Monday, 24 July 2017

Theories of Surplus Value, Part I, Chapter 6 - Part 15

[5. Circulation of Commodities and Circulation of Money in the Tableau Économique. Different Cases in Which the Money Flows Back to Its Starting-Point]


Marx here turns to this question of what the Tableau Economique demonstrates in terms of the role of money, in these great social exchanges, and the circulation of commodities and capital. A number of things are apparent. Firstly, it has already been discussed earlier that the amount of money required to effect the exchanges depicted is the result of the assumption that the rent is paid in one lump sum rather than in say ten instalments during the year.

In short, the amount of money required is itself a function of the velocity of circulation, which is driven by the pace of economic activity, as well as the rate of turnover of capital. If commodities change hands quickly, the same piece of money can be used for more transactions than if they change hands slowly. Similarly, if capital is thrown into circulation quickly, and metamorphoses into money-capital more quickly, i.e. if the rate of turnover of capital is high, less capital itself must be advanced to achieve a given level of output, and consequently less capital, in its money form, is required.

In addition, the amount of money required to effect a given circulation of production, as depicted in the Tableau, depends upon other assumptions, for example, in relation to the sequence of exchanges. If we take the ₣2 billion paid to landlords, for example, its possible that ₣1 billion may be paid in rent, which is used by landlords to buy manufactured goods. The manufacturers then use this to buy means of subsistence. The ₣1 billion now back in the hands of farmers, is then used to pay a second instalment of rent, which in turn flows back, as landlords buy food. In that case, only ₣1 billion in money would have been required to circulate ₣3 billion of commodities - ₣1 billion manufactures sold to landlords, ₣1 billion food sold to manufacturers, and ₣1 billion food sold to landlords, from the second instalment of rent.

Moreover, different results arise if we assume that money is already in the hands of landlords and manufacturers, prior to the payment of rent by farmers. Marx now examines some of these various means by which money flows back. If we look at the exchanges between manufacturers and farmers, the former buys ₣2 billion of food and raw material from the latter. But, they only sell ₣1 billion of manufactured goods to the former. That leaves a balance of ₣1 billion that the manufacturer must pay to the farmer. As Marx says,

“Quesnay seems to confuse this payment of 1 milliard to F with the purchase of F’s product to the amount of 1 milliard.” (p 333)

In fact, the balance must be made up in money, and this money comes from the ₣1 billion paid in rent by the farmer to the landlord, and which passes from landlord to manufacturer, in exchange for manufactured goods.

“In fact (on our calculation) the 2 milliards have only served to: (1) pay rent to the amount of 2 milliards in money; (2) circulate 3 milliards of the farmer’s gross product (1 milliard means of subsistence to L, 2 milliards means of subsistence and raw materials to S) and to circulate 2 milliards of the gross product of S (1 milliard of it to L, who consumes it, and 1 milliard to F, who consumes it reproductively).” (p 333)

Marx is distinguishing here between those transactions whereby commodities exchange for commodities, and money only acts as means of circulation, and those exchanges where no commodities are exchanged on the other side, and where money acts, therefore, as a means of payment.

“In the last purchase (a''–b'') in which S buys raw materials from F, he pays him back in money.” (p 333)

This is money that has come from L in exchange for manufactured goods, a-c. But, it originally came from F as payment of rent to L. When S buys means of subsistence from F, therefore, it simply flows back to F. It does not, in fact, represent any exchange of commodities between F and S. F has provided commodities to S, not in exchange for an equivalent value of commodities from S, but for ₣1 billion of their own money, originally paid as rent to L.

With the same ₣1 billion, F then buys manufactured goods from S. Finally, S buys ₣1 billion of raw materials from F. So, here there is an actual exchange of commodities with the money acting merely as means of circulation.

Sunday, 23 July 2017

The Sharks Smell Blood

Over the last few weeks we've heard a lot about the different countries that want to do trade deals with Britain. The Brexiteers that trumpet this attention don't seem to realise that it is the equivalent of sharks having smelled blood in the water, or buzzards circling over a wounded animal.

