Let us visualize an entrepreneur who, in a perfect competitive society, carries out an innovation which consists in producing a commodity already in common use at a total cost per unit lower than that of any existing firm because his new method uses a smaller amount of some or all factors per unit of product. In this case, he will buy the producers' goods he needs at the prevailing prices which are adjusted to the conditions under which "old" firms work, and he will sell his product at the prevailing price adjusted to the costs of those "old" firms. It follows that his receipts will exceed his costs. The difference we shall call Entrepreneurs' Profit, or simply Profit. It is the premium put upon successful innovation in capitalist society and is temporary by nature: it will vanish in the subsequent process of competition and adaptation. There is no tendency toward equalization of these temporary premia. Although we have thus deduced profit only for one particular case of innovation and only for conditions of perfect competition, the argument can readily be extended to cover all other cases and conditions. (Business Cycles,  p.104)
The entrepreneur is the subjective factor that can switch on the mechanism of pure equilibrium theory – he is the “impure” external force (Bobbio, Da Hobbes, circa p.65) that gives “content” or “soul” to the “pure” or “soul-less” machine (Weber) or form (Kant, Simmel). The Schumpeterian entrepreneur is like a sculptor that works the brute inert matter of a stone and by so doing brings it to life. Marx never pursued this logico-theoretical line of inquiry, preferring instead to follow the purely historical path of political antagonism. Indeed, the reason why Schumpeter stressed (with the intellectual decency that characterized him) the unique “unity” of economic and sociological analysis in Marx’s critique of economic theory was precisely the fact that Marx’s definition of political antagonism contained already or pre-supposed the convergence of human interests that would lead to its supersession! No such “utilitarian/hedonistic” convergence (recall Marx’s doctoral thesis on Epicurus) is possible in the negatives Denken to which Schumpeter belonged and that runs from Hobbes to Hayek going through Schopenhauer, Nietzsche, Weber, Heidegger and the Austrian School!
It is leadership rather than ownership that matters. The failure to see this and, as a consequence, to visualize clearly entrepreneurial activity as a distinct function sui generis is the common fault of both the economic and the sociological analysis of both the classics and of Karl Marx, (BC, pp.102.)
The point to stress is that although Schumpeter’s thesis is certainly encompassed by Marx’s theory of political antagonism of the wage relation, Schumpeter’s originality lies in deriving or inferring this conclusion from the very axiomatic conditions of “pure competition” in both Classical and Neoclassical economic theory – something that even Marx failed to do given that (a) he did not question or examine internally the concept of competition itself, (b) he probably entertained the thought of both competition and equilibrium as internally consistent and valid concepts, and (c) he always strenuously upheld the notion of “objective science” if not technology as separate from or exogenous to capitalist social relations of production, at least epistemologically. Schumpeter - difficile dictu! - actually challenges all these points from within the bourgeois standpoint by making explicit both the “instrumentality” of his “science” and of its apories.
Schumpeter’s distinction between innovation and profit as distinct from mere interest and rent, between entrepreneur and capitalist, between leadership and ownership, is valid only for economic theories that do not allow for political antagonism and also for theories like the Marxian that, although they allow for antagonism, do not address it explicitly as a necessary requirement of the ec-sistence of the concept of pure competition. Schumpeter’s advance on Marx is to show the logical necessity of innovation out of the profit-seeking assumptions of pure competition! Marx certainly failed to notice and to enucleate this essential theoretical point.
Schumpeter writes [in History of Economic Analysis] that “[for Marx,] accumulated capital invests itself in a wholly automatic manner”. As we saw in the note above, Schumpeter is quite simply as wrong on Marx on this point as is humanly possible to be. Hollander and Sweezy rightly dispute Schumpeter’s view too, but on totally spurious grounds. Of course, if we define capital as a “quantity”, a “surplus”, as does Sweezy [cf. his The Theory of Capitalist Development], then the generation and reinvestment of this surplus and profit becomes “wholly automatic” for capital even though the ultimate motivation for seeking this “surplus” may be social power, as Sweezy allows. What we are showing here is that capital, and therefore value, as Marx amply demonstrated, is not a quantity but a social relation, which requires innovation, and therefore entrepreneurial capitalists, for capitalist social relations of production to be kept antagonistically alive. To the extent that Marx believed that [a] surplus value is a quantity and therefore innovation is about the relative share of production going to capitalists and workers and [b] that science and technology are exogenous to capitalist relations of production, and insofar as Marx did not derive the necessity of innovation and leadership from a conceptual critique of the notion of pure market competition, then Schumpeter’s charge is quite founded.
