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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Anti-Duhring, Part III – Socialism, II – Theoretical - Part 4

But, its clear that this perceived role of share ownership, in each of these forms, has no validity. In a worker cooperative, for example, the money put up by each worker is always likely to be only a tiny fraction of the money-capital required. The worker cooperative, as with any other capital, will, usually, need to borrow money-capital from a bank, or directly in the money markets, by the issue of bonds, for example. Yet, the loaning of money in any of these other forms – from the bank, or the buyers of bonds – does not give the bank nor bondholders any legal right to exercise control over the cooperative.

Nor should it. The lender of money is the owner of that money, and so entitled to exercise control only over it. They do so by voluntarily surrendering possession of that money, for a specified period, and on specific terms. For example, they agree to lend the money for, say, 5 years, and, in return, for a given rate of interest, which may be fixed or variable, and so on. But, surrendering possession of the money means exactly that. The borrower becomes the possessor of that money – not its owner – for a specified time, and buys things with it. They pay a price for this temporary possession of the money, and that price is the market rate of interest. As Marx sets out, what they have actually borrowed is not money, but money-capital.

Money can have no price, contrary to the claims of bourgeois economics, however much they try to dress it up with concepts of time-preference and so on. But, Marx explains, loanable-money-capital, can have a price, precisely because, of the nature of capital, as self expanding value. The value of capital, is that, once employed, its use-value is to be greater at the end of its circuit than it was at the start. It is this use-value of capital – not as a thing, i.e. not as machines, materials, or labour-power (commodities) – as a social relation, that has a price, precisely because those that do not own it, are prepared, and are able, to buy it, in order to employ it, so as to obtain the average industrial profit, by doing so. As Marx notes, in Capital III, it is the division of capital into these two different forms – interest-bearing capital, and industrial capital – each antagonistic to the other, and of the owners of these two different forms of capital, that makes possible the category of interest, and determines the rate of interest.

The owners of interest-bearing capital lend money-capital to industrial capitalists, who buy things with it. The commodities they buy – machines, material etc. (constant capital), as well as labour-power (variable-capital) – they not only possess, but own. They buy these commodities, precisely in order to utilise them as capital, to obtain, thereby, the average industrial profit. It is only the potential to obtain this average industrial profit that makes borrowing the money-capital worthwhile, but, also, which makes possible the payment of interest to the lenders of that money-capital.

If I borrow money, and just put it in a box, buried in the ground, at the end of the loan period, it will not have become any more money, whatever the basis of my time-preference. Similarly, if I spend the money on the purchase of commodities for my personal consumption, it will not have expanded in value, whatever my time preference. In the former case I at least have the initial capital sum that I can repay, and only have to find a way of obtaining money from elsewhere, to pay the interest. In the latter, having consumed unproductively the commodities I bought with the money, I now have to find money to repay both the initial capital sum, and the interest. There is no objective basis for assuming either is possible.

Money cannot have have two different values. It cannot have a price – interest – based on a difference in those values. But, as Marx describes, capital, as a social relation, does have two different values, precisely because it is self-expanding value. Its value at the end of the circuit of industrial capital, is greater than it was at the start of the circuit. It is greater by the amount of average industrial profit, whose basis is the surplus-value created in the production process. Interest is not a price of money, but of money-capital. It is a deduction from profit, just as is rent and taxes.

It is not the lender of money-capital – be they a bank, bondholder, or shareholder – that is the owner of the industrial capital, bought with the money-capital they loaned, but the industrial capitalist. The loaned money-capital, might appear to be itself, capital, and to self-expand, by the amount of interest, but it is not. It is Marx explains, simply fictitious-capital. It has no real existence, as capital, separate from the same money-capital, borrowed by the industrial capitalist, and used as industrial capital to produce profit. The industrial capitalist, as the owner of that industrial capital appropriates the profit, and only out of it, then, pays interest to the owner of the money-capital they borrowed. The lender of money-capital has no such right of ownership or control. It is not their industrial capital, and not their industrial profit.

When, a bank lends money to someone to buy a house or a car, the bank has no ownership of the house or car, no right to tell the borrower how to use the house or car, and so on. They only have a right to the return of the money at the end of the loan period, and to be paid the agreed interest on the loan. The interest, is not a price for money, in this case either, but the same price of money-capital, the price the lender could have obtained had they loaned the money to be used as money-capital to an industrial capitalist.

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Forward To Part 5

SNNS 59

 

Northern Soul Classics - Cheer Me Up - The Globetrotters

I found out that one of the members of the Globetrotters was J.R Bailey, whose aliases include Chuck Wood, J.B. Troy, and Al Wilson (Help Me), not the other Al Wilson known for the Snake.