Sunday, 30 April 2017

Social-Democracy, Bonapartism and Permanent Revolution Chapter 11 – Results and Prospects (3)

Chapter 11 – Results and Prospects

Part 3

In the 17th century, in England, feudal production was dominant. Around 80% of the population was still employed in agricultural peasant production. But, a merchant class, in the towns and cities, was growing rapidly, and becoming economically and socially powerful; in terms of foreign ventures, the existing ruling class looked to it as a partner in developing colonial empires, and to finance its activities; and capitalist production was taking hold in agriculture itself. The bourgeois ideas that flowed from this, and the ability of this rising bourgeois class to mobilise the peasantry behind them is what determined the dominant economic and social power that challenged for state power in the English Civil War.

And, despite the fact that capitalist production still was not dominant, by the end of the 17th century, this bourgeois economic and social power was, by that time, dominant enough to provide the ruling ideas of society that flowed through its institutions, such as the universities, which then determined the consciousness of all those functionaries of the state itself. Its supremacy, and control of the state is signified by Locke's Second Treatise on Government, and practically by the Glorious Revolution. Yet, despite the bourgeoisie being the controlling economic and social power, and state power being in their hands, they were still not the controlling governmental power. The parliament, and thereby the government was still firmly in the grip of the old landed aristocracy.

Even at the start of the 19th century, only 2% of the population, in Britain, had the vote, and that is why, at events such as the Peterloo Massacre, the crowds comprised not just urban workers, but also the urban bourgeoisie. Only in 1832, with the Second Reform Act, does the bourgeoisie, as a whole, exert its influence, and only after 1848, does the industrial bourgeoisie, with the backing of the urban proletariat, exert its specific political power.

The Reform Bill of 1831 had been the victory of the whole capitalist class over the landed aristocracy. The repeal of the Corn Laws was the victory of the manufacturing capitalist not only over the landed aristocracy, but over those sections of capitalists, too, whose interests were more or less bound up with the landed interest-bankers, stockjobbers, fundholders, etc....

Chartism was dying out. The revival of commercial prosperity, natural after the revulsion of 1847 had spent itself, was put down altogether to the credit of Free Trade. Both these circumstances had turned the English working class, politically, into the tail of the ‘great Liberal Party’, the party led by the manufacturers. This advantage, once gained, had to be perpetuated. And the manufacturing capitalists, from the Chartist opposition, not to Free Trade, but to the transformation of Free Trade into the one vital national question, had learnt, and were learning more and more, that the middle class can never obtain full social and political power over the nation except by the help of the working class.”

The state power flows from the economic and social power, which is its base. The state power is objectively driven to defend and extend the dominant economic and social relations, because it is on them that the existence of the state itself depends. And, it is that objective reality, which conditions the ideology of the state. Yet, a process of combined and uneven development is also at play here.

In his Preface to Capital I, Marx discusses the development of ideas, in this context, and in particular, the development of political economy in Germany. Even whilst capitalist production was in its infancy, in Germany, German political economy was able to skip over the stages of development, on the back of the development of political economy in France and England, where capitalist production was more advanced.

Intrinsically, it is not a question of the higher or lower degree of development of the social antagonisms that result from the natural laws of capitalist production. It is a question of these laws themselves, of these tendencies working with iron necessity towards inevitable results. The country that is more developed industrially only shows, to the less developed, the image of its own future.

But apart from this. Where capitalist production is fully naturalised among the Germans (for instance, in the factories proper) the condition of things is much worse than in England, because the counterpoise of the Factory Acts is wanting. In all other spheres, we, like all the rest of Continental Western Europe, suffer not only from the development of capitalist production, but also from the incompleteness of that development. Alongside the modern evils, a whole series of inherited evils oppress us, arising from the passive survival of antiquated modes of production, with their inevitable train of social and political anachronisms. We suffer not only from the living, but from the dead. Le mort saisit le vif! [The dead holds the living in his grasp. – formula of French common law]

It is also in this vein that such societies find that they must catch up, and as Marx says they then suffer the iniquities of capitalism, and from its inadequate development. Lenin makes the same point about the development of capitalism in Russia that they were suffering not just from capitalism but also from not enough capitalism.

And from these principles it follows that the idea of seeking salvation for the working class in anything save the further development of capitalism is reactionary. In countries like Russia, the working class suffers not so much from capitalism as from the insufficient development of capitalism. The working class is therefore decidedly interested in the broadest, freest and most rapid development of capitalism. The removal of all the remnants of the old order which are hampering the broad, free and rapid development of capitalism is of decided advantage to the working class.”

