Monday, 20 April 2015

Capital III, Chapter 1 - Part 2

Suppose the value produced by a day's abstract labour equals £1. The capital advanced is £500, divided £400 c, and £100 v. The capital advanced is equal to 500 working days, 400 working days for c, and 100 for v, i.e. for the production of the means of subsistence required to reproduce this labour-power. If the rate of surplus value is 100%, the workers will work not just for 100 days, but for 200 days. The value of the commodity will then be - £400 c + £100 v + £100 s = £600, which also is equal to 600 working days.

The value of the constant capital is not created in this production process.

“It exists as a component of the value of the commodity only because it previously existed as an element of the invested capital.” (p 28)

The value it transfers to the commodity then reappears in the commodity-value, and so enables it to be replaced.

“This element of the cost-price, therefore, has a double meaning. On the one hand, it goes into the cost-price of the commodity, because it is part of the commodity-value which replaces consumed capital. And on the other hand, it forms an element of the commodity-value only because it is the value of expended capital or because the means of production cost so and so much.” (p 29)

But, the opposite is true with the variable capital. The 200 hours spent in the production process creates £200 of new value. £100 of that goes to reproduce the variable capital advanced, and the other £100 as surplus value.

“But this advanced capital-value does not in any way go into the creation of the new value. So far as the advance of capital is concerned, labour-power counts as a value. But in the process of production it acts as the creator of value. The place of the value of the labour-power that obtains within the advanced capital is taken in the actually functioning productive capital by living value-creating labour-power itself.” (p 29)

In other words, it is not the commodity labour-power that is transferred to the end product, in the way that the commodity cotton is transferred to yarn. The commodity labour-power is what the name suggests, the power to undertake value-creating labour. This power is in no way transferred to the end commodity. Even where the worker's end product is a machine, that might replace the labour of other workers, he doesn't transfer his power of undertaking value creating labour. The machine can do work, but not labour, and certainly not value creating labour. The machine itself will only be able to transfer its own value not create new value.

It is not the value of the commodity labour-power that is transferred to the new product. The new value added to that product is the consequence, the creation of new value by the act of labour itself. The consequence of this can readily be seen if we look at what happens, as a consequence of a change in the value of the constant capital, as opposed to the variable capital.

We started with:-

£400 c + £100 v + £100 s = £600.

This is what happens if the value of the constant capital changes.

£300 c + £100 v + £100 s = £500

£500 c + £100 v + £100 s = £700.

In neither case does it affect the surplus value, because the amount of new value created in the production process has not changed. Two hundred hours are still expended, so the £200 of new value is created, divided as before. But, in the first case, the lower value of c causes the value of the end product to fall, because this lower value is transferred to it. In the second case, the value of the end product rises for the same reason.

But, if the value of the variable capital changes.

£400 c + £150 v + £50 s = £600

£400 c + £50 v + £150 s = £600.

Here it is the value of the end product that does not change. The value of the constant capital transferred to it has not changed. But, also, the new value created, in the production process, has not changed. It remains at 200 hours undertaken creating £200 of new value. All that changes is its division. In the first case, the value of labour-power has risen by 50% meaning the equivalent of 150 hours of labour are required for its reproduction. The variable capital advanced reflects this, so that out of the £200 of new value created, only £50 are now left over as surplus value. In the second case, the value of labour-power has fallen so that only 50 hours are required for its reproduction. Consequently, surplus value rises to £150.

The difference is precisely because the constant capital transfers its own value to the commodity, but the variable capital does not. But, under capitalist production things seem reversed. The value of labour-power appears, in the form of wages, rather as the price of labour itself.

“The variable part of the advanced capital, therefore, appears as capital expended in wages, as a capital-value which pays for the value, and accordingly the price, of all the labour expended in production.” (p 30)

The value of the labour-power bought is £100, which is the equivalent of 100 days of labour. That is how much labour needs to be expended to produce the commodities required to reproduce that labour-power, and which are bought by the workers with their wages. But, the labour performed by the workers is 200 days, and their wages appear as 200 days of labour. The labour performed of 200 days thereby adds 200 days of new value, equal to £200. If we divide the workers wages of £100 by the number of days labour they perform, which is 200, we get a daily wage of £0.50, although the value produced by a day's labour we know is £1.

