Thursday, 16 August 2018

Theories of Surplus Value, Part II, Chapter 17 - Part 49

Where commodity production and exchange dominates, and where commodities are bought and sold for money, not only is production and consumption separated, but purchase and sale is also separated. The bible producer no longer exchanges a bible with a value of 10 hours, for 10 bottles of wine, but exchanges their bible for money, with a value of 10 hours. Money always initially takes the form of a money commodity, be it cattle, copper, silver or gold, but also, as Marx describes, money itself is not a commodity, although all commodities are money. It is exchange-value incarnate, a representative of all commodities, the general commodity, and thereby the physical measure of their exchange-value. The seller of the bible no longer exchanges it for money as an exchange of use values, with an equal value, but exchanges the bible for money only for its exchange-value. The only use value of money is its exchange-value, and once this situation arises, it becomes possible for there to be sellers who are not buyers, as well as buyers who are not sellers. The failure of Ricardo to recognise that money, even in the form of a money-commodity, is not a commodity, is central to the error in his theory of money, but also to his error in relation to the acceptance of Say's Law

The bible producer may sell their bible, on the market, for £10, but, having sold it, they are now under no compulsion to use the £10 to buy wine from the wine producer, who now has produced but cannot sell. They have bought, but cannot sell, because the bible producer has sold, but does not buy. The £10 they now have, in say gold coins, is not a commodity. As money, its only use value is as money, i.e. as exchange-value incarnate. If they wanted to use the gold contained in the coins as a commodity, they could only do so by ending its existence as money. In other words, they would have to melt down the coins, and transform them into gold, to be used as a commodity in the production of jewellery etc. It can only act as money, as the general commodity, by abandoning its use value as a commodity. 

“Crisis results from the impossibility to sell. The difficulty of transforming the commodity—the particular product of individual labour—into its opposite, money, i.e., abstract general social labour, lies in the fact that money is not the particular product of individual labour, and that the person who has effected a sale, who therefore has commodities in the form of money, is not compelled to buy again at once, to transform the money again into a particular product of individual labour.” (p 509) 

It's money, by separating purchase and sale, by creating the potential to sell without buying, which thereby creates this potential for crisis, because it creates the potential for producers to be unable to convert their commodity into money, and unless they can sell, and convert their commodity into money, they are unable to convert money into commodities, so the process of production is itself then disrupted. 

“The difficulty of converting the commodity into money, of selling it, only arises from the fact that the commodity must be turned into money but the money need not be immediately turned into commodity, and therefore sale and purchase can be separated. We have said that this form contains the possibility of crisis, that is to say, the possibility that elements which are correlated, which are inseparable, are separated and consequently are forcibly reunited, their coherence is violently asserted against their mutual independence. Crisis is nothing but the forcible assertion of the unity of phases of the production process which have become independent of each other.” (p 509) 

Wednesday, 15 August 2018

Paul Mason's Postcapitalism - A Detailed Critique - Chapter 6(7)

Scarcity and Abundance

Paul is right that at the heart of marginalism is the concept of scarcity. But, it's not just become wrong in its assumption about that as a result of information technology or info-capitalism. The basic concepts of marginal productivity theory were developed by James Anderson, and then by Ricardo and Marx, in their theories of differential rent. Marx, mostly adopts Ricardo's argument that the market value of agricultural products/minerals is determined by the least efficient land, rather than the average, because, unless this land produces the average profit, it would not be cultivated. In Theories of Surplus Value, he modifies this to illustrate the role of demand and the effect of Absolute Rent. Where Marx, following Anderson disagrees with Ricardo is in the notion that production must always move to less fertile lands, in order to meet rising demand. Marx shows that, as a result of rising demand, capital can open up new, more fertile lands, so that instead of rising marginal costs, they fall. More importantly, Marx shows where this can happen in agriculture, it always does happen in industry. Industrial capitals, he says, never introduce new machines or processes that are less efficient, less productive, or less profitable than what they replace. 

