Sunday, 21 September 2014

The Law Of The Tendency For The Rate of Profit To Fall - Part 41

The Rise In The Rate of Turnover (6)

The rise in the rate of turnover of industrial capital, increases the annual rate of profit. It does so, because for two capitals of equal size, the one that turns over more frequently produces more surplus value, as Marx describes in Capital II, Chapters 15 and 16. In Chapter 16, Marx demonstrates that an advanced capital of £500, which turns over ten times a year, produces as much surplus value in a year, as a capital of £5,000, which turns over just once a year, if they both have the same rate of surplus value. In each turnover period, the advanced capital of £500 produces £500 of surplus value, which equals £5,000. But, the capital of £5,000 also only produces £5,000 in a year. The smaller capital produces as much surplus value, in a year, as a capital ten times its size.

On this basis, the rate of profit of the smaller capital is ten times that of the larger capital, because it has produced the same quantity of surplus-value, with a tenth of the quantity of capital. However, if we look at the value of the commodities produced, the rate of turnover has no effect on it. If £100 equals 100 hours of labour, so that each week 200 hours of labour is expended (100 paid and 100 unpaid), then in a year, both capitals have expended the same amount of labour. Both capitals laid-out £5,000 as variable capital, both bought labour-power, which performed 10,000 hours of labour, and which created 10,000 hours of new value.

If we calculate the average rate of profit, taking into consideration the merchant capital, then proceeding as Marx did by assuming a single turnover of capital in the year, the basis becomes the amount of surplus value produced in the year, divided by the sum of productive-capital and merchant capital. If the quantity of productive capital amounts to £80 and the commercial capital £20 (we can think of figures in billions for greater realism) and the amount of surplus value is £10, then, for the productive-capitalists alone, the rate of profit is 12.5%. If they sold the goods at their price of production, the price would be £90. However, although the merchant capital adds no value, nor surplus value, it does get to share in the surplus value. Adding in the merchant capital, the rate of profit then falls to 10%.

The productive-capitalists sell their commodities at their price of production to the merchant capitalists, i.e. £80 costs plus 10% profit, £88. But, the value of these commodities is £90. The merchants then add the average profit to their own capital, and so add £2, as their own profit margin, thereby selling the commodities at the value of £90.

If the productive-capitalist turns over their capital more often, then the mass of surplus value produced, and their annual rate of profit rises, but, Marx demonstrates this is not the case, for the merchant capitalist, but it does affect his profit margin per unit. 

“If the price of production of 1 lb. of sugar were £1, the merchant could buy 100 lbs. of sugar with £100. If he buys and sells this quantity in the course of the year, and if the average annual rate of profit is 15%, he would add £15 to the £100, and 3s. to £1, the price of production of 1 lb. of sugar. That is, he would sell 1 lb. of sugar at £1.3s. But if the price of production of 1 lb. of sugar should fall to 1s., the merchant could buy 2,000 lbs. of sugar with £100, and sell the sugar at 1s. 1 4/5d. per lb. The annual profit on capital invested in the sugar business would still be £15 on each £100. But the merchant has to sell 100 lbs. in the first case, and 2,000 lbs. in the second. The high or low level of the price of production has nothing to do with the rate of profit. But it would greatly and decisively affect that aliquot part of the selling price of each lb. of sugar, which resolves itself in mercantile profit, i.e., the addition to the price which the merchant makes on a certain quantity of commodities or products. If the price of production of a commodity is small, so, too, the amount the merchant advances in its purchase price, i.e., for a certain quantity of it. Hence, with a given rate of profit, the amount of profit he makes on this quantity of cheap commodities is small as well. Or, what amounts to the same, he can then buy with a certain amount of capital, say, 100, a larger quantity of these cheap commodities, and the total profit of 15, which he makes per 100, breaks up into small fractions over each individual piece or portion belonging to this mass of commodities.”

Capital III, Chapter 18

I will examine this further in the next part.

Saturday, 20 September 2014

Scotland Has Spoken. Now Its rUK's Turn.

