‘The Enigma of Capital: and the Crises of Capitalism’ reviewed by Ed Rooksby

The Enigma of Capital: and the Crises of Capitalism

Profile Books, London, 2010. 296pp., £14.99 hb
ISBN 9781846683084

Reviewed by Ed Rooksby

About the reviewer

Ed Rooksby teaches politics at the University of Southampton and Economic History at the University …


David Harvey’s aim in The Enigma of Capital is to help restore a critical understanding of the systemic logic of capitalism and of the role that periodic crisis plays within that logic. The organising metaphor Harvey deploys at the beginning of the book is to describe capital as the ‘lifeblood that flows through the body politic’ (vi). Indeed the focus throughout the book is on the ‘flow’ of capital – which, for Harvey, is not a ‘thing’ but a constantly moving and dynamic process. Capitalism, he emphasises, is permanently in flux – constantly renewing itself in a process of what Schumpeter termed ‘creative destruction’. For Harvey, Marxism is the only approach that is adequately equipped to analyse capitalism in the dialectical, dynamic terms that can provide us with an understanding of the systemic character of capital flow. It is, moreover, the only approach that can provide us with an adequate grasp of capitalist crisis.

The book begins with a detailed account of the current crisis. Harvey then sets this crisis in longer term historical context, presenting it as the latest (and most serious) of a series of structural crises that have emerged since the post-war boom petered out in the early 1970s. Capitalism, Harvey explains, has in effect moved from one crisis to another since the end of the long boom. In fact, for Harvey, capitalism never really resolves its crisis tendencies – they are merely shifted around, postponed and held off. For me, this is one of the most impressive sections of the book. Harvey manages to provide an in-depth, but still highly accessible, overview of the present crisis and of major macroeconomic developments and trends over the last 40 or so years in just under 40 pages. This is no mean feat.

Capitalist crisis can erupt and manifest itself in myriad forms. Underlying this, though, is a key problem for capitalism which Harvey terms ‘the capital surplus absorption problem’ (26). The logic of capital is one of perpetual accumulation – capitalists are forced, under pressure of competition, to recapitalise and reinvest in expanding a proportion of the surplus they produce. This requires constant discovery of new profitable outlets for investment so that the surplus can be absorbed and accumulation can continue. Overaccumulation of surplus capital – lack of profitable investment opportunities – lies at the root of capitalism’s crisis tendencies.

As Harvey points out, periodic crisis is indispensable for capitalism – it is the means by which capitalism renews itself. Crises devalue or destroy surpluses for which no profitable outlets can be found, clear-out inefficient capitals, push down wages through expansion of the ‘reserve army of labour’ and purge the system of debt for example, so creating the basis for renewed and reinvigorated growth. As Harvey puts it, crises are the ‘irrational rationalisers of an irrational system’ (215). Crises, however, are also moments of acute vulnerability for capitalism in which political opposition to it typically grows – there is nothing inevitable about whether or how crisis is (temporarily) resolved.

Harvey feels that capitalism may well find it particularly difficult to find its way out of this crisis and get back to adequate rates of long-term growth. Capitalism, he suggests, is running into serious constraints in relation to the ‘capital surplus absorption problem’ and this, indeed, is a key problem underlying the current crisis. It is generally agreed, as Harvey points out, that a ‘healthy’ capitalist economy must expand at a rate of about 3 per cent per annum. This means, of course, that more and more capital surplus must be absorbed. If we are to return to 3 per cent compound growth today, $1.6 trillion in surplus capital would need to be profitably invested. If sustained growth returns, the world economy will need to absorb some $3 trillion in surplus capital by 2030 (216, 26-27). This, Harvey remarks, is ‘a very tall order’ (27). There simply must come a point where capital accumulation outstrips the capacity of the world economy to absorb the growing capital surplus. We may, Harvey indicates, be reaching this point and the depth of the current crisis may be a reflection of this problem.

In the next part of the book Harvey examines different types of obstruction to capital flow that can bring about crisis. One of Harvey’s major arguments is that, beyond the underlying problem of capital surplus absorption at least, it is a mistake to seek to identify ‘one dominant explanation for the crisis-prone character of capitalism’ (116) and that, instead, we should ‘recognise the multiple ways in which crises can form in different historical and geographical situations’ (117). Harvey argues that it is helpful to think about crisis formation in terms of barriers that disrupt or slow down the flow of capital and to recognise that these barriers can take many different forms. Harvey is keen to stress that, in principle, capital can find ways to overcome or circumvent any one of these barriers, but he also argues that the very solutions capital finds to enable it to overcome one barrier will often throw up further obstacles to deal with.