Its not info-capitalism that undermines the notion of scarcity, but the whole history of human production, and particularly the history of that production under capitalism. Certainly, in the short-term, there may be limitations on how much of something can be produced, though, as Marx says, beyond a certain point, capital becomes very elastic in being able to expand production, without even the need to employ additional fixed capital. But, the whole history of capitalist production has shown the possibility of expanding output to ever larger volumes, and that contrary to the Malthusian prophecies of catastrophe, each increase in output brings with it greater efficiency and lower marginal costs. Even in the 1950's, as Colin Clarke showed, the world could feed itself several times over. 

The fact that the unit value of commodities can fall to very low levels does not mean that value becomes zero, or that the surplus value becomes zero. Moreover, for capital, what is important is not the gross revenue but the net revenue, i.e. the surplus value. The surplus value per unit/profit margin may fall to very low levels – that is the basis of Marx's law of the tendency for the rate of profit to fall – whilst the mass of surplus value rises to ever higher levels, precisely because of the volume of production. The only issue here may be how to realise the value and surplus value. However, again, this is not a new problem. Fairly early on, capital learned to utilise insurance, including social or national insurance, as a means of pooling large volumes of small payments into larger collective payments. As well as tolls for roads and bridges, this problem of zero marginal costs, for public goods, was addressed by collective payments via taxes, and so on. And, I will examine the potential that the cloud now provides for exerting control over access to many information tech products, and thereby eliminating copying. 

Paul says, 

“Information goods exist in potentially unlimited quantities and, when that is the case, their true marginal production cost is zero. On top of this, the marginal cost of some physical info-tech (memory storage, and bandwidth) is also collapsing towards zero. Meanwhile, the information content of other physical goods is rising, exposing more commodities to the possibility that their production costs begin to plummet too. All this is eroding the very price mechanism that marginalism describes so perfectly.” (p 163) 

Firstly, marginalism does not describe that price mechanism perfectly, because its underlying assumption is scarcity and diminishing returns, when that has never been the case. Its reflected in the fact that orthodox textbooks show the supply curve rising from left to right, reflecting higher marginal costs at higher levels of production. When it gets into the weeds, it becomes more sophisticated, showing rising short-run marginal cost curves, in the context of a longer-run falling marginal cost curve, but the underlying assumption remains that ultimately marginal costs rise due to diminishing returns. 

Secondly, all that Paul is recognising here is what has always been true in relation to fixed costs, which is they too, along with labour fall as a proportion of output value, as productivity and output rises. The concept that Marx’s law was about a rising proportion of fixed capital, which more or less ignored the actual basis of his law – a rising share of raw material value – is a misrepresentation of Marx that has persisted for a long time, and can still be seen. But, that focus on fixed capital, rather than raw material follows more from Ricardo than from Marx. 

Paul is right to note that the value of many commodities, including material commodities, is falling rapidly, but, if anything, the changed nature of production should lead to opposite conclusions to those Paul arrives at. It's always the case that fixed capital value shrinks as a proportion of output value. To the extent that materials and intermediate production experience falls in unit values, as a result of rising productivity, that falls absolutely, thereby reducing commodity values. Given that services account for 80% of value added, we should expect that is not affected by the increase in the volume of material processed. 

The fact that a lot of value in these commodities comes from intellectual labour, and that this labour, in the realm of research and development, acts like fixed capital, is simply being reflected in the fact that the value created by the intellectual labour is spread over a huge level of output. Paul's faulty concept of The Labour Theory of Value also plays a part here, because he makes the error of assuming that because the value of labour-power is reduced, this is the same as a fall in the value of labour as a proportion of output value. It isn't. That depends on the quantity of labour-time, not the value of labour-power. A fall in the value of labour-power simply increases the proportion of surplus labour-time, and so surplus value. 