The Brexiteers, and unfortunately also the Labour leadership think that Britain can simply put its demands to the EU, and apart from some small fudge here or there, the EU will agree. The policy of hard Brexit has gone off the front burner for now, as a result of the General Election result, though given the government's support from the DUP, and the strength of the ultra-nationalist elements on the Tory back benches, and from elements like Gove, I still would not rule out the possibility of the government walking out of the talks before this year is out. However, that simply puts in stark relief the totally unsustainable nature of the stance of “have cake and eat it” that the soft Brexiteers, including the Labour front bench are now left trying to uphold. It is typical British exceptionalism, born of the quaint notion that Britain is still some 20th century, imperial and global power that can negotiate on preferential terms with the rest of the world.

There is absolutely no reason why the EU would grant Britain the same rights and benefits of being in the single market and customs union, whilst not actually being members of those structures. There is every reason why they will not do that. No organisation that wants to stay in existence gives equal or preferential treatment to non-members as opposed to members. It is typical British arrogance to think that the EU will make an exception to that for Britain. They won't, and its deluding the British people to pretend they will. Even the kind of options that Norway has in relation to the EU, are not tenable as far as Britain is concerned, because Britain is a much larger economy than Norway. As the EU negotiators said at the start, the real options after all the initial talking has gone on will come down to Hard Brexit or No Brexit. Hard Brexit will be a disaster for Britain, and it is up to socialists to say so, and to tell the truth to British workers on that account, and to start making the case as to why Brexit should be dropped.

Labour is being tied in knots trying to cope with all of the irreconcilable contradictions in its stance. It just makes Labour spokespeople look like the Tories second 11, as well as making them appear indecisive, if not dissembling in the inevitably confused answers they give to media questions. If they persist with this stance, Labour risks throwing away a large portion of the support it has won over the last year or so.

But, the same arrogance and cognitive dissonance can be seen in relation to the Brexiteers, and their spokespeople like Liam Fox. They portray the advances of Donald Trump, or of Modi and others as being evidence of the fact that Britain still has it, and the world still wants it. Well they would be better advised to think about it in terms of Trump seeing just yet another pussy to grab. The only reason that Trump would want to do a deal with Britain, is because outside the EU, Britain is weak. The US will be able to dictate terms to Britain on trade in a way they could never do with the EU, the economy of which is larger than that of the US. In fact, that is what characterises imperialism. Even a fairly large national economy, such as Britain, might obtain nominal political independence outside the EU, but only at the expense of losing real sovereignty. In the age of imperialism, it is impossible for any nation to exercise absolute sovereignty, because political independence does not provide, and indeed undermines economic sovereignty.

When it comes to taxes, and a whole range of other issues, Britain will find itself even more at the mercy of large multinational corporations able to blackmail it into providing subsidies, lower tax rates and preferential treatment, and so on, on pain of simply moving their investment and business elsewhere. That is already happening, ahead of Brexit in relation to the big transnational banks. And, to the extent that Britain seeks to align with others in challenging the power of those multinationals, it will find itself doing so on the terms of these other larger organisations, without having any seat at the table itself.

And the same applies to all of those other countries that have given notice of their willingness to do trade deals with the UK. British politicians still think that this is the age of the Empire, and that they can pick up where it left off in terms of trading with India, Australia and so on. In 1800, India still accounted for 25% of global textile production. Britain, in breaking up the old village communes, which were the basis of its Asiatic Mode of Production, also undermined that production. At the same time, Britain imposed swingeing import duties on Indian textiles, so as to protect the rapidly developing capitalist textile production in Britain.

On that basis, Britain supplanted India as the world's leading producer of textiles, whilst India was thrown back on to producing cotton. Even then Britain obtained most of its cotton from the United States, only resorting to the lower quality Indian cotton, when the US Civil War, prevented supplies coming to Britain. Britain could dictate terms to India, just as it did to other parts of the Empire, and could organise production of primary products within them to meet its domestic needs, as well as using them as protected markets for its manufactured goods, thereby keeping out the manufactured products of its competitors such as Germany, France, and the United States. But, those days are long gone. Even after WWII, that world was broken up.

