Monday, 30 June 2014

The Law of The Tendency For The Rate of Profit To Fall - Part 21

Fall In the Value Of The Variable Capital (5)

For the reasons set out in Parts 18 and 19, its clear that although the quantity of labour employed in any one industry sphere may reach some limit, no such limit exists for the employment of labour in general in the economy, precisely because, as Marx sets out, the surplus value produced does not have to simply keep being accumulated in the existing industries, as set out in Part 20. It branches out into the development of new industries with low organic compositions, and high rates of profit. It creates whole new needs for workers as consumers that transforms them as human beings and as providers of labour, because not only are their horizons for consumption, including for education, culture etc. widened, but in that very process the nature of their capacity to perform labour is also transformed.

“...likewise the discovery, creation and satisfaction of new needs arising from society itself; the cultivation of all the qualities of the social human being, production of the same in a form as rich as possible in needs, because rich in qualities and relations -- production of this being as the most total and universal possible social product, for, in order to take gratification in a many-sided way, he must be capable of many pleasures [genussfähig], hence cultured to a high degree -- is likewise a condition of production founded on capital.”

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. 

Just as the relative reduction of labour in any one sphere is accompanied by an absolute increase in the quantity of labour employed, as the total capital expands, so the ultimate reduction in employment in certain spheres goes along with the continual increase in the quantity of labour employed in the economy, and the continual increase in the mass of profits created by it.

But, in addition to the reduction in the quantity of labour employed, the value of the variable capital may fall for the other reasons previously outlined. I will examine those next.

Sunday, 29 June 2014

Capital II, Chapter 17 - Part 9

Given that we are talking only of simple reproduction, the situation is this. A capitalist starts a business with £5,000 of capital. They buy £4,000 of means of production, and £1,000 worth of labour-power. So, this £5,000, which they had in its money form, has now been spent, and is out there circulating, and consequently can come back to them to buy their commodities when they are put up for sale. However, as a capitalist, he expects to make a profit. This comes from the fact that the labour-power he buys is exploited at a rate of 100%. So, it produces £1,000 of surplus value.

Looking at the situation then, he has put £5,000 into circulation. £4,000 is in the hands of the producers of means of production. The £1,000 he paid as wages has been spent by his workers, to buy necessities, and is in the hands of the suppliers of means of subsistence. Of course, the producers of these means of production and subsistence will in turn have paid out money for wages, and for means of production themselves.

The fact, remains that £5,000 of money has been put into circulation by our capitalist and can return to buy his commodities. But, with the £1,000 of surplus value, created by his workers, those commodities now have a value of £6,000, leaving a shortfall of £1,000.

The answer to where this additional money, required to purchase these commodities, comes from requires us to take a step backwards. Because it takes a year for his commodities to come on to the market, and provide him with an income, he must have additional funds for his own consumption during that period. If his own consumption requirements come to £1,000, and we know they do because we have assumed simple reproduction where all surplus value is unproductively consumed, then he will have also, during the year, put this additional £1,000 into circulation, as he has bought the items required for his own consumption.

This £1,000 is not capital. It is not used capitalistically, to buy productive-capital. It is merely money used to buy commodities for individual consumption. The £1,000 of commodities he buys with this money themselves comprise a part of the society's total surplus product.

So, the total amount of money he has put into circulation is £6,000; £5,000 advanced as money-capital, £1,000 spent to buy commodities. Consequently, this £6,000, now in circulation, can return to him to buy the commodities he throws into the market. Of that £6,000, £5,000 go to replace the productive-capital, and £1,000 is available to him once again to fund his own personal consumption for the following year.

“And henceforth this operation is repeated every year. But beginning with the second year, the £1,000 which he spends are constantly the converted form, the money-form, of the surplus-value produced by him. He spends them annually and they return to him annually.” (p 339) 

If his capital turned over more frequently than once a year that wouldn't change things, but would mean he would need less money to cover his personal consumption, just as he would need to advance a smaller sum of money-capital to buy productive-capital. He would throw the same amount of money into circulation in total, its just that it would keep coming back to him faster, but in smaller amounts, for him to spend it again.