When the economic and social power in society is balanced or generally weak, this creates the conditions in which the state power itself can rise up, above society, and exert its influence. It is why conditions of dual power cannot last for long without one side or the other taking control. In such conditions, the state power becomes fused with the governmental power, usually via some kind of coup – Cromwell's dissolution of parliament, Bonaparte's coup, Lenin's dissolution of the Constituent Assembly and so on.  All were the result of premature political revolutions, which arose before the revolutionary class, and the economic and social relations upon which it is based, were sufficiently developed, i.e. prior to the completion of the social revolution.

The economic and social power may be balanced because a new revolutionary class has become strong and exerted its influence – as with the bourgeoisie under Mercantilism, leading to the English Civil War. It may be weak for a variety of reasons. The society may be riven with a variety of other cleavages. As with the situation in 1917, in Russia, a weak bourgeoisie, dependent on the peasantry, may itself be overthrown, by a tiny and weak proletariat, itself relying on a Peasant War, to achieve its goals. The working-class in such a situation, being entirely feeble, becomes the ruling economic and social class effectively by default, as the material foundations of the other classes – landlords and bourgeoisie - are torn up, along with the economic and social relations that flow from them.

Theories of Surplus Value, Part I, Chapter 4 - Part 55

Marx says, if 10 workers work a 12 hour day with 10 hours required as necessary labour, and 2 hours surplus labour, the value produced is 120 and the capitalist obtains 20, or a sixth. If 5 workers work a 12 hour day, of which 6 hours is necessary labour, they will produce a total value equal to 60, of which 30, or half goes to surplus value.

“The total surplus-value too would have risen, namely from 20 to 30, by 1/3. When I appropriate one-half of 60 days, this is one-third more than when I appropriate one-sixth of 120 days.” (p 216)

There is again a minor error here, as 30 is 50% more than 20, not a third larger, as Marx states. Of course, this depends upon the conditions described above. For any one industry, this rise in productivity would simply reduce the value of the output, so that a greater quantity of it would have to be sold to replace the workers wages. Marx assumes that only the same quantity of output need be produced to reproduce the labour, without taking into consideration the inevitable fall in the value of the output.

He is right that,

“Moreover, the one-half of the total product that the capitalist gets is also greater in quantity than before. For 6 hours now produce as much product as 10 did before; 1 [hour] as much as ten-sixths of an hour [before], or 1 as much as 1 4/6=1 2/3, So the 30 surplus hours contain as much product as did previously 30 (1+2/3) = 30 + 60/3 = 50. 6 hours produce as much product as 10 did previously, that is, 30—or 5×6—produce as much as 5×10 did before.” (p 216)

provided we assume that this rise in productivity causes a proportional drop in the value of labour-power. But, if the rise in productivity is restricted to this one industry, with no effect on the value of labour-power, although the capitalist will obtain a larger surplus product, this will not translate into greater surplus value.

The fall in value of the commodity will simply mean that a greater quantity of output will have to be sold to reproduce the value of wages and surplus value.

“The surplus-value can even rise without the quantity of the total product being increased.” (p 216)

I've shown above that this can be the case for any individual industry anyway, but Marx has in mind the situation in respect of production as a whole. The basis of this rise in surplus value is an increase in relative surplus value. So, a rise in productivity in the production of wage goods means that the physical products required to reproduce the workers labour-power can be produced in less time, so the amount of surplus labour-time rises.

But, its hard to see under what conditions this would occur without the total product rising in quantity. Suppose 1000 commodity units are required to reproduce labour-power, and these are currently produced in 5 hours of a working day, with another 1000 surplus units being produced in the other 5 hours of the working day. If productivity rises by 20%, the 1000 units required for workers consumption will be produced in 4 hours, equal to 250 units per hour. But, with a 10 hour day, that means that 2500 units will be produced – an increase of 25%. Total output would only remain constant at 2000 units, if the number of workers employed fell.

But, in that case, the actual amount required as variable capital would fall further because less physical product would also be required to reproduce the employed labour-power. If previously 100 workers were employed, now only 75 will be required. Previously, each worker consumed 10 units, making 1000 units in total, and now only 750 units are required to meet the workers needs.

