Thursday, 28 February 2013

Capital I, Chapter 24 - Part 4


The proportion in which surplus-value breaks up into capital and revenue being given, the magnitude of the capital accumulated clearly depends on the absolute magnitude of the surplus-value. Suppose that 80 per cent. were capitalised and 20 per cent. eaten up, the accumulated capital will be £2,400 or £200, according as the total surplus-value has amounted to £3,000 or £500. Hence all the circumstances that determine the mass of surplus-value operate to determine the magnitude of the accumulation. We sum them up once again, but only in so far as they afford new points of view in regard to accumulation.” (p 561)

The rate of surplus value is determined primarily by the degree of exploitation of labour. Assuming workers are paid the value of their labour power, this can only be increased by lengthening the working-day, making the working day more intensive (both of which we have seen have limits), or else by reducing the value of labour-power, thereby increasing relative surplus value.

But, in practice, the lowering of wages below the value of labour-power, also plays an important part.

It, in fact, transforms, within certain limits, the labourer’s necessary consumption fund into a fund for the accumulation of capital.” (p 562)

As a consequence, all other things being equal, (which we know they are not) capital will always seek to lower wages to the minimum. Today, that means that capital will seek to locate its activities to where the labour it requires can be had at the lowest price e.g. China, Vietnam, India, Indonesia and Africa. That means this presses down on wages elsewhere, as Marx pointed out.

Today, thanks to the competition on the world-market, established since then, we have advanced much further. “If China,” says Mr. Stapleton, M.P., to his constituents, “should become a great manufacturing country, I do not see how the manufacturing population of Europe could sustain the contest without descending to the level of their competitors.” (Times, Sept. 3, 1873, p. 8.) The wished-for goal of English capital is no longer Continental wages but Chinese.” (Note 2, p 563)

In order to achieve these reductions, all sorts of methods were adopted by capital, particularly in its youth. It led to all those abuses discussed earlier, as workers sought to compensate for their scant and reduced wages, by buying the cheapest food, thereby encouraging the supply of cheap but adulterated food. Today, workers are led into the grasp of the usurers, charging 4000% interest on pay day loans, to make up for the fact that in competition with Chinese wages, their own wages have remained stagnant.  The other effect has been the continuation of the process of adulteration of food, as with horse meat, to cheapen it, once again illustrating the important role that Co-operative production, distribution and consumer testing continues to have in protecting workers.

Today, also, as in Marx’s day, the bad employers get away with reducing wages below the value of labour power, and force other workers to make up the difference, in transfers through the tax and benefits system.

At the end of the 18th and during the first ten years of the 19th century, the English farmers and landlords enforced the absolute minimum of wage, by paying the agricultural labourers less than the minimum in the form of wages, and the remainder in the shape of parochial relief.” (p 563-4)

Marx then looks at the effect on constant capital. The instruments of labour have to be efficient for the number of workers to work with them. But, increased production resulting from accumulation does not necessarily mean they have to be increased in the same proportion.

In a factory, suppose that 100 labourers working 8 hours a day yield 800 working-hours. If the capitalist wishes to raise this sum by one half, he can employ 50 more workers; but then he must also advance more capital, not merely for wages, but for instruments of labour. But he might also let the 100 labourers work 12 hours instead of 8, and then the instruments of labour already to hand would be enough. These would then simply be more rapidly consumed. Thus additional labour, begotten of the greater tension of labour-power, can augment surplus-product and surplus-value (i.e., the subject-matter of accumulation), without corresponding augmentation in the constant part of capital.” (p 565)

If two workers are employed simultaneously to operate milling machines
two machines are needed.  But, if the same worker simply works more hours,
 or if two workers work the same machine on a shift system, only the
one machine is needed, reducing the amount of capital that has to be laid out.
The additional use will mean the machine wears out more quickly but not
at a proportional rate.
Being picky this could be challenged. Suppose we take a three year period. Assume 100 tools which last 1.5 years, so over 3 years, 200 tools are required. If the number of workers rises to 150 then the number of tools is 300 over three years. If the workers remains at 100, but they work 50% longer then, other things being equal, the tools will wear out 50% quicker. Instead of lasting 1.5 years, they will last only 1 year. So, over 3 years, once again 300 tools have to be provided.

In practice, Marx is right, however, because for most tools, being used 50% more will not mean they wear out proportionately quicker. This is particularly significant in the extractive industries like mining where increased production does not involve the purchase of additional raw material to be worked up. Here, almost all the constant capital is made up of the instruments of labour. So, the hours of labour can be increased, labour intensity can be increased, shift systems can be introduced, which result in increased output, but involve no significant increase in constant capital, either in the form of raw materials, or instruments of labour.

A similar thing applies in agriculture. Increased output requires additional constant capital in the form of raw materials (seed, fertiliser etc) but no additional instruments of labour. The workers can simply work with the existing implements for longer or work more intensively.

Finally, in what is called manufacturing industry, every additional expenditure of labour presupposes a corresponding additional expenditure of raw materials, but not necessarily of instruments of labour. And as extractive industry and agriculture supply manufacturing industry with its raw materials and those of its instruments of labour, the additional product the former have created without additional advance of capital, tells also in favour of the latter.” (p 565-6)

When the Corn Laws were abolished a whole range of
other tariffs on imported raw materials like cotton were
also abolished.  The fall in food prices meant less had to be
spent on wages, as the Value of Labour Power fell, but the fall
in the price of Constant Capital, meant that more of it could be
bought for less money, still leaving over Capital to employ more
Labour Power to process it.  This raises the Rate of Profit, and
the volume of profit, and thereby Accumulation.
The point here is not that the saving in additional constant capital produces more surplus value. We have established that constant capital only transfers its value to the end product. Whether capital has to lay out a lot or a little for constant capital does not affect the amount of surplus value. But, the extent to which capital has to expend surplus value in replacing or adding to constant capital does have an important consequence for the rate of profit, and, therefore the rate at which capital can expand! The less capital has to expend on constant capital, the larger the proportion of surplus value, capital can expend on additional labour-power, which does determine the amount of surplus value produced.

A further factor is the rising productivity of social labour. The more productive labour becomes, the more use values are produced, and the cheaper each of these use values becomes. If the rate of surplus value remains the same, the total amount of surplus product increases. So, in terms of physical quantities, of use values, the capitalist could both consume more luxury goods, and yet still be able to accumulate more capital.

