essays on Marxian Economics in Japan
By Makoto Itoh
296 pp., $29.00, 9781583678985
Reviewed by Bo Harvey
for Marx & Philosophy Review of Books
Despite the expulsion of Marxists from Japanese universities in the 1930s and postwar US occupation, when Makoto Itoh began studying economics at the University of Tokyo in 1955 Marxism was arguably the dominant school of thought. This would shift as scholars returned with Neoclassical and Keynesian perspectives picked up in the US and Europe, however the dominance was such that he could write as late as 1980 that, ‘in terms of quantity, the numbers of Marxian and neoclassical economists were evenly matched’ (11). Precisely how this relatively successful institutionalization of Marxist thought within the Japanese university system shaped this period of Marxist theory remains, in English at least, relatively unexplored.
Japanese Marxism in its Unoist instantiation however is a fascinating milieu precisely because of the academic-institutional integration that sets it apart from the Soviet, Western Marxist and Anglo-American trajectories. This includes sophisticated and consistent enough engagement with Capital such that readers should not find outlandish Itoh’s claim that, ‘Japanese studies of Capital may be safely said to be the most advanced in the world’ (45). ‘At a time when only a handful of Marxists were allowed to teach at the very fringes of West German universities,’ Jan Hoff writes, ‘the systematic study of capitalism was “mainstream” in Japan and occupied a strong place at the center of academia.’ (2014) Given the relative increase in academic Marxism over the past decade in English, it might be a supposed scholasticism or academicism which goes a long way towards explaining recent English language interest in Uno and Japanese Marxism more generally. Indeed, if there has been a single figure within this Unoist tradition that has been semi-widely received in English it is Itoh. His Basic Theory of Capitalism (1988) was subject to lengthy reviews by Simon Clarke and John Bellamy Foster and he was co-author with economist and former left-wing Greek MP and economist Costas Lapavistas.
The first chapter of Itoh’s Value and Crisis: Essays on Marxian Economics in Japan offers an intellectual-historical survey of competing economic schools of thought in Japan generally, covering the dominance of the Classical and German Historical school in the decades following the Meiji restoration, through the interwar debates on the Japanese capitalism between the Kozo-ha and Rono-ha, to the postwar emergence of the Uno school of which Itoh is a professed adherent. Itoh describes how the curriculum at the University of Tokyo began with ‘Economic Theory I’ based on Marx, before moving to ‘Economic Theory II’, which followed the Neoclassical school. In describing a situation that seems a far cry from the contemporary Anglo-American one, ‘most Japanese neoclassical economists,’ Itoh writes, ‘were at least aware of Marxist viewpoints on various problems’ (29).
Beyond the initial intellectual-historical chapter, Itoh discusses Marx’s theory of value in chapter two, Marx’s theory of market value in chapter three, Marxist theories of crisis in chapter four and then a final chapter on the inflation crisis of the 1970s. There he makes some interesting claims regarding the specificity of the effectiveness of Keynesian inflation policy from a US perspective insofar as, ‘inflational policy by means of currency control originates in the highly nationalistic attempt to relieve the effect of the great depression of the 1930s by the segregation of foreign and domestic relations’ (155). For Itoh, initial attempts at Keynesian inflationary policy were suitable to a US context because the US was largely economically self-reliant and able to afford this kind of segregation between domestic and international concerns. With the end of WWII and the rise of a global division between a ‘free’ and ‘Socialist’ bloc, a less segregated US economic policy functioned to bolster this ‘free bloc’ via the extension of a global dollar system and leveraging of American financial capital, however this positioned the well-being of American workers and middle-class downstream from the health of global capitalism writ large. In this geopolitical and economic context, readers may find the serpentine context for recent interest in Keynesian social democracy as a domestic political-economic project.
The crux of the book has to do with the relation between the production of value by abstract labor specific to capitalism and the necessity of economic crises, for ‘without such a systematic theory we cannot clarify the logical necessity of cyclical crises, which reveal the contradictory nature of capitalist economy in all its interrelations’ (93). Itoh sets himself up as explicitly Marxist insofar as he takes the inevitability of crisis as a basic principle immanent to capitalist economic relations no matter the forms of state intervention. In his excellent compendium of Marxian theories of crisis, Clarke has characterized the Uno school’s model of crisis more generally as, ‘rest[ing] on a model of monopoly capitalism based on monopolistic product markets and a competitive labor market, so that competition in the labor market replaces competition in product markets as the spur to innovation’ (Clarke 1994: 70). The general model of accumulation is one where stable technological innovation leads to a stable rate of profit eventually destabilized by rising wages forcing a wave of labor-saving innovations. What is important here however isn’t rising wages in general associated with the classic ‘profit squeeze’, but rather the ‘overaccumulation with respect to labor power.’ For Itoh, ‘Marx’s theory of crisis must be completed as a theory of excess capital wherein the notion of overproduction of capital is in relation to the laboring population’ (154).