So, we have a revolution in technology that reduces the value of fixed capital, we have a rise in the significance of intellectual labour in output. Both of these, however, fall as a proportion of the value of output, as the mass of output rises exponentially. To the extent material prices are reduced, this reduces the value of commodities, further releases capital, and raises the rate of profit. Paul seems to miss that point that the more those input costs are reduced in value, the more capital is released as revenue, and the more it raises the rate of profit, and facilitates capital accumulation

And, whilst, traditionally, a rise in productivity has been marked by a proportional rise in the mass of material processed, for all the reasons Paul has described, and that I have set out elsewhere, that is no longer the determining feature. Take the example of media production. A cameraman could previously have used several cameras, and a lot of time to stitch images together to produce a rough 3-D picture. But, now, a 3-D camera, and recent technology allows that to be done in no more time than it previously required to produce a 2-D video. The fixed capital (camera) here may cost little more than did a previous camera, and before long probably less. The labour here becomes more productive, i.e. it now produces a 3-D video in the time previously required to produce a 2-D video, and less time than was previously required to produce a 3-D video. But, no raw material is processed as part of this process, let alone a larger quantity of raw material. 

The firm selling the 3-D video may be able to sell it at a higher price than a 2-D video, even though it only requires the same amount of labour to produce, because consumers may see a 3-D video as providing more use value than a 2-D video. In other words, they may view the labour used in the production of the 3-D video as complex labour, relative to that which produced the 2-D video, even though, in practice, its the same labour. And, the employer will have paid the cameraman the same wages as before, because the value of their labour-power has not changed. So, the firm will now get a higher rate of surplus value, and higher rate of profit. 

Sitting here, writing on a sunny day, looking across my garden, and the fields beyond, I was thinking about the same thing in relation to the use of drones for aerial photography, where the same kind of argument can be made. And, this applies to increasing areas of production, where raw material processing plays no part or only a minor part, but where complex labour plays an increasing role. The consequence of technology in these cases is increasingly not to reduce the amount of labour employed, but to increase the quality, range, and quantity of these outputs, by the existing labour. But, again, Paul fails to account for the fact that, if anything, a growing proportion of labour is complex labour – thereby creating more value and surplus value – but that the very processes he describes, of falling commodity prices, not only reduces the value of constant capital, thereby releasing capital as revenue, and raising the rate of profit, but also reduces the value of labour-power, thereby releasing variable-capital as revenue, and raising both the rate of surplus value and rate of profit. 

Because Paul accepts the marginalist claims about scarcity, he believes that non-scarcity undermines orthodox theory. But, the reality of non-scarcity over the last 100 years has not undermined it. The fallacy of the Ricardian Law of diminishing returns and his theory of crisis built on it, as with the Malthusian theory, did not stop the marginalists adopting that principle in the first place. Contrary to Ricardo and Malthus, even in the 19th century, in place of diminishing returns, falling profits, crisis and catastrophe, the opposite was seen. Capital expanded massively, productivity rose, unit costs fell, and the mass of profit grew like topsy. Falling nominal commodity prices, resulting from that process did present a problem, because workers are reluctant to accept lower nominal wages, even when they represent a rise in their real wages. That is why, alongside Fordism, central banks were introduced to create low levels of annual inflation, so that nominal wages could rise, but by less than the rise in productivity, so that the rate of surplus value could rise. 

Hammond's Amazon Tax Is Idiotic

Tory Chancellor Philip Hammond has talked about introducing a tax on online retailers such as Amazon, in response to the increasing decimation of high street retailers. It is a totally idiotic proposal, but entirely in keeping with the kind of policies that conservatives have pursued over the last 40 years. 

The basis for the tax on online retailers is that, because they do not utilise high street floorspace, they do not have the same overhead costs as high street retailers, and so have an advantage over them. That is the same landlord mentality that says, a mill that has the advantage of utilising a windmill, or a water-mill, on the land, has a competitive advantage, and so its surplus profits can legitimately be siphoned off as rent by the landowner on whose land the windmill or stream are situated. Or in later times, it would be like a government turning to those industrialists who invested in steam engines, and saying to them,

“Now look you fellows, you have a competitive advantage here with this new fangled technology, and it just won't do, so we are going to tax you for having invested in this technology.”

Is it any wonder that Britain has a terrible problem with raising productivity, when at every step over the last 40 years, conservative governments have placed increasing levels of taxation on innovators, and those that invest in productivity raising technologies, in order to provide subsidies to the small, inefficient capitalists that rely on cheap labour, poor conditions, and who continually carp at the disadvantages they face from larger, more efficient and innovating competitors? 