Britain is no longer a major manufacturing centre. That title now goes to China. Australia has enjoyed a 25 year long boom, largely on the basis of being a major supplier of primary products to China. China can absorb all of the minerals, all of the meat, and all of the wool that Australia produces. There are significant advantages for a country like Australia being able to trade on such a large scale with a single country like China, which is why it can do so on better terms than if it were selling its output to a relatively small country like Britain. Similarly, Australia has opened up its own trade with the United States across the Pacific Ocean, as well as with Japan.

Canada's main trading relation now is with the US, and it is likely to be followed by its trade with the EU, not Britain. India too has become a regional economic power. It may indeed want to do trade deals with Britain, but they will likewise be deals based on its interests and its terms, not those of Britain. None of these countries will be looking to do deals with Britain that in any way favour Britain, or replace what it will lose in terms of trade with the EU, and that will be even more the case as Britain's significance in the world continues to diminish.

Theories of Surplus Value, Part I, Chapter 6 - Part 14

Marx points out here that, on the basis of Quesnay's presentation, however, there seems to be a gap in relation to the allocation of the gross product. According to Quesnay, the value of the gross product is ₣5 billion. For the Physiocrats, it is only agriculture that produces new value, the manufacturers only transforming the value produced in agriculture into other products.

“That is to say: one-fifth goes into reproduction for the farmer, and does not come into circulation; the landlord consumes one-fifth (that makes two-fifths); S gets two-fifths; in all, four-fifths.” (p 331)

Marx's assumption here, and in his further analysis is based on the idea that, for Quesnay, it is only a fifth of the output, which does not enter into circulation. Marx returns to this later. But, also he refers to it in Chapter X of Engels' “Anti-Duhring”, which Marx wrote. There, Marx writes,

“The whole gross product, of a value of five milliards, is therefore in the hands of the productive class, that is, in the first place the farmers, who have produced it by advancing an annual working capital of two milliards, which corresponds to an invested capital of ten milliards. The agricultural products—foodstuffs, raw materials, etc.—which are required for the replacement of the working capital, including therefore the maintenance of all persons directly engaged in agriculture, are taken in natura from the total harvest and expended for the purpose of new agricultural production. Since, as we have seen, constant prices and simple reproduction on a given scale are assumed, the money value of the portion which is thus taken from the gross product is equal to two milliard livres. This portion, therefore, does not enter into general circulation. For, as we have noted, circulation which takes place only within a particular class, and not between one class and another, is excluded from the Tableau.”

(Anti-Duhring, Part II, Chapter X, p 315-6)

This is a similar situation to that discussed by Marx in criticism of Smith and the Trinity Formula, that, in fact, the gross output is greater than the value of the commodities that enter circulation, and form the consumption fund, because a portion of output is always simply consumed in kind, as an exchange of capital with capital. In fact, Marx points to a number of flaws in Quesnay's presentation.

The ₣5 billion represent only the gross annual product. However, Quesnay's presentation requires that the farmers had ₣2 billion also in money, at the start of the year, which they pay as rent to landlords. In addition, the manufacturers must also have in their possession ₣2 billion of manufactured goods, which are the product of last year's activity.

When the landlords buy ₣1 billion of food from farmers, this food is the product of last year's harvest, which must be replaced out of this year's production. Similarly, when the landlords buy ₣1 billion of manufactured goods these come out of the existing commodity-capital of the manufacturers, and this production must be replaced out of this year's output.

In the current year, therefore, the total value of output is ₣7 billion, ₣5 billion produced in agriculture, and ₣2 billion produced in manufacturing, but the ₣2 billion produced in manufacturing is actually comprised of ₣1 billion of raw materials produced in agriculture, and ₣1 billion of food used as means of subsistence by manufacturing workers, so that, consistent with the Physiocratic system, it only represents a transformation of this value into another form.

