Anti-Duhring, Part III – Socialism, II – Theoretical - Part 8

But, did this crisis that industrial capital faced then mean that there was no way out for it, and that the mass of profit must fall, as Smith and Hodgskin believed? Would it mean that, even if it escaped this immediate crisis, it would only lead to a bigger crisis and more rapid series of crises, leading to its collapse, as many modern catastrophists have argued? No, Marx explains.

Ricardo noted that when wages rise so that it is no longer cheaper to use women to pull canal barges, industrial capital turns to the use of horses, which are, in fact, more efficient, especially when barges become bigger and heavier, as more freight is moved around. Industrial capital does not engage in major technological revolutions, which involve it in greater immediate expense, unless it becomes worthwhile to do so. But, this introduction of technology/machines shows again why the idea of a relatively fixed labour supply, leading to falling profits, whilst valid in the medium term, is false in the long-term. If labour productivity rises, less labour is required, or put another way, its as though one worker is now equivalent to 2, 3 or more workers. In Capital I, Marx explains the way this higher productivity results in the creation of relative surplus value in two ways.

Firstly, if one producer introduces some new machine that raises the productivity of the labour they employ, it has this effect of making their labour like complex labour. In other words, it is as though the new value they create in an hour is equivalent to 2,3 or more hours labour of workers employed by other producers of that commodity. That is so because they produce 2,3, or more times the quantity of those commodities, all of which sell at the market value. Its the same as where a farmer has the benefit of more fertile land.

But, this particular advantage disappears when other producers of the commodity introduce the same machine – just as when the use of drainage and irrigation etc., raises the fertility of all land. Now, all of that labour reverts back so that it all produces an hour of new value in each hour worked. However, far more commodities are now produced in that hour so that the unit value of each commodity falls. This, in fact, is central to Marx's explanation of the real basis of the long-term tendency for the rate of profit to fall.

In other words, the value of a commodity is comprised of the value of the constant capital (materials and wear and tear of fixed capital) consumed in its production, plus the new value created by labour in its production. The latter resolves into variable capital (the value of the commodities required to reproduce labour-power) and surplus-value/profit. So, if this new value falls, as a proportion of the value of each commodity unit, as a result of the rise in productivity, but the value of constant capital (c) remains the same, then the value of constant capital rises relative to the new value created (v + s). Unless s rises relative to v (a higher rate of surplus value), s falls relative to c, and to c + v, i.e. the rate of profit falls, even if the total mass of profit rises.

But, in Theories of Surplus Value, Chapter 23, Marx points out, again, that this effect is, also, grossly overstated. Firstly, he points out that where there is a generalised technological revolution, the rise in productivity reduces the value of all those commodities that comprise the constant capital.

If “one worker produces a spinning-machine whereas previously he produced only a spindle, then the ratio of value remains the same...”

A spinning machine, spins much more yarn than a spinning wheel, so the value of the machine is much less per unit of output. What increases is the amount of material spun, in terms of its physical quantity/use value, but, as he noted, it is not these physical quantities that ultimately count, but the relationship of their respective values.

“For us, however, the main thing is: does this fact explain the decline in the rate of profit? (A decline, incidentally, which is far smaller than it is said to be.) Here it is not simply a question of the quantitative ratio but of the value ratio.”

The technical composition of capital is what lies, objectively, behind the rise in the organic composition required to drive the long-run tendency for the rate of profit to fall, i.e. rising productivity means that the physical quantity of material processed rises relative to both the labour required to process it, and the fixed capital which brings about the higher productivity. But, that ignores the role of that rise in productivity in relation to the value of that material itself.

“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.”

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Let Piddington Go

I wrote a while ago that the logic of nationalism leads to a break-up of the nation state.  In the last few days that has been born out.

On the one hand, we have the nationalists in Scotland, Wales and Northern Ireland, demanding that the British nation state be broken up, reversing the main progressive development of the 18th/19th century, largely now driven by the reality imposed by the reactionary English nationalism that led to Brexit.  In England itself, that same failure of Brexit leads to a similar drive towards regionalism, provincialism and parochialism, as seen in the attempts to create regional and metropolitan fiefdoms in the guise of elected mayors.

The ultimate idiocy of that has now come in the form of the referendum in Piddington, again driven by the inevitable failure of Brexit to "bring back control", leading the reactionary bigots, and racists to put forward such a solution rather than have refugees housed in their midst.  The well-healed of the area, of course take the same attitude to many other issues, wanting all the benefits of their rural idylls, without any of the attendant infrastructure.

Well, we should let them go, as they claim to want.  The sooner the better.  Let them then have to pay for their own infrastructure, energy supplies, water supplies, waste services, NHS and so on.  And, of course, they would have no rights to employment outside their borders, or even right to cross that border.  Brexit proved a disaster within weeks, and continues to be so.  The proponents of a Passport to Piddington, would not even get that project off the ground.

