At a certain point, as Marx and Engels set out in Capital III, in the
section on overproduction of Capital, the process set out in Part 3
reaches the point whereby the increase in production brings about no
further increase in the amount of profit i.e. Capital has been
overproduced, and further production ceases being Capital. As they
put it,
“When would over-production of
capital be absolute? Overproduction which would affect not just one
or another, or a few important spheres of production, but would be
absolute in its full scope, hence would extend to all fields of
production?
There would be absolute over-production of
capital as soon as additional capital for purposes of capitalist
production = 0. The purpose of capitalist production, however, is
self-expansion of capital, i.e., appropriation
of surplus-labour, production of surplus-value, of profit. As soon as
capital would, therefore, have grown in such a ratio to the labouring
population that neither the absolute working-time supplied by this
population, nor the relative surplus working-time, could be expanded
any further (this last would not be feasible at any rate in the case
when the demand for labour were so strong that there were a tendency
for wages to rise); at a point, therefore, when the increased capital
produced just as much, or even less, surplus-value than it did before
its increase, there would be absolute over-production of capital;
i.e., the increased capital C + ΔC would
produce no more, or even less, profit than capital C before its
expansion by ΔC. In both cases there would be a steep and sudden
fall in the general rate of profit, but this time due to a change in
the composition of capital not caused by the development of the
productive forces, but rather by a rise in the money-value of the
variable capital (because of increased wages) and the corresponding
reduction in the proportion of surplus-labour to necessary labour.”
However, suppose as a consequence of a whole series of discoveries
and developments four new industries are created, say producing
micro-electronics, biotechnology, computer games and healthcare.
Now,
instead of the total of £800 of additional Capital being employed in
industries 1-4, it is employed in creating industries 5-8. The
Supply of commodities 1-4 remains as it was. The “ magnitude
of definite social wants” that
previously existed continues to be met, at the original price of
£1.40, and the original amount of Constant and Variable Capital
continues to be employed to satisfy those wants. But now, the
additional Capital employs the additional workers, and additional
Constant Capital, producing commodities 5-8. As new commodities they
have a completely new “magnitude
of definite social wants” waiting
to be satisfied. To the extent that demand for commodities 1-4 falls
as the original workers/consumers decide to purchase an amount of
commodities 5-8, so it is compensated for by the additional demand
for commodities 1-4, from the new additional workers.
When the reality of Capitalist production is taken into
consideration, whereby there is technological change which reduces
the Value of Constant Capital, which revolutionises production, and
where there are increasing returns to scale, it can easily be seen
how, the development of whole new industries and commodities that
characterise the commencement of a new Long Wave Boom, facilitates a
rise in the Rate of Profit, and how this feeds through into increased
accumulation.
“The
modern state, no matter what its form, is essentially a capitalist
machine, the state of the capitalists, the ideal personification of
the total national capital. The more it proceeds to the taking over
of productive forces, the more does it actually become the national
capitalist, the more citizens does it exploit. The workers remain
wage-workers - proletarians. The capitalist relation is not done away
with. It is rather brought to a head”
(p360).
Kliman
is absolutely correct on this point. He writes,
“Government
provision of, and people's entitlement to, some goods and services is
now frequently called 'decommodification', but it is actually nothing
of the sort. Before the Government can provide these things, it must
either buy them or produce them. If it buys these things, they
obviously remain commodities. They continue to be produced in order
to expand value. This means they continue to be produced in a way
that minimises cost and maximises production, and the consequences of
this – exploitation, poor working conditions, unemployment and the
falling tendencies of prices and the rate of profit – continue to
exist as well. And Marx (Marx and Engels Collected Works Vol. 24 pp
531-59) argued that 'Where the state itself is a capitalist producer,
as in the exploitation of mines, forests etc., its product is a
“commodity” and hence possesses the specific character of every
other commodity.' This is not so because he defined it to be so, but
because a government that acts as a capitalist producer minimises
costs, maximises production, and in general behaves just like a
private capitalist. Nothing is different in this case except that
the moneys that purchase the 'de-commodified' commodities that the
government produces are called tax contributions rather than sales
revenues.” (Note 16 to Chapter 1, “The Failure of Capitalist
Production”)
In my original article, I wrote that this development of Monopoly
Capitalism, together with the increased planning that goes with it,
both at the level of the enterprise, and of the Capitalist State,
fundamentally changes the manner in which these crises of
overproduction are manifested, though it does not change the
underlying dynamic of overproduction as analysed by Marx, and
described above. I wrote,
“When the credit crunch stopped
economic activity in 2009, companies like Honda in Swindon slowed
down production, and got their workers to take holidays. They did not
say, ‘We have to maximise profits so let’s ramp up production to
secure a bigger market share’ - which is how a crisis of
overproduction classically developed, according to Marx. The
capitalist state helped smooth out the dislocation through‘cash for
clunkers’ schemes. The Chinese state provided vouchers redeemable
against consumer goods. In other words, Nick’s view of capitalism
seems stuck in an early 19th century neoclassical world, which had
even disappeared in Engels’ last descriptions.”
