Saturday, 10 October 2015

Capital III, Chapter 15 - Part 31

This kind of absolute overproduction must affect the whole economy, as Marx says, because the rise in demand for labour-power causes wages to rise across the economy, whether in sections where the demand for labour-power is high or not. As described earlier in Capital, the assumption of a single rate of surplus value across the economy is based on this. If the rate of surplus value is lower in one place than another, competition will tend to even it out via competition for labour-power and wages. If additional supplies of labour-power exist in industries where the demand for labour-power, and wages are low, this additional supply would be attracted to where demand, and wages are higher.

The exuberance causes additional new capitals to be formed. Some of these will be created by workers themselves, thereby removing them from the labour market, but either way, these new capitals will provide a new demand for labour-power to be withdrawn from the market. Most of these new capitals, as was seen earlier, will fail, precisely because they are small. But, some will not. Some may succeed, because they have been started up using some new, more efficient method of production that gives them an advantage over existing capitals; some will succeed because they are producing some new use value, that captures a share of the market.

This can then materialise in various forms. Some of the new capital continues to operate only as means of production. That is it continues to produce commodities that are thrown on to the market, but no surplus value is created in this production. If the individual capital succeeds in making a profit, it is only because it has been successful in buying its inputs at prices below the market values; because it succeeds in swindling its workers, suppliers or consumers in some way.

But, more often, such small capitals not only cannot produce surplus value, they produce even less than the average capital employed in the same production. If they continue to operate, it is on the basis of producing no surplus value, and realising no profits. It is often only the very small scale of operation that allows this to continue for any length of time. This was described by Marx in Capital I, in relation to those small enterprises, sweat shops, where not only were the workers super exploited, but the owners of such enterprises worked themselves for below the value of labour-power.  It is a typical situation for some peasant farmers, share croppers and so on.  During this period, not only will any workers be asked to accept lower wages etc. but the owner, who is often still a worker of some kind, will not only accept lower wages themselves, but they may keep the business going by drawing on their own savings and assets to add capital, in the hope of better times ahead.

For those who are really just self-employed workers – as was the case with the hand-loom weavers, for example, this becomes particularly acute, as not only does their profit disappear, but their wages also fall below the level of subsistence. Its on this basis, that the 160,000 or more “zombie firms”, reliant on state handouts, in the form of subsidies to their workers, survive today.

In reality, this is capital that is not acting as capital, but only as means of production. But, some of this new capital does act as capital, does act to produce surplus value, for the reasons described above. To this extent, it replaces a portion of the existing capital. Again that may appear in two ways. On the one hand, a new efficient capital might take the place of an old inefficient capital, particularly where they are of a similar size. The former then produces a surplus value that can be realised in the commodities it produces and sells at the market value, but the latter now cannot, because its output has been replaced by that of the new capital. On the other, it may take the place of just a portion of some larger capital, which finds that it cannot make the same profit on all of its output as before. That may be because a portion of its output is produced inefficiently, or because although its output overall is more efficient than the average, it is not as efficient as the new smaller capital. The latter cannot replace all of the capital of the former, because its too small, but it can replace a portion of equal size.

“In reality, it would appear that a portion of the capital would lie completely or partially idle (because it would have to crowd out some of the active capital before it could expand its own value), and the other portion would produce values at a lower rate of profit, owing to the pressure of unemployed or but partly employed capital. It would be immaterial in this respect if a part of the additional capital were to take the place of the old capital, and the latter were to take its position in the additional capital. We should still always have the old sum of capital on one side, and the sum of additional capital on the other.” (p 252)

In fact, under these conditions, not only will the rate of profit fall, but the mass of profit may fall too, because the continued accumulation of capital, beyond the point where it can add surplus value, causes wages to rise so much that the rate of surplus value falls more than the quantity of variable capital employed rises. In fact, this situation that causes a crisis of overproduction is quite different to the conditions that Marx describes for the Law of The Tendency for The Rate of Profit to Fall.  Marx makes clear that for the latter to occur, the rate of surplus must rise (the consequence of rising productivity that is the corollary of the rising organic composition of capital, and the mass of profit is rising).  However, the conditions described that lead to a crisis of overproduction, are that the rate of surplus value is declining, because increased accumulation has caused wages to rise, and the elasticity of demand to rise, as higher wages cause higher levels of consumption.  Rather than the mass of surplus value, rising, as is the case with the Law of Falling Profits, it is falling, squeezed by these higher wages, and the inability to pass on higher input costs.  But, even if the quantity of surplus value does not fall, and if the rate of profit on the capital actually employed does not fall, the overall rate of profit must fall, because the total mass of capital, i.e. including that part which has been accumulated, but which does not act as capital, has risen. The same mass of profit, therefore, measured against an increased mass of capital, must result in a lower rate of profit.