Scotland has voted to remain part of the UK. That is a progressive result, compared to the alternative, which was the establishment of a separate, Scottish capitalist state, and the division of the British working-class that would have flowed from it. However, the debate and the rash offer to provide Scotland with additional powers, that look very much like the creation of a Scottish state, in all but name, has opened the door to debate, over the constitutional arrangements, for the rest of the UK. That is good, because Britain has long needed a thorough discussion of its lack of a proper constitution, and the fact that its own bourgeois revolution, begun in the 17th. Century, and strung out over the following three centuries, has never been completed. A debate, in the whole of Britain, of a similar nature to that which has just happened in Scotland, is badly needed. It should not be simply a matter, as currently suggested, of cobbling together a set of proposals, over the next couple of months.

The basic thrust of such a constitutional reform, for a Marxist, must be the advocacy, as Engels described it, of the one and indivisible Republic. All talk of federalism, for Britain, is reactionary. Marxists only support fragmentation, in the shape of various forms of autonomy and federalism, where, in exceptional conditions, it represents a more centralised, unified form of state than what otherwise would be possible. So, for example, when the United States was being created, it would have been difficult to have established one single unified state. Yet, Engels commented that, even in his time, the federal system was acting to hamper the development of the more advanced areas of the US. The US Civil War was a war fought, in the interests of big industrial capital, to establish a strong centralised state, and limit the powers of the individual states.

Similarly, given the creation of the EU, as an amalgamation of existing nation states, the establishment of a federal United States of Europe, would be a progressive development, in place of the existing multiplicity of competing nation states. But, for three hundred years, Scotland was a fully integrated part of the centralised UK state. The process of devolution was, therefore, a reactionary, opportunist manoeuvre to try to win votes in Scotland, at the expense of weakening the integrity of the existing state. It created the basis upon which the SNP could develop its power base, in a proto Scottish state, and use it as a bridgehead to spread its nationalist poison, and division, into the working-class. Feeding that source, will not remove the poison, it will only make it more potent.

The proposals, for giving a Scottish proto state, and, by implication, all of the other mini proto states, that would demand equal treatment (there are already idiots demanding independence for Yorkshire), tax raising and other such powers, are insane, from the standpoint of the working-class. If Scotland were to attempt to cover higher spending on welfarism, for instance, by raising income tax, within its borders, it would simply result in the same process that has happened in the US, and elsewhere. Businesses and the rich, simply move to the next best lower tax area. In the US, businesses, and the more affluent, left New York in droves, for example, and moved to lower taxed New Jersey. That meant that New York's attempts to solve its debt problems, by higher taxes, rather than being solved, were made much worse.

That is one reason that such problems can only be solved in larger unified states, where a common tax rate can be applied, over such a large area, that businesses and the super rich cannot so easily avoid payment.

But, equally, the opposite applies. The splitting up into these smaller areas, is rather like the creation of Enterprise Zones. It means that each area will try to attract business to its area, by having the lowest taxes it can get away with, and by trying to impose the worst pay and conditions on workers. Ireland already tries to do that with its low corporation tax rates, and the SNP proposed to do the same.  It necessarily leads, therefore, to a race to the bottom. That was always likely to be the case, had Scotland established a new Scottish capitalist state, but the proposals for additional powers for Scotland leave that potential in place.

Instead of these proposals, for trying to perfect the capitalist state, by tinkering with such constitutional arrangements, which continue to sow division, Marxists should argue for a more unified state, but one whose role is more limited, and over which there is greater democratic control, to the extent that such control can ever be exercised over a state which belongs to, and is the instrument of, a ruling class.

Such a programme would involve:

  • Abolition of the Monarchy
  • Abolition of the House of Lords 
  • Creation of a Unicameral Parliament 
  • Right of Recall Over All MP's, on the basis of a request by 10% of the electorate, for any reason. 
  • Election of All Top Civil Servants, Judges, Military Top Brass and Police Chiefs. 
  • Creation of a Citizen's Militia in Place of The Standing Army, and for Universal Military Conscription. 
  • The Duty of Each Citizen to Engage In Community Policing. 
  • Open All The Books On Links Between the State, Media, and Business Interests. 

But, for a Marxist, these are simply the demands that are the minimum required for consistent bourgeois democracy. Our ambition is not the perfection of bourgeois democracy, but its destruction and replacement with workers' democracy. Marxists only advocate consistent bourgeois democracy in so far as it limits the power of the capitalist state, and creates better conditions for workers to fight for their interests.