In the 1980's, Thatcher introduced Enterprise Zones, designed to enable all these small inefficient capitals to escape basic regulations, enjoy lower rates and so on, as a means of helping them stay afloat. The low wages they paid to their workers were subsidised by a growing amount of benefits paid to low-paid workers, along with Housing Benefits to cover the rents that those workers now increasingly could not afford to pay. That was paid for by taxing the other firms in the economy that actually were more efficient and able to pay decent wages, and provide more civilised conditions. It held back the growth of the latter in order to subsidise the Tories core supporters and membership base amongst the ranks of the small capitalists. Its that constituency the Tories now seek to protect by their Brexit proposals, and the desire to be able to have a further bonfire of rights, once they have accomplished it. 

In addition to taxing the innovators and investors in real capital, the Tories as well as subsidising their friends amongst the inefficient small capitalists also favoured their other friends amongst the ranks of the speculators and money lenders. At the same time as taxing and hindering technological development, they did all in their power to encourage money to go into unproductive speculation be it speculation that drove up house prices, or that drove up stock and bond markets. They encouraged everything that drains wealth from the economy, and discouraged everything that creates wealth in the economy. 

Hammond's Amazon tax is just the last in a long line of such idiotic policies, whose justification is only that they help the Tories friends amongst the ranks of the speculators, landowners and small capitalists that make up the core of their support. It is economics effectively based upon the same kind of nepotism and corruption as seen in Trump's regime in the US, Erdogan's regime in Turkey, and Putin's regime in Russia, if not so blatantly undertaken. 

Theories of Surplus Value, Part II, Chapter 17 - Part 48

Once the process of commodity production and exchange begins, it sets in place a process whereby it inexorably extends. Any direct producer that has any kind of natural advantage can increase their revenue, and thereby their wealth and productive capacity by specialising in that sphere of production. A talented potter may not only gain more demand for their wares than other potters, but they may spend less labour-time in their production than others. By spending all their time in pottery production, rather than most of their time tending their fields etc., they may be able to exchange their ware for all of the food, clothes and other commodities they need, with money to spare. And, with this money, they can buy better tools, etc. so as to increase their advantage. Increasingly, production is undertaken for the purpose of obtaining this exchange value, rather than the production of use values. In other words this specialisation enables them to obtain a comparative advantage

The more production is the production of commodities, for exchange, rather than production of use values for direct consumption, the more the requirement to sell what has been produced imposes itself. The wine producer who spends most of his time producing those things required for his own consumption, and who only takes his surplus wine to market, to exchange for other commodities can take it or leave it, whether he sells all of his 12 litres, or whether he only exchanges 10 with the producer of bibles. He can always consume an additional 2 litres himself. But, the matter is different if the only thing he produces is wine, and in order to obtain all of the things required for his own subsistence, and to be able to cultivate his vineyard, for the next season, he must sell all of the wine he has produced. Here lies the possibility of crises, in the separation of production and consumption, and in the contradiction inherent within the commodity itself between use value and exchange value

“The possibility of crisis is indicated in the metamorphosis of the commodity like this: 

Firstly, the commodity which actually exists as use-value, and nominally, in its price, as exchange-value, must be transformed into money. C-M. If this difficulty, the sale, is solved then the purchase, M-C, presents no difficulty, since money is directly exchangeable for everything else. The use-value of the commodity, the usefulness of the labour contained in it, must be assumed from the start, otherwise it is no commodity at all. It is further assumed that the individual value of the commodity is equal to its social value, that is to say, that the labour-time materialised in it is equal to the socially necessary labour-time for the production of this commodity. The possibility of a crisis, in so far as it shows itself in the simple form of metamorphosis, thus only arises from the fact that the differences in form—the phases—which it passes through in the course of its progress, are in the first place necessarily complimentary and secondly, despite this intrinsic and necessary correlation, they are distinct parts and forms of the process, independent of each other diverging in time and space, separable and separated from each other. The possibility of crisis therefore lies solely in the separation of sale from purchase.” (p 507-8) 