As Marx sets out, the Technical Composition of Capital
determines the amount of Labour Power required to
process or work with a given physical amount of
 Constant Capital.  With any given Technical Composition
 of Capital then, the volume of Surplus Value can only
 rise if more labour-power is exploited, which in turn means
 the physical amount of constant capital must also increase.
  If the Value of Constant Capital e.g. cotton falls, more
 can be bought for the same amount, leaving capital
left over to buy more labour-power.  In Value terms,
 Constant Capital could fall, whilst accumulation rises.
  It only makes sense to understand
 accumulation in physical rather than Value terms.
Incidentally, this deals, in part with the arguments of the proponents of the TSSI, which seeks to define accumulation in value rather than physical terms.

By the same token, the capitalist could increase their consumption without accumulation falling and vice versa.

Moreover, even if the rate of surplus value is falling, this can still be the case provided the productivity is rising faster than the rate of surplus value is falling.

For example,

C 1000 + V 1000 + S 1000 = E 3000 = 3000 units.

Suppose these units of output can be equally consumed by the capitalists or used for accumulation. Suppose productivity rises by 50%, so 4500 units are produced, whilst the rate of surplus value falls from 100% to 75%.


C 1000 + V 1000 + S 750 = E 2750 = 4500 units.

If capital divides the surplus equally between consumption and accumulation, then previously the surplus product was 1000 units, divided into 500 consumption and 500 accumulation. Now, however, the surplus product amounts to 750 x 1.5 = 1125 units, divided 562.5 consumption, and 562.5 accumulation.

Things don't stop there. Along with the rise in productivity goes the reduction in the value of labour power, as the workers necessaries are cheapened. That means that the rate of surplus value rises through Relative Surplus Value.

In the 1950's and during the Long Wave Boom,
 the Value of Labour-Power fell, as Fordism raised
 the productivity of labour massively.  Each year
 wages were able to buy more, cheaper (in real
 i.e. inflation adjusted terms) commodities.
  So real wages rose.  But, the percentage rise
 in wages was less than the increase in productivity,
 so surplus value increased relative to wages,
 bringing about an increased Rate of
 Surplus Value, and for a time, increased
 Rate of Profit.
But hand-in-hand with the increasing productivity of labour, goes, as we have seen, the cheapening of the labourer, therefore a higher rate of surplus-value, even when the real wages are rising. The latter never rise proportionally to the productive power of labour. The same value in variable capital therefore sets in movement more labour-power, and, therefore, more labour. The same value in constant capital is embodied in more means of production, i.e., in more instruments of labour, materials of labour and auxiliary materials; it therefore also supplies more elements for the production both of use value and of value, and with these more absorbers of labour. The value of the additional capital, therefore, remaining the same or even diminishing, accelerated accumulation still takes place. Not only does the scale of reproduction materially extend, but the production of surplus-value increases more rapidly than the value of the additional capital.” (p 566)

By the same token, this rise in productivity has an effect on the instruments of labour. That is the constant capital that is fixed capital being consumed only gradually over a period. Every so often, a portion of these machines wear out and have to be replaced. From the time these machines were originally bought, increases in productivity mean that the replacement machine will be cheaper than the original. Frequently, also, the replacement machine will not only be cheaper, but will be better and more productive than the original because of technological improvements incorporated in it.

Every advance in Chemistry not only multiplies the number of useful materials and the useful applications of those already known, thus extending with the growth of capital its sphere of investment. It teaches at the same time how to throw the excrements of the processes of production and consumption back again into the circle of the process of reproduction, and thus, without any previous outlay of capital, creates new matter for capital. Like the increased exploitation of natural wealth by the mere increase in the tension of labour-power, science and technology give capital a power of expansion independent of the given magnitude of the capital actually functioning. They react at the same time on that part of the original capital which has entered upon its stage of renewal. This, in passing into its new shape, incorporates gratis the social advance made while its old shape was being used up. Of course, this development of productive power is accompanied by a partial depreciation of functioning capital. So far as this depreciation makes itself acutely felt in competition, the burden falls on the labourer, in the increased exploitation of whom the capitalist looks for his indemnification.” (p 567)

As the productivity of labour rises, the new value created by it in a given time remains the same, but the volume of constant capital in raw material it processes increases. If the value of each unit of this raw material remains constant, the proportion of value accounted for by the constant capital compared to labour rises. That is true even though the intensity with which the workers work remains the same or may even fall.

An English and a Chinese spinner, e.g., may work the same number of hours with the same intensity; then they will both in a week create equal values. But in spite of this equality, an immense difference will obtain between the value of the week’s product of the Englishman, who works with a mighty automaton, and that of the Chinaman, who has but a spinning-wheel. In the same time as the Chinaman spins one pound of cotton, the Englishman spins several hundreds of pounds. A sum, many hundred times as great, of old values swells the value of his product, in which those re-appear in a new, useful form, and can thus function anew as capital.

In 1782,” as Frederick Engels teaches us, “all the wool crop in England of the three preceding years, lay untouched for want of labourers, and so it must have lain, if newly invented machinery had not come to its aid and spun it.”

Labour embodied in the form of machinery of course did not directly force into life a single man, but it made it possible for a smaller number of labourers, with the addition of relatively less living labour, not only to consume the wool productively, and put into it new value, but to preserve in the form of yarn, &c., its old value.” (p 567-8)

As the physical quantity of capital increases with the accumulation of capital, labour acts both to preserve its value, and to enhance it.

With the increase of capital, the difference between the capital employed and the capital consumed increases. In other words, there is increase in the value and the material mass of the instruments of labour, such as buildings, machinery, drain-pipes, working-cattle, apparatus of every kind that function for a longer or shorter time in processes of production constantly repeated, or that serve for the attainment of particular useful effects, whilst they themselves only gradually wear out, therefore only lose their value piecemeal, therefore transfer that value to the product only bit by bit. In the same proportion as these instruments of labour serve as product-formers without adding value to the product, i.e., in the same proportion as they are wholly employed but only partly consumed, they perform, as we saw earlier, the same gratuitous service as the natural forces, water, steam, air, electricity, etc. This gratuitous service of past labour, when seized and filled with a soul by living labour, increases with the advancing stages of accumulation.” (p 569)

The bourgeois economists are quick to praise the power of capital embodied in physical equipment, but they fail to point out that this capital is only the result of past labour and that in two senses. Firstly, that it was produced by living labour, and secondly that the capitalist is only able to accumulate it as a result of the surplus value created by his own workers.