“If a total capital of 1,000 yielded a profit of 100, and after being increased to 1,500 still yielded 100, then, in the second case, 1,000 would yield only 66⅔. Self-expansion of the old capital, in the absolute sense, would have been reduced. The capital = 1,000 would yield no more under the new circumstances than formerly a capital = 666⅔.” (p 252)

Northern Soul Classics - There was A Time - Gene Chandler

The times I've sweated to this!

Friday, 9 October 2015

Friday Night Disco - Ain't No Stopping Us Now - McFadden & Whitehead

A classic piece of the sound of Philadelphia.

Capital III, Chapter 15 - Part 30

There are then, for capitalism, two types of such overproduction. One is where capital is absolutely overproduced. In other words, the capital itself has been so expanded that the additional capital cannot function as capital. No additional surplus value is produced, because none can be extracted. Capital has expanded so much, so much labour is employed that wages rise, the rate of surplus value falls by more than the quantity of variable capital rises. But, the second type of overproduction is relative, where the capital does act as capital, labour is exploited and produces surplus value, but because production has expanded beyond the capacity of the market to absorb it, the surplus value that has been produced cannot be realised, because market prices fall below prices of production.  In fact, the two can go together, because the same boom conditions that lead to labour being employed on this scale, and which lead to higher wages, for that same reason leads to higher levels of consumption, so that demand elasticity rises.  As Marx points out, crises of overproduction usually coincide with periods also of high levels of consumption, not underconsumption.

“There would be absolute over-production of capital as soon as additional capital for purposes of capitalist production = 0. The purpose of capitalist production, however, is self-expansion of capital, i.e., appropriation of surplus-labour, production of surplus-value, of profit. As soon as capital would, therefore, have grown in such a ratio to the labouring population that neither the absolute working-time supplied by this population, nor the relative surplus working-time, could be expanded any further (this last would not be feasible at any rate in the case when the demand for labour were so strong that there were a tendency for wages to rise); at a point, therefore, when the increased capital produced just as much, or even less, surplus-value than it did before its increase, there would be absolute over-production of capital; i.e., the increased capital C + ΔC would produce no more, or even less, profit than capital C before its expansion by ΔC. In both cases there would be a steep and sudden fall in the general rate of profit, but this time due to a change in the composition of capital not caused by the development of the productive forces, but rather by a rise in the money-value of the variable capital (because of increased wages) and the corresponding reduction in the proportion of surplus-labour to necessary labour.” (p 251-2)

Its important to listen carefully to what Marx is saying here, about this absolute overproduction, particularly this last part. This overproduction he is making clear, has nothing to do with any long run tendency for the rate of profit to fall. The sharp fall in the rate of profit he describes, is a result of a crisis of overproduction, not vice versa. But, the reason the crisis exists, as an absolute overproduction of capital, has nothing to do with a long run tendency for the rate of profit to fall either. The reason, that surplus value cannot be extracted, he makes clear here, is because wages have risen sharply, the rate of surplus value has fallen, and that is not because of a falling rate of profit, but the opposite. It is high rates of profit that have created exuberance, rapid, large scale investment that has sucked in available supplies of labour-power, pushing up demand and wages.

In fact, this is the situation he described in Chapter 6, where a boom leads to high rates and masses of profits, which causes a sharp rise in demand for labour-power and other inputs, which causes sharp rises in wages and other input prices. Its basically the situation Glynn and Sutcliffe described in “Workers and the Profits Squeeze”, arising in the post-war boom. This is also the situation Marx described in Chapter 6, in relation to the boom period of the 1840's and 1850's, when high rates and volumes of profits led to precisely these kinds of periods of over-exuberance, where new factories were being built, old ones re-opened and so on, precisely because high and rising profits were available, but its precisely this which pushed up the market prices of inputs and wages.

