Saturday, 4 December 2021

The Handicraft Census In Perm, Article I, Section I - Part 3 of 6

By including landless industrial producers in the survey of handicraft production, the investigators had removed the justification, used previously, for not including handicraft production in the towns, i.e. the idea that it was somehow inextricably linked with agricultural production. Yet, having done so, the investigators included data from just one town, Kungur, in their findings.

“No explanation is given in the Sketch, and it remains a mystery why the census was taken for one town only, and why this particular town was chosen—whether by chance or for some sound reason. This causes no little confusion, and seriously detracts from the value of the general data. On the whole, therefore, the handicraft census repeats the usual Narodnik mistake of separating the country (“handicraftsmen”) from the town, although often enough an industrial district embraces a town and the surrounding villages. It is high time to abandon this distinction, which is due to prejudice and an exaggeration of outdated divisions into social estates.” (p 360)

The fact that urban artisans were sometimes included in the data for handicraftsmen, and sometimes not, indicated the inadequacy of the term handicraftsmen from a scientific perspective. In practice, Lenin says, everything other than machine industry tended to be included in the category of handicraft industry, which blurred the important socio-economic distinction between those that produced for the market and those that did not. Similarly, there is a distinct socio-economic difference between the first two groups and those that work for buyers up, this latter group being already essentially wage workers.

Lenin then provides a table (Table p 362) in which these divisions into the above groups and sub-groups are illustrated. It sets out their composition in terms of number of establishments in each, the number of family workers, wage workers, as well as the total number of establishments employing wage workers.

“We see from the table that although there is a preponderance of agriculturists (Group I) among the rural industrialists and artisans, they are more backward in the development of forms of industry than those who do not cultivate the land (Group II). Among the former primitive artisanship is far more prevalent than production for the market. The greater development of capitalism among the non-agriculturists is shown by the larger proportion of establishments employing wage-workers, of the wage-workers themselves, and of handicraftsmen who work for buyers up. It may therefore be concluded that the tie with agriculture tends to preserve the more backward forms of industry, and vice versa, that the development of capitalism in industry leads to a break with agriculture.” (p 362)

This is consistent with the data that Lenin has analysed in previous works. In other words, first industrial production separates from agriculture, and becomes concentrated in the towns, on the basis of a social division of labour. This division necessarily leads to an increase in commodity production, as the industrial producers become dependent on an exchange both between themselves, and with agricultural producers both for materials and food. As markets grow in the towns, so, as some industrial producers fail, for a variety of reasons, so the merchants step in to become buyers-up, employing the former producers as effectively wage labourers. Merchant capital enters capitalist production. The same process sees some of the more efficient producers able to expand. They are also able to become buyers-up, offering to take their neighbours production to more distant markets, along with their own. By this means, some independent producers become merchant capitalists, and they are also able to utilise the capital accumulated to employ wage labourers alongside family members.

As soon as more capitalistic methods become available, it is these producers that adopt them, whereas the agricultural producers continue in the old way. As Lenin demonstrated in On The So Called Market Question, the urban producers increasingly undercut those elements of domestic industry that the agricultural producers relied upon for additional income. At the same time, agriculture must provide a growing quantity of material for the expanding capitalist production in the towns. So, agricultural producers are themselves now led into increasing commodity production, to meet the needs of industrial centres.

Northern Soul Classics - I'm The One Who Loves You - Darrell Banks


Friday, 3 December 2021

Friday Night Disco - Being With You - Smokey Robinson & The Miracles


Adam Smith's Absurd Dogma - Part 23 of 52

The significance of surplus product as against surplus value, and replacement of material balances can be seen when the question of expanded reproduction rather than simple reproduction is considered. Take one of Marx's corn models, and assume a change in productivity does not affect labour-power, and so the mass or rate of surplus value. We may have, in physical terms,

100 c (seed) + 100 v + 100 s (all in kilos). A rise in productivity means that, instead of 300 kilos being produced 600 are produced. Assuming no change in the rate of surplus value, we now have the 100 kilos of seed reproduced and the 100 kilos for wages, but, this now leaves a surplus product of 400 kilos. Previously, the 100 kilos was required for the capitalist's consumption, but now 300 kilos exist as surplus above this. As Marx says, in relation to this release of capital, it can be used for increased consumption or increased accumulation. For example, now the amount of seed can be increased to 250 kilos, and 250 kilos can be allocated to wages, so that 25 rather than 10 workers are employed. That means that the increased mass of labour, even with the same rate of surplus value now produces 2.5 times as much surplus value as was previously the case.