If 100 workers produce 250 units per hour, 75 workers produce 187.5 units per hour. The 750 units they require being produced in 4 hours, and a further 1250 surplus units being produced in the remaining 6 hours of the day. But, there are various reasons why this does not usually happen. Firstly, businesses usually are interested in increasing output, not simply producing the same output with fewer workers. It is expansion of output that facilitates other economies of scale, as well as being the means by which firms grab larger market share.

They usually introduce new, more efficient equipment as additional investment in fixed capital alongside existing equipment, not in place of it. To the extent it replaces existing equipment, during periods of intensive accumulation, it often replaces worn out equipment, so that one old machine is replaced by a new machine that is more productive. During periods of extensive accumulation, although the new equipment is relatively labour replacing, i.e. a new machine does the work of two older machines, and 2 workers, it is absolutely labour adding, because as an additional machine it still requires an additional worker. It is only as older machines wear out, and are replaced by new machines that they actually replace labour, but the extent of this will depend upon the ratio of machine replacement to machine accumulation, i.e. whether it is a period of intensive or extensive accumulation.

If a firm replaces 1 machine per year, but also accumulates 1 machine per year, and each new machine is twice as productive as the machines being replaced, there may be no reduction in employment, whilst the level of output will continually rise.

Marx explains this in Capital I.

It is only where firms are at a more mature stage of the product cycle, where a large portion of the demand for the product is satisfied, the price elasticity of demand is high, and where supply is more or less just replacing existing consumption, rather than expanding markets, that any technological innovations result in an absolute reduction in employment.

But, also for these same reasons of only potential for a slow growth of demand – usually accompanied by tight profit margins – capital accumulation in these industries tends to be slow, the need to expand the workforce is reduced, and so the need to introduce labour-saving technology is reduced, leading to investment in innovation being concentrated in areas where labour shortages do exist.

Saturday, 29 April 2017

Theories of Surplus Value, Part I, Chapter 4 - Part 54

Marx's actual example proceeds as follows. Wages are £1 per worker. £300 is advanced as wages. £310 is advanced for materials. He assumes that the number of workers is halved, so wages fall to £150, but because the same quantity of output is produced, the same quantity of material is required, so this component of c remains £310.

He says, 

“If the value of the machinery was four times as much as the rest of the capital, it would now be £1,600.” (p 214)

Again, this is not quite correct as it would be £1,840. This is not significant and would only complicate the calculations. On the basis that the fixed capital loses 10% p.a. in wear and tear, £160, and previously amounted to only £40, Marx derives the following table.

Raw Material
Rate of Profit
Total Product
Old capital
150 or 50%
23 1/13%
New Capital
150 or 100%
24 6/31%

As shown, the result here is that the rate of profit rises, because the mass of surplus value has remained constant whilst the advanced capital has declined. More capital is advanced as fixed capital, but a much bigger reduction results from the fall in wages.

On the assumptions made, there is a £30 release of capital, which can, therefore, be used for additional accumulation. But, as described earlier, the foundation of Marx's argument here is false. So, he writes,

“If a labourer without machinery needs 10 hours to produce his own means of subsistence, and if with machinery he only needs 6, then (with 12 hours’ labour) in the first case he works 10 for himself and 2 for the capitalist, and the capitalist gets one-sixth of the total product of the 12 hours.” (p 215)

But, for any particular industry this additional productivity – other than for individual firms, initially and temporarily – does not result in a higher rate of surplus value, for the reasons set out above, and set out by Marx in Capital I. The higher productivity simply results in a lower value of each unit of output, as the same quantity of labour is spread amongst a much greater quantity of use values. If weavers produce 1000 metres of cloth per day, instead of 500 metres, the value of each metre halves, so that twice as much cloth as before must be produced and sold to reproduce the labour-power.

It is only if all labour, or at least all labour employed in producing wage goods, enjoys this rise in productivity that it raises the rate of surplus value, by reducing the value of labour-power.

Northern Soul Classics - S.T.O.P. - The Lorelei

Friday, 28 April 2017

Friday Night Disco - Day Tripper

Bojo To Trump - "How High Shall We Jump?"

Boris Johnson was one of the leading proponents of Brexit.  It was sold to millions of British people on the flaky foundation of a return of sovereignty.  In fact, Britain has not yet even Brexited, but it has already become apparent that rather than regaining sovereignty, it has given up whatever sovereignty it had.  Bojo's latest antics indicate the extent to which a rapidly declining Britain is merely a vassal state of the US, so that Bojo's latest outburst tells us that when Trump shouts "Jump", Britain's only response is "Yes sir.  How high sir?"