Alongside the above, therefore, Marxists would advocate all measures that strengthen the economic, social and political power of the working-class, and their own self-government. Rather than encouraging a growth of the capitalist state, therefore, as the social democrats and welfarists seek, it requires a limitation of its powers, and where possible a transfer of those powers to workers themselves. The idea, fermented by the social democrats and welfarists, that the answer to workers problems, of poverty and uncertainty, is to be found by a reliance on the capitalist state, is pernicious. It limits workers to a view that the answer to those problems is only to seek an amelioration of their condition by alms provided by that state; it suggests that they limit themselves merely to seeking additional crumbs from the table, by obtaining a share of the wealth created by others, rather than empowering them with the ability to own and control, and create wealth and power of their own.

Marxists, therefore, would argue that a fundamental constitutional and democratic reform involves facilitating workers in collectively developing that wealth and power of their own. As Engels put it,

“The German workers' party strives to abolish wage labour and hence class distinctions by introducing co-operative production into industry and agriculture, and on a national scale; it is in favour of any measure calculated to attain that end!”

(Engels letter to Bebel)

And, Engels writes,

“ demanded by the Paris Commune, the workers should operate the factories shut down by the factory-owners on a cooperative basis."

Within working-class communities, like many of those suffering deprivation, in Glasgow, the answer lies, not in crumbs from the capitalist table of welfare, but in the transfer of council and other social housing into the hands of its tenants, to operate as housing co-ops. That should form the material base for the workers living within such communities, to form their own co-operative and democratic structures, for day to day control over all aspects of their community, not simply by sticking a cross on a ballot paper, every few years, but via their own direct democratic structures, in which they participate themselves, in the same way that ordinary working class people have participated in Scotland, over the last few months. These democratic bodies should be able to not just discuss issues, but, on the basis of that discussion, to arrive at decisions, and to immediately act upon those decisions. Like the organs of power developed by the workers and small producers, during the days of the Paris Commune, they should be executive as well as legislative bodies.

The answer to poverty and uncertain employment is not handouts, from the capitalist state, or even vain hopes of redistribution, through the tax system, but the ability for workers to increasingly have control over the wealth they create. For example, the above co-operative organisations should work with the trades unions to establish construction co-operatives that can carry out the necessary maintenance work on houses and facilities within those communities, and to build, in a democratically planned way, additional properties and facilities. A model for such co-operation, between the trades unions and co-operatives, has been developed by the United Steelworkers of America, and the Mondragon Co-operatives

By organising such activity, in a democratically planned manner, workers could begin the process of removing uncertainty, providing jobs and training, with decent wages and conditions, and preventing the surplus value they create being siphoned off by the bosses in the first place, rather than the futile attempt to reclaim part of it in tax. By such democratic planning they can begin to replace the anarchy of the market that creates that uncertainty, and which makes their repeated guerilla actions, to defend wages and jobs, a necessity. As Marx put it,

“Any distribution whatever of the means of consumption is only a consequence of the distribution of the conditions of production themselves. The latter distribution, however, is a feature of the mode of production itself. The capitalist mode of production, for example, rests on the fact that the material conditions of production are in the hands of nonworkers in the form of property in capital and land, while the masses are only owners of the personal condition of production, of labour power. If the elements of production are so distributed, then the present-day distribution of the means of consumption results automatically. If the material conditions of production are the co-operative property of the workers themselves, then there likewise results a distribution of the means of consumption different from the present one. Vulgar socialism (and from it in turn a section of the democrats) has taken over from the bourgeois economists the consideration and treatment of distribution as independent of the mode of production and hence the presentation of socialism as turning principally on distribution. After the real relation has long been made clear, why retrogress again?” 

(Critique of the Gotha Programme)


“At the same time, and quite apart from the general servitude involved in the wages system, the working class ought not to exaggerate to themselves the ultimate working of these everyday struggles. They ought not to forget that they are fighting with effects, but not with the causes of those effects; that they are retarding the downward movement, but not changing its direction; that they are applying palliatives, not curing the malady. They ought, therefore, not to be exclusively absorbed in these unavoidable guerilla fights incessantly springing up from the never ceasing encroachments of capital or changes of the market. They ought to understand that, with all the miseries it imposes upon them, the present system simultaneously engenders the material conditions and the social form necessary for an economical reconstruction of society. Instead of the conservative motto: “A fair day's wage for a fair day's work!” they ought to inscribe on their banner the revolutionary watchword: “Abolition of the wages system!"”