But, assume that the workers and capitalists must sell the grain they obtain as revenues – wages and profit – and, because, in value terms, the value of a kilo of grain has halved, the workers now require 200 kilos, as does the capitalist, to buy the consumption goods they need. That means that 100 kilos is set aside to reproduce seed, 200 kilos for wages, and 200 kilos profit – 500 in total. That still leaves a surplus of 100 kilos compared to the prior situation. It means that 33.3 kilos can go to accumulate seed, and 66.6 kilos to accumulate labour, meaning the capital is expanded, and a greater mass of value and surplus value is produced.

The reason for this, as Marx explains, is that it is the difference between use value and value, which Ramsay and the proponents of the TSSI and historic pricing fail to take into account. When it comes to replacing the seed (constant capital), it is not its historic price that must be replaced, but its use value, i.e. as Marx puts it in Capital III, it must be physically replaced “on a like for like basis”. Its not the historic price of the seed that must be replaced but its use value as 100 kilos of seed, and that is replaced at its current value/reproduction cost, not its historic price. Marx points out that this additional 100 kilos, and its value equivalent is not “additional” profit, or surplus value, but is merely a release of capital, a release of a proportion of total social labour-time previously required to physically replace that quantity of seed. It is social labour-time that can now be used as revenue. Marx demonstrates this by also showing that, although this “additional” profit is an illusion, the change in the rate of profit is real. If the additional 100 kilos of grain is ignored, so that the profit is just 200 kilos, then, in physical terms we have 200/100 + 200 = 66.6%, whereas originally it was 100/100 + 100 = 50%. In value terms, let 100 kilos of grain equal 100 hours or £100, the rate of profit was 100/100 + 100 = 50%, whereas now 100 kilos equals 50 hours of labour, so that we have 100/50 + 100 = 66.6%.

If, on the other hand, we calculated the rate of profit on the basis of historic prices, we would not calculate on the above basis, as Marx does, in Theories of Surplus Value, Chapter 22, but as follows £100 (seed) + £100 wages + £100 profit, and so £100/£100 + £100 = 50%. But, its on this basis that the proponents of the TSSI and historic pricing calculate the rate of profit, and so systematically understate the rise in the rate of profit, or even claim it to be falling, particularly in periods of rapid technological innovation and moral depreciation of the fixed capital stock, such as the 1980's and 90's.

In Theories of Surplus Value, Marx gives an example of this, in relation to a machine maker. Marx says that, in Capital I, it had been shown how the value of a commodity could be broken down into c, v and s, by apportioning physical quantities of the output to these categories. This is the same as done above in relation to grain. The machinery maker, Marx says, produces 12 machines, and of this 8 represent constant capital. The other 4 then divide into 2 representing wages, and 2 representing profit. Assuming they only use machines to produce machines, if productivity rises, and they produce 20 machines, they still only require 8 to replace the ones that have worn out in their own production, leaving 2 to cover wages, meaning that 10 now form the revenue available to the capitalist. This is precisely what happened in the 1980's and 90's, as a technological revolution meant that fixed and circulating constant capital was massively devalued, because it could be produced on a like for like basis using much less social labour-time. That released social labour-time to be used for additional consumption and accumulation.

The change in productivity did not change the need to replace material balances on a like for like basis. It merely changed the relative proportions in which social labour-time had to be allocated to achieve that, and so raised the rate of profit. But, the same rise in productivity also reduced the social labour-time required to replace the material balances constituting the variable-capital, i.e. wage goods. In doing so, it reduced the value of labour-power, and increased the rate of surplus value, thereby raising the rate of profit for this second reason.

Thursday, 2 December 2021

The Handicraft Census In Perm, Article I, Section I - Part 2 of 6

I - General Data

The handicraft census covered 8,991 families, excluding families of wage workers. It was spread across all uyezds in the gubernia, covering about 72% of all handicraft production.