And in support of this last statement I quoted Engels comments in his
Critique of the Erfurt Programme, where he wrote,
“Capitalist production by
joint-stock companies is no longer private
production, but production on behalf of many associated
people. And when we pass on from joint-stock companies to trusts,
which dominate and monopolise whole branches of industry, this puts
an end not only to private production, but also to planlessness.”
I also cited Simon Clarke who set out in Capital and Class Winter
1990, the extent to which this planning was more a feature of modern
Capitalism than it was of the USSR! He wrote,
“Indeed it would be fair to say
that the sphere of planning in capitalism is much more extensive than
it is in the command economies of the Soviet bloc … The extent of
coordination through cartels, trade associations, national
governments and international organisations makes Gosplan look like
an amateur in the planning game. The scale of the information flows
which underpin the stock control and ordering of a single western
retail chain are probably greater than those which support the entire
Soviet planning system.”
In
response Nick makes an argument, which to be honest I found bizarre.
On the one hand he does not deny that “There
is a process of ongoing concentration and centralisation of capital
and an increasing role for the state in advancing the interests of
national capitals.” But, he
seems to want to ignore that fact in terms of what it means in terms
of the way Capitalist Crises manifest themselves! Indeed, he seems
to be wanting to present my argument as being that this development
means that Capitalist Crises are thereby abolished, a position I have
never even suggested! What is also odd is that he comes to this
argument having set out the extent to which Kliman was arguing
against the underconsumptionists. But, in fact, on this point of the
way modern corporations operate, Kliman is once again in agreement
with me, not with Nick! Kliman writes,
“In a competitive environment,
companies must lower the prices they charge when their costs of
production decline.” (Page 16)
And he
adds in Note 4 to this point,
“This explanation of why prices
fall has nothing to do with the irredeemably flawed notion that
technical progress causes 'overproduction' – the production of too
much output in relation to demand which in turn forces companies to
slash their prices. Companies' decisions about how much output to
produce are based on projections of demand for the output. Since
technical progress does not affect demand – buyers care about the
characteristics of products, not the processes used to produce them –
it will not cause companies to increase their levels of output, all
else being equal.”
Quite
right, and provided this planned expansion or contraction of their
output in line with their projections of demand is consistent with
reality, i.e. their projections of demand were correct there is no
reason why each individual Capital should not order its affairs in
such a way. There is no reason even where a firm is achieving high
rates of profit, because its costs are falling, and its Capital is
being thereby devalued, should not actually reduce its level of
output rather than increase it! In fact, during the 1990's there was
a saying in Silicon Valley that the most prosperous firms were the
ones that were able to move to SMALLER premises! There is no reason,
why such an oligopolistic firm, if it sees it can meet its planned
output targets with a reduced amount of Capital, or with a lower
level of re-investment will not do so, especially where its analysis
shows that to expand output further would be unprofitable.
Furthermore, having arrived at that conclusion, there is no reason
that such a capital would not seek to invest its surplus funds in
some other venture, be it some other area of production, or be it
some speculative adventure.
The argument that Nick proposes in this respect that high rates of profit must mean high levels of demand does not at all follow. A firm or industry can experience a a rising rate of profit when demand is falling, providing its costs are falling rapidly such that even with a decling volume of profit its relation to the advanced Capital is rising. Moreover, the rate of profit in buggy whip production may be higher than the average, and yet will not cause any great increase in investment, precisely because the actual volume of profit created is so small. As Marx points out at a certain stage, the actual volume of Profit becomes more important than the Rate of Profit.