Yet, despite the fact that this capital is the product of workers they are so in awe of this capital that “... according to the Scotch genius MacCulloch, ought to receive a special remuneration in the shape of interest, profit, etc.” (p 569)

In other words, the productive assistance, to current living labour that the product of past labour affords it, in the shape of machines and other instruments of labour, is not assigned to the labour that made it possible, but to capital.

With a given degree of exploitation of labour-power, the mass of the surplus-value produced is determined by the number of workers simultaneously exploited; and this corresponds, although in varying proportions, with the magnitude of the capital. The more, therefore, capital increases by means of successive accumulations, the more does the sum of the value increase that is divided into consumption fund and accumulation fund. The capitalist can, therefore, live a more jolly life, and at the same time show more “abstinence.” And, finally, all the springs of production act with greater elasticity, the more its scale extends with the mass of the capital advanced.” (p 570)

Back To Part 3

Forward To Part 5

Tuesday, 26 February 2013

Obama and Bernanke Against Austerity

On Monday, President Obama once again spoke out strongly against austerity measures that are likely to send the US economy into recession. On Tuesday, in testimony to Congress, Federal Reserve Chairman, Ben Bernanke, echoed the message. If the US gets dragged into recession by unnecessary measures of austerity, it will not just be damaging for US Capital, it will be damaging for Capital in general.

Marx, in Capital III, comments that bank legislation cannot prevent a crisis from erupting, but it can be the cause of a crisis erupting. Over the last 5 years, much of the damage that has been done to economies in the US, and Europe has been self-inflicted. It has been caused by political ineptitude, and wrong-headed economic dogma. The Eurozone Debt Crisis has been caused by a refusal of EU Governments to take the necessary political decisions to establish a United States of Europe, or even to establish Fiscal and Political Union as a step towards it. In turn that has meant that the structures of the Eurozone have constrained the economic solutions that could be advanced, because the necessary fiscal transfers to support the peripheral economies have political costs.

In the US, the initial success of the Tea Party, created its own political constraints, particularly after the Republicans won a majority in Congress. That along with spending cuts by Republicans at State and Local level, limited further fiscal expansion by the Obama Administration. That was exacerbated last year in the fiasco over the Debt Ceiling, when Republicans, purely for political advantage threatened to throw the US into a technical default on its debt, if the President did not agree to drastic spending cuts. Only at the last minute, did they draw back, and the price was a deal to set up a committee to draw up a plan of agreed cuts. That is what led to the Fiscal Cliff at the end of last year, and which now threatens to throw the US into recession as a result of the so called “Sequester”, which will introduce automatic spending cuts across a huge swathe of the US State.

For Marx, Capital is the social relation between
 Capital and Wage Labour.  He said, the expansion
of Capital, is the increase of the working-class.
The potential effect of that was seen at the end of last year. The US economy surprisingly shrank by 0.1%, and it was down almost entirely to a cut in the US Defence Budget. Unless a deal is reached to avoid the sequester, then beginning on Friday this week, automatic cuts of US Budgets, amounting to $85 billion will begin to be introduced. It will see thousands of teachers, civil servants, police, firepeople and so on being laid off, as well as cuts to welfare payments. Economists believe that it will reduce US GDP by at least 0.5%. Remember what GDP is. Its a measure of the value of goods and services produced in the economy. Growth of GDP is growth of Capital, just as a reduction in GDP is a reduction of Capital. Then it can be seen why Capital is not in favour of such measures. Capital expands by accumulating profits, if Capital shrinks it means profits are falling.

In the Critique of the Gotha Programme, Marx
fiercely attacked the statist ideas of the Lassalleans.
 Marx attacked the idea that Socialism had anything to
 do with promoting an increased role of the State, as
opposed to the self-activity, and self-government of
the workers.  Later, Engels also attacked similar
ideas in the Erfurt Programme promoting Welfarism, and
the establishment of a National Insurance Scheme.  Yet both
these ideas today are promoted by people who call
themselves Marxists! 
Yet some sections of the Left have fallen into the trap of accepting the arguments and propaganda of the populist Right. That misrepresents spending by the Capitalist State as in some sense inimical to the interests of Capital, and, therefore, cuts in that spending as necessarily in the interests of Capital. That approach signifies, in fact, just how far sections of the Left have drifted away from Marxism and into the camp of reformism and Lassalleanism. It is the same approach, which deludes itself into a belief that the Welfare State was established in the face of opposition from Capital, rather than the reality, which is that Capital itself established the Welfare State, to meet its needs for regulating the economy, and for ensuring the reproduction of a sufficiently well educated and healthy working-class. The only real argument over the Welfare State is how much welfare should be provided at any one time, to meet the needs of Capital, and its over that, which the periodic economic struggles between Capital and Labour occur.

After all, the clue is in the name. It is a Capitalist State, the State of the Capitalists, and there to meet their needs not ours! Of course, that doesn't mean that Capital is not always on the look out to achieve these goals by ever more efficient means. That includes nowadays looking to provision of services by private capital rather than state capital, now that new technology means that they can do that more efficiently. Yet, even here, it is the delivery of services that are being privatised, whilst the core of Welfarism, the provision of a Capitalist State run, National Insurance Scheme, funded by workers, and controlled by the State remains intact. That could hardly be otherwise, because since the end of the 19th Century the bedrock of capitalist rule has been the existence of bourgeois democracy. As Lenin put it in State and Revolution,

“Another reason why the omnipotence of “wealth” is more certain in a democratic republic is that it does not depend on defects in the political machinery or on the faulty political shell of capitalism. A democratic republic is the best possible political shell for capitalism, and, therefore, once capital has gained possession of this very best shell (through the Palchinskys, Chernovs, Tseretelis and Co.), it establishes its power so securely, so firmly, that no change of persons, institutions or parties in the bourgeois-democratic republic can shake it.”

But, he should also have added that this bourgeois democracy in the age of Imperialism takes a special form, the form of Social Democracy, representing an historic comprise between the working-class and Big Capital, mediated via the Labour Bureaucracy. This Social Democracy incorporates the workers into the State, and a fundamental aspect of it is the Welfare State. That is why openly bourgeois parties like the Tories in Britain are just as Social Democratic as the Labour Party, and the same is true of their European and North American counterparts. The only difference is that the openly bourgeois parties like the Tories are more conflicted in performing this role, because their membership and electoral base, rests neither upon Big Capital, nor on the working-class, but on the backward layers in society.