In fact, this metamorphosis involves a series of sales and purchases, as well as purchases and sales. A wine producer purchases materials for the cultivation of their vineyard. They purchase vats in which to ferment and store the wine, wine presses to squeeze the grape, and possibly labour-power to undertake the work. They buy bottles in which to put the wine before it is sold. The sale of the wine only takes place many months, or even years after all of these purchases have been made, and the labour process undertaken to produce the wine. As Marx said earlier, any number of changes in the market, and in market prices may have occurred between these various purchases and the sale of the wine. By the time the wine is ready to be sold, on the market, a fad for drinking coffee may have swept society, so that there is a much reduced demand for wine. All of the wine output may then only be sold at market prices way below what is required to replace all of the inputs consumed in the wine's production. Here, Marx says that if the sale proceeded, C-M, then there is no problem with the purchase, because money can be exchanged for anything. However, that assumes that what is to be bought is available. 

As Marx sets out in Capital III, Chapter 6, and again later, the US Civil War cut off supplies of cotton to the Lancashire cotton mills. Having sold their textiles, and obtained money, the textile capitalists could not metamorphose it once more into cotton. A crisis arose, and thousands of textile workers were thrown out of work. But, it can also be the case that the demand for inputs rises so fast that it is simply a matter that supply cannot be increased fast enough to meet it. Then the price of those inputs will also rise sharply. That happened with copper, oil, iron ore and food prices after the new long wave boom started in 1999. And, Marx later in Theories of Surplus Value looks at the same effect with labour-power, where the demand exceeds the supply, increasing wages and reducing surplus value

But, whilst the possibility of crisis is inherent within the commodity, because the process of exchange implies the separation of production and consumption, under barter, at least, either what is produced for exchange is exchanged for some other commodity or it isn't. Either A exchanges their bible for 10 litres of wine or they don't. If they don't, both retain their products, and either consume them themselves or bring them to market another day, refraining from any additional production of these commodities until they have sold. Moreover, under systems of barter, the producers often produce to order, so that they know in advance that they will be able to engage in mutual exchange. But, that is not the case where money intervenes. 

“If the commodity could not be withdrawn from circulation in the form of money or its retransformation into commodity could not be postponed—as with direct barter—if purchase and sale coincided, then the possibility of crisis would, under the assumptions made, disappear. For it is assumed that the commodity represents use-value for other owners of commodities. In the form of direct barter, the commodity is not exchangeable only if it has no use-value or when there are no other use-values on the other side which can be exchanged for it; therefore, only under these two conditions: either if one side has produced useless things or if the other side has nothing useful to exchange as an equivalent for the first use-value. In both cases, however, no exchange whatsoever would take place. But in so far as exchange did take place, its phases would not be separated. The buyer would be seller and the seller buyer. The critical stage, which arises from the form of the exchange—in so far as it is circulation—would therefore cease to exist, and if we say that the simple form of metamorphosis comprises the possibility of crisis, we only say that in this form itself lies the possibility of the rupture and separation of essentially complimentary phases.” (p 508) 

Tuesday, 14 August 2018

Paul Mason's Postcapitalism - A Detailed Critique - Chapter 6(6)

Scarcity, Marginal Utility and Demand

I don't think that Paul's explanation of marginalist theory is accurate either. He says, 

“... if the supply of something increases, it becomes rational for people to start wanting it, and to decide what price they pay for it. Supply creates its own demand, says the theory: a freely operating market will 'clear' until demand matches supply, with prices changing in response.” (p 161) 

But, the reason that marginalist/neoclassical economists believe that supply creates its own demand, so that the market clears, is essentially the same as that held by Ricardo, Mill, Say and others. It is that there can be no general overproduction of commodities. For Mill et al, if some commodities are overproduced, it is only a reflection that other commodities are not available to exchange for them, so that the former are under-consumed, as a result of the latter being under-produced. As Marx says, they arrive at this conclusion, because, rather than considering the process of commodity exchange as it actually occurs under capitalism, they apply the conditions that apply under barter. As I've set out elsewhere, some Marxist economists, by failing to take into account the actual role of demand, and of the market, also fall into this error. 