(Value, Price and Profit)

This is part of the process by which, Marx argues, in Capital, that capital is dissolved within the framework of the capitalist system itself.  It is part of the process of the "expropriation of the expropriators".  The more workers reclaim these functions for their own ownership and control, the more they then develop their own self-government, in opposition to that of the capitalist state, and they are able to do that irrespective of existing national or regional boundaries. They can unite across those artificial borders, by creating their own co-operative structures, based on the shared interests of workers as workers, not workers of a particular trade, industry, firm, region or nation. The more they reclaim this control, and establish that self-government, the more they diminish the economic and social power of the capitalist state over them. That is why Marx argued for direct taxes so that workers would act to limit the expansion of the capitalist state. He wrote,

“No modification of the form of taxation can produce any important change in the relations of labour and capital...”

But advocated direct taxation,

“Because indirect taxes conceal from an individual what he is paying to the state, whereas a direct tax is undisguised, unsophisticated, and not to be misunderstood by the meanest capacity. Direct taxation prompts therefore every individual to control the governing powers while indirect taxation destroys all tendency to self-government.” 

(Instructions for Delegates to the First International Executive Committee)

One aspect of that control should be for such communities to be able to police themselves. It should be not only the right, but also the duty, of every able bodied citizen, to participate, on a regular basis, in such community policing, of their communities, in the same way that all citizens are required to participate in jury service. It should be, similarly, a legal requirement, of all employers, to provide employees with paid leave, to undertake such duty.

Such bodies can also form the basis of establishing a workers militia, which can ultimately replace the standing army. Such a body, combined with the implementation of universal military conscription, is the necessary logical extension of universal suffrage, as Engels described. If the whole people are to vote, to make decisions, then the whole people must also be armed, so as to be able to enforce those decisions, against any attempt by forces, internally or externally, to subvert them.

“Universal conscription — incidentally the sole democratic institution existing in Prussia, albeit only on paper — marks such an enormous advance on all previous forms of military organisation that, having once existed, even if its implementation left much to be desired, it cannot again be permanently reversed...

“Whether reorganisation means some slight increase to the military burden or not, will make little difference to the working class as a class. On the other hand it certainly cannot remain indifferent to the question of whether or not universal conscription is fully implemented. The more workers who are trained in the use of weapons the better. Universal conscription is the necessary and natural corollary of universal suffrage; it puts the voters in the position of being able to enforce their decisions gun in hand against any attempt at a coup d'état.

The only aspect of army reorganisation in Prussia which is of interest to the German working class is the increasingly thorough Implementation of universal conscription.”

(Engels - The Prussian Military Question and the German Workers' Party)

By the same token, the more the means of production, and the communities, are brought under the direct, co-operative ownership and control of the workers, that live and work in them, the more the workers establish their own direct, democratic self-government, as the necessary corollary to these new material conditions, the more these democratic bodies will form the organs and structure of the new workers semi-state that will replace the existing capitalist state, the more this universal conscription will, therefore, become the means by which the workers prevent such a coup d'etat being launched against them, by that existing capitalist state, the more it will become the means of ensuring the liquidation of the latter.

These are the kinds of constitutional changes that Marxists should be organising around, not merely attempts to make the existing capitalist state work more efficiently. Our task is not to perfect that machine but to smash it. As Marx put it,

"If you look up the last chapter of my Eighteenth Brumaire, you will find that I declare that the next attempt of the French Revolution will be no longer, as before, to transfer the bureaucratic-military machine from one hand to another, but to smash it, and this is the precondition for every real people's revolution on the Continent. And this is what our heroic Party comrades in Paris are attempting."

(Marx – Letter to Kugelmann April 12th, 1871.

Northern Soul Classics - Night Owl - Bobby Paris

One of the classic Wigan dancers from the late Bobby Paris.

Friday, 19 September 2014

Capital II, Chapter 20 - Part 2

Marx describes the situation under capitalist production in similar terms to set out in Part 1. In other words, just as for Robinson, a capitalist society has to devote a portion of its time to producing means of production as well as means of consumption, part of which is required to reproduce workers, and part of which is appropriated as surplus product consumed by non-producers.