No sooner had May triggered Article 50, than she scuttled off to the US, to supplicate herself, fawningly before Emperor Trump.  She tried to cover her selling of UK plc to the dealmaker by claiming that she had obtained significant promises from him.  Well anyone watching Trump's first 100 days, knows just how much those promises are worth.  It was only a matter of a few weeks before Trump announced that he would be putting the EU ahead of Britain in any trade negotiations, and when it came to his strike on Syria, Britain came behind Russia in being even notified about it.

Now, Bojo, wanting to seem like he and Britain still has a role to play, has offered again to play second fiddle to the US in any foreign wars it wants to start, so as to hope to curry favour.  Its like the new boy at Eton, who offers to fag for the school bully in order to try to gain some credibility and protection from other bullies.  For most of us, that's only something we learn about from reading Tom Brown's Schooldays, but for Boris and the other Tory members of the establishment its part of their actual upbringing.  No wonder they are such an arrogant bunch of snobs, who think they have a god given right to rule and lead the rest of us free from any criticism or opposition; no wonder they hate anti-establishment figures like Corbyn with a venality they could never show for people like Blair.

The Brexiters like Bojo sold the idea largely to that group of older voters who grew up when the world was a very different place, but who have not come to terms with the fact that times have changed.  They grew up at a time when their school books showed large areas of the world coloured pink, where the British Empire still ruled.  On a Sunday morning, they got up to listen to "Two-Way Family Favourites" on the radio that broadcast messages and music from families in Britain to their spouses, and children serving in the armed forces, in these far flung outposts of the Empire, even if by then it was called the Commonwealth.  And many, like many of the Tories themselves are still under the delusion that Britain still has that importance, when, in fact, it is merely a second rate power on the global stage, whose importance is decreasing by the day.

Even before Britain has Brexited, not only did May scuttle off to try to curry favours from Trump, but having embarrassed  herself there, she scuttled off to visit the medieval butchers of Saudi Arabia and other Gulf monarchies, pleading with them to buy more British weapons to use on their peoples, so as to prop up the British economy for a while longer.  Then she went to visit the dictator in Turkey, Erdogan, perhaps to learn some lessons on how to prevent criticism and opposition, and also to try to sell him more weapons.  Then in the last week we have had International Trade Minister, Liam Fox, going off to visit the butcherous dictator, Duterte, in the Phillippines, and  speaking of their shared values!

Even before Brexit has happened, it has been turned into a vassal state of the US, and a creature of any rogue or dictator across the globe who might be the source of a few silver coins.  And, its no wonder, therefore, that May and the Tory government are trying to prevent any criticism or opposition at home, and why Bojo is now even talking about sending British troops to fight US wars, without parliamentary approval.  The only approval that counts now for British Tory politicians is the approval of Trump.

As members of the EU, Britain at least had Ministers who sat on the Council of Ministers, Commissioners appointed to the EU Commission, and MEP's directly elected to the  European Parliament.  Now British voters will have no votes in the decisions taken by the US president and Congress, but Britain will be automatically signed up to those decisions by May and Bojo.  That is why they are trying to establish May as a dictatorial strong leader now, in the fashion of Erdogan.

And who can wonder that they attempt that.  If Britons are to have no say in their future, having signed away any hope of sovereignty they may have exercised through the EU, by voting for Brexit, the Tories will only be able to press ahead with being the servants of Trump, if they can ride roughshod over any criticism or opposition in Parliament, or by the British electorate.  And, after all that is what the Tory media continually tell us the British public want.  In vox pop after vox pop, newspaper editorial after newspaper editorial, press preview after press preview what we are told is that the British public want a strong leader, an Il Duce, a Mussolini in a skirt.

They should be careful what they wish for.

UK GDP Data Shows The Economy Is Starting to Stagflate

The GDP data for the first quarter, for the UK, has come in at just 0.3%, as against forecasts, which themselves anticipated a sharp slow down, to just 0.4%.  The figure represents a drop of more than 50%, on the quarterly growth figure of 0.7% at the end of last year.  At the same time, the fall in the pound, resulting from Brexit, has caused imported inflation to start to surge, at a time when stronger economic growth in the EU, and globally is causing global inflation itself to rise, putting additional cost pressures in a fragile UK economy.  Nearly all of the growth in the UK economy over the last year or so has been down to credit financed consumer spending, whilst UK household debt levels are back to those last seen ahead of the 2008 financial meltdown.  As I wrote, last year Britain is headed for stagflation.