Where the marginalists differed was essentially only in this: they rejected the classical notion of value, so that for them supply does not create its own demand by a process of barter, by which A exchanges an equal amount of value with B – for Ricardo money is only a means of mediating this exchange – but by the fact that the factors of production – land, labour, capital – obtain revenues from the production of A, just as similar factors obtain revenues from the production of B etc., and they use these revenues for the purchase of other commodities, thereby creating demand. For those commodities where consumer preferences are high, relative to supply, the price will rise, and that will cause factor incomes in that sphere to rise, and vice versa. Factors of production will move to where those higher incomes are available, so that capital is reallocated, at which point prices in one sphere will fall back, and in the other they rise again. Given the nature of marginalist theory and the premise of diminishing returns, prices in the former will not fall back to former levels, because of higher marginal costs and vice versa. 

It's not the case, as Paul says, that the last ecstasy tablet in the nightclub has higher value/marginal utility than all the others, because it depends whether there is demand for it or not. And, nor is it the case that because the supply of something rises, marginalism says that the demand for it must appear or rise. On the contrary, the proposition is that the market will clear, because if there is no demand for it, the sellers will have to continually reduce the price of it, until a sufficient demand is created, as fruit sellers on a market stall are forced to sell off any remaining produce towards the end of the day at lower prices to clear them. 

This, in fact, is the crucial point about understanding crises of overproduction, from a Marxist perspective. What the marginalists fail to account for, precisely because of their theory of subjective value, is what happens when this price at which a sufficient demand exists, to clear the market, is itself insufficient to cover the costs of production, i.e. to reproduce the capital consumed in production. So long as prices only move marginally, so as to ration out supply, or to clear some temporary excess, things are manageable. Temporary price fluctuations happen all the time, and firms factor such movements into their longer term calculation of average prices, and longer-term profits. A more sustained fall in price, reflecting a change in consumer preferences may hit a firm's profit, but, so long as it still produces a profit that is not crucial. 

Such a fall in profit means it may not be able to expand, at the rate it anticipated, but, if it sees demand falling, it may decide that is no bad thing. But, if it makes a large, or sustained series of losses, unless it has reserves on its balance sheet, it will be unable to reproduce the capital consumed in its production. It will have to lay off workers, buy fewer materials, sell some machines and so on. In turn, the laid off workers have no income to buy commodities, the suppliers of materials etc. see the demand for their commodities fall, so those prices fall, and so do their profits etc. 

The marginalists solution to such a situation is that, in the first company, the capital has already seen its return disappear, so the workers, to retain their jobs, have to take lower wages, the firm should negotiate lower rents with landlords, on pain of the landlord losing rent altogether and so on. But, the problem here is that the workers wages are not some arbitrary amount. As an average price, the wage is what is required to reproduce the workers' labour-power. Not only does it mean that if the workers accept lower wages they cannot buy all the wage goods they require for their reproduction, it means the suppliers of those wage goods see a fall in demand for their own output. What was a partial crisis, in one sphere, can thereby spread generally. Such falls in wages may be possible temporarily, or for longer periods where workers can utilise cheap credit, but only by deferring the problem, which is another experience seen in the last thirty years. 

As Marx says in relation to the production of knives, a rise in productivity may greatly reduce the value of a knife, but this goes along with a rise in the quantity of knives produced. There is no logical reason why the demand for knives should rise proportionally to the rise in output, even at this lower unit value. 

“The same value can be embodied in very different quantities [of commodities]. But the use-value—consumption—depends not on value, but on the quantity. It is quite unintelligible why I should buy six knives because I can get them for the same price that I previously paid for one.” (Theories of Surplus Value, Part 3, p 118-9) 

Similarly, landlords may decide to simply take their land out of circulation, rather than accept lower rents. And, again, in the last thirty years we've seen a different manifestation of that, because as central banks continually inflated asset prices, it increasingly became the case that the owners of landed property, and financial assets became less interested in yields, and more concerned with guaranteed capital gains from simply hoarding those assets. 