The value of this total national output is equal to C', the total national commodity-capital. That comprises both those commodities destined for consumption and those destined to reproduce the means of production.

In other words, for the national commodity-capital, it is no different than for the commodity-capital of a firm. That we have seen is produced as follows. M – C (L + MP) … P … C' – M'. So, part of the value of C' is equal to the value of the means of production – constant capital – that went to produce it.  Part is equal to the wages paid to the workers, which they spend buying commodities from society's consumption fund, and a part comprises the surplus value created by the workers, which the capitalists spend, also buying commodities from the consumption fund.

So, these are the same three funds that existed for Robinson and Friday. The Law of Value, which determines how much social labour-time is required, for that production, by them, still determines how much is required, under Capitalism. As Marx says in his letter to Kugelmann, it simply assumes a different form, the form of commodity production and exchange.

The difference is the way the capitalist society goes about producing those funds, and the consequences that then has for how these funds are distributed.

Marx has uncovered the specificity of capitalist production in Volume I. The task now is to uncover the specifics of the distribution of social capital. If the national output is nothing more than the total commodity-capital, C', i.e. already incorporating the surplus-value, then the starting point is the circuit of commodity-capital itself. This is why Marx says that the Physiocrats were correct, as against Adam Smith, in that they began their analysis, of the exchange of the total social capital, not with this year's production, but with last year's harvest.

C' —
M — C ... P... C'
m — c

Here, as Marx explains, M has to be seen not simply as money-capital, but more accurately as the money equivalent of C. That is the money equivalent of the value of the productive-capital consumed in the productive-process. That is important, because the value of that capital may have changed for reasons outside its self-expansion. For example, suppose the capital produces yarn. It requires the purchase of cotton. But, if the labour-time required for producing cotton falls, after it has been bought, then the value of C (in the shape of the cotton in stock, being processed, and in yarn waiting to be sold) will fall. This fall in the value of the cotton will then be reflected in the price of the yarn. The nominal value of M will then fall, because M here is only the money equivalent of C, but the real value of M is unchanged, for the same reason. In other words, this lower value of M is able to exactly reproduce C, the physical quantity of cotton consumed in production.

This illustrates another point made by Marx, which is that the circuit, M - C... P... C' - M', is only the circuit of newly invested money-capital.  Here, M is neither the start nor end point of the circuit, but only a mere moment within the actual circuit.  The value of M is determined by the value of C, because M is merely its monetary reflection.  As Marx puts it, M here does not stand for an actual advance of money-capital, it is simply the current value of C expressed in money terms, for the purpose of calculation and comparison.  Money here is money only as unit of account.  However, the circuit, which begins with m, the money equivalent of the surplus value, does represent the commencement of a new circuit of money-capital, if it is invested productively.  Unlike M, m is not determined by the value of C.  Where, the nominal value of M, may have fallen, because the value of C has fallen, whilst its real value is unchanged, i.e. it buys/reproduces exactly the quantity of productive-capital previously consumed, this is not the case for m.  The real value of m here has risen, because the value of C has fallen.  In other words, if m is used productively, accumulated to buy more cotton for processing, it will buy proportionately more than it would have done previously. This is why, as Marx describes, when the value of productive-capital falls, the rate of profit rises.

Consumption necessarily plays a part in this, for the reasons set out previously. In other words, at various points in this circuit, new circuits of commodities are established. For example, at P, both the workers spend their wages, on commodities (necessities), and the sellers of means of production spend their receipts, from the sale of commodities, on commodities themselves, including labour-power, replacement materials, as well as articles of personal consumption. And at M'(M + m), this individual capitalist not only spends M on buying C (Productive Capital) but also spends m on articles of personal consumption, c, given that this is only simple reproduction. Under expanded reproduction, a portion of m would also be spent on commodities in the form of additional productive capital.

So, the analysis, of this circuit of commodity-capital, at a social level, necessarily involves, also, an analysis of the circulation of money and commodities, for both productive and unproductive consumption.