“We thus have: (1) 2 milliards in money in the farmer’s hands; (2) 5 milliards in gross product of the land; (3) 2 milliards in manufactured goods. That is, 2 milliards in money, and 7 milliards in product (agricultural and industrial).” (p 332)

The Tableau Economique is, therefore, important not just for its function in describing the basis of these social exchanges of production, but also the role of money in this process of the circulation of commodities and capital. Its possible to envisage the exchanges of physical products that result, but not on the basis of capitalist production and exchange.

Quesnay's presentation suffers because of the limitations of Physiocratic concepts of value. For example, in this schema it is only the farmers who are capitalists, the landlords are simply recipients of revenue, whereas the manufacturers are merely wage earners (even those who are capitalists) but, it is possible, as Marx does, to move beyond those limitations.

Saturday, 22 July 2017

Theories of Surplus Value, Part I, Chapter 6 - Part 13

[4. Circulation between Farmer and Manufacturer According to the Tableau Économique]


In the third act of circulation, represented in the Tableau as a – c, the landlords (L) buy manufactured goods from the industrial capitalists or sterile class (S). The landlords pay ₣1 billion, and obtain manufactured goods of the same value. The only reason that ₣1 billion are thought necessary for this circulation process is that its taken that the farmer pays rent in one payment, and similarly the landlord buys goods from the farmer and manufacturer in one go. If the farmer paid rent at the rate of ₣200 million, ten times a year, then the landlord could use ₣100 million to buy food, and ₣100 million to buy manufactured goods.

The ₣100 million then having returned to the farmers, they would have this available, once more, to advance as rent. Meanwhile, the manufacturers would have ₣100 million, which they spend with the farmers so that now the farmers have all the ₣200 million returned to them, available for the payment of rent. In other words, all of this circulation of commodities could be effected with just ₣200 million rather than ₣2 billion in money.

In the fourth act of circulation, represented by c-d, the manufacturers (S) buy ₣1 billion of food from the farmers (F), required as means of subsistence. But, there is a difference between this exchange between S and F, compared with either the exchange between S and L or L and F. The landlords pay ₣1 billion to buy food, and to buy manufactured goods, and these are simply consumed. However, when S buys ₣1 billion of food from F, this is used as means of subsistence for workers, whose labour-power had been consumed in the production of manufactured goods. It is then a reproduction of the capital that had been expended for that purpose.

“The one metamorphosis of the commodity, its retransformation from money into commodity, thus in this case expresses at the same time the beginning of its real, not merely formal, metamorphosis—the beginning of its reproduction, the beginning of its retransformation into its own production elements; in this transaction there is at the same time metamorphosis of the capital. But for L, revenue is merely converted from the form of money into the form of commodity. This implies only consumption.” (p 329)

In this same process, the ₣1 billion that F had paid to L as rent, thereby returns via S, but only in exchange for ₣1 billion of commodities thrown into circulation by F. It is the same as if the landlords had had the whole of the rent paid to them in food, and had then kept half themselves for consumption, and exchanged the rest with S for manufactured goods.

“But instead of this, four acts have taken place: (1) transfer of 2 milliards in money from F to L; (2) L buys means of subsistence for 1 milliard from F, the money flows back to F, serving as means of circulation; (3) L buys manufactured goods from S for 1 milliard in money; the money functions as means of circulation; changing hands in the reverse direction to the goods; (4) with the 1 milliard in money, S buys means of subsistence from F; the money functions as means of circulation.” (p 330)

However, as seen above, for S it also circulates as capital, because it acts to reproduce the labour-power consumed in production as variable capital.

At the end of this sequence, the landlord's participation in the exchanges is at an end.

In the process, the landlord has partly replaced the capital of S, because they have bought ₣1 billion of manufactured goods, and with the proceeds, S are able to buy food, to replace the means of subsistence consumed by their workers, i.e. the variable capital.

Those means of subsistence have thereby been consumed and pass out of circulation. Finally, a further ₣1 billion of means of subsistence are consumed by landlords out of the current harvest.