Theories of Surplus Value, Part II, Chapter 17 - Part 47

A may produce bibles, and B produce wine. B may see A's bible as a use value they wish to buy, and A may see B's wine as a use value they seek to acquire. But, A's bible may represent 100 hours of labour and B may have spent 100 hours producing 12 litres of wine. A may only want 10 litres of B's wine, the other 2 litres representing no use value for them. B would have overproduced wine. In this case, they would probably exchange 10 litres of their wine for the bible – assuming it was in separate bottles. They would then either consume the 2 litres themselves, or retain it for another market day. And, this continues to be the case, wherever the bulk of production continues to be for direct consumption. It is only the surplus product that is produced as commodities, and sent to market, to obtain either other commodities in exchange, or to obtain the general commodity, exchange-value incarnate, money

In order to avoid any irrelevant distractions, it is assumed here that each producer of these commodities produces using only the average socially necessary labour, i.e. the individual value of what they produce is equal to its social or market value. It's also assumed that what they produce actually is a use value. Were this not the case, then its clear that, for any individual producer, they may experience a crisis. A producer of bibles or wine, whose quality is so poor that no one wants them would be unable to sell them or exchange them. They would have no use value, and so no exchange value. Likewise, a producer of bibles or wine, who expends twice the average amount of time on their production would not be able to sell them at the individual value, and would thereby suffer considerable loss, even if only of their personal labour

Such individual crises did occur, so that those concerned went bankrupt, or had to give up their own means of production, becoming wage labourers, or servants and slaves. But, such individual catastrophes do not extend to becoming general social crises. The possibility of crisis exists here, because the commodity as something produced to be exchanged, thereby separates production from consumption, in time and space. The commodity, as something produced to be exchanged, and the process of exchange itself implies that the two things, production and consumption are inextricably linked. The producer produces a commodity that they believe can be exchanged precisely because they believe that what is produced is desired by someone else for consumption. 

But, these two inextricably linked acts, production and consumption, become increasingly independent, as commodity production and exchange extends, and direct production declines. When this independence results in a severance of the connection between the two, so that what is produced no longer corresponds with what is required for consumption, it is this which represents the crisis. The crisis, as Marx says, is the means by which the underlying unity of these two poles, at either end of the process is violently restored

Monday, 13 August 2018

Paul Mason's Postcapitalism - A Detailed Critique - Chapter 6(5)

Machines and Productivity

The problem with Paul's earlier, confused description of The Labour Theory of Value, which failed to distinguish between labour and labour-power, is again illustrated in the example he gives, when he comes to examine productivity. He sets out an example of a factory producing 10,000 units of a commodity. It requires 10,000 hours of living labour, and 10,000 hours of congealed labour, or “finished labour” as he calls it. That is a total of 20,000 hours. Each unit is equal to 2 hours labour. 

“On the market, it should exchange for the money equivalent of two hours labour-time.” (p 158) 

But, previously, we saw that Paul defined this amount as the equivalent of an hour's wages (p 151). If we use the $0.28 figure, it would mean that it sold for $0.56. Out of that, $0.28 go as wages, whilst the other $0.28 must go to pay for the replacement of the consumed “finished labour”. But, that means that the firm could produce no profit. We will let that go. 

Paul then says, assume a new process is introduced that doubles labour productivity in one firm. Now, each of its units contains 1 hour of finished labour and ½ hour of living labour. It can still sell its output at the market value of 2 hours per unit, making a surplus profit of ½ hour per unit. That gets other firms to introduce the new process so that the market value of the commodity falls from 2 hours to 1.5 hours, and the surplus profit disappears. But, then Paul makes a leap that does not follow from this argument. Remember, he only spoke about a new “process”. He then says, 

“To increase productivity, we increase the proportion of 'machine value' to the living labour employed.” 

But, that is not what this example shows. It talks only of a new process. The division of labour continually introduced new processes that raised labour productivity without increasing the machine value relative to labour. What does increase, in such conditions, is the raw material value relative to labour, because the rise in productivity by definition, means a given amount of labour processes more material. Marx and Engels describe a variety of new chemical and other processes, which increased productivity without any additional machinery, and sometimes without any additional cost. 