In fact, spending by the Capitalist State has played a fundamental role for Capital from its very inception. Marx sets out in Capital, the role that state spending plays in the process of primary accumulation of Capital, for instance. And debt, from the very beginning was also the method by which that is accomplished. Indeed, not only does it provide the basis for the primary accumulation of Capital, but via debt, it also creates the conditions for the centralisation and concentration of capital, both through the provision of credit and via the ruination of small capitals that are taken over by bigger capitals. A look at the data for UK Public Debt illustrates that. Back in the 1700's, UK Debt to GDP was far higher than today, and rose as the process of primary capital accumulation proceeded. Only when that process had raised the level of capital to a sufficient level, and the Industrial Revolution that developed upon it, rapidly increased growth, did that ratio fall. At its height, Debt to GDP rose to 250%, compared to about 70% today. A similar process could be seen after WWII, when the State once again acted to bring about a new accumulation of Capital, which laid the basis for the Post War Boom.

The system of public credit, i.e., of national debts, whose origin we discover in Genoa and Venice as early as the Middle Ages, took possession of Europe generally during the manufacturing period. The colonial system with its maritime trade and commercial wars served as a forcing-house for it. Thus it first took root in Holland. National debts, i.e., the alienation of the state – whether despotic, constitutional or republican – marked with its stamp the capitalistic era. The only part of the so-called national wealth that actually enters into the collective possessions of modern peoples is their national debt. Hence, as a necessary consequence, the modern doctrine that a nation becomes the richer the more deeply it is in debt. Public credit becomes the credo of capital. And with the rise of national debt-making, want of faith in the national debt takes the place of the blasphemy against the Holy Ghost, which may not be forgiven. 

The public debt becomes one of the most powerful levers of primitive accumulation. As with the stroke of an enchanter’s wand, it endows barren money with the power of breeding and thus turns it into capital, without the necessity of its exposing itself to the troubles and risks inseparable from its employment in industry or even in usury. The state creditors actually give nothing away, for the sum lent is transformed into public bonds, easily negotiable, which go on functioning in their hands just as so much hard cash would. But further, apart from the class of lazy annuitants thus created, and from the improvised wealth of the financiers, middlemen between the government and the nation – as also apart from the tax-farmers, merchants, private manufacturers, to whom a good part of every national loan renders the service of a capital fallen from heaven – the national debt has given rise to joint-stock companies, to dealings in negotiable effects of all kinds, and to agiotage, in a word to stock-exchange gambling and the modern bankocracy. 
Capital I, Chapter 31

That demonstrates why debt is not really a problem for Capital. States going back thousands of years have dealt with debt quite easily. They effectively renege on the debt by debasing the currency, paying back their creditors with increasingly worthless money. That is where they do not simply default. Debasing the currency to pay back your creditors with worthless money also causes inflation, but the inflation itself dissolves the debt, because debt is denominated in nominal money terms, whereas the taxes that are collected by the State are based on the new inflated money prices. Once consequence is that interest rates rise, because lenders increasingly seek to protect themselves by demanding a higher return, but interest rates rarely rise enough to cover the inflation.

In the early 1970's inflation rose sharply. The Heath Government even introduced a Sliding Scale of Wages so that wages rose as prices rose. Inflation was reduced for a while as a result of the Social Contract, between Labour and the TUC, which introduced controls over prices and wages. But, when it collapsed, inflation rose sharply once again in the late 70's and early 80's. Inflation ran at more than 20%. But, interest rates did not rise to that level. In fact, even though today, we have historically low nominal interest rates, real interest rates back then were probably lower.

Under these conditions, austerity is a mindless economic solution being perpetrated by right-wing ideologues attempting to simply replicate policies from the 1980's, the totally different conditions of today. It clearly is not in the interests of workers, who see their wages and savings reduced, their jobs disappear, and their services cut. But, nor is it in the interests of Capital in General either, and largely for the same reasons. Rising wages, more jobs, an ability to provide more, better services are an indication of a Capital that is growing. In fact, in Marx's terms that is precisely what a growth of Capital is. For Marx, Capital is the social relation between Capital and Wage Labour, its expansion is an expansion of that relation.

The United States is the representative of the most mature industrial capital. The US Democrats are the representative of that form of Social Democracy that represents the historic compromise between the workers and Big Capital. It is no wonder that for the last 5 years, the US has stood out against the other countries that have adopted Austerian economic policies, and has instead adopted a policy of Keynesian fiscal expansion. Its no wonder that Obama, and Bernanke, as representative of the US Capitalist State, are raising the level of their opposition to the austerity that will arise from the sequester. They are doing so, not because spending by the Capitalist State is somehow socialist, somehow a concession to workers from Capital, as the reformists and Lassalleans would have it, but because it is in the interests of Capital.

Capital 1, Chapter 24 - Part 3


In reality, surplus value acts neither as solely a fund for accumulation nor solely for the enjoyment of the capitalist. It is a fund for both together. Given a certain amount of surplus value, the more the capitalist devotes to his own consumption, the less he has for accumulation and vice versa.

But it is by the owner of the surplus-value, by the capitalist alone, that the division is made. It is his deliberate act. That part of the tribute exacted by him which he accumulates, is said to be saved by him, because he does not eat it, i.e., because he performs the function of a capitalist, and enriches himself.” (p 555)

From the perspective of capitalism, the private consumption of the capitalist represents waste, precisely because it means that a portion of surplus value has not gone to increase capital.

Except as personified capital, the capitalist has no historical value, and no right to that historical existence, which, to use an expression of the witty Lichnowsky, “hasn’t got no date.” And so far only is the necessity for his own transitory existence implied in the transitory necessity for the capitalist mode of production. But, so far as he is personified capital, it is not values in use and the enjoyment of them. but exchange-value and its augmentation, that spur him into action. Fanatically bent on making value expand itself, he ruthlessly forces the human race to produce for production’s sake; he thus forces the development of the productive powers of society, and creates those material conditions, which alone can form the real basis of a higher form of society, a society in which the full and free development of every individual forms the ruling principle.” (p 555)

The function of private capitalists disappeared long ago.
It has been replaced by professional managers, by collective
provision of Capital by Stock Markets, Banks and Pension Funds,
 and the the State.
In fact, as Marx describes later, the very operation of capitalism itself, let alone of socialism, makes the historical and social function of the capitalist redundant. His position in the factory is replaced by the professional manager; his function even of providing private capital is replaced by the collectivisation of that function through the joint stock company, the public limited company, (and today the financing of these via workers' pension funds etc.) and by the capitalist state. In all these forms the capitalist, as an individual need not exist, and yet the laws of capital accumulation continue to operate, and thereby perpetrate the exploitation of workers.