Sunday, 19 April 2015

Why We Need One Big Union

I'd been watching the Channel 4 News reports last week, about the plight of exploited migrants in Southern Spain. It didn't have to be Spain, of course. The same phenomena can be seen in Britain, and other European countries, like the plight of the Chinese cockle pickers who died in Morecambe Bay a few years ago. Its a plight that is not helped by the restrictive immigration laws that exist, which force many immigrants underground. But, its also a plight that is not assisted by other laws that make exploitative practices illegal either. Labour is to be applauded for saying it will go after the bad, exploitative employers, but if such laws are to have any effect, they will also have to get rid of the Thatcher era anti union laws, so that workers can create the means by which the exploiting employers can be brought to book.

A look at Spain illustrates the point in other ways. Spain undoubtedly has the same kind of Health and Safety laws that Britain and other European countries have, yet go to a lot of resorts in Spain, and you will see little regard for health or safety. That is manifest not just in working practices for construction workers, but its apparent just by looking at the number of large holes left in roads and pavements, just waiting for someone to fall into and break a leg. Simply having laws against something does not automatically prevent it from happening. Just look at the fact that Britain introduced Equal Pay and Opportunity laws back in the mid 1970's, and yet forty years later, we are far from having either equal pay or opportunities!

As Marx recognised, such laws only have any significance if they form a basis for workers to be able to utilise their own strength and organisation to police and enforce them. They are useful to workers only to the extent that they enable workers to establish an agreement with employers as a whole, rather than having to negotiate with them at an individual enterprise level. But, in Capital Volume I, Marx outlines why, even after various Factory Acts were established, they were observed in the exception rather than the rule. The ability to enforce the conditions of any of the acts, in the end came down to whether the workers in any enterprise or industry were well organised, and, therefore, able to enforce the regulations.

Marx outlines the way the Factory legislation was introduced due to a number of factors. One factor was that the early industrial capital had been so rapacious that it was simply destroying its most valuable resource – labour-power. Generations of workers were being destroyed and crippled at such a rate that their future supply was endangered, and without labour there could be no creation of value and profits. That view had been put forward in Parliament by people like William Ferrand MP. But, big industrial capitalists had also put it forward. Marx quotes Josiah Wedgwood, in a submission to the Children's Employment Commission.

““We, therefore, find, e.g., that in the beginning of 1863, 26 firms owning extensive potteries in Staffordshire, amongst others, Josiah Wedgwood, & Sons, petition in a memorial for “some legislative enactment.” Competition with other capitalists permits them no voluntary limitation of working-time for children, &c. “Much as we deplore the evils before mentioned, it would not be possible to prevent them by any scheme of agreement between the manufacturers. ... Taking all these points into consideration, we have come to the conviction that some legislative enactment is wanted.” (“Children’s Employment Comm.” Rep. I, 1863, p. 322.)”


Its an example, of the state acting as the executive committee of the ruling class, because, as Marx says, what the capitalists need is a level playing field, and here the state intervenes to introduce rules in the interests of capital as a whole, by placing limits on the interests of individual capitals. The extent to which the state was acting as this executive committee is illustrated by the numerous reports from state officials, such as Leonard Horner, and other factory inspectors, quoted by Marx. But, its only when those sections of capital – usually the big industrial capitals – for whom these regulations are important and affordable, become sufficiently dominant, that these regulations are given any meaning.

Often, insufficient inspectors were provided to enforce the regulations, and even when they did, they faced the effective opposition of individual employers. So, for example, Marx quotes Horner, who wrote,

“Having endeavoured to enforce the Act ... by ten prosecutions in seven magisterial divisions, and having been supported by the magistrates in one case only ... I considered it useless to prosecute more for this evasion of the law. That part of the Act of 1848 which was framed for securing uniformity in the hours of work, ... is thus no longer in force in my district (Lancashire). Neither have the sub-inspectors or myself any means of satisfying ourselves, when we inspect a mill working by shifts, that the young persons and women are not working more than 10 hours a-day”

(Capital I, p 274) 

By the late 1840's, after a strong recovery had arisen following the financial crisis of 1847, workers were getting better organised, and their economic position was strengthened by the long wave boom, despite the failure of Chartism. When employers tried to cut wages along with the reduction in hours, workers still opted for the reduced hours. But, the fact that different conditions applied in different areas was also a problem for capital itself. As Marx writes,

“Some of the masters themselves murmured: 

“On account of the contradictory decisions of the magistrates, a condition of things altogether abnormal and anarchical obtains. One law holds in Yorkshire, another in Lancashire, one law in one parish of Lancashire, another in its immediate neighbourhood. The manufacturer in large towns could evade the law, the manufacturer in country districts could not find the people necessary for the relay system, still less for the shifting of hands from one factory to another,” &c.

And the first birthright of capital is equal exploitation of labour-power by all capitalists.”