Blaug echoes Schumpeter on this criticism of Marx. Both are quoted in N. Hollander, The Economics of Karl Marx at p.410. Hollander concentrates instead on Marx’s allowance for “uncertainty” for the necessity of leadership in deciding the direction of investment at least in the early stages of capitalism [pp.410ff]. Both Hollander and Blaug, however, completely miss the point that we are making here: It is not “uncertainty” that engenders “leadership”; it is conflict as political antagonism – among capitalists, for Schumpeter, and between capitalists and workers for Marx. But antagonism here does not mean, as it does even for Sweezy, conflict over “the surplus” or “surplus value”; it is not a struggle over quantum because value in capitalism is not a quantity and only its monetary form, profit, is quantifiable! Blaug upbraids Marx for overlooking Schumpeter’s pioneering distinction which, for him, explains the “technical dynamism of capitalism”. Here Blaug has truly put the cart before the horse and then got himself into the most vicious of vicious circles: the entrepreneur is defined as “the agent of technically dynamic economic change”; ergo, capitalist technical dynamism cannot be explained unless there is an entrepreneur! But if the entrepreneur is an agent sui generis, in what historically and conceptually specific way must he be connected with capitalism? Why not have “feudal entrepreneurs” instead?
Of course, because leadership and ownership are different moments of capitalist industry, we should speak not of “entrepreneurs” and “capitalists” as does Schumpeter, but rather of “capitalist entrepreneurs” and “capitalist financiers”. The fact remains that capitalist financiers only entrust capital with capitalist entrepreneurs if the latter have “skin in the game”. In some ways, capitalist entrepreneurs bear far greater personal risks than do capitalist financiers who are able “to socialize” their losses. Consequently, “risk” or uncertainty cannot be the true source and rationale of Schumpeter’s distinction, regardless of what he claims [at pp.103-4 of BC, just after the passage quoted above].
Schumpeter’s entire oeuvre is punctuated and bedeviled with many contradictions and non sequiturs. At times, reading his works, one is reminded of the zany concoctions in Vilfredo Pareto’s Trattato di Sociologia. (Schumpeter’s manifest elitarian views – by which I mean not necessarily politically elitist but sociologically highlighting the prominent role of elites in society – are quite cognate to the views of Mosca and Pareto, a close collaborator of Walras, and then Michels and Weber in the first postwar period. Schumpeter dedicated a study to Pareto in his Ten Great Economists.) Yet, as Bobbio has shown (On Mosca and Pareto), the geniality, breadth and sheer intrepidity with which these great thinkers explore their themes can bear copious fruit if we resist the temptation to dismiss them as nonsense.
... would have said (and, as a matter of fact, he did say it to me the only
time that I had the opportunity to converse with him) that of course economic
life is essentially passive and merely adapts itself to the natural and social
influences which may be acting on it, so that the theory
of a stationary process constitutes really the whole of theoretical
economics and that as economic theorists we cannot say much about the
factors that account for historical change, but must simply register
them. ... I felt very strongly that this was wrong....
I was trying.... to answer the question of how the economic system generates the force which incessantly transforms it.... a source of energy within the economic system which would of itself disrupt any equilibrium that might be attained.... If this is so, then there must be a purely economic theory of economic change which does not merely rely on external factors propelling the economic system from one equilibrium to another. It is such a theory that I have tried to build ...