But, it is these objective laws of capital accumulation which also constrain the choices made by the capitalist, and which dictate that his own pleasures are subordinate to the need of his capital to expand.

Moreover, the development of capitalist production makes it constantly necessary to keep increasing the amount of the capital laid out in a given industrial undertaking, and competition makes the immanent laws of capitalist production to be felt by each individual capitalist, as external coercive laws. It compels him to keep constantly extending his capital, in order to preserve it, but extend it he cannot, except by means of progressive accumulation.” (p 555)

In other words, his capital must expand or die.

The key to Ford's success was to increase productivity,
 thereby increasing surplus value to invest and expand, which
 in turn brought further increases in productivity.
So far, therefore, as his actions are a mere function of capital — endowed as capital is, in his person, with consciousness and a will — his own private consumption is a robbery perpetrated on accumulation, just as in book-keeping by double entry, the private expenditure of the capitalist is placed on the debtor side of his account against his capital. To accumulate, is to conquer the world of social wealth, to increase the mass of human beings exploited by him, and thus to extend both the direct and the indirect sway of the capitalist.” (p 555)

Marx quotes from Martin Luther a passage that is long, but worth quoting in full, given the return today in Britain of the usurer, in the form of the Pay Day Loan companies.

Taking the usurer, that old-fashioned but ever renewed specimen of the capitalist for his text, Luther shows very aptly that the love of power is an element in the desire to get rich. “The heathen were able, by the light of reason, to conclude that a usurer is a double-dyed thief and murderer. We Christians, however, hold them in such honour, that we fairly worship them for the sake of their money.... Whoever eats up, robs, and steals the nourishment of another, that man commits as great a murder (so far as in him lies) as he who starves a man or utterly undoes him. Such does a usurer, and sits the while safe on his stool, when he ought rather to be hanging on the gallows, and be eaten by as many ravens as he has stolen guilders, if only there were so much flesh on him, that so many ravens could stick their beaks in and share it. Meanwhile, we hang the small thieves.... Little thieves are put in the stocks, great thieves go flaunting in gold and silk.... Therefore is there, on this earth, no greater enemy of man (after the devil) than a gripe-money, and usurer, for he wants to be God over all men. Turks, soldiers, and tyrants are also bad men, yet must they let the people live, and Confess that they are bad, and enemies, and do, nay, must, now and then show pity to some. But a usurer and money-glutton, such a one would have the whole world perish of hunger and thirst, misery and want, so far as in him lies, so that he may have all to himself, and every one may receive from him as from a God, and be his serf for ever. To wear fine cloaks, golden chains, rings, to wipe his mouth, to be deemed and taken for a worthy, pious man .... Usury is a great huge monster, like a werewolf, who lays waste all, more than any Cacus, Gerion or Antus. And yet decks himself out, and would be thought pious, so that people may not see where the oxen have gone, that he drags backwards into his den. But Hercules shall hear the cry of the oxen and of his prisoners, and shall seek Cacus even in cliffs and among rocks, and shall set the oxen loose again from the villain. For Cacus means the villain that is a pious usurer, and steals, robs, eats everything. And will not own that he has done it, and thinks no one will find him out, because the oxen, drawn backwards into his den, make it seem, from their foot-prints, that they have been let out. So the usurer would deceive the world, as though he were of use and gave the world oxen, which he, however, rends, and eats all alone... And since we break on the wheel, and behead highwaymen, murderers and housebreakers, how much more ought we to break on the wheel and kill.... hunt down, curse and behead all usurers.” (Martin Luther, l. c.)” (Note 1, p 555)

Modern Capitalism is really a form of State Capitalism.  A very tiny
 number of very rich and powerful capitalists allocate Capital via
 international Stock Markets, and via their control over the Big Banks
 and the State, which control the huge amounts of Capital built up in
 workers pension funds,and National Insurance Funds.  The Rate of
 Profit is nowadays essentially equalised, instantaneously with
 adjustment for risk, on the basis of billions of adjustments to share
 prices.  The Capitalists have become mere coupon clippers and
In fact, as we will see later, as part of the process of capitalist accumulation, the state placed limits on the interest rates that could be charged, precisely because this kind of usury drained resources that would otherwise have been used for productive investment.

The more capitalism develops, and the social function of the capitalist diminishes, the more the individual capitalist is separated from the actual process of production, and of accumulation. Their role becomes increasingly merely that of the “coupon clipper”, who invests money capital in bonds, shares and other assets, simply seeking the highest return.

But, on this basis, they are no longer, as an individual, constrained to accumulate or die, because that is only a law which applies to the individual capital, not the individual capitalist.

Although each capital continues to be constrained by the need to
accumulate or die, the individual capitalist, whose capital
 is footloose - free to be invested one minute in Microsoft, the next
 in Apple, today in Shanghai tomorrow in Birmingham - is not.
  Their activity is designed only to maximise their total returns
 (dividends, yield, interest, and capital gain) in order to maximise
 their potential to consume.  Subjective analyses of the motives
 and actions of individual capitalists, are therefore no basis for
understanding the underlying dynamic of Capital.
As capitalist production, accumulation, and wealth, become developed, the capitalist ceases to be the mere incarnation of capital. He has a fellow-feeling for his own Adam, and his education gradually enables him to smile at the rage for asceticism, as a mere prejudice of the old-fashioned miser. While the capitalist of the classical type brands individual consumption as a sin against his function, and as “abstinence” from accumulating, the modernised capitalist is capable of looking upon accumulation as “abstinence” from pleasure.

Two souls, alas, do dwell with in his breast;

The one is ever parting from the other.”