Of course, this kind of absolute overproduction, where surplus value cannot be produced, goes along with relative overproduction where it is produced, but cannot be realised. And again, the process is contradictory. On the one hand, the higher wages of workers, caused by the higher demand for labour-power, means that workers demand for wage goods and even some luxuries, rises. So, the potential to realise produced surplus value increases, as the higher demand tends to raise market prices, or to present less resistance to higher market prices due to higher costs. On the other, as Marx sets out in Chapter 6, the higher costs of materials become harder to pass on into the prices of the end product, because higher market prices tend towards reducing demand. Capital has to absorb some of that higher cost, thereby reducing realised surplus value.

In addition, the more workers wages rise, the more they are able to satisfy their demand for some commodities. As Marx pointed out, there is no reason to buy six knives when one will do, just because the price has fallen. But, similarly, there is no reason to buy six knives when one will do, just because wages have risen. So, some wage goods face an increasing problem of consumer resistance, due to the elasticity of demand. Its one reason workers use their higher wages in such periods to begin to buy some luxury goods. So, capital faces a problem arising from such a boom, of sharply rising wages, squeezing produced surplus value, of sharply rising material prices that cannot be fully passed on, squeezing realised surplus value, along with a further squeeze on realised profits emanating from the limitations of the market imposed by the elasticity of demand for existing products. The lower the profit margin on each commodity unit, imposed by the first cause, the more the production is likely to be unprofitable as it confronts the latter. Both are a consequence of the unrestricted expansion of production, driven by competition and the rise in the productivity of social labour.

Thursday, 8 October 2015

Tory Conference Displays Just How Out of Touch They Are

Its not just the fact that the Tory Party Conference was stuffed with chinless wonders, passing their adolescence at Eton and other such establishments.  Its not just that it is still full of 1980's throw backs, who haven't recognised that the world has moved on, and still have realised that Thatcher's policies from that time were a disaster for British capital, as well as British workers, or even that this is reflected in the fact that male or female so many of those delegates see themselves as latter day manifestations of The Iron Lady, and that Cameron's policies are modelled upon those same failed policies.  It is simply in the assumptions that the Tories make, and which run through their policies, which demonstrate how out of touch they are with the average British citizen today.

Take the Tories announcement on housing policy, for example.  The real problem facing the majority of people today is that they cannot afford the basic requirement for shelter.  At its worst, that is reflected in the 55% increase in the number of rough sleepers since 2010.  Similar rises in all forms of homelessness have been seen since the Liberal-Tories came to power.  It can also be witnessed in the return of the phenomena of Rachmanite landlords, and of the mushrooming of sheds at the bottom of gardens to house people, that is reminiscent of the worst periods of the 19th. century.  But, it is also reflected in the sharp rise in the number of people that are led to rent from private landlords, because conservative policies over the last 30 years (conservative policies pursued by both Tory and Labour governments) have both reduced the quantity of available council housing, and at the same time promoted property price bubbles, that make home ownership unaffordable, and make moving up the property ladder for existing home owners, similarly unaffordable.

But, what is Cameron's response to this crisis, in his new found desire to govern from the centre.  It is not to provide the funds for councils to build hundreds of thousands of new council houses, as even right-wing Tory governments have done in the past.  Quite the contrary, not only is it to place even further restrictions on local councils, and ever higher levels of austerity on council budgets, but it is also to force even Housing Associations to sell off the properties they own!  No wonder, having followed policies that force people into poor quality, expensive, private rented accommodation, Cameron now abuses all those placed in this position, by his dismissive, snooty sneering at "Generation Rent".

In just the same way that the Tories seem to think that the Jobs Fairy will simply come along and provide jobs for the unemployed and under-employed, if only the benefits are removed from them, so Cameron seems to think that the Property Fairy, will come along and provide houses for all those in rented accommodation, if only Housing Benefit is removed from them.  But, its not the existence of Housing Benefit that has prevented people living in expensive, poor quality rented property from buying homes of their own!  It is the fact that the price of such houses has been blown up to astronomical levels by the conservative policies of easy credit that have been pursued over the last 30 years.

But, of course, if you are a Tory that fact is not one you can recognise.  A quarter of Tory MP's are private landlords.  The astronomical rise in property prices is no crisis for them, because it represents a huge rise in their fictitious wealth, which has risen along with the astronomical rise in their fictitious wealth held in the shape of shares, and bonds, and caused by the same easy credit policies.