But, this has still not actually answered the question of where the money itself has come from. The question of where the additional money comes from has been dissolved because Marx has demonstrated that it comes from the same place that all of the other money comes from. Here the capitalist threw the additional £1,000 in to cover their expenditure. Yet, this simply poses the question where did this £6,000 come from?

Saturday, 28 June 2014

In Memory Of Bobby Womack

In memory of the late Bobby Womack whose death was announced today, I'm providing the link to one of his best dance records, which has lots of memories for me, and which I posted back in 2011.

I Feel A Groove.

And I'm also posting below another of his classic tracks from around the same time.  I can understand it.

Miliband And The Media

Murnaghan last Sunday, asked the question whether Ed Miliband is being hounded by a hostile media. Coming from someone who works for the Evil Media Empire, of Rupert Murdoch, the question itself seems a bit rich. The answer is, of course, Miliband is being so hounded, but the further, more interesting questions are why, and what should Labour do about it?

The glib answer to why would be that we have a Tory press, so why would we expect that they would not attack a Labour leader? But, that begs further questions such as, why do we have an overwhelmingly Tory press? The answer cannot be that the Tories are the party of business and Labour are the party of the workers. As far back as Lenin, it was recognised that Labour was only the Workers' Party in the sense that its membership was made up of workers, and it was organisationally and ideologically tied to workers organisation like the trades unions. But, as Lenin pointed out, it was a bourgeois workers' party. That is the reformist ideology that underpinned it was the same bourgeois ideology that underpinned the trades unions from whence it came, and which also dominated the vast majority of workers.

In other words, the LP, from the start, has been a party which has been little more than a development of the Liberal Party, from the end of the 19th century, a party that relies on the votes and activism of workers, but whose ideology, and, therefore, its actions, are ultimately governed by what is in the interests of capital, and in particular, that big industrial capital, whose interests, and those of the workers, are mediated and negotiated within a modern social democracy.

Over the last century, capital has had enough experience of Labour to affirm itself of this understanding. Nor is it the case that “Red Ed” is in fact anything more than the palest pink with a hint of purple. Miliband differs little ideologically from Blair, who repeatedly won the support of the Tory press, despite trebling spending on the NHS, introducing the minimum wage, let alone being an ardent advocate of that one idea sure to set Tories off on an apoplectic fit – Europe.

In fact, the one paper you would think would be the clearest voice of the interests of the most important section of British capital – the FT – has, if anything, been more pro-Labour than Tory. It has generally criticised the policy of austerity, as opposed to fiscal expansion, in the US, for example.

Although part of the explanation of the actions of the British press can be located in its ownership structure, which gives a few, very rich, press barons the ability to treat the papers in their stable as their own playthings, it also has to be remembered that newspapers are businesses, and have to provide a commodity they can sell. Each will then try to place its product in a segment of the market it believes it can exploit to maximise its sales.

The reason we have an overwhelmingly Tory press is not because the Tories represent the interests of capital, and newspapers are owned by capitalists. The reason is that a large proportion of the population, who buy newspapers, hold the same kind of reactionary views that the newspapers they buy are happy to validate for them. We have the gutter press we have, because it acts like a comfort blanket for bigots, and the kind of bigotry that infects a sizeable section of the population, and whose manifestation is shown in the votes for the BNP, UKIP and the Tories.

None of this bigotry should be confused with the interests of capital. In large part, it is, in fact, contrary to the interests of modern, large-scale capital, particularly in respect of Europe and the free movement of labour and capital. If its in the interests of capital at all, its only those backward sections of capital, particularly those kinds of small, inward looking capitals, that make up the core of Tory votes and membership.