It was not clear to me at the outset what to the reader will perhaps be obvious at once, namely, that this idea and this aim are exactly the same as the idea and the aim which underlie the economic teaching of Karl Marx. In fact, what distinguishes him from the economists of his own time and those who preceded him, was precisely a vision of economic evolution as a distinct process generated by the economic system itself.” (Schumpeter 1937/1989, p. 166)” (Preface to Japanese edition of “Theorie”, quoted in N. Rosenberg, ‘Endogeneity’, p.7.) of
Schumpeter’s eager attempt to reconcile Marx’s critique of political economy with Walras’s axiomatic schema of Neoclassical equilibrium theory whilst maintaining the “distinct” character of the Statik and the Dynamik founders on its evident logical impossibility, that is, on the impossibility of theorizing the capitalist economy on these two “distinct processes”: – that of Neoclassical stationary equilibrium which describes an economy of pure equal exchange based on marginal utility, and even that of the Marxian critique of political economy based on the political antagonism of capitalist accumulation. This is so because theories based on pure exchange leading to equilibrium view the economic system as one in which “prices” – the rate of exchange of goods, where supply meets demand – reflect the equi-valence of the determinant of prices, the “value” of the goods they represent, whether this be marginal utility or labour-power, whereas a theory based on political antagonism cannot regard prices as signifying the “equivalent values”, either objective quantities (labour-power measured by time) or rates of change of subjective estimations (marginal utilities), prescribed by the Law of Value of both Classical and Neoclassical Political Economy. (Note in this regard that the “Objective Value” described by the Austrian School from Menger to Bohm-Bawerk remains “subjective” in the sense that it springs from subjective “utilities” and its “objective” character – price – is dictated by the conflicting utilities of individuals in market transactions. For Marx, instead, this conflict is not over the utility of goods in exchange but over the violent objectification of living labour as labour- power by capitalists against producers.)
Differently put, equilibrium theory deals with equivalent values (whatever it is that is being “priced” for “exchange”) whose underlying “sub-stance” is “utility” (Menger, Jevons, Walras) or “labour” (Smith, Ricardo) or “labour-power” (Marx) because its “prices” are all relative to the “values” exchanged within the equilibrium system of exchange as defined, and cannot be determined until all exchanges have been completed. Furthermore, the axiomatic condition of perfect or pure competition prevents individual market participants from entering combinations or from changing production functions so as to obtain an advantage over other market participants. In complete contrast, the critical side of Marxian theory, the one that implicitly contradicts the Labor Theory of Value, treats the economic system as one in which political antagonism determines prices and therefore no independent market mechanism can fix prices as the exchange rates of equivalent values. Neoclassical equilibrium theory and the Marxian critique of political economy cannot be regarded as “distinct processes” except in the sense that they deal with subject-matters that are categorically different and therefore incommensurable and incomparable.
Hence, the contradiction in
Schumpeter’s well-known exposition of his theory of economic development is
absolutely evident: If indeed “the economic system” can be “propelled
from one equilibrium to another”, then for him the notion of “economic
equilibrium” must be theoretically valid. Yet, if indeed there exists “a
distinct process generated by the economic system itself...[through a] force or
source of energy that incessantly transforms it..., which
would of itself disrupt any equilibrium that might be
attained”, then it is obvious that no such “equilibrium” exists or
can exist, for the precise reason that “the economic system” is at all
times – “incessantly”! – being trans-formed. It is the
very trans-formation, the meta- morphosis, the trans-crescence of
the economic system that precludes any “equi-librium” (Gleich-gewichtigkeit),
any “equi- valence” of its internal values. An economic system that
is able internally (“from within”) to undergo the “incessant
transformation” that Schumpeter intends to theorize is quite simply conceptually
incapable of being in “equilibrium” because equilibrium can be
predicated only of economic systems based on “equal exchange”, that is,
the exchange of equivalents. But Schumpeter’s “dynamic process” is
one in which the values produced by the economic system are
incessantly and qualitatively changing because of political forces that turn
market prices into something entirely different from “equilibrium prices”,
because they reflect a political reality rather than a reality
of “pure competitive exchange” on the basis of marginal utility or of labour
values. This means that Schumpeter’s dynamic process, the Dynamik,
is categorically different from the static economy, the Statik,
intended by equilibrium theory. Schumpeter’s dynamic economy is one in which “equilibrium”,
if attributed to it, is a contradictio in adjecto!