So, what has been Cameron's new centre ground policy been to remedy this crisis?  He has limited the amount of social housing even further.  In his conference speech, he announced that private builders would no longer have to build a given proportion of houses available for rent in any new development, but would instead be able to produce that proportion as "affordable housing", to be sold at a 20% discount.  And what is the Tory definition of affordable?  In London, it is a house for a first time buyer costing £450,000, and outside London, a house costing £250,000!!!!

In order for a first-time buyer, to buy one of these "affordable" houses in London, they would need to be earning £77,000 a year, or more than three times the average wage.  For someone to buy one of these affordable houses in Stoke, they would need an annual salary of around £40,000 a year, or nearly three times the average wage for someone in the area.  But, why would a party of millionaires like Cameron have any conception whatsoever, about what affordable means for the average citizen today?  After all this is a party one of whose supporters announced prior to the election that she could not find anything other than a decent garage in London, for less that £3 million!

As, Phil has pointed out, Cameron's speech is just hot air.  No one believes that any of the supposed "centre ground" policies and ideas he blathered on about bears any resemblance either to the policies the Tories have actually pursued over the last five years, or the policies they are going to pursue in the next period.  It is as disconnected from reality, as Theresa May's comments on immigration, as though she had not been the Home Secretary for the last five years, or in a different context, its rather like the VW Executives who now act, as though the introduction of cheating devices on their cars, is somehow an accidental occurrence that they now have to remedy!

The reason people are not currently buying houses, and why the introduction of this new gimmick will not change that, is because house prices are currently 400% higher than they should be on any kind of rationality, and past basis.  That means that, for the vast majority they are now unaffordable, and for those who can afford to buy, there is no rational basis for doing so, because such an inflated bubble, must burst sooner or later, which would mean simply throwing money away, by buying at current prices.  The same thing explains why builders will not build more houses.  If buyers cannot afford to buy at current prices, why on Earth would builders build houses they cannot sell at current prices, and on which, therefore, they could make no profit?

The same thing applies with the Tories policies on the removal of Tax Credits.  Marxists oppose things such as Tax Credits.  Marx in Capital Volume I, set out the reactionary and distorting effect that such measures represent.  Analysing the plight of the hand loom weavers, who could not compete with the newly introduced power looms in factories, Marx describes the pernicious effect that such measures, at that time in the shape of Parish Relief, had upon them.  It meant that the hand loom weavers continued to pursue their occupation, supported by such relief, which was taken from the wages of other workers in the Parish, and thereby survived in the most miserable conditions, clinging to a subsistence close to starvation, and often even then falling below it.

"The questions of the Committee of Emigration, and Mr. Turner’s answers, show how the competition of human labour is maintained against machinery. ‘Question: Has not the use of the power-loom superseded the use of the hand-loom? Answer: Undoubtedly; it would have superseded them much more than it has done, if the hand-loom weavers were not enabled to submit to a reduction of wages.’ ‘Question: But in submitting he has accepted wages which are insufficient to support him, and looks to parochial contribution as the remainder of his support? Answer: Yes, and in fact the competition between the hand-loom and the power-loom is maintained out of the poor-rates.’ Thus degrading pauperism or expatriation, is the benefit which the industrious receive from the introduction of machinery, to be reduced from the respectable and in some degree independent mechanic, to the cringing wretch who lives on the debasing bread of charity. This they call a temporary inconvenience.” (“A Prize Essay on the Comparative Merits of Competition and Co-operation.” Lond., 1834, p. 29.) (Capital I, Note 1, p 406)

The use of such welfare benefits not only leaves its recipients in this pauperised, "wretched" and "debased" condition, but it mitigates against the displacement of all of that inefficient capital, that cannot exist without such debased labour, and which thereby prevents that capital being used in more effective, more profitable pursuits, which would enable normal wages to be paid.  The existence of all these in work benefits, be they Tax Credits, Housing Benefit, Child Benefit, along with all of the other bureaucratic fiddles such as subsidised childcare and so on, have the effect both of subsidising underpaying employers, and overcharging landlords, and service providers, whilst increasing the costs of more efficient capitals, who have to pay higher wages, and taxes to cover these state transfers.  It is one reason that British productivity levels are so appalling, and levels of under-employment so high.  It is why there are so many zombie companies (around 160,000) only clinging to survival because of such subsidies, and low interest rates; it is why there are so many households with huge levels of private debt, and dependent upon pay day lenders, credit cards, and other forms of usurious lending.