Next, Harvey seeks to integrate an account of uneven development in space and time into his analysis of capital flow. This part of the book provides an interesting analysis of the historical geographical evolution of capitalism from its beginnings to the present day. Harvey also provides an account of the ways in which capitalism continually produces new spaces and new space relations. He also analyses the tendency for ‘agglomerations’ of inter-reliant capitals in close geographical proximity to emerge and sets out the place and functions of the capitalist state within the logic of capital flow.

Possibly the most important and novel aspect of this part of the book concerns what Harvey terms ‘the seven activity spheres’. Drawing, and further elaborating, on a brief comment in Marx’s Capital Harvey argues that capital ‘cannot circulate or accumulate without touching upon each and all of these activity spheres in some way’ (124). These spheres are:

technologies and organisational forms; social relations; institutional and administrative arrangements; production and labour processes; relations to nature; the reproduction of daily life and of the species; and ‘mental conceptions of the world’. (123)

‘Each sphere’, Harvey argues, ‘evolves on its own account but always in dynamic interaction with the others’ (123). ‘A study of the co-evolution of activity spheres’, he goes on to say, ‘provides a framework within which to think through the overall evolution and crisis-prone character of capitalist society’ (124). Indeed, ‘we can reconceptualise crisis formation’, he suggests, ‘in terms of the tensions and antagonisms that arise between the different activity spheres’ – the interactions between them ‘are not necessarily harmonious’ (123).

In the final chapter Harvey advances some general strategic principles in relation to left-wing struggle. He suggests that the theory of co-evolution of ‘activity spheres’ provides important conceptual resources for thinking about how a successful transition beyond capitalism might take place. Just as the historical evolution of capitalism involved dialectically intertwined changes within each of the seven spheres, any transition towards a democratic and egalitarian post-capitalist society must also involve complementary transformations within each sphere. Harvey argues that an anti-capitalist movement could start in any sphere. ‘The trick’, he continues, ‘is to keep the political movement moving from one sphere of activity to another in mutually reinforcing ways’ (228). Left-wing intellectuals must play an important part in this process, Harvey argues, and one of their key tasks is to unravel ‘the enigma of capital, rendering transparent what political power always wants to keep opaque’ (241).

Harvey certainly makes a powerful contribution to this process of unravelling. Though it covers complex processes and advances sophisticated ideas, the book is written in a relatively accessible style that will appeal to a wide readership. Indeed it is clear that Harvey’s intended audience extends beyond academia. This is not to say that The Enigma of Capital will be of little interest to scholars. Harvey advances some interesting and innovative new ideas in this book – the theory of ‘activity spheres’ for example – that make an important contribution to advanced debates in relation to the analysis of capitalism and to theories of social change. Harvey also provides a useful synthesis of many key ideas first put forward in previous works – his theories of ‘spatial fix’, ‘time-space compression’ and ‘switching crises’, for example, are all integrated into the overview of the logic of capital flow presented in this book.

However the book contains a few weaknesses. One of the most frustrating things about it is that Harvey is never quite clear about the relationship between the ‘capital surplus absorption problem’ and his account of the barriers to capital flow that can bring on a crisis. Should we understand these barriers as manifestations, or aspects, of the capital surplus absorption problem? Is there any necessary connection or interaction between these barriers and the capital surplus problem? Harvey does not spell this out and the reader is left, in the end, feeling slightly unsure of his theory of crisis formation. Furthermore, in relation to the current crisis, Harvey’s view about whether or not capitalism can return to long-term growth is difficult to pin down. At some points in the book one gets the distinct impression that he feels that it cannot and, at other times, that it can. Part of the problem, here, is that the relationship between the notion of ‘a return to long-term growth’, on the one hand, and the notion of an exit-route from the current crisis, on the other, is rather ambiguous –are these distinct possibilities (so that it is possible to exit the current crisis, but without a successful return to long-term growth) or are the two synonymous? Harvey does not make this clear.

Many readers may baulk at Harvey’s dismissiveness in relation to the theory of the tendency for the rate of profit to fall (TRPF) which he argues is rendered ’more than a little moot’ (94) by the long list of counter-acting influences Marx identifies – counter-tendencies that, notoriously, seem to entail that the TRPF seldom has any material effect. Even if one is not sure whether one agrees with him, Harvey’s brusque scepticism in relation to a Marxist orthodoxy, here, is refreshing. Harvey’s neglect of a closely connected, but much more fundamental, issue in Marxian economics is, for me, more concerning. Harvey makes very little mention of labour as the source of value (it is mentioned only in passing on a couple of pages) or of related matters such as exploitation. This seems rather strange in a book about the flow of capital written from a Marxist perspective.