Schumpeter himself explicitly states in the Theorie that “dynamic equilibrium” is impossible because it is a contradiction in terms, an oxymoron:
Thus, development and equilibrium in the sense that we have given these terms are therefore opposites, the one excludes the other. Neither is the static economy being characterized by a static development, nor is the dynamic economy characterized by a dynamic equilibrium; an equilibrium can only exist at all in the one sense mentioned before. The equilibrium of the economy is essentially a static one.`19[Theorie, ch.7]
Yet, he does not seem to realize that for that very reason it is also impossible for the “distinct process” of Entwicklung to lead “from one equilibrium to another”! When speaking of Entwicklung, Schumpeter rightly treats equilibrium as a stationary state in which all “exchange values” or “market prices” are fixed in accordance with the utility schedules of market participants taken as individuals. But then, he fails to notice that for the “economic system” to move “from equilibrium to equilibrium”, those “exchange values” or “market prices” can no longer be fixed, first, in a regime of “pure competition”, and second, according to utility schedules, or indeed even labour values - because the very reality of Entwicklung, the “dynamic process”, determines values and prices not according to the pure economic laws of equilibrium theory with its axiomatic utility or labour-value schedules, but rather according to the very “impure” practico-political processes that allow the economic system to be “trans-formed” and to mutate!
The all-important point that is being made here is that once we exit the axiomatic conditions of equilibrium theory and we allow market participants (a) to effect changes to production functions and (b) to co-operate, selectively to the detriment of others, then market prices are no longer determinable in accordance with the given utility schedules of market participants because these no longer act as “equals” in terms of their production functions and their market power. In neoclassical equilibrium theory and in the Labor Theory of Value it is the axiomatic “goal” of equilibrium that determines “prices” – so that these “prices” are necessarily “relative” to the constraint of equilibrium axioms that ensure the formal equality of market participants. But once the axioms of the “atomicity” and formal equality of market participants and, above all, the immutability of the productive process are removed, then the determination of market prices is no longer possible because there can no longer be an “equilibrium” in what has become an economic system whose “prices” are affected by technological changes and political conditions and antagonisms that are not amenable to “measurement”.
Whilst he clearly contends here that the “economic system” already contains the internal “force” or “source of energy” that will “disrupt any equilibrium that might [temporarily] be attained” and degenerate into periods of profound instability and crisis, Schumpeter is also equally adamant that it is possible to theorize positions of “equilibrium” or “tranquility” (Joan Robinson’s preferred term, in The Accumulation of Capital) during which the behavior of “the economic system” is scientifically predictable or stable and can even be said to be “in harmony”. Whilst he wishes to construct “a purely economic theory of economic change” that relies on “endogenous” rather than “external factors”, Schumpeter still insists on the need to differentiate this “purely economic dynamic theory” from the more “static” theory of economic equilibrium as a “distinct process”, even though the two “processes” are quite evidently not only “distinct” but also in fact categorically inconsistent!
Schumpeter therefore bases himself on a dual typology of “economic science”: a Statik science represented, in his case, by orthodox Neoclassical Theory as the “scientific” attempt to systematize empirical observations about “the economic system” founded exclusively on the empirical reality of “market exchange and pricing” that must lead to a state of equilibrium – which is why he insists that the economy moves from equilibrium to equilibrium; and a Dynamik science capable of being “a purely economic theory of economic change” founded on the fact that the capitalist economy seems to be able to trans-form itself and, in so doing, go through a wave-like or “cyclical” motion or “evolution” that “propel[s] the economic system from one equilibrium to another”, - a “propulsion” not due to “external factors” unconnected with the scientific operation of the economic system, but much rather to the fact that
the economic system [itself] generates the force which incessantly transforms it..., a source of energy
within the economic system which would of itself disrupt any equilibrium that might be attained...