As set
out earlier, the existence of a Long Wave Boom makes it easier for
such surplus Capital to be invested in some new productive activity.
In fact, if we look at the present situation there is no evidence of
a crisis of overproduction. There may be unused resources, but that
is not the same as a crisis of overproduction, which is where Capital
has expanded to a stage where there are masses of unsold and
unsaleable commodities left on the market. In fact, in large parts
of the economy – if we take the Capitalist economy as we must as
being one single global economy – growth and investment are
continuing at a massive pace. In the last decade, the global
workforce has grown by about a third, GDP has doubled, and Fixed
Capital Formation has also doubled.
But,
when the Long Wave turns to the down phase, this is no longer so easy
to achieve. Those same large firms can bring about planned
reductions or slowdowns in output and investment, but they
increasingly find a lack of alternative profitable homes for their
investable Capital. As a consequence, the workers they lay off, the
companies from which they no longer purchase inputs see their income
disappear. Now, its not just the reduction in demand the
corporations foresaw, which comes about, but an additional sudden
drop in demand, and the longer such conditions persist, the less any
Government intervention to stimulate additional demand can have any
effect, as firms use any temporary upturn to raise prices rather than
production. It creates the kind of stagflation witnessed in the
1970's.
But I
find Nick's comment bizarre for another reason. He equates this
introduction of planning with a reduction in competition. But, in
almost any sphere you can think of increased planning does not reduce
competition it intensifies it! Is the competition on the football
field or the battlefield reduced let alone abolished, by more and
more effective planning by football managers, or by Generals? As
Marxist economists identified during the 1980's, the development of
huge multinational oligopolistic firms did not reduce competition but
raised it to ever new heights. The difference is that this
competition is not manifest in a price competition, but is manifest
in competition to raise profits by reducing costs, by winning market
share not by slashing prices, but by raising quality, promoting brand
loyalty and so on.
Less
still is Nick's comment that such planning spells the end of the Law
of Value understandable. Marx makes clear that the Law of Value is a
Law of Nature, which has applied from the beginning of Man's history.
For most of that history, production was planned in some form or
another. Primitive Communist Communities planned their hunting and
gathering activities to meet their needs, peasants assessed their
family needs, and organised their production to meet it alongside
their feudal obligations. In Capital, Marx even refers to Robinson
Crusoe to demonstrate how the Law of Value determined his production
decisions. As Marx put it in his letter to Kugelmann,
“Every
child knows that any nation that stopped working, not for a year, but
let us say, just for a few weeks, would perish. And every child
knows, too, that the amounts of products corresponding to the
differing amounts of needs demand differing and quantitatively
determined amounts of society’s aggregate labour. It is
self-evident
that this necessity
of the
distribution
of social labour
in specific proportions is certainly not abolished by the specific
form of
social production; it can only change its
form of manifestation.
Natural laws
cannot be abolished at all. The only thing that can change, under
historically differing conditions, is the form
in which those
laws assert themselves. And the form in which this proportional
distribution of labour asserts itself in a state of society in which
the interconnection of social labour expresses itself as the private
exchange
of the
individual products of labour, is precisely the exchange
value
of these
products.”
So,
given that according to Marx the Law of Value has applied throughout
the millennia of man's history, during most of which time his
production was planned, its difficult to understand how Nick believes
that a return to some kind of planning under Capitalism could abolish
it!!! Indeed, its difficult to see how even the “form” of the
Law of Value adopted under Capitalism could be abolished either,
because this planning is only a Capitalist planning for the
production of commodities in a more effective manner, not planning to
abolish the commodity form itself! Even when that takes the form of
production by, and planning by the Capitalist State itself, it
remains production of commodities as Kliman described in the quote
provided earlier.
For more on what Marx actually said in relation to the Law of Value see - Law Of Value
For more on what Marx actually said in relation to the Law of Value see - Law Of Value
In the
next part I will look at the arguments in relation to the TSSI put
forward by Nick.
Back To Part 3
Forward to Final Part
Back To Part 3
Forward to Final Part
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