(Capital I, p 276)

Its why capital today that operates in a global economy and global market, similarly requires the conditions for “equal exploitation”, and why it requires a single European state to enforce standard regulations across the EU. But, workers have to understand that when the capitalist state introduces such regulations and laws, it does not do so in THEIR interests, but in the more general interests of capital, as against the particular interests of individual capitals. Such laws and regulations are useful for workers, only in so far as they provide them with a legal framework to utilise, but they do not change the fundamental requirement for workers themselves to organise, and to thereby oppose their interests to those of capital.

But, the problem for workers, as Marx and Engels set out, is that so long as capitalist property relations continue – and that includes state capitalist property relations as the miners discovered in 1984, and other workers employed by state capitalist industries have found – they will always be at a disadvantage in enforcing their interests against those of capital, particularly at those times of the economic cycle when their interests come most under attack. The only answer to that is for workers to organise themselves in such a way as to begin to change those property relations.

One of the problems faced by the workers in Spain, but it is a problem faced by all casual workers, is that they were employed by employment agencies, rather than directly by an employer. That has immediate implications for employment rights in general, but it also means that the agency takes a share of the workers wages and so on. Yet, the existence of the agency presents workers with an opportunity. It presents the opportunity that workers should create their own agency, as a monopoly supplier of labour-power, just as the capitalists have their own large trusts and monopolies. The most effective means of organising such a monopoly of the supply of labour-power would be the creation of one big union.

The idea goes back to the early 1830's, and took its most developed form, at that time, in the Grand National Consolidated Trade Union, developed by Robert Owen. As Marx describes in the Communist Manifesto, the communist ideals, put forward by Owen and others, were utopian, because, given the time they were writing, they could not yet recognise the decisive role that the working class played in the historical process, a role that could only be undertaken in opposition to the interests of capital, and not in harmony with it. But, Marx says that, setting that aside, the general vision that these “Utopians” presented was correct. Their error was not in the goal they set themselves of establishing worker owned co-operative property, but the means they adopted to achieve it.

A single union, expanding over an ever wide area, could act as both the employer of all labour-power, and the monopoly supplier of that labour-power. It could dictate to employers the price they would have to pay for all labour-power supplied to them, and the minimum conditions they would have to provide during its employment. The one big union could utilise its own members to ensure, via their own employment, that these conditions were being met, and bring to bear the power of the entire union where they were not.

It would require that, in addition to workers current contributions to their union, that increasingly their social insurance and tax contributions, now handed over to the capitalist state, which oppresses them, were also handed over to the one big union, so that, through it, they could not only provide the funds required to hold out against any employers refusing to pay the necessary levels of wages, but with which they could provide for their own periods of sickness, retirement and so on.

Such action currently, in Britain, would be illegal. It would not only breach the anti union laws on secondary action, if workers in general came out to support any groups of workers facing a recalcitrant employer, but the creation of such a monopoly supplier of labour-power, would conflict with the laws on monopoly. It is necessary to have those laws removed, but their existence should not prevent workers from attempting to protect their rights by these means anyway, just as previously the existence of laws restricting the actions of capital in relation to the length of working day etc. did not stop capitalists from acting to further their interests.

But, one reason Owen's GNCTU failed, as Marx and Engels describe in relation to the weakness of all trades unions, is that they are weakest at the time they need to be strongest, and strongest at the time when they least require that strength. At times of prolonged economic weakness, the demand for labour-power undermines the ability even to defend wages at existing levels, whilst in boom times, the demand for labour-power causes competition between capitals to raise wages anyway. In the US, at the moment, the large anti union companies like Wal-Mart have increased their minimum wage levels, not because of pressure from unions, but because the economic growth in the US has caused a sharp increase in the demand for labour-power, and these companies are using their economic muscle to ensure that they are able to recruit and retain workers at the expense of the weaker companies.

If one big union was to be able to resist the periods of economic weakness, when the demand for labour-power falls, and the ability to demand higher wages, or even to defend existing wages is undermined, the union would have to be able to ensure that its members were able to continue to obtain a sufficient income. It could not do that simply on the basis of accumulated funds – though if workers had control over the £800 billion in their pension funds, that would go a very long way towards making that possible. Instead, it would be necessary, as Owen and the early co-operatives proposed, to utilise the periods of economic boom, especially periods like now, when interest rates are low, and credit is available – to begin to develop their own property in opposition to that of capital.

In a recent interview on “The Daily Politics”, Andrew Neil asked Dave Nellist of TUSC, how he would finance his proposals for the capitalist state to nationalise the banks and other commanding heights of the economy. Unwilling to actually say that they would just confiscate this property without compensation, Nellist was unable to answer. But, the reality is that Neil had answered his own question, by pointing out that a large part of the shares of these companies are owned by workers via their pension funds! The truth is that there really is no need for the capitalist state to nationalise these companies, there is only a need for workers to be able to exercise control over their own pension funds, and thereby all of these major companies, rather than at present that control being exercised by the banks and finance houses!