Apart from the fact that “external influences” could be hypothetically the ultimate cause of capitalist “disturbances” (Storungen), it remains true for Schumpeter that
practically all the phenomena, difficulties, and problems of economic life in capitalist society... as well as the extreme sensitiveness of capitalism to disturbance, would be absent if productive resources flowed every year through substantially the same channels toward substantially the same goals, or were prevented from doing so only by external influences, [Business Cycles, p.83]
Following Marx in opposition to Walras, Schumpeter maintains that the economic system is characterized by two “distinct processes” that generate opposing forces, one of which guides it toward equilibrium (what Marx called “simple reproduction”) and one that pushes it out of that position (Marx’s “expanded reproduction”). In these premises, the Law of Value shared by both Neoclassical equilibrium theory and Classical Political Economy necessarily entails, at least theoretically, the inevitability of economic “stagnation” – the former because aggregate supply must equal demand until no further profitable exchange is possible (this is the outcome of Walrasian tatonnement), and the latter because competition among capitalists and competition for higher wages from workers will eliminate all possibility of profit arising from the exploitation of workers - as Schumpeter consistently and validly argues throughout his work. (This point is discussed at length in the next section.)
Equilibrium is “simultaneous”: it admits of no real physical time. Indeed, we should follow Hayek in calling equilibrium time “semaphoric” or “telegraphic” in that it is merely a signalling system for economic agents to communicate prices. Equilibrium leaves no logical room for real time, historical or chrono-logical. Perhaps Friedrich Hayek’s greatest achievement was to establish this evident truth conclusively, in Individualism and Economic Order. Joan Robinson’s attempt to distinguish between “logical” and “historical” time, in her Time in Economics, is quite simply non-sensical for the devastatingly obvious reason that real time may be “measured” and so be chronological rather than historical or evenementiel, (in French, referring to historical events), but it cannot ever be imputed logically to any sequence of real events or mathematical sequences, which are by definition, simultaneous because logical, and therefore deprived logically of temporality! Logic applies to statements, not to events! The simultaneity of Walrasian equilibrium entails the complete absence of time in its formal Schema: indeed, it is time-less because of its formalism! But the absence of time in equilibrium entails the absence of change or development in the economy it seeks to describe. Therefore, it implies the absence of profit. In turn, the absence of “profit” or “surplus value” in neoclassical equilibrium theory means that the problem of the Dynamik, that is, the problem of the mutation or trans-formation of the economic system, of its “evolution”, is not even posed.
To be sure, the analytical framework of Walrasian equilibrium is also beset with “unscientific” ethico-political and indeed metaphysical problems. It is hard to imagine, for instance, a more metaphysical notion than that of “utility”, which is essential to neoclassical economic theory, or indeed even the notions of “individual” and “self-interest” that form the mechanical elements of equilibrium theory. Equilibrium theory, exactly like Hobbes’s notion of the state of nature or state of civil war – a state by institution, a contractual state -, begins with the formal equality of individual market participants who are unequal or different only in the “endowments” with which they conduct their perfectly competitive market exchange. Indeed, it could be argued that the differences in “initial endowments” do not constitute “inequality” given that no two individual human beings are alike! The central ethico-political assumption of equilibrium theory is that individual market participants have a legal right to their initial endowments. Once this initial legal right is accepted, then the entire “settlement” of equilibrium exchange transactions in accordance with utility schedules is mathematically determined.
By contrast, in the case of Schumpeter’s Dynamik, given the “indeterminateness of prices” caused by the fact that the economic system is changing endogenously (“from within”) and not exogenously (“from outside” as in equilibrium) through the innovative actions of “economic agents” (Withschafts-subjekte) and changing “incessantly”, the question that comes up immediately is not just how initial entitlements or endowments are to be settled between economic agents, but also how present and future endowments or entitlements are justified! In other words, the ethico-political questions raised by the Dynamik relate not just to the initial acquisition of property rights, to their transfer from the state of nature to the civil state, but also and especially to the present and future legal claim over the pricing of all goods and services for exchange on “the market”. In this case we have a Lockean “state by acquisition”, a historical state.