But, even if we take Paul's argument here to mean that the new process involves the introduction of a new machine, his argument does not follow. Suppose there were 100 workers initially each using a machine. Now, a new machine is introduced that can do the work of 2 of the old machines. So, now, 50 machines are employed rather than 100 machines, and 50 workers are employed rather than 100 workers. So, in terms of machines to workers there is no change; it is 1:1, as before.

Marx himself describes this in Theories of Surplus Value, Chapter 23.

"Here it is not simply a question of the quantitative ratio but of the value ratio.

If one worker can spin as much cotton as 100 [workers spun previously], then the supply of raw material must be increased a hundredfold, and this is moreover brought about only by the spinning-machine which enables one worker to control 100 spindles. But if simultaneously, one worker produces as much cotton as 100 workers did previously and one worker produces a spinning-machine whereas previously he produced only a spindle, then the ratio of value remains the same, that is, the labour expended in the spinning, [in the production of] the cotton and the spinning-machine remains the same as that expended previously in spinning, the cotton and the spindle."

Indeed, as I've set out elsewhere, the technological advances that make this new machine possible mean that its value is also likely to be lower. Moreover, Marx sets out, in Capital, that any such new machine, introduced must cost less than the paid labour it replaces. Each new machine replaces a worker, and so must cost less than a worker's wages. So, in actual fact, we might expect the machine value to fall relative to the value of the living labour. What would increase, relative to labour is the value of the processed material, because now each worker and machine processes twice as much of it. 

In the rest of his argument in Chapter 23, Marx assumes that the value of the machinery rises against labour, and falls on relatively as against the output value.  That is what Marx sets out, in Capital III, Chapter 6, that the value of both fixed capital and of labour falls as a proportion of the value of output, whilst the value of raw material rises. If the 100 machines cost £100, the 50 that replace them can cost no more than £100, but they may cost less than £50. Say they cost £75, and wages fall from £100 to £50, then machine value will rise, relative to wages, but both machine value and wages will fall relative to output, but materials rise.  In fact, there is no reason why the value of fixed capital, and of materials may not fall by a larger proportion, so that in value terms they fall relative to labour.  That is certainly true, in economies based upon service production, where no processing of materials is essentially involved.

Paul believes that it is this process whereby more machines are introduced that replace labour which is continually proceeding to reduce the employed labour, and so production of surplus value that leads to the tendency for the rate of profit to fall, which then ultimately leads to crises. What stands in its way are the various countervailing forces to the fall in the rate of profit, described by Marx in Capital III, Chapter 14. But, this is all wrong. Firstly, Marx nowhere says that his law of falling profits leads to crises of overproduction. He says that this law, which only operates as a tendency, is only perceptible over long periods, and in Theories of Surplus Value, Chapter 23, he says that the fall attributable to it is much smaller than it is said to be, and that the countervailing tendencies are sufficient to reduce the value of materials sufficiently to offset it.

"The cheapening of raw materials, and of auxiliary materials; etc., checks but does not cancel the growth in the value of this part of capital. It checks it to the degree that it brings about a fall in profit."

But, also in Capital III, Chapter 15, he makes clear that for long periods, there are no technological leaps, and, instead, all that happens is that more of the existing machines are rolled out, employing more workers to operate them, and thereby resulting in more surplus value being produced, not less, and also no change in productivity, meaning no change in the organic composition of capital, or in the rate of profit. As he sets out in Theories of Surplus Value, Chapter 21, if £1,000 of capital employs 1 worker who produces £100 of surplus value, the rate of profit is 10%. But, it is still 10% if then £8,000 of capital employs 8 workers who produce £800 of surplus value. 

What does lead to overproduction, in these cases, is where this increase in employment means that wages begin to rise, so that the rate of surplus value falls, and profits get squeezed. As I've set out previously, its in response to these conditions that capital is led to innovate, to introduce new labour-saving technologies, which are the response and solution to those crises, not the cause of them.