We might see inflation tick down slightly for the next month, because following the announcement of the General Election, the Pound has strengthened against the dollar by around 5%.  But, at $1.29, it is still considerably down from its rate prior to the Brexit vote, and down even more from its rate in 2015, when it stood at around $1.70, and rising.  The stronger pound seems to be a delusion in markets that the announcement of the election will be a means of May, orchestrating a soft Brexit, by having more room to face down her backbenches.  It won't.  Tories at a local level are likely to select even more hard right, Brexiteers as candidates.  Moreover, May has already said she doesn't even want to be in the Customs Union or Single Market, so what negotiations are there to have?  Merkel has quite rightly reinforced what Juncker said some time ago.  there is a chance between hard Brexit and no Brexit.  Far from the election being about room to negotiate a soft Brexit, it is about May knowing that today's GDP data is just the start of the bad news; it is about May preparing to just pull out of negotiations in a couple of months time, and announce that they are going to just repeal the 1972 European Communities Act, taking Britain out of Europe at a stroke.

Inflation is already above 2.3%, and rising.  As the Pound continues to drop, and as global prices for things like materials, energy, and food prices, all of which Britain imports in large quantities, that inflation rate is likely to rise sharply.  At the same time, wages in the UK are falling causing a squeeze on real wages, which is feeding through to consumer spending figures.  Given that the UK GDP figure has been reliant on consumer spending, with investment at low levels, that spells further problems for the UK economy, in the near future.

UK households have maxed out their credit cards to finance their spending, and only that spending has kept the UK economy going.  As wages fall, and consumers are unable to finance further spending by yet more debt, and as inflation rises, spending will get increasingly squeezed, also squeezing UK profits.  The hit to consumers has already been seen in the drop in house prices for a second consecutive month by Nationwide.  That is just for asking prices, which as readers of this blog for some years will know are pretty meaningless, especially as aggregate figures.  As I pointed out several years ago these house price figures are largely a fiction.  Anyone who has been looking for a house in a specific area, as I have, for the last few years, will have seen how actual houses they have viewed or identified, have continued to fall in price, and actual selling prices, as opposed to asking prices are often 20% below the initial asking price.

That is despite the fact that government policy for the last 10 years, at least, has been geared to keeping both property prices and stock and bond prices high by what ever means, including giving government money away to the shareholders and bond holders in banks, and to house buyers in the various Help To Buy and Buy To Let Scams, and via hundreds of billions in money printing.  All that has been done to keep those asset prices inflated, even at the cost of the real economy, as it helped to such further resources into such speculation, and away from investment in real productive capital.  It caused the hyperinflation of asset prices to be protected at the cost of a deflation of consumer prices, and stagnation of the real economy.

Moreover, the rise in rents in recent years to record levels, which is a consequence of house prices being driven to ridiculously, and unsustainably high levels, and the pricing out of increasing numbers of people from the housing market, has only been sustained by yet more subsidies to landlords, in the form of a ballooning bill for Housing Benefit.  And, where does the money for that Housing Benefit come from?  It comes from taxes, which means out of profits, which means less money available for real investment in productive-capacity, fewer jobs, and less real wealth as the cost of protecting fictitious wealth.  Adam Smith and David Ricardo understood these principles more than 200 years ago, but the Tories in order to keep these paper prices inflated are prepared to destroy all real wealth and ignore those basic economic laws.  It is also why Theresa may wants to set herself up as an authoritarian strongman, knowing that as the economic reality bites, the only way they can continue to try to defy the laws of economics is by imposing increasing pain on the ordinary citizen.

They know that they had tied themselves in over tax in the previous Tory Manifesto, and that their commitments on pensions were not going to be sustainable after Brexit, as the economy stagnates.  So, they have gone for an election now, so as to be able to inflict all that pain on ordinary families over the next five years, slashing real wages further, raising taxes and national insurance, scrapping the triple lock on pensions, willing to see unemployment rise "as a price worth paying", as they put it in Thatcher's time, and seeing increasing numbers of people put on zero hours contracts, and other forms of unstable working conditions.

We need to get rid of the Tories before its too late, and the only party that can offer an alternative government is Labour.