These unsolved dilemmas left accumulation in a no-man’s land. The dismal scientists insisted that capital is an ‘economic’ entity and quickly appropriated the exclusive right to theorize, justify and criticize it. But as often happens with uncontested monopolies, the service hasn’t been something to write home about. It has now been more than two centuries since economists started to work on capital, and they have yet to figure it out. . . .

Chapter 5 - The liberal debacle

Chapter 5 examines the liberal debacle. The key purpose of neoclassical economics is to justify the profit of capital; and it does so by making the income of capitalists equal to the productivity of their capital. This justification, though, faces two insurmountable obstacle:

First, according to its own prerequisites, the theory can work only under the strict conditions of a perfectly competitive economy untainted by politics and power. Ironically, though, this explanation emerged at the end of the 19th century, precisely when oligopoly replaced ‘competition’; and it gained prominence after the Second World War, exactly when governments started to ‘intervene’ in earnest.

Second, and more importantly, even if pure competition did prevail and there was no government in sight, the theory would still fall flat on it face. In order to explain profit by the productivity of capital, we first need to know the quantity of that capital. Yet it so happens that in order to know the quantity of capital, we first have to know the amount of profit! And since there is no way to tell the chicken from the egg, the neoclassicists continue to run in circles. 

Chapters – 6 and 7 – Marx

Unlike liberals, Marxists do not try to justify profit. On the contrary, their entire effort aims at showing that capitalists can accumulate only by exploiting workers. And yet, since their notion of capital, just like the neoclassical one, is anchored in the ‘economy’, they end up falling into the same materialistic traps. These traps are crucial – so crucial, in fact, that they [p. 13] undermine Marx’s entire theory of accumulation. And since most people who are otherwise sympathetic to Marx’s critique of capitalism are unaware of these difficulties, we devote two full chapters – 6 and 7 – to their examination.

The commodified structure of capitalism, Marx argues, is anchored in the labour process: the accumulation of capital is denominated in prices; prices reflect labour values; and labour values are determined by the productive labour time necessary to make the commodities. This sequence is intuitively appealing and politically motivating, but it runs into logical and empirical impossibilities at every step of the way. First, it is impossible to differentiate productive from unproductive labour.

Second, even if we knew what productive labour was, there would still be no way of knowing how much productive labour goes into a given commodity, and therefore no way of knowing the labour value of that commodity and the amount of surplus value it embodies.

And finally, even if labour values were known, there would be no consistent way to convert them into prices and surplus value into profit. So, in the end, Marxism cannot explain the prices of commodities – not in detail and not even approximately. And without a theory of prices, there can be no theory of profit and accumulation and therefore no theory of capitalism. 

Chapter 8 - what accumulates?

And that isn’t the end of the story. Chapter 8 shows that political economists are having trouble explaining not only how and why capital accumulates, but also what accumulates. As noted earlier in the introduction, neoclassicists pretend to count capital in ‘utils’ and Marxists in hours of ‘abstract labour’.

Unfortunately, though, there can be no ‘economy’ distinct from politics and other aspects of society; and even if the ‘economy’ were an independent sphere, its production and consumption could not be ‘objectively’ given. These two impossibilities turn the search for universal material–economic units into an exercise in futility.