Mariana Mazzucato’s new book is a detailed exposé of the parasitic character of modern capitalism, drawing on Karl Marx’s theory of the source of value creation. But understanding the law of value is only a first step to providing an alternative to a system that cannot overcome its inevitable tendency for periodic crises and which needs to be overthrown.


The Value of Everything: making and taking in the global economy
By Mariana Mazzucato
Published by Allen Lane, 2018, £20

This book has met with acclaim even from capitalist economic reviewers. It is highly critical of the deficiencies of modern ‘financed-based’ capitalism, with its neglect of what Mariana Mazzucato calls the ‘real capitalism’ of the value creating process. To make her case, the author uses the value theories of Karl Marx, as well as the classical capitalist political economists who preceded him, Adam Smith and David Ricardo. She also criticises the pro-capitalist schools of economics, such as the purveyors of ‘marginal utility theory’ who argue that values are fixed by scarcity and the usefulness of products to consumers. This sets a subjective and not objective standard of value, since utility may vary between individuals and at different times.

In contrast, as Mazzucato acknowledges, Marx always identified and differentiated between those who produce value and those who do not, between productive and non-productive labour. She sums this up well: “Defining everything that commands a price as valuable led to the marginalists’ conclusion that what you get is what you are worth. Profits are not determined by exploitation [the process whereby employers appropriate the surplus value created by the working class] but by technology and the ‘marginal product of capital’.”

However, Mazzucato does not attack capitalism as a whole, just one aspect of the system: what she calls ‘value extraction’. Moreover, her book is inconsistent with Marx’s ideas. These seek to arm the working class and the labour movement with an understanding of the economic laws which govern capitalist society – the economy’s limits and contradictions – the better then to replace capitalism with the more advanced system of democratic socialism. The aim of Mazzucato is not to overthrow the system but to reform and replace it with “a type of capitalism that is more sustainable, more symbiotic – that works for all”.

Capitalism, which today is more and more parasitic and failing, as the book shows in graphic detail, by its very nature can only benefit the ‘few’ – certainly not ‘all’, or even the ‘many’ to whom Jeremy Corbyn has appealed. Some of the proposals advanced by Mazzucato – such as the increased involvement of the state in the economy and curbs on the more voracious aspects of capital – have already been embraced by the reformist left in Britain and elsewhere. They could form part of the programme of a left-wing Corbyn government in Britain. Even if they were fully implemented, however, although capitalism could be weaker as a result of the halfway measures being proposed, it would still remain largely intact.

Mazzucato uses Marx’s writings on value to attempt to ride to the rescue of ailing capitalism. Her intention is not to enable the new generation of workers and youth to understand the law of value and prepare them for the series of crises which inevitably flow from this. Nor does she suggest programmatic measures to replace the rule of capital with socialism.

Wealth creation

Mariana Mazzucato correctly comments in the early chapters on ‘wealth creation’ which she clearly differentiates from ‘wealth extraction’. She invokes Adam Smith, David Ricardo and particularly Karl Marx, through the labour theory of value, to emphasise the origins of value. This flatly contradicts the arguments of the later neo-classicalist economists who followed them, and their modern equivalents. So she represents a step forward in that she agrees with the Marxist argument that the working class creates value.

The great majority of ‘modern’ economists argue that there is not only one source of ‘value creation’, human labour, but a number of factors. For instance, in the banking and financial sector, they claim that the phase of financialisation also adds value. But, says Mazzucato correctly, these activities do not perform the function of value creation but of ‘value extraction’.

Leon Trotsky, in defending the ‘law of labour value’, emphasised that “… where labour has created no new value, there even Rockefeller can get nothing”. Without human labour no value is created. From this simple proposition flows the class struggle, which “… is nothing else than the struggle for surplus-product. He who owns surplus-product is master of the situation – owns wealth, owns the state, has the key to the church, to the courts, to the sciences and to the arts”. (Marxism In Our Time, 1939)

Mazzucato, like many others, while not going outside the parameters of the system, is worried about the character of much of contemporary capitalism, which emphasises value extraction at the expense of value creation and could endanger the system by failing to develop the productive forces. She fails to see however that capitalism is based on production for profit and not social need. It is therefore inevitably faced with periodic crises – even if the limited measures she proposes of mass state-directed investments were implemented. To continue along the current path risks not just a worsening of the economic future, but also mass working-class opposition and action against capitalism.

Big bank hypocrisy

The book emphasises the hypocrisy of the big banks in claiming to be ‘valuable’. In 2009 the CEO of Goldman Sachs claimed: “The people of Goldman Sachs are among the most productive in the world”. Yet the previous year this company had been a major contributor to the worst financial and economic crisis since the 1930s. US taxpayers had to stump up $125 billion to bail it out. The bank laid off 3,000 employees between November 2007 and December 2009, and profits plunged.