Because accumulation typically takes the form of the increasing mechanization of production, a generic Marxian standpoint might find no issue for capital accumulation in a shortage of labor power availability insofar as, by displacing workers via mechanization, capitalism creates its own reserve army of labor. For Itoh however the key ratio determining the relationship between accumulation and unemployment is between the organic composition of capital resulting from mechanization and the rate of exploitation, for if the increase in the former is not associated with an increase in the latter, little stops the use of less mechanized but more labor-intensive methods of production. Business owners, in other words, will choose cheap labor over investments in mechanization if it means maintaining higher profit rates. There is no tendency to innovation ex nihilo. If the rate of accumulation is greater than the rate of growth of labor power at the level of demography however (or, to use a related economic measure ‘labor force participation’), the prospect of a labor shortage means rising wages for those laborers remaining as part of the laboring population provoking a crisis. For Itoh, the tendency for the rate of profit to fall therefore does not manifest directly, but is rather guaranteed at the level of a basic principle via overaccumulation with respect to labor power.
Indeed, for Clarke, prior to the 1930s, the tendency for the rate of profit to fall was understood primarily as a secular rather than periodic law operative in the long run having little actual significance to Marxian theories of economic crisis such as those of Kautsky, Hilferding or Luxembourg. The tendency to periodic crises was connected to the growing mass of profits; with the centralization and concentration of capital rather than with the slowing rate of capitalist profitability generally. The situation changed in the 1970s and the delinking of Marxian underconsumption theories and Keynesian demand management (hitherto seen largely as two-sides of at least a similar coin) with the perceived failure of Keynesian policy to deal with stagflation; to deal with, in other words, a decline in the rate of profit not associated with deflation but with inflation and a rise in unemployment. Of course, every crisis is marked by a fall in the rate of profit, yet common to both underconsumptionist and disproportionality standpoints however is the claim that this tendency is a result of a crisis rather than its cause. This changed in the 1970s. To explain falls in the rate of profit accompanied by inflation, Marxists increasingly rendered the rate of profit as a cause rather than consequence of crisis. The idea that the tendency for the profit rate to fall was a secular tendency irrespective of state or inter-state mediation via economic policy, more popular for obvious reasons given the failures in managing stagflation, thus turned debate into arguments about the causes of such a fall. The 1970s essentially saw a re-playing of debates that had arisen in miniature in the 1930s; namely, attributing the erosion of profits as the result of rising wages or the result of a rising ‘organic composition of capital’ and the increase in capital-intensive technological innovations. In the eyes of the latter, the former was largely ‘Neo-Ricardian’ given the emphasis on distributional changes (whether via union or worker militancy or changes in the laboring population and/or labor participation) – and therefore reformist. In the eyes of the former, the latter were ‘fundamentalists’ for their ‘orthodox dogma’ surrounding the tendency of the profit rate to fall.
The point here for this brief yet incomplete run-through of such a history is Clarke’s description of Itoh’s crisis theory as, ‘a complex synthesis of neo-Ricardian, falling rate of profit, and disproportionality theories, each pertaining to a different phase of the [business] cycle’ (Clarke 1994: 71). Specifically, the way in which, ‘unlike almost all other falling rate of profit theorists, he [Itoh] does try to show how the fall in the rate of profit leads to a crisis.’ Marx had shown that the source of increased demand lay in the purchase of means of production and labor power by the capitalist as the capitalist sought to expand his capital by reinvesting his surplus value. From a disproportionality perspective, provided that the appropriate relations between the various branches are maintained, capital faces no barrier to the realization of its expanded product. Crises instead arise out of disproportionality between branches of production rather than by its absolute expansion. From a disproportionality perspective therefore, production can expand infinitely whatever the state of the market for consumption by expanding the production of the means of production. Adherence to a disproportionality perspective is important politically, insofar as capitalist accumulation faces relative limits vis a vis the relations between branches of production rather than any absolute limit that follows from its contradictory structure.
For Itoh, proving the logical necessity for the overaccumulation of capital via arguments over accumulation with respect to labor power is itself insufficient to answer important questions related to capitalist crisis, such as why over accumulated capital can’t be laid aside as ‘unused’, or why capital can’t slow down the pace of its own accumulation as the profit rate falls. Having already shown the logical necessity of crisis in the overaccumulation of capital with respect to labor power at the level of production, the way the credit system mediates capitalist competition at the level of circulation functions as the other half of his theory. Itoh’s theory is Neo-Ricardian because of his emphasis on wage increases due to the overaccumulation with respect to labor power. It is ‘disproportional’ because of his focus on the credit system and its relation to moving idle capital in, out, and between various branches of production.