Two types of handicraft family were identified – I which owned a farm, and II which didn't. These were divided into three sub-groups - 1) those producing for the market, 2) those working to order for private customers, and 3) those working for buyers-up. In these latter two groups, the raw material is provided by the customer or buyer-up. This can amount to different economic and social relations. In the first case, what is sold is a labour service. For example, a tailor who comes to your house, and makes a coat, or someone who cooks your dinner. What is paid for is the value of this labour-service, not the value of labour-power. Labour-power is not sold as a commodity, the labour service is.

In the second case, the buyer up provides material, not for the producer to produce a use value for their own consumption, but in order that they produce a commodity that the buyer-up will sell in the market. The only reason to do this is to obtain a profit from it. This is the basis of The Putting Out System. The merchant, who is the first form of buyer-up, makes a commercial profit, because they buy from producers at a price below the exchange-value of the commodity. The producer agrees to this arrangement, because the price they get from the merchant is more than they would have obtained from going to market themselves, after all those costs were accounted for. The merchants are always the first to enter capitalist production, therefore, because, when markets, in the towns, for manufactured commodities, have grown large enough, the merchant can always add to their commercial profit, by also extracting surplus value from the production of what then become wage labourers.

When any handicraft producer fails, it is a result of not being able to reproduce their raw material from the sale of their output. At that point, the merchant can offer to provide the materials, on condition that the output then belongs to them, and that they will then only pay to the producer the equivalent of the value of their labour-power, i.e. wages. The producer has become a proletarian, a wage labourer, and they now sell, not the product of their labour-power, but their labour-power itself. This is the start of the process of differentiation of the small producers, into a proletariat and bourgeoisie.

“The division of handicraftsmen into those who farm land and those who do not is, of course, a sound and necessary method. The large number of landless handicraftsmen in Perm Gubernia, frequently concentrated in industrial settlements, has led the authors to stick to this classification and to use it in the tables. We learn, for example, that 6,638 persons, or one-third of the total number of handicraftsmen (19,970 working members of families and wage-workers in 8,991 establishments) do not farm land.” (p 359)

As Marx discussed in Capital, and Theories of Surplus Value, the separation of increasing spheres of industrial production from agriculture is one of the first manifestations of a social division of labour, as soon as agricultural labour becomes sufficiently productive that it can produce a social surplus product. It enables a portion of society to split off and to use the product of agriculture as raw material in its own production, which becomes increasingly concentrated in the towns, which then exchanges these products with the countryside, as described in the Tableau Economique.

“This fact alone shows the fallacy of the common assumptions and assertions that the connection between handicraft industry and agriculture is universal; this connection is sometimes stressed as a specifically Russian feature. If we exclude the rural (and urban) artisans who have been wrongly classed as “handicraftsmen,” we find that 2,268 of the remaining 5,566 families, or over two-fifths of the total number of industrialists working for the market, are landless.” (p 359)

As Lenin points out, however, in The Sketch, not even this basic distinction is applied consistently. Left out is the data for households of wage workers, for example. The reason is that the census only looked at those households which represented establishments where production was taking place. If the households of wage workers were included then its likely that the majority of these would have been landless. Wage workers, employed by handicraftsmen were no less engaged in handicraft production than those that hired them, and so this omission distorts the picture. Wage workers constituted a quarter of all workers.

“This omission is due to the fact that, in general, the census registered only the establishments, the owners, and ignored the wage-workers and their families. In place of these terms, the Sketch employs the very inaccurate expression “families engaged in handicraft industries.” This is inaccurate because families whose members are employed by handicraftsmen as wage-workers are no less “engaged in handicraft industries” than the families which hire them. The absence of house-to-house information on the families of wage-workers (who constitute one-fourth of the total number of workers) is a grave omission in the census. This omission is highly characteristic of the Narodniks, who at once adopt the viewpoint of the small producer and leave wage-labour in the shade.” (p 359-60)

Wednesday, 1 December 2021

Adam Smith's Absurd Dogma - Part 22 of 52

Marx explores Smith's absurd dogma at greatest length in Theories of Surplus Value. He deals with the differences between surplus product and surplus value, as well as the illusions created by the use of historic pricing, rather than current reproduction cost, as the means for determining value, and analysing the process of social reproduction. Again the basis of Marx's analysis of the process of social reproduction is the requirement to replace material balances, or as he put it in Capital III, Chapter 49, to replace them “on a like for like basis”.