In spite of everything, Goldman Sachs – along with other banks and hedge funds – then proceeded to bet against the very financial instruments they had created and which led to the crash. Moreover, no banker was jailed and their ability to continue to pile up money through speculation continued unhindered. Between 2009 and 2016 Goldman Sachs received ‘net earnings’ of $63 billion on revenues of $250 billion.

The US government saved the banking system with taxpayers’ money because, according to Mazzucato, “the government did not have the confidence to demand a fee from the banks for such high risk activity. It was simply happy, in the end, to get its money back”. It is not really a question of the confidence of the US government, whose job it is to save capitalism. In the words of Marx, which Mazzucato quotes accurately, a capitalist government is the executive committee of the ruling class. It did what was necessary to save its system no matter how much of an enormous burden this would impose on the working and middle classes.

The supine leadership of the ‘radical’ Democratic Party in the US also allowed the financial mafia – of which it is a part – to get away scot-free with one of the greatest robberies in history because it is rooted in the system. Only Iceland jailed its bankers in the aftermath of the 2007-08 crisis because of the mass outpourings at their actions. The capitalist governments in other countries not only did not punish the thieves and swindlers but are in the process of dismantling some of the minimal restrictions on the banks and speculative activity imposed after the crash – Donald Trump leading the way.

Swindlers and tax cheats

In a chapter with the highly appropriate title, Making Versus Taking, which accurately portrays ‘modern’ capitalism, Mazzucato demolishes the claims of high-tech firms like Apple which seek to justify their swindles perpetrated on taxpayers. It cheated Ireland of taxes estimated at €13 billion. Its mountain of cash of $187 billion held offshore was about the same size as the Czech Republic’s economy in 2015!

Apple bosses also evaded paying taxes in the US by locating part of their company’s profits – “$2.5 billion in interest and dividends” – not in California, where its headquarters are based, but in Nevada, where there is no corporate income or capital gains tax. The consequences of this value extraction meant that the larger debt of California was not significantly reduced because of the relocation of profits to Nevada: “Value extraction thus pits US states against each other, as well as the US against other countries”.

She also crushes the argument that the capitalists deserve their fabulous ‘rewards’ in mega-salaries. Marx pointed out that the capitalists, by presiding over the development of the productive forces in its relatively progressive phase, perhaps deserved the “wages of superintendence of labour” (Capital, Volume 3). In relation to their claim of massive rewards for their part in innovation, however, Mazzucato writes: “All the technology that makes the smartphone smart was publicly funded”.

There are some very interesting and informative chapters on the history of value, dealing in some detail with the ideas of Smith, Ricardo and of course Marx, who essentially argued that only the labour theory of value explains the workings of the capitalist system in an all-sided fashion. For Ricardo, for instance, it was the industrial capitalists, “those who reproduce”, who ensured that workers subsist and generate a surplus that the capitalist is free to use where he sees fit.

Ricardo’s villains were those who do not ‘reproduce’: the landed nobility, the owners of scarce land who charge very high rents and appropriate the surplus. An echo of these ideas is reflected in modern debates on how the rise of the financial sector in the last couple of decades and the massive ‘rents’ arising “from speculative activity [have] created disincentives for industrial production”. The call made for the ‘rebalancing’ of the economy to allow genuine profits from production to win over rents is the same as the arguments made by Ricardo “200 years ago, and John Maynard Keynes was to make 100 years later”.

Marx differentiated between ‘productive’ and ‘unproductive’ labour in his volumes on Theories of Surplus Value. He showed the way in which different kinds of capitalists came by their profits and then deployed them. The first category is production capital, the second is commercial capital. The former produced commodities while the latter circulated commodities by selling them and making money. Marx pointed out that the first category of capitalists created surplus value – the unpaid labour of the working class – and commercial capital ‘realises’ it.

Strictly speaking, commercial capital does not add value to capitalist production but, Mazzucato explains: “Under capitalism, the commercial capitalists realise the value produced by the production capitalist. To apply Marx’s theory to a modern-world example, Amazon is a commercial capitalist because it is a means by which production capitalists sell their goods and realise surplus value. Banks’ money transfer services are also an example of commercial capital”.

The capitalists involved in this branch share in part of the surplus created in the production process itself. Mazzucato points out: “Ricardo and Marx refined the theory of rent to make it clear that rent is income from redistributing value and not from creating it… Rent of any kind is basically a claim on the total of social surplus value and therefore lowers productive capitalists’ profits… Neoclassical (mainstream) economics has fundamentally changed this idea of rent into one of imperfections and impediments – which can be competed away”.