But, Cameron's policy of cutting Tax Credits, has nothing in common with a Marxist objection to these subsidies to bankrupt capital.  First of all, a Marxist objection stems from an analysis that the problem resides, in the first instance, from the organisation of capitalist production itself, which denies useful work to millions of workers, only on the basis that capital cannot make a profit from the employment of their labour.  But, even from a social-democratic position, i.e. from a position which accepts the continued existence for now, of capitalism, any removal of such benefits, should only be made on the basis of workers' wages being high enough, that such benefits are not required, and that workers who are denied work by capital, should receive a minimum level of income to cover their needs.

Had Cameron announced that his government was immediately raising the Minimum Wage to £20,000 a year, with a minimum monthly wage for each worker of £2,000, irrespective of the hours worked, then a removal of Tax Credits, and other benefits could have been justified.  But, of course, the Tories would not introduce such a policy.  They originally opposed even the introduction of the Minimum Wage, and now their introduction of the National Living Wage, is simply a means of covering the fact that they have cut workers' wages.

The Tories for all their hot air, and propaganda by their media, are as far to the right as they have ever been.  In fact, as Polly Toynbee, pointed out on Newsnight, Cameron is even further to the right than Thatcher, manifest by his ideological attack on the capitalist state, and by their renewed attacks on trade union rights.  Even The Sun, has criticised the right-wing policies of Cameron.  The centre ground belongs currently to Corbyn and the Labour Party.

Capital III, Chapter 15 - Part 29

For previous societies, the aim is the maximisation of consumption. Development of the means of production is merely a means to that end, and the surplus product is simply what is left over, and, therefore, available, after the non-productive classes have taken their cut, to develop the means of production further. But, for capitalism, it is the expansion of the surplus product, and the surplus value, which is the prime goal, as a result of competition.

Each capital is driven to maximise its surplus value in order to accumulate, so as to expand its production, because only by doing so can it be competitive and survive. But, in order to achieve this, it must sell ever more of the commodities it produces, at the highest values it can achieve. Yet, its own need, and that of every other capital, and so of the social capital, is to minimise its own consumption of the commodities that comprise its capital, and to minimise the value of those inputs. It is epitomised in the capitalist mantra “Buy low, sell high.”

The whole process is based on a series of contradictions. Every capitalist wants to sell as much as they can, but buy as little as they can get away with. On the other hand, every capital wants to expand as much as possible in order produce as much as possible, in order to make as much profit as possible. The expansion of capital requires the purchase of more means of production, and labour-power, so as to produce more, yet each capital seeks to minimise how much labour-power and means of production it buys, in order to reduce the costs of its production.

Every capital in order to sell more, of its production, wants the wages of workers to be high, yet every capital wants the wages of its own workers to be low, so as to reduce its costs.

In short, every capital seeks to drive production to the maximum, but restrict consumption to the minimum. As Marx points out, in Theories of Surplus Value 3, the secret basis of glut is high profits. The more capital devotes its surplus to the accumulation of means of production, the smaller the proportion of its revenue it spends on consumption. The more it reduces wages, to increase the proportion of surplus value, the less the workers have to spend on consumption, yet the only purpose of expanding the means of production is ultimately to increase the means of consumption.

If more is invested in building car production plants (means of production) the only purpose of this is to produce more cars (means of consumption). If wages are reduced, to increase profits, and/or a bigger portion of profits are devoted to such investment, rather than consumption, then supply of means of consumption is increased at the same time that the demand for means of consumption is being reduced – even if only relatively.

The result is that means of consumption – commodity-capital – is overproduced, and consequently the means of production used in its production had also been over accumulated. As the supply of means of consumption rises, whilst the demand falls relatively, the market prices of these commodities must fall below their prices of production.

At the least, not all the surplus value contained in these commodities is realised. At the worst, for the least efficient firms, as profit margins have fallen, they make losses.