In Theories of Surplus Value, Marx examines the process, already having analysed the division of surplus value into profit, interest, rent and profit of enterprise. Profit is merely the phenomenal form first assumed by surplus value, before its division into these other revenues. The profit can only be increased if surplus value increases, or if the cost of realising it is reduced, as a result of the action of commercial capital, hence its inclusion in the calculation of the general, annual rate of industrial profit.

The issues involved, here, take in not just Smith's absurd dogma, but also the debate over the Temporal Single System Interpretation, and use of historic pricing as against current reproduction cost. It has relevance to the analysis of the changes that arose during the 1980's, and calculation of the rate of profit, involving an understanding of the role of the tie-up and release of capital, resulting from changes in social productivity.

Surplus value can only increase if either a) the rate of surplus value increases, or b) the mass of simultaneously employed labour increases – increase in the social working-day. For example, 100 hours labour with a 100% rate of surplus value produces 100 hours of surplus value, whilst 200 hours of labour with an 80% rate of surplus value gives 160 hours of surplus value. As Marx puts it in Capital III, Chapter 15,

“Given the necessary means of production, i.e., a sufficient accumulation of capital, the creation of surplus-value is only limited by the labouring population if the rate of surplus-value, i.e., the intensity of exploitation, is given; and no other limit but the intensity of exploitation if the labouring population is given.”

Ramsay sees rising productivity creating a release of capital, and misinterprets it as an increase in profit. It is, in reality, only a release of capital, which is then converted to revenue. There has been no increase in surplus value. But, this illusion leads him into error, and a view that constant capital can also be a source of surplus value. His use of historic prices, rather than current reproduction costs, and a failure to recognise that what has to be reproduced are the material balances at those current reproduction costs. For the proponents of the TSSI, and historic pricing, a rise in productivity results in a fall in the current value of capital relative to its historic cost. They translate this capital loss into a reduction in profit, (this is seen most clearly when they discuss capital gain/losses on financial assets, and interpret them as profit or loss), which forms the basis of many of their claims that the rate of profit fell during the 1980's, or did not rise by as much as others have shown, but also from the fact that they measure the profit against the higher historic cost, rather than the lower reproduction cost. Both fail to recognise Marx's point that what has to be replaced are the material balances, and they are replaced at current reproduction cost, not historic prices.

The effect is most notable during periods of rapid technological development, such as the 1980's. During such periods, one new machine replaces 2, 3 or 4 older machines. The new machine may cost more than one old machine (or not), but is cheaper than the 2, 3 or 4 older machines it replaces. That is like a spinning wheel replacing a hand-held spindle, or a spinning machine with 100 spindles replacing 100 spinning wheels. The result is that the value of fixed capital, per unit of output, wear and teardechet – falls significantly, as Marx sets out in Capital III, Chapter 6.  It means the value of spinning wheels suffers a massive moral depreciation. That is what happens to fixed capital in the 1980's.

Marx describes the difference between the wear and tear of fixed capital, and depreciation. The former is a function of production, and the value is recovered from production; the latter is a function of time, and changes in value outside the production process, which are not recovered from production. The importance of that in terms of the process of reproduction is set out by Marx in Theories of Surplus Value, Chapter 23. When technological development is very rapid, the fixed capital stock does not have time for its value to be recovered in wear and tear. In Capital I, Marx set out the examples of periods in which some machines had to be scrapped even before they were put into production, because they had become out of date, as a result of new inventions. Some capitals, where fixed capital was bought with borrowed money, go bust, but, as Marx sets out in Capital III, Chapter 6, the real basis is then revealed, because these capitals, or their fixed capital is bought up by other capitals at prices based upon current reproduction cost, not the historic price, and it is that, which forms the basis of their calculation of the rate of profit.

Inflation Continues To Surge. Interest Rates Are Next - Part 10 of 10

Central banks have printed money tokens to inflate the prices of assets, which today is the form in which the top 0.01% hold their wealth. Alongside it, governments have implemented measures of fiscal austerity, to hold back economic growth, and, thereby, hold back the demand for money-capital, which would cause interest rates to rise, and asset prices to crash.

Shareholders who exercise control over the large-scale socialised capital they do not own, have been able to protect their paper wealth, in such conditions, by using profits to buy back shares, issuing bonds, bought by accommodating central banks, so as to use the proceeds to buy back shares, so inflating their price.