Finance sector parasites

A central theme of her book is the extreme parasitism which could endanger capitalism if not checked. This is a familiar theme, and the rise of what the bourgeois economist Hyman Minsky called “money manager capitalism” is a worrying concern for the ruling class. It is deplorable, according to Mazzucato, that “finance makes money by serving not the ‘real’ economy, but itself”.

This has been taken further with a new force in modern capitalism, asset management – mainly trading between financial institutions, making colossal fortunes simply from money changing hands. Finance’s share of gross value has doubled between 1960 and 2014. A similar process in the UK saw a corresponding fall in the share of manufacturing from over 30% of total value added in 1970 to 10% in 2014. Finance and insurance rose from less than 5% to 12%. Mazzucato concludes: “So in the three decades following deregulation, the financial sector comprehensively outpaced the ‘real’ economy”, with fabulous financial sector profits, especially in the UK and the US with their global financial hubs in London and New York.

Incredible figures are provided to underline this: “In the US assets under management grew dramatically from $3.1 billion in 1951 to some $17 trillion in 2015. In the UK the asset management industry accounted for £5.7 trillion by the end of 2015, more than three times the size of the GDP in the same year”. Moreover, “the fund management industry is now quite concentrated, especially in the US, where about 25 fund managers control 60% of all equities in the hands of investment institutions”. No pretence that this is ‘popular capitalism’!

This behemoth – even for the capitalists – is an out-of-control monster which has helped to wreck the world economy once, in 2007-08, along with the lives of millions, and is heading for a similar result again. However, the author hopes that “reform is not impossible. Financial regulation can be used to reward long-termism and also help to direct finance towards the real economy, as opposed to feeding on itself”.

Vulture capitalists

Another important issue highlighted by Mazzucato is the vital role of innovation under capitalism: who initiates it and, crucially, who gets the rewards. The so-called ‘venture capitalists’ – more like vulture capitalists – usually elbow their way through to cash in on the vital initial steps taken by the state and others. Public funds often make the initial risky investments, which the private venture capitalists only enter at the point where investment looks as though it would be more of a sure bet.

Mazzucato comments: “Contrary to the prevailing image of fearless, risk-taking entrepreneurs, business often does not want to take on such risk. This is especially the case in areas where a lot of capital is needed and the technological and market risks are high – pharmaceuticals, for instance, and the very early stages of sectors, from the internet to biotech and nanotech. At this point the public sector can and does step in where private finance fears to tread, to provide vital long-term finance”. One of those involved in long-term R&D replied to a vulture capitalist who was boasting about his sector’s role in biotech: “Where were you guys in the ’50s and ’60s when all the funding had to be done in the basic science? Most of the discoveries that have fuelled [the industry] were created back then”.

The venture capitalists only arrive when the prospect of astonishing profits opens up. Mazzucato emphasises: “The biopharmaceuticals industry… was built on massive US government investment, this time through the life sciences knowledge base, the National Institutes of Health (NIH), since 1938. Between 2009 in 2016, the NIH have been spending an average of $31.5 billion a year (in constant 2009 dollars), twice the level of the 1990s and three times the level of the 1980s”. Only then do the private vultures muscle in and claim ownership. This leads her to conclude: “Patents, indeed, have become synonymous with value extraction”. In other words, these dashing, new risk-taking capitalists only cash in, with very little risk to themselves, from the previous achievements of others, particularly the state, whose expenditure is financed by us, the broad mass of working people.

Democratic nationalisation

What then are the conclusions Mazzucato comes to after such a thorough and searching analysis of capitalism? These are summed up in a later chapter, Regaining Confidence and Setting Missions. She correctly lacerates the colossal looting of state assets through mass privatisation, and carried out under ‘private-public’ partnerships by both Tory and the disastrous Blairite governments that followed. In fact, Tony Blair and Gordon Brown carried through the biggest privatisations in British history.

Yet Mazzucato advocates a watered-down version: a ‘new’ but continued ‘partnership’ between the public and private sector. She seeks a solution within the framework of capitalism. She is quite specific in ruling out nationalisation, under whatever form of ownership: “Today, few governments or politicians argue for wholesale nationalisation and government ownership”. Well, the Socialist Party does. Not, of course, of every company, especially small firms, but for the state takeover of the 100-150 monopolies that control about 70% of the economy. We will only be able to fully discover how many giant monopoly firms there are by opening the books of big business to inspection by the labour movement.

We advocate nationalisation precisely because the experience of every Labour or ‘radical socialist’ government shows that partial nationalisation is inadequate. This is because it leaves control in the hands of the major capitalists. The Labour government of 1945 presided over a quarter of a revolution by nationalising 20-25% of the economy. But the 75% which remained in the ‘private sector’ dictated to the minority of industry owned by the state and not vice versa.