The farmers now, once more, have ₣2 billion in money. But, they need manufactured goods, both as tools etc., and as means of consumption. If the farmers pay ₣1 billion to buy manufactured goods this is a simple act of circulation, which now puts the ₣1 billion into the hands of the manufacturers, whilst putting ₣1 billion of manufactured goods into the hands of farmers. But, this also represents a metamorphosis of capital for both farmers and manufacturers.

The goods bought by the farmer are part of the manufacturer's commodity-capital, which is thereby metamorphosed into money-capital, ready to be transformed into productive-capital once more. For the farmer, the money they use to buy manufactured goods is already money-capital, and the manufactured goods they buy, therefore, represent the metamorphosis of this money-capital into productive-capital. In other words, some of it, in the form of tools etc. forms part of the farmer's constant capital, whilst that part which comprises consumption goods, such as clothes, makes up the farmer's variable capital.

“This is a simple process of circulation. It puts 1 milliard into the hands of S, while the second part of his product existing in the form of a commodity is converted into money. On both sides there is metamorphosis of capital. The farmer’s 1 milliard is reconverted into elements of production needed for reproduction. The finished goods of S are reconverted into money; they pass through the formal metamorphosis from commodity into money, without which the capital cannot be reconverted into its production elements, and therefore also cannot be reproduced. This is the fifth circulation process. One milliard of manufactured goods (product of the previous year’s harvest) (a'–b') fall out of circulation into reproductive consumption.” (p 331) 

This is reproductive consumption as opposed to the consumption of the landlords, precisely because in the former it goes to reproduce elements of productive-capital, i.e. means of production and means of subsistence for productive workers.

In the final circulation process, the manufacturers take the ₣1 billion of money paid by farmers and buy raw materials from farmers. Again, this is a simple process of circulation, whereby money moves in one direction, and commodities move in the other. But, it is again a metamorphosis of capital on both sides. Now the money-capital of the manufacturers turns into productive-capital, in the form of raw and auxiliary materials, whilst the farmers commodity-capital is metamorphosed into money-capital. The commodities once more fall out of circulation as a consequence of being productively consumed.

Northern Soul Classics - If I Could Only Be Sure - Nolan Porter

Keep on Keeping on with Nolan Porter's other northern soul classic.


Friday, 21 July 2017

Friday Night Disco - P-Funk - Parliament

Theories of Surplus Value, Part I, Chapter 6 - Part 12

Marx gives a brief excursus here to distinguish the situation being discussed, here, of a return flow of money, to that where money flows back to a bank, which issues bank notes in return for discounting bills or advances notes by other means.

“In this case the transformation of the commodity into money is anticipated. It receives the form of money before it is sold, perhaps before it is produced. Or perhaps it has already been sold (for bills of exchange).” (p 327)

So, goods may have been produced, and are in the process of being shipped. As Marx and Engels describe in Capital III, during periods of speculation, banks would issue banknotes to sellers on the basis of Bills of Lading, or Dock Warrants, as collateral. In this case, the money was handed to the seller before the goods were sold, and the money would flow back to the bank if and when the sale took place.

Similarly, a bank may advance money to a capitalist on the basis that they will produce commodities, which when sold will realise a sum of money, out of which the bank will be repaid. Finally, the capitalist may have sold commodities on commercial credit, having received a Bill of Exchange for the amount of the sale. The bank discounts the bill, giving the seller bank notes in exchange, less their discounting fee, and the bank then obtains payment from the buyer of the commodities.

The return flow to the bank may be in the form of its own bank notes or else banknotes of some other bank, which are then redeemed either for the bank's own notes or for gold coins.

In all these cases, banknotes were put into circulation in anticipation of the sale of commodities, and once these commodities are actually sold, this money flows back to the bank, although it may pass through several hands before it does so, for example, where a bill of exchange has been used by several sellers as a means of circulation

As Marx and Engels set out in Capital III, some of these transactions represent an advance of money-capital, which attracts the payment of interest, whereas others represent only the advance of money.

Where they represent an advance of money-capital, the payment of interest is made possible out of the generation of surplus value by productive-capital.