Wednesday, 7 October 2015

Capital III, Chapter 15 - Part 28

We know from Marx’s analysis so far, that the surplus value is a function only of the new labour expended. The means of production (constant capital) can only transfer its value to the commodities in whose production it participates. But, as a result of competition, as Marx has shown in Capital III, earlier, it does not seem that way to each individual capital. It seems instead that the profit is derived from the whole of their capital (constant and variable combined) equally. Profit appears to be the difference between the cost price and the selling price, and so whatever means can be employed to reduce the cost price, is for any individual capital, a means of increasing its profit. Moreover, as Marx set out in Capital III, Chapter 11, for the bigger capitals, the constant capital forms a much bigger component of their cost of production than their wages. If the general level of wages rise, it is the smaller capitals that get hit hardest. The general rate of profit falls, the price of production of commodities produced by the smaller capitals rises, as capital leaves this production, whilst the price of production of commodities produced by the bigger capitals falls, as capital migrates towards it, and supply rises. In fact, as part of this process, the mass of profit in those sectors dominated by the bigger capitals also rises as the increased supply overrides the lower profit margin.

Moreover, as the rate of profit, i.e. the profit margin or s/C, falls, the more these small capitals, who produce at lower levels of efficiency and even lower levels of profit margin than the average, are prone to find that the market price declines below their individual cost of production. Every capital is led to reduce its costs (both for constant and variable capital), but big capital has more incentive to reduce the former whilst small capital the latter. This is the material basis for the development later of Fordism, when big industrial capital comes to dominate. It is the material foundation of the bourgeois social-democratic regimes, established in all developed economies, by the 20th century, founded on the shared interests of big industrial capital and the working-class, that provides a modus vivendi that temporarily overrides their conflicting class interests. As Engels puts it,

“Thus the truck system was suppressed, the Ten Hours’ Bill was enacted, and a number of other secondary reforms introduced — much against the spirit of Free Trade and unbridled competition, but quite as much in favour of the giant-capitalist in his competition with his less favoured brother. Moreover, the larger the concern, and with it the number of hands, the greater the loss and inconvenience caused by every conflict between master and men; and thus a new spirit came over the masters, especially the large ones, which taught them to avoid unnecessary squabbles, to acquiesce in the existence and power of Trades’ Unions, and finally even to discover in strikes — at opportune times — a powerful means to serve their own ends. The largest manufacturers, formerly the leaders of the war against the working-class, were now the foremost to preach peace and harmony. And for a very good reason. The fact is that all these concessions to justice and philanthropy were nothing else but means to accelerate the concentration of capital in the hands of the few, for whom the niggardly extra extortions of former years had lost all importance and had become actual nuisances; and to crush all the quicker and all the safer their smaller competitors, who could not make both ends meet without such perquisites. Thus the development of production on the basis of the capitalistic system has of itself sufficed — at least in the leading industries, for in the more unimportant branches this is far from being the case — to do away with all those minor grievances which aggravated the workman’s fate during its earlier stages...

“The Reform Bill of 1831 had been the victory of the whole capitalist class over the landed aristocracy. The repeal of the Corn Laws was the victory of the manufacturing capitalist not only over the landed aristocracy, but over those sections of capitalists, too, whose interests were more or less bound up with the landed interest - bankers, stockjobbers, fundholders, etc. Free Trade meant the readjustment of the whole home and foreign, commercial and financial policy of England in accordance with the interests of the manufacturing capitalists — the class which now [These words belong apparently not to Bright but to his adherents. See The Quarterly Review, Vol. 71, No. 141, p. 273.-Ed.] represented the nation...

Both these circumstances had turned the English working class, politically, into the tail of the ‘great Liberal Party’, the party led by the manufacturers. This advantage, once gained, had to be perpetuated. And the manufacturing capitalists, from the Chartist opposition, not to Free Trade, but to the transformation of Free Trade into the one vital national question, had learnt, and were learning more and more, that the middle class can never obtain full social and political power over the nation except by the help of the working class. Thus a gradual change came over the relations between both classes.”

(Engels The Condition Of The Working Class In England) 

It was this that led to the creation of social-democratic regimes, social-democratic states, geared to the interests of big industrial capital, maintained on the back of the votes of workers, whilst at a governmental level a struggle continued between the interests of big capital, and its historical opponents within the context of such a social-democratic regime, reflected as a struggle between more openly social-democratic as opposed to conservative parties.