At the historical dawn of capitalist production, — and every capitalist upstart has personally to go through this historical stage — avarice, and desire to get rich, are the ruling passions. But the progress of capitalist production not only creates a world of delights; it lays open, in speculation and the credit system, a thousand sources of sudden enrichment. When a certain stage of development has been reached, a conventional degree of prodigality, which is also an exhibition of wealth, and consequently a source of credit, becomes a business necessity to the “unfortunate” capitalist. Luxury enters into capital’s expenses of representation. Moreover, the capitalist gets rich, not like the miser, in proportion to his personal labour and restricted consumption, but at the same rate as he squeezes out the labour-power of others, and enforces on the labourer abstinence from all life’s enjoyments. Although, therefore, the prodigality of the capitalist never possesses the bona fide character of the open-handed feudal lord’s prodigality, but, on the contrary, has always lurking behind it the most sordid avarice and the most anxious calculation, yet his expenditure grows with his accumulation, without the one necessarily restricting the other. But along with this growth, there is at the same time developed in his breast, a Faustian conflict between the passion for accumulation, and the desire for enjoyment.” (p 556-7)

Malthus, the representative of the landlord class, had his own solution to this problem. He proposed that the capitalists should content themselves with the business of accumulating and working in their factories, whilst all those classes that shared in their surplus value should content themselves as they always had with consumption! Not surprisingly, the capitalists, themselves becoming used to much greater consumption, thought little of the suggestion.

But, at least during this period, the bourgeois economists searched after and spoke openly about the extraction of this surplus value, the better to dispute its division with the landlords. That ended when the whiff of proletarian revolution in Europe began to enter the nostrils of the bourgeoisie, particularly in England, encouraging them to hush their dispute with their fellow exploiters.

The learned disputation, how the booty pumped out of the labourer may be divided, with most advantage to accumulation, between the industrial capitalist and the rich idler, was hushed in face of the revolution of July. Shortly afterwards, the town proletariat at Lyons sounded the tocsin of revolution, and the country proletariat in England began to set fire to farm-yards and corn-stacks. On this side of the Channel Owenism began to spread; on the other side, St. Simonism and Fourierism. The hour of vulgar economy had struck.” (p 559)

So began the whole industry of orthodox bourgeois economic theory, of explaining the existence of profit as arising from anything other than its actual source – the exploitation of workers. Nassau Senior, proposed to replace the term “Capital” with the term “Abstinence”, and to explain the existence and justification of profit on the grounds that it was the reward to the capitalist for abstaining from consumption, and thereby allowing their capital to be used for production.

The debunking of these theories of vulgar economy, still trotted out today, by the apologists of capital, was done in discussing the working day. So there is no point repeating it here. But, what can simply be said is that in all societies including those that do not have capitalists practising abstinence, a social surplus of production is created, and this surplus product allows the members of society to continue to consume at the same level, whilst adding to its stock of means of production. This in turn enables it to expand its production further, thereby facilitating both an increase in consumption and accumulation.

Richard Jones, who died a few years ago, and was the successor of Malthus in the chair of Political Economy at Haileybury College, discusses this point well in the light of two important facts. Since the great mass of the Hindu population are peasants cultivating their land themselves, their products, their instruments of labour and means of subsistence never take “the shape of a fund saved from revenue, which fund has, therefore, gone through a previous process of accumulation.” On the other hand, the non-agricultural labourers in those provinces where the English rule has least disturbed the old system, are directly employed by the magnates, to whom a portion of the agricultural surplus-product is rendered in the shape of tribute or rent. One portion of this product is consumed by the magnates in kind, another is converted, for their use, by the labourers, into articles of luxury and such like things, while the rest forms the wages of the labourers, who own their implements of labour. Here, production and reproduction on a progressively increasing scale, go on their way without any intervention from that queer saint, that knight of the woeful countenance, the capitalist “abstainer.”” (p 561)

Back To Part 2

Forward To Part 4

Monday, 25 February 2013

Markets Rise Strongly On Centre-Left Win In Italy

Exit polls indicate that the Centre Left will win around 38% of votes in the Italian elections, putting them in power in both houses of the Italian Parliament.  On the back of that news, meaning that policy will move away from austerity and towards growth, Italian markets soared by around 3.5%, and global markets rose strongly too.  That comes on the back of Moody's giving a similar signal of where Capital seeks to move policy.  Their decision to downgrade Britain's Triple A Rating cited clearly the detrimental effect austerity was having on growth, and the effect a lack of growth was having on Britain's ability to repay its debts.

That illustrates just how wrong Britain's Liberal-Tory Government is in persisting with its illiterate economic policies, not just in the face of what experience is once more illustrating, but in the face of what is even in the interests of the Capitalist Class they seek to serve.  But, it also demonstrates once again how wrong those on the Left are, who operate with a crude economic determinist view whereby  the policies adopted by Governments always have to be read back as mechanically meeting the needs of Capital.

Under some circumstances such as those of the 1920's and 30's, and those of the 1980's and 90's, economic policies that seek to boost profits by squeezing workers, and limiting government spending might meet the needs of Capital.  Yet, in fact, even during the 1980's and 90's, Government Spending actually continued to rise.  What is more specifically the case during those periods, is that Keynesian fiscal stimulus cannot act as a means of providing a sustainable boost to the economy.  But, in other periods, periods of Long Wave Boom, policies of Keynesian fiscal stimulus can fulfil that function, and so it makes no sense for Capital to create, or lengthen periods of recession by failing to use them, because such recessions by their nature mean lower profits, and even destruction of Capital Value.

The global economy, since 1999, has been in a period of Long Wave Boom, likely to last until around 2025-30.  That is manifest in the huge increase in global GDP during that period, similar increases in global fixed capital formation, and a 30% increase in the size of the global working-class.  A large part of that growth has come in the new dynamic centres of the global economy in China, Asia, Latin America, and increasingly Africa.  Even as North America, and Europe suffered from the Financial Crisis of 2008, and its aftermath, these other new centres of economic activity have continued to grow strongly.

The US, which suffered severely from the Financial Meltdown of 2008, has not grown as strongly as these new economies, but by using Keynesian stimulus it has at least managed to continue growing, and as a consequence the profits of US companies have continued to grow too.  That is in stark contrast to the performance of those European economies that have followed an Austerian economic policy.  Greece on the basis of those policies has become a basket case, Spain is experiencing a 1930's style Depression that is getting worse, and Britain's economy under the Liberal-Tories has stagnated, now falling into a Triple Dip Recession.  The only thing these policies are doing is weakening the economies that pursue them, and thereby weakening the position of the Capital based in them relative to Capital in other parts of the global economy.

Those right-wing populist parties that insist on pursuing these disastrous policies are not doing so in the interests of Capital, but in order to meet the interests of their own core membership and voter base.  In general that is not the dominant section of Capital, but those backward sections of Capital, the small businesses, alongside the backward sections of the middle class that have a parochial, nationalistic outlook.