Thursday, 18 September 2014

The Law Of The Tendency For The Rate of Profit To Fall - Part 40

The Rise In The Rate of Turnover (5) 

The increase in the rate of turnover for productive-capital increases the annual rate of profit, but it does not change the price of commodities. Marx demonstrates in Capital III, Chapter 18, that this is not the case with Merchant Capital. Unfortunately, because Marx didn't live long enough to complete Capital, and because, as Engels points out, even much of the material for Volume III was missing, which meant he had to fill in where possible, despite his own increasing old age, Capital III is, in many ways, the most problematic, because a lot of material that Marx would undoubtedly have added to, and modified appears unsatisfactory. The sections on the rate of profit are an example of this.

In the chapters on it, Marx sets out that the rate of profit must be calculated on the advanced capital, but much of the confusion over the nature of the falling rate of profit arises, because in Chapter 13, setting out the law, Marx proceeds as though the capital is advanced only once during the year. On this basis, he demonstrates the effect of the falling rate, as output is expanded, under conditions of a rising organic composition of capital. The effect is to reduce the profit margin, because even as the price of individual commodity units falls, the portion of the price accounted for by the wear and tear of fixed capital, of variable capital and of surplus value declines, whilst the proportion attributable to the circulating constant capital rises. Despite the fact, that in this chapter he and Engels warn of the danger of taking this at face value, because the advanced capital will turn over more than once a year, this warning is unheeded by those who want to turn the Law of the Falling Rate of Profit into some kind of Philosopher's Stone to explain crises, and even open the door to socialist revolution, in a way that Marx never intended.

Unfortunately, those who want to use the Law in that way are assisted by the fact that all of Marx’s examples in this respect are undertaken on the basis of a single turnover of capital. In Chapter 4, Engels set out just what a dramatic effect the rate of turnover has on the annual rate of profit, compared to the “Rate of Profit”, and Marx certainly gives plenty of material about the concomitant rise in the mass of profit and capital that accompanies the falling rate. But, it is the headline chapters 12-15, that get the attention.

But, in examining the rate of profit for Merchant Capital the problem becomes manifest. On the one hand, the general, average rate of profit is described as the basis of the price of production, and as set out above, this is usually discussed in terms of a single turnover of capital. In contrast to this we have the annual rate of profit, which takes into consideration the rate of turnover. But, in Chapter 18, Marx is led to have to introduce another measure of profit, that he has not previously defined – that is the general annual rate of profit, which appears to be an amalgam of the the general rate of profit and the annual rate of profit. That is it is the actual annual rate of profit, which Marx requires for his discussion of Merchant Capital, combined with the concept of a general rate of profit, which provides the basis for determining the price of production.

It becomes clear from this point that the use of Rate of Profit in the way it is usually used to support the idea of a Falling Rate of Profit, is only a convenience of calculation and explanation used by Marx, as he had done in the past. Had he had more time, he would undoubtedly have filled out his analysis in that regard to demonstrate that the falling rate of profit, which causes a shrinkage of profit margins, simultaneously, because of the rise in the rate of turnover, increases the annual rate of profit. Given what he says, in Chapter 18, he would undoubtedly have been led to provide adequate examples to demonstrate that case. The examples he gives in Chapter 18, in respect of Merchant Capital, illustrate the point, at the same time as illustrating the difference between the effect on merchant capital and productive-capital.

I will analyse these next.

Wednesday, 17 September 2014

Capital II, Chapter 20 - Part 1

Simple Reproduction

1) The Formulation of the Question 

If we think about society in the terms of Robinson Crusoe, or Robinson and Man Friday, the essential relations within an economy are laid bare. That is not just true in relation to the operation of the Law of Value, as Marx described in Volume I. It is also true in relation to the connected aspect of the social reproduction that must be undertaken.

So, we can see clearly that a given proportion of available labour-time, determined by the Law of Value, has to be set aside for producing tools, pens etc. - means of production – as well as their replacement. This production never enters into the consumption of Robinson or Friday. It can be considered the portion of the value of their national output that goes to maintaining the capital stock of both fixed and circulating constant capital). It is not the same physical capital stock that is maintained from year to year, precisely because a portion of it is used up or worn out. That is why a portion of the annual output has to go simply to replace it. In this sense it can be considered to circulate, but only as capital, not as revenue, i.e. not as as an income to someone that can be consumed.

Another part of Robinson and Friday's production does go to produce an element that can be consumed, i.e. a revenue. That is what they produce to meet their needs for food, clothing, shelter etc. If this production is large enough, Robinson may choose not to work for some or all of the time. In that case, part of Friday's production will go to meet his own consumption needs, and the rest will be a surplus appropriated by Robinson.