There is then another reason why the media don't like Miliband, and that is he appears different – summarised by the media as geeky. A fundamental aspect of bigotry is the singling out of anything or anyone who is different. Ed Miliband might be the finest P.M. the country ever had, might have all the qualities of intelligence, organisation, hard work, determination and courage required, but all that amounts to nothing when, in the mind of a bigot, he appears as “different”.

And, once that meme is established, simple game theory demonstrates that no paper that wants to retain its readers is going to demur from it. Indeed, few media commentators are going to risk their own reputation and prospects by challenging it.

Unfortunately then, for Miliband, he faces a perfect storm, in relation to the media. On the one hand, he had the audacity to be elected leader, despite the fact that the majority of the media were backing his brother, and confidently predicting he would win. From the start, he has faced their wrath, therefore. Secondly, he is seen as different, which is never going to be acceptable to bigots, or those that appease bigots. Thirdly, he is seen as part of the metropolitan elite, whose culture is antipathetic to the reactionary ideas and bigotry of those backward sections of the population that make up the bulk of the readership of the Tory press, and whose ideas have been reinforced as a result of the economic crisis engendered by the policies of the Liberal-Tories, and for which Europe, immigration etc. are an easy explanation.

So, what should Labour do about that? Perhaps, given the money paid out to David Axelrod, its a question he should already have answered. And, in doing so, he should have advised Miliband not to appease the worst representative of that reactionary media, by posing with a copy of the Sun. In fact, Miliband should stop being an appeaser altogether. You cannot appease bigots. Their bigotry has to be confronted, and the fears that underlie their bigotry addressed.

Miliband did well when he was attacking the Evil Empire, rather than appeasing it. Labour in general needs to go on the attack. After 30 years of monetarist and Austrian orthodoxy it was inevitable that its spell would be hard to break. Gordon brown should take credit for doing so in 2008, in response to the financial crisis, but he and Alistair Darling, should not have responded to the Tories switch back to austerity in 2010, by following suit. They should have followed Obama's lead, in demanding a continuation of fiscal expansion, until the economic recovery was fully established.

Brown was also wrong to have opposed Blair's support for joining the Euro. A single European market only makes sense in the context of a single currency and state. Labour should be spearheading the drive, with workers' organisations across Europe, for the establishment of a United states of Europe. That would be the best way of dealing with the arguments of euroseptics about benefit tourism, and the undercutting of wages etc.

Instead of appeasing the bigots with weasel words about preventing foreigners obtaining benefits in Britain, Labour should say we need a united Europe to bring the low levels of workers benefits and conditions, in Britain, up to those of the best in Europe, such as Germany. Labour needs to give a strong, clear and confident message, based on promoting the interests not just of British workers, but all worker across Europe, and should do so unashamedly, rather than trying to appease those reactionary ideas of the Tories, which do not even represent the interests of big capital, which itself requires a forward looking, modern European economy, that can quite easily provide decent minimum standards for workers, even if the backward looking, inefficient small capitals, built up under Thatcher, cannot.

In fact, Miliband has the opportunity to make a great advance, simply by making the decisive break from all of the mistakes that arose under Thatcher and her heirs. There would be nothing geeky about that.

Northern Soul Classics - She's Wanted In Three States - Larry Clinton

Once reputed to be the most expensive Northern Soul record.  Another classic, that probably wasn't from one of Bill's relatives.

Thursday, 26 June 2014

The Law of The Tendency For The Rate of Profit To Fall - Part 20

Fall In the Value Of The Variable Capital (4)

Assume there are four industrial spheres. We can designate them as Food, Clothing, Shelter and Transport respectively. For the ease of calculation assume that the Organic Composition of Capital is the same in each. Such that:

C 1000 + V 200 + S 200 = 1400, R = 16.6% 

C 1000 + V 200 + S 200 = 1400, R = 16.6% 

C 1000 + V 200 + S 200 = 1400, R = 16.6% 

C 1000 + V 200 + S 200 = 1400, R = 16.6% 

Assume, each produces 1000 units of each commodity so the price per unit is £1.40.