For more than 100 years the interests of the dominant sections of Capital have been represented, not by these right-wing populist parties but by Social Democracy.  That is why they are welcoming the victory of the Centre-Left in Italy.


In the half hour since I wrote this post events have further confirmed its thesis.  New exit polls suggest that the Centre-Left might only have won control of the Lower House, with Berlusconi having a majority in the Senate.  On the back of that, the FTSE MIB not only lost all of the 3.5% gtain it had made during the day, but went into negative territory.  Other markets that had been showing solid gains on the day, also went into negative territory.


The price of a commodity is its exchange value expressed in terms of the money commodity. In this relation expressed in terms of Marx's value form the commodity stands in the position of the relative form of value whilst the money commodity stands in the position of equivalent form of value. In fact, Marx defines the money commodity as the Universal Equivalent Form of Value.

Marx sets out in Capital I, Chapter 3 the development of money. He does so by tracing the evolution of value into exchange value, and the evolution of Exchange Value via the Value Form until it arrives at the money form.

As Marx sets out at the beginning of Capital I, all use values, not just commodities, possess Value if they are the product of human labour. Value is labour-time. All societies from the most primitive, through to Communism allocate available labour-time to best meet their preferences i.e. to maximise their wealth/Use Values by balancing the utility obtained from those Use Values, against their Value (i.e. labour-time required for their production). This is the law of value. Marx summarised it in his Letter To Kugelmann, where he wrote,

“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.”

But also sets it out in its most simple form in the example of Robinson Crusoe, in Volume I, of Capital.

“Since Robinson Crusoe’s experiences are a favourite theme with political economists,let us take a look at him on his island. Moderate though he be, yet some few wants he has to satisfy, and must therefore do a little useful work of various sorts, such as making tools and furniture, taming goats, fishing and hunting. Of his prayers and the like we take no account, since they are a source of pleasure to him, and he looks upon them as so much recreation. In spite of the variety of his work, he knows that his labour, whatever its form, is but the activity of one and the same Robinson, and consequently, that it consists of nothing but different modes of human labour. Necessity itself compels him to apportion his time accurately between his different kinds of work. Whether one kind occupies a greater space in his general activity than another, depends on the difficulties, greater or less as the case may be, to be overcome in attaining the useful effect aimed at. This our friend Robinson soon learns by experience, and having rescued a watch, ledger, and pen and ink from the wreck, commences, like a true-born Briton, to keep a set of books. His stock-book contains a list of the objects of utility that belong to him, of the operations necessary for their production; and lastly, of the labour time that definite quantities of those objects have, on an average, cost him. All the relations between Robinson and the objects that form this wealth of his own creation, are here so simple and clear as to be intelligible without exertion, even to Mr. Sedley Taylor. And yet those relations contain all that is essential to the determination of value.” 

As Marx says in his letter to Kugelmann, all that changes in different societies is the form in which this law manifests itself, and in a commodity producing society it manifests itself via the Exchange Value of those commodities. That is what Marx sets out in the Value Form – the Value of commodity A is expressed as a certain quantity (a certain amount of Use Value) B. The money commodity is originally simply that some commodity that is separated off from all other commodities solely to act as the Universal Equivalent Form of Value. In order to fulfil that function, it is divided into regular physical amounts.

So, the Value Form might take the shape of Commodity A = 1 ounce of Gold. Here gold is the Universal Equivalent Form of Value, and the PRICE of commodities is expressed in various quantities of the Use Value Gold. The Price of commodity B might be 2 ounces of Gold, and so on. As Marx describes in Chapter 3, over time, these quantities of the money commodity are given names. A pound of sterling silver, being given the name Pound, and so on. Over time, also, the monetary authorities in order to cover their debts via inflation, as well as the general wear and tear of coins, erodes the actual content of precious metal in these coins, so that their actual weight loses all connection with their nominal description.

The price of commodities then is expressed simply in terms of this nominal monetary unit – a pound, a dollar and so on – whose origin as a certain quantity of some Use Value such as Gold or Silver has now been lost in the mists of time.

The price of commodities as the monetary expression of their Exchange Value also has to be distinguished from their price of production. The Price of Production is the cost price of the commodity plus the average rate of profit, expressed in terms of Money. It has also to be distinguished from the Market Price. The Market Price of commodities fluctuates above and below its Price of Production in response to variations in Demand and Supply.

Sunday, 24 February 2013

The Labour Theory Of Value

The Labour Theory of Value is a theory of Objective Value. It is not, as some people have confusedly believed, an Objective Theory of Value! There is a significant difference between the two.

A theory about anything can claim to be objective, which is what the latter is asserting, but in reality, because all theories are based on the perspectives of those who advocate them – the way they see the world – they are always to one degree or another subjective. Marx never claimed that his theory was objective in this sense. He advanced it unashamedly from the perspective of the working-class. That is not the same thing as falsifying data, being dishonest etc. On the contrary, it is being all the more honest for proclaiming from the beginning that the way you see the world depends upon your position within it.

What Marx advanced was a theory that was based upon the idea that Value itself was objectively measurable, just as the length of a table, a football field etc. is objectively measurable, using some agreed upon standard measure of length. The standard measure of length in the case of Labour is Abstract Labour.

There was nothing radical in Marx's proposal of such a Labour Theory of Value, because at the time he did so, the idea that Labour was the basis of value was accepted by nearly all economists. Nor was that something that had only recently been arrived at. The notion that Labour was the basis of value went back thousands of years. At about the same time both Plato in Greece and Mang-Tsze in China attempted to theorise commodity production in the context of the division within the commodity between Use Value and Exchange Value.

Both Plato and Aristotle put forward a Labour Theory of Value. Aristotle attempted to develop a Theory of Value based on Use Value, but he found himself stuck in a dead end. In the coming centuries, it was the idea that for the commodity it was its Exchange Value not its Use Value, that was determinant, and it was on that basis that the role of Labour in determining that Value played the central role.

Nor was it anything unusual that Labour should occupy this position. For millennia around the globe it had in practice played that role as I have set out here.

As described there, it is the performance of labour that is seen as the basis of value in the ideas of a whole series of thinkers such as Thomas Aquinas , and Albertus Magnus , Duns Scotus and Ibn Khaldun. Similarly, the Physiocrats believed that Labour was the source of all wealth, but living at a time prior to the domination of Capital, they believed that it was only agricultural Labour that produced Value.