Anti-Duhring, Part III – Socialism, II – Theoretical - Part 7

In a joint-stock company/corporation, these same laws of capital apply, but the nature of the ruling-class, today, as a class of parasitic owners of fictitious-capital, brings about the new contradictory social relations referred to earlier. Industrial capital, to be competitive, in the global market, must continually accumulate, and each individual capital must seek to accumulate at a faster pace than its competitors. To do that, it must make more profits and/or retain more profit to use for the purpose of accumulation.

But, the accumulation of industrial capital, as Marx describes in Theories of Surplus Value, Chapter 21, is faster than the growth of the population (labour supply/social working-day).

“We have seen that over 20 years, capital increased sevenfold, whereas, even according to the “most extreme” assumption of Malthus, the population can only double itself every twenty-five years. But let us assume that it doubles itself in twenty years, and therefore the working population as well. Taking one year with another, the interest would have to be 30 per cent—three times greater than it is. If one assumes, however, that the rate of exploitation remained unchanged, in 20 years the doubled population would only be able to produce twice as much labour as it did previously (and [the new generation] would be unfit for work during a considerable part of these 20 years, scarcely during half this period would it be able to work, in spite of the employment of children); it would therefore produce only twice as much surplus labour, but not three times as much.”

Marx uses the term “interest”, here, rather than profit, because he is analysing the argument of Hodgskin, who used that term.

Adam Smith had noted this point, and extrapolated from it the conclusion that the market price of capital (profit) must fall, and the price of labour (wages) must rise, eventually eliminating profit completely. It formed the basis of his explanation for the long-term falling rate of profit. As Marx sets out, in Theories of Surplus Value, Chapter 21, early advocates of labour such as Hodgskin, made a similar argument. Marx sets out why this explanation for the long-term tendency for the rate of profit to fall, which relies on the mass of profit itself being reduced, absolutely or relatively, compared to wages, is wrong. Basically, the argument that the mass of profit must fall, as it hits a buffer of inadequate labour supply, assumes that the labour supply, itself, is relatively fixed. In the long-term, it isn't. Ricardo had already set out what was wrong with that aspect of Smith's argument. Ricardo noted that, where labour is plentiful, capital will use it inefficiently, because its cheap. He uses the example of women pulling canal barges, because they were cheaper than horses.

However, at some point, as industrial capital expands, this existing supply of cheap labour does, indeed, as Smith had argued, begin to run out. The demand for labour rises, and, as seen in Britain, and every subsequent industrialisation, the supply is increased, as labour displaced from the land is drawn into the towns. Nor is the supply of labour only a question of the number of available labourers. It is also a question of how long each worker works. In other word, the labour supply/social working-day, is comprised of the working-day multiplied by the number of workers.

So, industrial capital increases the labour supply/social working-day by, on the one hand, drawing into the workforce all of these latent reserves from the countryside, and, on the other, it, also, lengthens the working-day to previously unheard of levels. So, the mass of surplus value rises, as a result of this rise in absolute surplus-value. In Capital I, drawing extensively on the work done by Engels in The Condition of The Working Class, Marx describes this process, and the way industrial capital used this cheap labour wastefully, until it was used up.

"Agents were appointed with the consent of the Poor Law Commissioners. ... An office was set up in Manchester, to which lists were sent of those workpeople in the agricultural districts wanting employment, and their names were registered in books. The manufacturers attended at these offices, and selected such persons as they chose; when they had selected such persons as their ‘wants required’, they gave instructions to have them forwarded to Manchester, and they were sent, ticketed like bales of goods, by canals, or with carriers, others tramping on the road, and many of them were found on the way lost and half-starved. This system had grown up unto a regular trade. This House will hardly believe it, but I tell them, that this traffic in human flesh was as well kept up, they were in effect as regularly sold to these [Manchester] manufacturers as slaves are sold to the cotton-grower in the United States.... In 1860, ‘the cotton trade was at its zenith.’ ... The manufacturers again found that they were short of hands.... They applied to the ‘flesh agents, as they are called. Those agents sent to the southern downs of England, to the pastures of Dorsetshire, to the glades of Devonshire, to the people tending kine in Wiltshire, but they sought in vain. The surplus-population was ‘absorbed.’”

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Anti-Duhring, Part III – Socialism, II – Theoretical - Part 6

In both cases, it forms no part of the circuit of industrial capital. 

As Marx sets out in Capital II and III, this loanable money-capital/interest-bearing capital, sits outside the circuit of industrial capital. It is why this fictitious-capital play no part in the determination of the average industrial rate of profit, and obtains not this average rate of profit (or, indeed, any “profit”), but only interest as a deduction from profit. Far from shareholders being just a continuation of the old, private industrial capitalists, they are, for this very reason, as Marx describes, in Capital III, antagonistic to the interests of industrial capital, and particularly, the current, collective owners of socialised, industrial capital, i.e. “the associated producers”.