Moreover, the type of nationalisation carried out in the past – a form of state capitalism – involved taking over largely ruined industries. They had been squeezed of every last bit of profit. Then the state rewarded the bosses with lavish overcompensation, with the added bonus of cheap coal, steel, etc. In addition, many of the former owners and managers who had ruined these industries were installed on the boards of the newly ‘nationalised’ enterprises. This form of bureaucratic state capitalism saw control exercised by a non-democratic clique of pro-capitalists and their co-thinkers.

The Socialist Party has urged Jeremy Corbyn and John McDonnell to take a different path and formulate a plan for real democratic nationalisation. This would involve control and management being exercised collectively by the workers in an industry, the working class as a whole through their organisations, and the government – each with roughly a one-third stake.

Irate commuters crammed into trains are not looking for the government, particularly a Labour government, to propose further partnership with creatures like Richard Branson who have already squeezed billions of pounds from the state. They will want a Labour government to take the railways over, not when the franchises run out after several years but immediately a Corbyn government comes to power. Similar demands for the renationalisation of utilities and other industries have increased as consumers confront rising bills – and spiralling profits – while shareholders pocket millions of pounds at the same time as infrastructure investment is neglected. This flies in the face of the gradual measures proposed by Mazzucato.

Nonetheless, if her approach – the bare minimum required – was adopted by a Corbyn-led government, it could provide a springboard for raising the need to take over the other big private monopolies and introduce a democratic socialist plan. However, this would be met with resistance and even sabotage from big business, both in Britain and abroad.

Greek lessons for Corbyn

The experience of the working class is collective and international. We have to draw on the recent example of the first Syriza government in Greece. This left-wing government was compelled by the troika – the European Commission, European Central Bank and International Monetary Fund – to retreat and carry through savage austerity, which still continues. This was because the Syriza leadership headed by Alexis Tsipras capitulated in a sell-out on the level of that by the social democrats in Germany at the outbreak of the first world war. When they voted for war credits they facilitated the terrible disaster which followed.

Initially, the Syriza government was every bit as radical in words as Jeremy Corbyn and the Labour leadership are today. However, it capitulated by the cowardly refusal to mobilise the working class following the overwhelming victory it had won in the referendum of July 2015. This would have meant taking over large-scale industry, the banks and finance industry, and establishing democratic state control of all financial in-goings and outgoings to prevent sabotage by the capitalists.

If this had been done, it could have ignited similar movements throughout southern Europe – with the working class already in revolt against the system and the governments supporting it. This could then have brought the working masses of the rest of the continent to their feet, confronting capitalism and leading a movement for a socialist Europe.

The last chapter of Mazzucato’s book is called The Economics of Hope. Tsipras, when he became prime minister in January 2015, also declared that ‘hope is coming’. That expressed the huge expectations for change of the working class and people of Greece, and of the working masses of Europe. Those hopes were to be cruelly dashed, however, by the colossal pressure of crisis-ridden capitalism on the Greek government to capitulate. The fact is that, even if all of Mazzucato’s measures for a greater share of the economy being placed under the direction of the state were carried out, they would not prevent capitalist crisis and collapse.

Ultimately, Mazzucato fails to provide remedies for the ills of capitalism. She writes: “When the UK Labour Party lost the 2015 election, leaders of the party claimed they had lost because they had not embraced the ‘wealth creators’. And who did they think the wealth creators were? Businesses and the entrepreneurs leading them, feeding the idea that value is created in the private sector and redistributed by the public sector. But how can a party that has the word ‘labour’ in its title not see workers and the state as equally vital parts of the wealth creation process?”

In reality, the then Labour leader Ed Miliband was in the same mould as the Blairites, a defender of capitalism. He lost the 2015 election because he did not base himself on the economic and political needs of working people. Mazzucato ends up in the same position, seeking collaboration with enlightened capitalism in “co-shaping and co-creating markets”.

Mariana Mazzucato is correct when she emphasises who are the real wealth creators, the working class – as Karl Marx consistently argued. And when she explains that those who profit from their labour – who extract value – are the capitalist class. But there are no ‘legitimate’ practitioners of ‘value extraction’, as she seems to imply, by ‘enlightened’ sections of capitalists. Their system is based on production for profit not social need. The material contained on virtually every page of her book indicts the incapacity, inefficiency, greed and avarice of capitalism and the capitalists. This should be used to further the arguments for real, liberating democratic socialism in Britain and throughout the world.

Committee for a workers' International publications


p248 01

p304 02