Nick Beams Article

Nick Beams Article - Part 2 The Theory of Capitalist...

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Part 2: The Theory of Capitalist Development By Nick Beams 7 April 2004 This is the second part of a series of articles by Nick Beams, a member of the International Editorial Board of the World Socialist Web Site , dealing with the life and work of radical political economist Paul Sweezy, founder-editor of the Monthly Review , who died in Larchmont, New York on February 27, 2004. Part 1 was published on April 6. Paul Sweezy’s views on political economy were to become central to what might be called the Monthly Review school. They were initially formed in the latter part of the 1930s, as he began to come to grips with Marx’s analysis. Sweezy’s first and, in many ways, most important work, The Theory of Capitalist Development , arose largely out of a process of self-clarification. It had its origins in classes he conducted on the economics of socialism, which included an examination of the theories of various socialist writers. As Sweezy later recounted, in the course of the graduate seminars he sought to raise the level of treatment of Marx, discovering that it involved a “long hard struggle to overcome the traditions and inhibitions of a neoclassical training .... It took me a long, long time before I could accept the Marxist labor value theory because I was totally accustomed to the type of thinking of marginal utility price theory, and so on. And ... for a long time, I couldn’t see how there could be another kind of value theory with totally different purposes.” [4] But The Theory of Capitalist Development was not simply a presentation of Marx’s ideas. In it, Sweezy was to sharply differ with Marx’s analysis of the law of the “falling tendency of the rate of profit”. Since his treatment of this question is intimately bound up with his political orientation and his analysis of American capitalism in Monopoly Capital— a work that was widely read during the political radicalisation of the late 1960s and early 1970s—it bears close examination. The tendency of the rate of profit to fall The tendency of the rate of profit to fall was an observable phenomenon of capitalism well before Marx. The Scottish political economist and philosopher Adam Smith (1723-1790) put it down to increased competition: as the capital stock increased, so production increased, leading to greater supply, increased competition and lower prices, and consequently a fall in profits. According to David Ricardo (1772-1823), as capital expanded and the workforce increased, agriculture also expanded. This meant that less fertile land was used to grow the food necessary for the increased workforce. Lower fertility of land meant an increase in the cost of food, resulting in higher wages and therefore lower profits. Marx rejected both of these explanations. The tendency of the rate of profit to fall arose neither from increased competition (Smith) nor lower productivity in agriculture (Ricardo). It was, rather, the expression under capitalism of the increased productivity of labour.
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