But, also Robinson and Friday may divide the work up. Robinson may work producing and reproducing means of production, whilst Friday produces the means of consumption. Here, Robinson's output certainly forms part of their total national output, but it does not constitute a revenue for the society. It is not available to be consumed. It is only Friday's output that constitutes a revenue for the society, and is available for consumption.

Yet, it might not seem that way to Robinson. He produces the means of production that Friday requires to produce the means of consumption. Robinson has no need of the former, but he has need of the latter. For Robinson, it appears that he “sells” his output to Friday, and so it does seem to provide him with a revenue, even though it can only act as a revenue, i.e. means of purchasing for consumption, because Friday produces the means of consumption, not only in sufficient quantity for his own needs, but also for the needs of Robinson. This is essentially the difference of how things appear from the standpoint of the individual capital, and of the social capital.  But, a closer look at this situation also shows, as Marx described in previous chapters, that, in fact, Robinson does not exchange all of his output with Friday at all!  A large, and increasing, part of the value of Robinson's output goes simply to produce the means of production he needs himself to produce other means of production, which are exchanged with Friday.

The means of production that Robinson exchanges with Friday, are what appear as "intermediate goods" in the national income and output data, i.e. they are the constant capital whose value reappears in end production.  But, these "intermediate goods" are only a minor part of the circulating constant capital output value of the economy.  In reality, all they represent is the equivalent of the new value created by the workers of Department I - here Robinson - i.e. v + s.    They are its revenue equivalent.  But, as Marx has demonstrated, the actual value of the output of Department I (Robinson) is not just equal to this new value created, but to c + v + s, i.e. it includes the value of the circulating constant capital produced in previous years, and which has to be reproduced out of current production, but is not, thereby traded.

In other words, Robinson may provide Friday with fishing nets and obtain an amount of fish for his consumption in return, may provide Friday with animal traps, and receive a quantity of rabbits for consumption in return, but a large part of the value created by Robinson, i.e. labour-time expended by him, is in producing hammers, chisels, saws, needles and other tools, which he requires to produce these means of production, as well as time spent replacing and repairing his existing tools, but which he exchanges with no one, and whose value is not included in the value of the "intermediate goods" he trades with Friday.

He has to spend time collecting wood to make into tools, to create pens and traps, he has to collect fibres to turn into ropes etc., to make nets.  Yet, none of these things does he trade with Friday for consumption goods.  None of them, therefore, form part of the value of "intermediate goods", whose value is only equal to the new value he creates.  Marx demonstrates that under simple reproduction, Robinson here provides Friday with means of production whose value is equal to the new value he creates (v +s), which is equal to the labour-time he expends on this production.  In return for these means of production (constant capital), Robinson receives means of consumption from Friday of the same value.  In other words, this is the equivalent of the consumption that Department I workers would spend their wages on, and which Department I capitalists would spend their profits on.

Moreover, this situation is not changed if we introduce a further person into the equation producing means of production.  If Mrs. Robinson becomes the producer of fishing nets, which she exchanges with Friday for means of consumption, she might also exchange some of these means of consumption with Robinson for the needles and fibres he produces used in the production of nets.  These needles and fibres then become "intermediate goods" used in Mrs Robinson's production.  But, it continues to be the case that the total value of output exchanged by Robinson and Mrs Robinson is exactly the same as it was before I (v +s) = II (c).  It is simply that it is divided differently as a result of this new producer of means of production.  It remains the case that I (c) is not exchanged against revenue, creates no income for anyone, and remains simply an exchange of capital with capital.

The basic equilibrium condition for simple reproduction is then that Department I (v + s) equals Department II (c).  The rest of the value of end production, i.e. the output of Department II is consumed by the workers and capitalists of Department II (v +s).  In other words, Friday produces a quantity of means of consumption (final output).  Part of the value of this output comprises "intermediate goods", or constant capital obtained from Robinson.  In exchange Friday gives Robinson, the consumption goods he requires equal in value to the means of production he has provided.  Friday then consumes the rest of his final production himself.

Robinson has then exchanged a portion of his output with Friday in return for the consumption goods he requires.  But, a large part of the total value produced by Robinson has not been exchanged with anyone.  It is value created in the labour-time he has expended in the production of means of production he requires himself.  Yet, the labour-time has been expended on their production, even though it forms no part of the value of consumption, has no equivalent in the form of a revenue or income for anyone.