But, that also leads to enhanced contradictions and costs, in the longer term. It meant a slower growth of economies, and accumulation of capital, but, then, capitalists in developing economies were presented with an opening to fill that gap. The rapid growth and accumulation of capital in China, has been an obvious case in point. But, even in the developed economies, it meant that a greater opening for smaller private capitals was created, and, with reactionary, conservative parties increasingly dominated by the interests of those small capitalists, policies were introduced that further facilitated them. The private owner of a small business, be it a window cleaner or gardener, or be it a small engineering firm, is not like a shareholder. Their revenues, and their wealth depends, directly, upon the profitability of their business, and not on the paper market value of shares, or the interest on loaned money-capital. That profitability, in turn, depends upon them being able to win market share. It depends on them investing in real productive-capital, and being able to undercut their competitors, as well as being able to produce and sell more.

Often, these companies have been the ones that could not easily raise capital, because banks were more interested in lending money for speculation in property, by lending to buy-to-let landlords and so on. In conditions in which fiscal austerity slowed economic growth, and excess liquidity diverted money into the purchase of assets rather than consumption, the scope for rapid expansion of these smaller firms was limited. But, now, liquidity is gushing into consumption. At the same time, interest rates are rising, and that means an inevitable fall in asset prices. It creates the conditions in which these smaller private capitals can grow rapidly, especially where they can accumulate circulating capital on the basis of commercial credit. The larger, socialised capitals, therefore, are in danger that they can be squeezed by large, new socialised capitals based in developing, and newly industrialised economies, on a global scale, and by a rapid growth of smaller capitals, in some spheres, in their own domestic markets.

Of course, Roberts is right that, frequently, the big monopolies will respond to such conditions by simply using the power of their balance sheets to buy up any domestic competition, from rapidly growing smaller firms. But, all of this means that there is an unavoidable shift away from simply using profits to buy back shares, and inflate asset prices, into the use of profits to invest in real capital accumulation, either via organic growth, or via acquisition. It necessitates a higher rate of economic expansion, and an increased demand for money-capital, as against its supply, necessitating higher rates of interest – whatever central banks might do in relation to their policy rates – and a consequent fall in asset prices.

As Marx notes, and Lenin, in his analysis of the development of capitalism in Russia, sets out, the determining characteristic of all commodity producing economies is competition, and capitalism as the most mature form of commodity producing economy is also so characterised, and determined even when that competition takes the form of monopolistic competition. Marx notes,

“Socialists know well enough that present-day society is founded on competition...

In actual fact, society, association are denominations which can be given to every society, to feudal society as well as to bourgeois society which is association founded on competition...

It must be carefully noted that competition always becomes the more destructive for bourgeois relations in proportion as it urges on a feverish creation of new productive forces, that is, of the material conditions of a new society. In this respect at least, the bad side of competition would have its good points...

In practical life we find not only competition, monopoly and the antagonism between them, but also the synthesis of the two, which is not a formula, but a movement. Monopoly produces competition, competition produces monopoly. Monopolists are made from competition; competitors become monopolists. If the monopolists restrict their mutual competition by means of partial associations, competition increases among the workers; and the more the mass of the proletarians grows as against the monopolists of one nation, the more desperate competition becomes between the monopolists of different nations. The synthesis is of such a character that monopoly can only maintain itself by continually entering into the struggle of competition.”

(The Poverty of Philosophy, Chapter 2)

Roberts notes a concern that higher interest rates might hit companies with large debts, so sparking a recession. But, as I have pointed out, before, that is unlikely. If interest rates rise from, say, 2% even to 5%, this large relative increase in the cost of money-capital, will still represent only a small fraction of the rate of profit, and as economic activity increases, the increase in interest payments by firms will be insignificant compared to the increase in the mass of profit they will enjoy. It is very unlikely, therefore, to deter firms from borrowing, be it from the bank, or via the issue of shares or bonds, to finance their expansion into a rapidly increasing market. What it will do, is to slash the capitalised value of revenues from assets, and so bring about an asset price crash that will make 2008 look like the hors d'oeuvre before the main meal.

What lies ahead is not the perennially predicted economic catastrophe suggested by Roberts, but a financial crisis that central banks will not be able to cut short by yet more money printing. It will be a financial crisis that will, in fact, create the conditions, in which the economic expansion that has so far been artificially constrained, by central banks and states, will be unleashed. It will surpass all previous economic expansions in its vigour.