The Physiocrats were followed by the Classical economists. They put forward the idea that Value was objectively measurable according to the labour-time required for production. For example, Benjamin Franklin wrote, 

“By labour may the value of silver be measured as well as other things. As, suppose one man is employed to raise corn, while another is digging and refining silver; at the year’s end, or at any other period of time, the complete produce of corn, and that of silver, are the natural price of each other; and if one be twenty bushels, and the other be twenty ounces, then an ounce of that silver is worth the labour of raising a bushel of that corn. Now if by the discovery of some nearer, more easy or more plentiful mines, a man may get forty ounces of silver as easily as formerly he did twenty, and the same labour is still required to raise twenty bushels of corn, then two ounces of silver will be worth no more than the same labour of raising one bushel of corn, and that bushel of corn will be as cheap at two ounces, as it was before at one ceteris paribus. Thus the riches of a country are to be valued by the quantity of labour its inhabitants are able to purchase.”


“trade in general being nothing else but the exchange of labour for labour, the value of all things is, as I have said before, most justly measured by labour.”

And Adam Smith wrote,

“The real price of everything, what everything really costs to the man who wants to acquire it, is the toil and trouble of acquiring it. What everything is really worth to the man who has acquired it, and who wants to dispose of it, or exchange it for something else, is the toil and trouble which it can save to himself, and which it can impose on other people…. It is natural that what is usually the produce of two days’, or two hours’ labour, should be worth double of what is usually the produce of one day’s or one hour’s labour.”

A look at the writings of these Classical Economists shows that it was on this basis that their economic analysis was conducted. For example, David Ricardo in his theory of Comparative Advantage sets out the argument in precisely these terms of the labour-time required for production of various commodities in two different countries.

Marx studied all of these theories in considerable depth, and set about resolving the inadequacies and contradictions within them. For example, it was clear that the idea implicit in Franklin's formulation that all labour was an equal measure of Value could not hold, any more than all feet can act as an equal measure of length. Different types of Labour – the labour of a joiner, a tailor, an accountant – vary just as one person's feet vary compared to another's. In the same way that a standard “foot” was arrived at as an abstraction from real feet, to act as a measure of length so Abstract Labour had to be considered the measure of Value.

But, also Adam Smith had found himself in a contradiction, because he believed, as did Ricardo and others, that what workers sold was Labour. But, if the value of a commodity was determined by the Labour required to produce it, say 10 hours (£10), then if the worker was paid the Value of the Labour they had supplied, which also equalled 10 hours (£10), then it was impossible for the capitalist to extract a surplus value from the worker. Marx resolved this contradiction by demonstrating that the Surplus Value arises because what the worker sells is not Labour, but Labour-power.

Finally, Ricardo's followers like John Stuart Mill recognised that market prices did not tally with Exchange Value, but found themselves stuck in a contradiction trying to reconcile the fact. Ricardo argued that these prices moved around the Exchange Value, which acted as a long term pivot. But, it was clear that this could not be correct either, because if commodities, produced by different industries with different organic compositions of capital, sold at their Exchange Values, then rates of profit would diverge wildly. All economists recognised that there would be a tendency for rates of profit to equalise, because capital would automatically move from where rates were low to where they were high. Marx reconciled this contradiction too by developing the concept of prices of production, which demonstrated the way in which Exchange Value forms the basis upon which surplus value arises, but this surplus value, existing as a fund at the level of Capital in General, of the economy as a whole, the exchange value or monetary equivalent of the society's surplus product, is then shared out by Capital on the basis of the share of the total capital provided by each industry. On this basis, the Value of the economy's output is determined by the labour-time required for its production, so the sum of Value will equal its monetary equivalent, the sum of prices. That is in fact tautological, because the amount of labour-time required to produce all of the output is determined, and thereby determines the total Value produced – Value is Labour-time – whilst the Exchange Value of all of that production is nothing other than the rate at which it exchanges against money i.e. its price!

In other words, the total Value (not to be confused with Exchange Value) of the economy's production is equal to the labour-time required for its production. This Value can then be expressed using Marx's value form. Here the total Value stands in the position of relative form of value. That is the thing whose Value is being expressed relative to some other commodity. That other commodity here is the Money Commodity. It stands in the position of equivalent form of value. In other words, money expresses the Value of the economy's total output as an Exchange Value, but that Exchange Value, by definition here is also its price, because the Exchange Value of any commodity measured in terms of money is its price - again not to be confused with Price of Production or Market Price.

As a theory of Objective Value, the Labour Theory of Value stands in contrast to Theories of Subjective Value, which form the basis of orthodox economics. These theories place their emphasis not on the Exchange Value of commodities, but on their Use Value. That is they argue that Value is subjective, depending upon the utility that each consumer obtains from any commodity as opposed to all other alternatives. To use the comparison with length used earlier, these subjective theories of value derive the Exchange Value/Price of a commodity on the basis of the sum of all the individual valuations of it made by consumers. The equivalent would be measuring the length of a table not by using a standard metre, but instead asking a large number of people to rank its length in relation to everything else, and then arriving at some average length!

I've dealt with some of the basic problems of orthodox economics based on this subjective theory of Value in my series reclaiming economics.

The fact that Marx develops a theory of objective value, of course, does not mean that his overall economic theory of capitalism can be reduced to some similarly objective, and, therefore, mechanical basis. On the contrary, Marx's analysis of Capitalism has to deal with the subjective nature of the psychology of individuals, be they workers, capitalists or consumers, precisely because his theory is a theory about real people, not automatons.

So, for example, Marx states that although there is an absolute minimum of wages, determined by what is physically needed to ensure the reproduction of the working-class, there is no such minimum for the rate of profit. Yet, Marx is fully aware that below a certain level, capitalists will tend to stop investing in productive capital, and instead spend on unproductive consumption, speculation and so on. There is no objective basis for determining when that will occur, because it depends upon the subjective decisions of the capitalists themselves, about what they think is an adequate level of reward.

Similarly, although an objective theory of value can determine what the Exchange Value/Price of any commodity is, it cannot determine what the level of demand for that commodity will be at that price. That again depends upon the subjective assessments of consumers. And Marx was fully aware of the idea of diminishing marginal utility derived from commodities the more of them are consumed. In other words, he understood the principle of Price elasticity of demand. In fact, it forms a central aspect of his theory of overproduction.