Assume each industry employs 10 workers, each worker being paid £20.

Assume that technology remains constant, but assume increasing returns to scale. The first assumption is unrealistic, but improvements in technology would only emphasise the point rather than contradict it. The second assumption is completely realistic and empirically justified, as we see such economies of scale all the time. The £200 surplus in each industry is accumulated. So, 

C 1167 + V 233 + S 233 = 1633, R = 16.6% 

C 1167 + V 233 + S 233 = 1633, R = 16.6% 

C 1167 + V 233 + S 233 = 1633, R = 16.6% 

C 1167 + V 233 + S 233 = 1633, R = 16.6% 

However, this conclusion is clearly invalid because elasticity of demand will be different in each sphere. But, we have assumed that there are increasing returns to scale. In other words, although the value of constant and variable capital has increased by 16.6%, the quantity of use values will have risen by a larger proportion than this. Let us assume that the production of use values has risen by a third to 1,333 units in each sphere. Then the average price per unit would be £1.225. However, that assumes that there is sufficient demand for all of this production, at this price. There is no guarantee that is the case. Suppose, at the price of £1.225 per unit there is only demand for 1,166 units. In that case, the labour-time consumed in producing 167 units was not socially necessary. It has to be deducted from the value of the total production in each sphere. In that case the actual value of production will fall in each sphere to around £1,429, meaning the value of each unit falls to £1.07.

So, on this basis in each sphere we have:

C 1167 + V 233 + S 29 = 1429, R' = 2%

We have essentially assumed that only workers are consumers here. Clearly, capitalist consumption could soak up some of the additional surplus production, but the aim of capitalist production is not increased luxury consumption by capitalists, but the self-expansion of capital.

As Marx says,

“It will never do, therefore, to represent capitalist production as something which it is not, namely as production whose immediate purpose is enjoyment or the manufacture of the means of enjoyment for the capitalist. This would be overlooking its specific character, which is revealed in all its inner essence.”

Unless, capitalists were to get together, and conspire to collectively raise their own unproductive consumption, then competition between capitalists will drive them to continue to accumulate capital, and to seek to each gain a larger market share. Of course, it is possible to argue that this is precisely what the capitalist state does on behalf of Capital in General via Keynesian intervention.

So, capital will try to sell this additional surplus production, but because, beyond a certain limit, demand does not increase proportionate to falls in price i.e. the demand is price elastic, prices have to fall proportionately more than the desired increase in demand! To use the terms of orthodox economics, the more demand is satisfied, the lower the marginal utility of each unit. To put it in Marx's terms, socially necessary labour-time is determined ultimately in the market, it cannot be separated from what the actual level of demand for each product is.


“The same value can be embodied in very different quantities [of commodities]. But the use-value—consumption—depends not on value, but on the quantity. It is quite unintelligible why I should buy six knives because I can get them for the same price that I previously paid for one.”

Any surplus production over what is demanded, is not socially necessary labour-time. It cannot be counted as value creating, and the consequence is that the value of each unit of production is lowered accordingly.

Of course, as it stands this is unrealistic. In fact, the elasticity of demand in each sphere will be different. In order to create sufficient demand to consume the excess supply of food, for instance, may require only a small drop in price. In order to get people to consume the excess units of transport (by driving more, taking more or longer train journeys etc) may require a much bigger fall in prices. 

The workers may continue to spend the same amount of money overall, but its division amongst the different spheres will now be changed as a consequence of the different elasticities of demand. So, the price per unit for food might fall to only £1.15, for clothing to £1.14, whereas for shelter it may fall to £0.98, and to £0.97 for Transport. Yet, its clear that this will then have further consequences. At these prices not only would there be divergent rates of profit in each sphere, but in some spheres if current levels of production were maintained there would be losses. Capital would then move to where the rate of profit was higher. The increased supply would then cause prices and profits in that sphere to fall, whereas prices and profits in the area out of which capital has moved would rise. Its clear from what has been said that the end result will be a new structure of capital, with more capital employed in food and clothing, and less in shelter and transport, until the same price per unit, and the same rate of profit is established.