Marx’s comments on the credit system are famously incomplete. Some can be found in Part V of Capital, Vol. III, a section which ‘seldom has been treated as an indispensable part of Marxian crisis theory except in the Japanese Uno School’ (109). Itoh attempts to further formalize and concretize Marx’s incomplete remarks to prove the inevitability of capitalist crisis at the level of a basic formal principle. In this section, readers will find fascinating comments about the creation of money by banks and its connection to production, as well as, perhaps most importantly, his emphasis on an analysis of capitalist circulation and production as being the sine qua non of an analysis of capitalist crisis. ‘The essential weakness of the excess commodity theory,’ as he puts it, ‘stems from its basic effort to look for capital’s difficulties not within the process of production. In contrast, the excess capital theory in Capital shows how “the real barrier of capitalist production is capital itself” (Capital Vol II 250), moving through the processes of both production and circulation’ (107).
Following Uno, the act of conceptual abstraction with the aim of elucidating a basic formal principle is a recurring theme throughout. While the function of the credit system is, ‘to utilize idle capitals or to shorten the production circulation period in the turnover of capital’ (109), the principle of the credit system, ‘should be abstracted from those outside factors [such as money capitalists and other depositors outside the ranks of industrial and commercial capitalists] in order to clarify the substantial function of the credit system, which is to facilitate the setting in motion of idle elements of capital which necessarily result from the turnover of capital’ (110). It is in this act of abstraction where, for Clarke, Itoh runs into trouble. As Clarke puts it rather briskly, ‘the cause of the crisis is not the fall in the rate of profit, but the failure of the fiscal and monetary authorities to check the inflationary over-expansion of the boom which leads to the erosion of profit, a failure which arises because his theory abstracts entirely from the state’ (Clarke 1994: 71). Indeed, while the extent of its effect is debated, monetary policy and central banking surely have a role to play in this ‘setting in motion of idle elements of capital’, from which Ito does indeed abstract. Clarke here repeats a version of a common critique that the methodological ground of the Unoist approach in general is overly abstract. A general charge – from Lange, to Clarke, to Bellamy Foster – is that Unoist perspectives (including Itoh’s) partake in a fundamental fetishizing of purely abstract theoretical frameworks.
In general, for Itoh as well as Uno, this act of abstraction to arrive at a ‘basic principle’ is a necessary rather than sufficient measure in terms of constructing a Marxian framework. A sufficient framework of analysis would encompass Uno’s three levels of abstraction: (1) the extraction and reconstruction of the purely logical; (2) a ‘middle theory’ of the stages of world capitalist development; and (3) empirical analysis of capitalism as it occurs in historically specific contexts. For Uno, the epistemological warrant for the purification of the social and historical in general of all non-capitalist, non-economic interferences resides in the self-abstracting properties of Capital itself. Rendered in a Polanyian register, the specificity of capitalism as an economic form is, according to Uno’s reading of Marx, precisely its ‘disembeddedness’ from the social, such that the division between ‘the social’ and ‘the economic’ is itself a result of capital’s logic of self-abstraction. Capitalism therefore becomes the historical condition of possibility of a specific social-scientific discipline called economics. For Uno then, Marx’s critique of political economy is not Archimedean point or alternative system of categories from which to mount a critique of hitherto political economy, but rather a set of categories that purports to follow capital’s own self-abstraction to its conclusion: the total disembeddedness and then subsumption the social by the economic in general. The question of what to do methodologically with ‘the state’ vis a vis this disembeddedness is an issue not only faced by many Marxists but perhaps even by Marx, particularly given the indeterminate role the state plays within the framework of Capital.
The relevant charge here seems to do more specifically with economism, which one is tempted to locate in the intellectual-historical circumstances of the institutionalization of Marxian economics within economics departments in Japan. Marx’s critique of classical political economy, but also economic discourse more generally, is of course partly historical, where a model of exchange between equal units within the sphere of circulation is possible only by abstracting from the distinction between commodity owners who own money and can employ labor (capitalists), and commodity owners whose only commodity to sell is their body and time. It ‘forgets’ the history of the institutional, social and legal forces that function as the model’s condition of possibility. No wonder then that Marx makes some of his most powerful comments about the state in his abridged account of that historical process in Capital – in the section on primitive accumulation. Yet whether formalistic, functionalist, ahistorical or not, what makes Uno and Itoh’s discourse unique in the history of Marxism is precisely the concerted effort in a specific institutional context to mediate Marx’s value-theoretical insights with the then contemporary economic discourse. This might offer, perhaps optimistically, a kind of discursive bridge to Marxism within the discipline of economics, but even further, one route out of the disciplinary cul de sac that is ‘economics’ strictu sensu when it comes to an analysis of capitalism as a historically specific economic form and mode of social reproduction. Beyond the uniqueness of his theory of crisis or his account of the history of twentieth century Japanese economics, Itoh’s book and the Unoist tradition more broadly is well-worth engaging with for this reason.
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