Schumpeter’s version of Walrasian equilibrium is one in which “growth” is possible only “horizontally”, only through “waxing” (like the moon, Wachstum in German) or “enlargement”, “magnification”, but not “vertically”, that is, not qualitatively, not in terms of “change” or “development” or, as we prefer, “trans-crescence”, transformational, metamorphic change.
Professor Schumpeter’s starting point is an economy in which change or development [Entwicklung] (though not growth [Wachstum]) is assumed to be absent….The resulting economic system is called “the circular flow” [Kreislauf] because it is found to run on, year in and year out, in essentially the same channels. (P. Sweezy, The Present as History, p.275)
It follows therefore that any economic theory that limits itself to the task of describing or classifying or merely analyzing this “circular flow” (Kreislauf) of economic activity would not only fail to account for the “disturbances” (Storungen) and for “all the phenomena, difficulties, and problems of economic life in capitalist society”, but it would also fail to account for the actual combined “quantitative growth [Wachtstum] and qualitative development [Entwicklung]” of the capitalist economy and society, that is to say, it would not account for capitalist accumulation. Both Classical and Neo-classical equilibria represent only a “circular flow” (Kreislauf) of goods exchanged, because in a state of “pure competition” (reinen Wettbewerbs) market exchange leads eventually to the exhaustion of any “profits” or “surpluses”, and therefore of any “growth” or “development” or “evolution” or indeed even “crisis”, that may exist initially when the economy is in dis-equilibrium.
In such an economy, profit or surplus value are not possible as a re-distribution of market share or social power between economic agents: profit or surplus value are possible only where development is present. But because change requires a transformation of the productive process, not as a definitional characteristic of the circular flow, Schumpeter then attributes this possible change to “subjective” factors – namely, innovation by entrepreneurs. For Schumpeter, innovation is the true source of profit, which he aptly calls Unternehmer-gewinn (entrepreneurial winnings or gains).
With this we really get closer to reality. In particular, we win a clearer insight into that peculiar jumble of conditioning and freedom, which economic life shows us. The static circular flow and the static phenomena of adaptation are dominated by a logic of things, while it is completely irrelevant for the general problem of freedom of will, nevertheless in practice - with fixed given social relationships - it leaves as good as no manoeuvering room for individual freedom of will. This can be demonstrated and yet it was always a point of criticism, since the free creative work of the individual was so obviously visible. We know now that the latter observation is correct. Yet, this observation does not contradict the theorems of statics. We can precisely describe the place and function of this creative work. Of course, in development the logic of things is not missing; and just as one cannot demonstrate with the static conception the case for philosophical determinism, one cannot maintain the case against it with the dynamic conception. But despite this we have shown that an element is present in the economy, which cannot be explained by objective conditions and we have put it in a precise relationship to those objective conditions.23 (Theorie,1912, ch.7)
This “subjective” theory of innovation gives rise to three immediate objections. The first is that it relies on the assumption that a state of equilibrium where “value” can be quantified really exists! Like all bourgeois economists, Schumpeter sees “freedom” as the opposite of “necessity” instead of “coercion” – which is why he remains fixated on the theoretical necessity or scientificity of equilibrium analysis as providing those “objective conditions” within which a “subjective element is present”. We shall deal with this objection in a later section in connection with our critique of economic methodology. The second objection is that the very voluntarism of the theory makes its explicatory power very fickle and unconvincing, indeed arbitrary and aleatory or contingent. The third objection is that, even allowing for the partial validity of the Schumpeterian theory of innovation as the driver of capitalist technological change for accumulation, the very reasons for its validity lead inexorably to its obliteration, as Sweezy explains with reference to his own alternative “objective” theory:
While the view of the innovation mechanism which has been suggested here differs in important respects from that adopted by Professor Schumpeter, it should not be supposed that the two are mutually exclusive. There is plenty of room for entrepreneurs of his type in the capitalist class economy, and, obviously, any satisfactory theory must make a place for them. The rise of new firms and new fortunes, which was such a common feature of the capitalist economy of a generation or two ago, is probably best accounted for along the lines of his theory. But nowadays, when the appearance of important new firms is a rare event and when innovation is carried out largely by existing enterprises almost as a part of their regular routine, reliance on the volitional and spontaneous activity of the entrepreneur as an explanatory principle seems less and less safe. Professor Schumpeter himself might possibly agree with this conclusion, at least in part,
282 THE PRESENT AS HISTORY
since all his major works include suggestions that he regards his theory as more suitable to conditions of competitive than what he calls "trustified" capitalism.'