In addition, much of what Harvey has to say in the final chapter is unconvincing. Rather predictably, perhaps, this final part of the book often descends into vague, hand-waving remarks. Certainly, there is much here that is valuable – the argument that a movement seeking to advance beyond capitalism must keep a mutually reinforcing dialectic of change within each of the seven ‘activity spheres’ in motion particularly so. Nevertheless there are echoes of Hardt and Negri and of Holloway in Harvey’s conception of anti-capitalist strategy, which, while not totally eschewing the need for political organisation, and clear that a left-wing movement cannot simply ignore state power, seems rather naïvely optimistic in its claims that a political movement against capitalism ‘can start anywhere’ (228) and could operate (or so Harvey appears to suggest), simply, as some loose alliance of well-meaning people.

Despite these shortcomings The Enigma of Capital is an extremely impressive book overall. I would thoroughly recommend it to anyone seeking to develop a critical understanding of the logic of capitalism.

29 November 2010

One comment

  1. Expanding on of the last points in this review, the word “value” doesn’t even make an appearance in this book. This leaves us wondering what is the substance that is being overaccumulated. Is it a physical surplus or a value surplus? As with much of Harvey’s recent work we are left wondering if this is an attempt to sidestep value theory, whether he thinks value is redundant or unnecessary in explaining crisis, or whether this is an attempt to make a Marxian crisis theory more accessible.

    The issue of a capital surplus absorption problem also raises similar questions. Harvey’s constant discussion of 3% compound rate of growth leaves open different interpretations. He often makes it sound as if there is a constant expansion of some substance at 3%, daring us to imagine how humanity can survive more of this growth. But what is this substance that is growing? And doesn’t a lot of it get destroyed in crisis? Though he references the destruction of capital in a few places he continues to make it sound as if the mass of this mystery substance grows forever. One can’t tell if these are rhetorical flourishes rooted in an attempt at popularization or if they are actual theoretical positions.

    I don’t understand why the reviewer finds Harvey’s brusque dismissal of TRPF “refreshing”. This is a long standing problem in Harvey going all the way back to his Limits to Capital. Even in Limits, after considering the counter-tendencies, we are left with a rather vague dismissal of the TRPF and then an assertion of an “overaccumulation” theory which still seems to cling rather closely to the TRPF that he has just dismissed. In Limits overaccumulation is tied to destabilizing technical change that makes it impossible to establish balance growth. (Harvey presents this as a refocusing of his take on Marx’s crisis theory… that he is identifying the key dynamics of crisis whereas Marx was to zoomed-in on a specific manifestation of crisis.) Yet in later work we don’t even see technological change really playing any role in Harvey’s concept of overaccumulation. Has Harvey moved away from his formulations in Limits?

    What is Harvey’s relation to the monopoly school and Sweezy’s crisis theory? I would be curious to hear him specifically explain the convergences and divergences between himself and Sweezy on the concept of oveaccumulation. I would argue that one convergence is that by dismissing the concept of tendency and countertendency within the TRPF their theories cannot establish the necessary dialectical understanding of the cyclical nature of crisis. Rather than seeing, for instance, the falling cost of constant capital, as something that nullifies the TRPF, I think the proper understanding is that the falling cost of constant capital creates devaluation of fixed capital which causes a fall in the rate of profit. Once enough capital is destroyed the profit rate can be restored. Tendencies and CounterTendencies are what allow economic laws to have a dialectical motion, a dynamism that keeps them from being uni-directional and deterministic. Without this sort of dialectical concept of tendency we end up with the Sweezy-Harvey picture of long-run stagnation: or an internal process of accumulation which encounters external barriers. There is no internal dynamic and thus no account of the cyclical nature of crisis.

    There is also an effort in Enigma to place speculation in a central place in all aspects of capital. It seems there are aspects of this that are correct. I don’t have the book in front of me to generate examples, but at times I recall this seeming problematic at times, as if the concept of speculation was being widened to include too much or be placed in too central a role in accumulation. I apologize for not providing more specifics. (It seems that much of this comes from Harvey’s reading of Marx’s answer to one of the questions in Vol. 2 of Kapital: “Where does the money come from to realize surplus value?” Marx’s answer is that the question is actually not important. The value has already been created. It just has to be exchanged with itself. Harvey stresses a different aspect of the problem: that capital throws money into production in the advance of value being produced. This is speculative in the sense that it is investment in future value production.)

    I have always been a big Harvey fan. But I found Enigma to be quite an enigma! It is full of vague formulations and popularizations that leave the reader puzzled.

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