If we look at the situation then we see that the total production is broken down into these two departments represented by Robinson and Friday, into the production of means of production and means of consumption.  We might then have:

Department 1:

C 4000 + V 1000 + S 1000 = 6000

Department 2:

C 2000 + V 500 + S 500 = 3000

So, Department 2's constant capital of 2000 (intermediate goods) is provided by Department 1, and is equal to Department I (v + s).  The rest of Department 2's output (1,000) is consumed by Department 2 workers and capitalists.  So, 2000 of the value of final output is comprised of the intermediate goods provided by Department 1.  But, 4000 of Department 1's output is traded with no one, it simply replaces its own consumed constant capital, and thereby forms a revenue for no one.

As Marx demonstrates, in his demolition of Smith's Trinity Formula, and the idea that the value of national output can be divided simply into the factor incomes of wages, profits, interest and rent, the value of national output as captured by these latter is actually only the value of the consumption fund. The total value of society's output is much greater, but never captured in the data, because it excludes this growing quantity of value that is never traded as part of the total social exchange.

But, the basic and relatively straightforward relation between the production and exchange of means of production and consumption illustrated by Robinson and Friday is obscured, under capitalist production, because of the role of money in mediating these exchanges, and because, therefore, the multitude of exchanges both within Department I, and between Department I and II, all appear to be of the same nature, all appear to produce revenue for the seller.

Its to elaborating the processes and effects of that which Marx now turns.

Tuesday, 16 September 2014

The Scots Have A Right To Say Yes, But They Should Say No - Part 4

Another argument that has been put forward is that Scottish independence weakens the british capitalist state, and by extension Britain's largest partner the US. But, this argument is thoroughly confused and, in most part, itself reactionary.

The argument, in many ways, typifies what is wrong with the left today – and it is only the left which puts forward this argument, the Scottish right, as with the Irish right, has no problem welcoming US imperialism to its shores, if it means an injection of capital. That problem is that the left begins with what is an inherently reactionary perspective; its politics is continually defined by what it is against, not what it is for – anti-capitalist, anti-imperialist and so on.

As  others have correctly pointed out Marxists certainly do seek to smash the existing capitalist state. But, they seek to do so only in the context of putting their own semi state in its place. In other words, as part of a revolutionary struggle for workers power. Outside that context, the demand to smash the existing state is simply mindless. It would be to follow that same course, as advocated by the liberal interventionists, as its been applied in Iraq, Libya, Syria and elsewhere, with the result of creating chaos and handing over control of society to its most reactionary elements, at best, and a collapse into perpetual warlordism at worst.

Moreover, what is ironic is that many of those who would argue for independence on this basis are also the same people who argue for independence on the basis that an independent Scottish capitalist state would be able to exercise a greater role! In other words, it is a hope to weaken the British capitalist state, whilst simultaneously proposing a more powerful, interventionist, Scottish capitalist state.

The means by which Marxists seek to weaken the capitalist state is not by linking arms with capitalists of their own nation, in a reactionary attempt to turn the clock backwards, but by linking the arms of Scottish, English, Welsh, Irish and other European workers to build working class self-reliance, so as to remove the serf-like condition of dependency that workers have been placed in as regards that state, as a consequence of Welfarism; to build European wide worker-owned, co-operative property, standing in opposition to capital; to build upon these co-operative productive relations, new co-operative social relations that unite workers across industries and across borders; it is to build new political structures that reflect those new social relations, political structures that grow out of the direct workers democracy of this new co-operative property, out of European wide trades unions and workers parties, along with their reflection in new co-operative structures, at a community level, that give back control to ordinary working people, over all aspects of their lives.

It is by building what Marx and Engels called workers “self-government” here and now, within the context of the existing capitalist regime, that we create the conditions, not just for weakening the capitalist state, but, when the time comes, of smashing it and putting in its place our superior alternative along with our superior co-operative property relations.

The Scottish independence debate is a reactionary diversion from this necessary class struggle. The Scots have a right to vote "Yes" for independence, but they should vote "No". The solution to the problems of Scottish workers lies with unity with their fellow workers, not with Scottish bosses.