If workers were to demand control of their property, represented by these pension funds, and thereby to demand democratic control over all of the major companies, owned by their pension funds, they would quickly be able to use those resources to support any groups of workers facing recalcitrant employers. The all round protection that a one big union could thereby afford its members, would then quickly attract the majority of workers under its banner, undermining any tendencies towards division, competition and fragmentation.

In many ways, workers have already won the battle for Socialism, if only they would recognise it. What is required now is a political struggle to bring appearance and reality into alignment, because the capitalist state will do all in its power to prevent workers from exercising control over the capital built up in their pension funds, and thereby of developing new worker owned, co-operative property relations. The mistake of Owen was to believe that enlightened capitalists could be persuaded to simply acquiesce or even facilitate such a transition. They will not, workers will need to organise in such a trade union, in co-operatives connected to it, and via their own political party to bring it about.

Capital III, Chapter 1 - Part 1

Cost-Price and Profit 

Volume I dealt with the production of capital at the level of the individual capital, and in isolation from anything outside that production process. Volume II examined the circulation of capital outside the process of production, first at the level of the individual capital (many capitals) and then at the level of the circulation of the total social capital (capital in general). The conclusion of this was that capital could only be understood as a fusion both of the production and circulation processes.

The analysis, although referring to actual capitals, as examples, had been conducted at a level of abstraction, to focus on the actual laws that governed these processes, free from any disturbances to those laws that might have obscured them. Having analysed the underlying mechanism, Marx now turns to the way this is represented at the level of society, in the shape of concrete capitals, and the relations between them, and how these produce concrete social relations.

“The various forms of capital, as evolved in this book, thus approach step by step the form which they assume on the surface of society, in the action of different capitals upon one another, in competition, and in the ordinary consciousness of the agents of production themselves.” (p 25)

The value of commodities, C, is equal to c+v+s. This can be divided into two parts, and is done so by the capitalist. If we deduct s, the surplus value, we are left with c+v, which is the value of the capital laid out to produce the commodity, and so appears to the capitalist as its cost price. But, in reality, this is not the cost price. If we totalled up the labour-time required for production, it would be equal to c+v+s. It only appears to the capitalist that the cost price is c+v, because that is indeed what it has cost them, what they have paid for. But, their gain in that regard is the worker's loss. The worker has provided a certain number of hours labour, but only been paid for a part of them, even though that payment is equal to the value of the worker's labour power.

On the basis of this division, the cost price can be designated k, and so this value of the commodity resolves into k+s.

“The grouping of the various value portions of a commodity which only replace the value of the capital expended in its production under the head of cost-price expresses, on the one hand, the specific character of capitalist production. The capitalist cost of the commodity is measured by the expenditure of capital, while the actual cost of the commodity is measured by the expenditure of labour.” (p 26)

But, the cost price of the commodity is important, because it continually has to be reproduced in the sale of the commodity, so that the productive capital can be reproduced, so that production can continue on at least the same scale.

“The category of cost-price, on the other hand, has nothing to do with the formation of commodity-value, or with the process of self-expansion of capital.” (p 28)

The value of the commodity does not arise out of the cost price, but out of the labour-time required for its production, which in turn can be divided into that transferred from the constant capital, and that newly created by the variable capital. The self-expansion of the capital arises only from the latter as, in the process of production, it transforms what is an absolute quantity, the value of the labour-power, into a variable quantity, the value created by that labour-power.

But, the cost price, in combining the constant capital and the variable capital, into one amount, obscures this reality, so then it appears that the surplus value arises from the capital advanced as a whole.

“The investigation will show, however, that in capitalist economics the cost-price assumes the false appearance of a category of value production itself.” (p 28)

Saturday, 18 April 2015

Northern Soul Classics - The Zoo - The Commodores

I was tempted to put this early Commodores classic in the Friday Night Disco category, but it was a biggie in the early Wigan days around 1974.

Capital III, Introduction - Part 6

Finally, Engels turns to the solution provided by George C. Stiebeling, from the US. Stiebeling's solution seemed simple, but rested on a straightforward mathematical error. His model provides two enterprises with different organic compositions of capital. He designates total capital in each case (c+v), y, and the difference in the organic composition x. The rate of profit in the first is then s/(c+v), and in the second s/(c-x) + (v+x) = s/(c+v),

The obvious error is that he has assumed that the value of s in both cases is the same! But, the whole point is that the value of s will be higher in the second firm, where the organic composition of capital is lower.