Where the private industrial capitalists were antagonistic to workers, as workers, because higher relative wages means lower relative profits, the owners of fictitious-capital (shares, bonds) are antagonistic to workers, not as workers, but as, objectively, the owners of socialised industrial capital. The ruling-class, as owners of shares and bonds, seek to maximise the amount they get as interest/dividends, just as landlords seek to maximise the amount they get as rent, but that means the smaller the amount of profit retained for capital accumulation, i.e. profit of enterprise. It is why the ruling class seeks to retain control over that socialised capital, so that it maximises its revenues – not, now, profit but interest/dividends and capital gains – and appoints Directors to that end.

The workers – associated producers – as collective owners of the socialised capital, as Marx notes in Capital III, Chapter 27, resolve the contradiction between capital and labour by becoming their own capitalist. That is most clearly seen in the worker cooperative. In the worker cooperative, the workers exercise democratic control over that capital, and they also appoint their own day to day managers to carry out the role of “functioning capitalist”, who, to use Marx's description is like an orchestra conductor.

But, even in the worker cooperative, the means of production are still capital, and must remain so as long as commodity production continues to determine the nature of the economy. Each company/cooperative continues to produce commodities for sale, and so competes against other commodity producers. It is exchange value that determines production, not use-value. In order to be competitive, each company must keep the individual value of what it produces below the market value.

It does that by all the same means that every other capital does. Wages cannot rise above the value of labour-power, for example. If they do, then, the rate of surplus value falls. The firms profit falls below the average profit. Over time, this lower level of profit means the cooperative cannot accumulate the capital required to expand production; it loses market share.

The other way a capital stays competitive, even if it does pay higher wages, is precisely this accumulation of capital. In Capital I, Marx notes that, in the 19th century, although British textile workers' wages were 50% higher than those in Europe, British textiles were always cheaper than those produced in Europe, and British profits were also higher. The reason was that the larger scale of production, in Britain, the greater number of machines, and more advanced nature of those machines, meant that, even with higher wages, unit labour costs, and also, unit fixed capital costs, were much lower.

But, in order to accumulate that capital in the first place, it is necessary to maximise profit, so as to be able to buy more and better fixed capital. In a capitalist economy, a worker cooperative is still bound by these laws of capital. The difference for the cooperative is that, in seeking to maximise its rate of surplus value/exploitation, it does so for this purpose of being able to accumulate capital, and so ensure its competitiveness, and longer-term future. Soviet Russia faced the same situation in 1917.

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SNNS 60

 

Northern Soul Classics - I'll Love You Forever - The Holidays

 

Anti-Duhring, Part III – Socialism, II – Theoretical - Part 5

In the case of socialised industrial capital, the borrower is the company itself, whether a joint-stock company, a worker cooperative, or a consumer cooperative. The company is itself a legal entity, the equivalent of a person. What it certainly is not is the people who lend it money, and whose rights and interests are not only distinct from it, but antagonistic to it. It borrows the money, and it is the owner of what it buys with that money. However, the company can only be those employed within it. Decisions to borrow money, to buy this or that means of production can only be made by humans, i.e. the associated producers within it. It is they who should exercise democratic control over it, and not shareholders.

There is no reason why shareholders, who simply lend money to the company should have any right to exercise control over what the company does with the money it has borrowed from them. Indeed, banks and bondholders, also, lend money to companies, but have no right to exercise any control over the company. Landowners lend land to companies, but that gives them no right to a vote at company meetings. Owners of equipment loan equipment to companies, but that gives them no right to a say in appointing directors, of determining company policy.

In each of these cases, the lender is simply entitled to an appropriate revenue – interest/dividends, rent – and the return of what they lent, at the end of the agreed period. A landlord can sell the title deeds to their property, in the intervening period, but only on the basis of the new landlord honouring the existing lease. The same with a leasing company. Share and bondholders can sell their shares to other buyers.

There is one reason, and one reason only that shareholders are given control over property/capital they do not own, and that is that, without such control, their continuation as ruling-class would quickly end. Laws of corporate governance were created by the bourgeoisie itself, and, as socialised capital expropriated private industrial capital, leaving the bourgeoisie as just a parasitic class of money-lenders, owners only of fictitious capital, they ensured that they could continue their control over that socialised capital, by using their control of the political regime/parliament.

The classification of shareholders as separate from other forms of creditor, or money-lender, serves simply to preserve the façade that these shareholders are, in some way, the owners of the company, just as were the private industrial capitalists of the past. But, clearly, they are not. The shareholders play no more functional role in the day to day activities of the company than does a bondholder or bank manager. A shareholder may have absolutely no involvement with a company, and yet gets their dividends all the same.

If other money lenders and creditors had the same rights as shareholders this façade would be exposed. For one thing, if banks had the rights of shareholders, simply on the basis of making bank loans to companies, it would raise the question of why they did not have similar rights in exercising control over other loans. If the bank manager came to inspect what colour you painted the walls of your living room, or what you watched on TV, it would soon provoke a response, for example. Yet, the money-capital loaned by a bank to a company is no different to the money-capital loaned to a company by a shareholder.

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