Sweezy is therefore entirely right to challenge this “subjective” view of the origin of capitalist profit, accumulation and so of technological change by making innovation to be the effect, not the cause, of profit due to “objective” factors compelling capitalists to accumulate capital. To Schumpeter’s “subjective” theory of the Innovations-prozess as the result of the Individualitat of the Unternehmer-geist (entrepreneurial spirit), his pupil Paul Sweezy wishes to substitute the “objective” Marxist view whereby it is the very process of accumulation of capital (by means of profits, of course) that leads to technological change. We call this alternative hypothesis “objective” because it avoids the patent “voluntarism” of Schumpeter’s theory by basing the origins of innovation on the very dynamic of capitalist accumulation – the objective drive of capital to accumulation as its very raison d’etre, as its differentia specifica.
Professor Schumpeter’s ordering of cause and effect may now be reversed. Instead of regarding surpluses and accumulation as the effect of change, we can look upon them as exercising a profound and steady pressure in the direction of economic change. The reasons for this may be briefly indicated.
First, accumulation in the absence of change tends to wipe out the surplus and hence to threaten the social position of the capitalist class…Second, the individual capitalist who introduces new methods makes a larger surplus and hence can get ahead more rapidly than his fellows. Finally, the capitalist who refuses to enter the race for new and improved methods stands in danger of being eliminated by his more alert competitors. (P. Sweezy, The Present as History, p. 280)
The first reason Sweezy adduces is that without change in the process of production, the surplus value extracted by the capitalist from the labour force is necessarily limited to the absolute population of workers. This is a reasonable assumption, provided we specify that the higher productivity obtained through technological change allows capitalists to extend their command over a larger number of actual and potential (reserve army) workers.
The second and third grounds are really one and the same in that they refer to inter-capitalist rivalry or competition as the drive for greater accumulation through technological change. But Sweezy forgets and neglects the most important reason for capitalist innovation – one which relies not on competition between individual capitalists but rather owes to the antagonism between the capitalist class as a whole and the working class. The fact that the biggest driver of capitalist innovation is neither the subjective leadership of the entrepreneur – his “will to conquer” in the Theory – nor competition between individual capitalists, but rather the existential survival need of the capitalist class to be able to de-compose working-class antagonism to exploitation in the workplace and through consumption – this most Marxian of reasons evades Sweezy because he adopts the more scientistic interpretation of “the economics of Karl Marx” rather than his “critique of political economy”. It is true that Marx oscillated too frequently between the scientistic and the political interpretation of economic production; nevertheless, it is clearly a mistake to espouse Marx’s scientistic position most notably in Das Kapital and to ignore completely the correct Marxian position expounded in the Grundrisse. Capitalism is not an objective system of production based on scientific parameters; it is and always has been an exclusively political system of class domination.
And the productive process is the battleground par excellence of this class antagonism. The other battleground is that of consumption or wage-good demand whereby the capitalist seeks to impose on the worker types and forms of consumption that are more likely to increase the worker’s dependence on capitalist employment, on wage labour. Of course, in the quotation above, Sweezy displays his profound lack of understanding of the true substance of Marx’s critique of political economy enucleated mostly in the Grundrisse but which unfortunately took misguided Darwinian semblances in Das Kapital and in the Preface to A Contribution, where the process of production is seen more as an objective mechanism whereby human beings seek to dominate a hostile nature and workers and capitalists come into conflict solely over the of distribution of “the product”. In this Darwinian or scientistic view, both the process of capitalist production (how goods are made) and the products themselves (what goods are made) are taken by Marx to be objectively-given realities (supply and demand) devoid of political content. In this view, the only political aspect of capitalist production is the distribution of “the product” intended as a homogeneous monetary or value quantity (who gets how much) rather than the what, when and how of production.