The controversies and misunderstandings surrounding Marx's theories, on the tendency of the rate of profit to fall, and on the transformation problem, have continued to this day. Many of those who treat, for example, the falling rate of profit as some kind of philosopher's stone, to unlock the key of capitalist crises, repeat half understood ideas, put forward by Marx, as though they were in some way fixed and frozen laws. In doing so, they trample on the grave of Marx's scientific method. They would do well, rather than repeating those mantras, to follow Engels' advice.

“No doubt Dr. Stiebeling has the best intentions, but when a man wants to deal with scientific questions he should above all learn to read the works he wishes to use just as the author had written them, and above all without reading anything into them that they do not contain.” (p 21) 

Friday, 17 April 2015

Friday Night Disco - Kool and the Gang - Kool and the Gang

First contact with the gang, from back in 1969.


Capital III, Introduction - Part 5

In his response to Peter Fireman, Engels gave a sharp warning to those dogmatic Marxists of today who want to find in Marx cut and dried definitions and answers good for all time, because of their 'objectivity'.

“They rest upon the false assumption that Marx wishes to define where he only investigates, and that in general one might expect fixed, cut-to-measure, once and for all applicable definitions in Marx’s works. It is self-evident that where things and their interrelations are conceived, not as fixed, but as changing, their mental images, the ideas, are likewise subject to change and transformation; and they are not encapsulated in rigid definitions, but are developed in their historical or logical process of formation. This makes clear, of course, why in the beginning of his first book Marx proceeds from the simple production of commodities as the historical premise, ultimately to arrive from this basis to capital — why he proceeds from the simple commodity instead of a logically and historically secondary form — from an already capitalistically modified commodity.” (p 13-14)

Fireman hits upon the right answer, but without providing all of the necessary logical development of the solution provided by Marx. Profit, says Fireman, is just a “conventional phenomenon”, specific to capitalism. Capitals make profits under this system, and how much profit is determined by the size of the capital. An average rate of profit arises only because capital moves from where profits are low to where they are high. But, profit, determined by the size of capital, is also comprised of surplus value, which depends on the rate of surplus value. How then is the latter transformed into the former? It can only be by selling commodities above their value where the organic composition of capital is high and vice versa.

Does this discrepancy invalidate the Law of Value? No says Fireman.

“For since the prices of some commodities rise above their value as much as the prices of others fall below it, the total sum of prices remains equal to the total sum of values ... in the end this incongruity disappears."” (p 14)

Engels comments,

“On comparing the relevant passages in Chapter IX with the above, it will be seen that Fireman has indeed placed his finger on the salient point.” (p 15)

But, far more work would be needed, “even after this discovery to enable Fireman to work out a full and comprehensive solution.” (p 15)

Engels briefly deals with the attempt by Professor Julius Wolf, before moving on to attack Achille Loria. Wolf thought he had resolved the issue, by pointing out that as constant capital rises, so productivity rises, and so relative surplus value rises. This is, of course, true, and forms one of the elements of the countervailing forces to the falling rate of profit. But, it is then a question of a struggle between the rate of surplus value, and the absolute quantity of surplus value produced. The rate of surplus value may rise, but if the quantity of labour exploited falls more, the amount of surplus value produced may fall, in which case the rate of profit will fall.

Engels is vehement against Loria, who attacked Marx soon after his death, claiming, in the process, that he, not Marx, had developed the materialist conception of history. Loria attacked Marx's theory that the surplus value is produced only by the variable capital, saying that, in practice, it depends on the whole capital. He points to Marx's statement in Volume I, Chapter 13, where Marx himself says this is the way it seems on the surface. He accuses Marx of being in an irreconcilable contradiction, and suggesting that Marx's statement that the resolution to it would be given in a future volume, was merely a ruse to get out of it.

Having declared the problem to be insoluble, in the 1880's, Loria then, in a review of Schmidt's article, comes forward with his own solution. Schmidt had set out, in the same way as Marx, where merchant's profit comes from, sharing in the surplus value produced of industrial capital, as set out in this volume. Loria seized upon this idea to provide his own solution to the formation of an average rate of profit. All it required was for some unproductive capital, like merchant's capital, to be able to charge 'interest' against the various industrial capitals, variable according to how much profit they made, so they were all reduced to the same level, a level that miraculously this unproductive capital then also achieves.

But, of course, Loria is unable to indicate why this commercial capital would be able to force productive capitalists to hand over this tribute, let alone why those that made the highest profits would hand over a larger proportion than their competitors.