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.

Wednesday, 25 June 2014

Capital II, Chapter 17 - Part 8

All purchases then come from only one of two sources. Either from the workers, from their wages, but these are only a secondary source, because the wages themselves come from capital, or else from capital itself. That includes all those with whom capital shares its spoils, e.g. the landlord's rent, the money-capitalists interest, the merchant capitalists profit, and the capitalist state's taxes.

“The capitalist class remains consequently the sole point of departure of the circulation of money. If they need £400 for the payment of means of production and £100 for the payment of labour-power, they throw £500 into circulation. But the surplus-value incorporated in the product, with a rate of surplus-value incorporated in the product, with a rate of surplus-value of 100%, is equal in value to £100. How can they continually draw £600 out of circulation, when they continually throw only £500 into it? Nothing comes from nothing. The capitalist class as a whole cannot draw out of circulation what was not previously thrown into it.” (p 338) 

This is not a question about the velocity of money or the rate of turnover of capital discussed earlier. Nor is it a question of the circulation of value, or the source of surplus value. It is a question of where the money that is the equivalent of this value itself comes from. We know that a given amount of money, say £500, can circulate £5,000 of commodities, if it is exchanged ten times a year. Similarly, that £500 of money capital can set in motion £5,000 of productive capital if it is turned over ten times a year.

Rather this is assuming that all these other factors remain constant, and asking the question where the amount of money comes from. In other words, if £500 was required before, and £600 is required now, where does this additional £100 come from?

“Indeed, paradoxical as it may appear at first sight, it is the capitalist class itself that throws the money into circulation which serves for the realisation of the surplus-value incorporated in the commodities. But, nota bene, it does not throw it into circulation as advanced money, hence not as capital. It spends it as a means of purchase for its individual consumption. The money is not therefore advanced by the capitalist class, although it is the point of departure of its circulation.” (p 338-9) 

This is only true if we are talking, as Marx is here, about a situation of simple reproduction. Where we are talking about expanded reproduction, then a portion of society's surplus product has to exist in the form of the constant capital, and means of subsistence, that will be used to expand production. The money advanced to buy this additional productive capital can only be advanced as additional money-capital.

Monday, 23 June 2014

The Law of The Tendency For The Rate of Profit To Fall - Part 19

Fall In the Value Of The Variable Capital (3) 

In Part 17, the situation was examined where the actual quantity of labour-power employed is reduced. That could be because fewer workers are employed, or because simple labour replaces complex labour. The reduction in the quantity employed may be either relative or absolute for any particular industry, but, for the reasons Marx sets out, for the total social capital, it can only ever be a relative reduction in the quantity of labour employed. In other words, a necessary concomitant of the tendency for the rate of profit to fall is that the mass of profit, and the mass of capital increases. The consequence is that for the total social capital, although the variable capital falls relatively, it increases absolutely, so that employment continues to rise, apart from temporary fluctuations.

For any particular capital, the very processes which lie behind the tendency for the rate of profit to fall, also act to increase the mass of capital employed, and, therefore, the mass of labour employed. That is because, as was seen, the mass of profit increases facilitating increased accumulation of capital, but also because the rate of profit itself is increased by that very same process. As Marx puts it,

“These different influences may at one time operate predominantly side by side in space, and at another succeed each other in time. From time to time the conflict of antagonistic agencies finds vent in crises. The crises are always but momentary and forcible solutions of the existing contradictions. They are violent eruptions which for a time restore the disturbed equilibrium.”

(Capital III, Chapter 15, p 249) 

But, there is equally a limit to the quantity of capital that can be employed in a particular sphere, before it simply runs up against the limits of the market to absorb its production. It is not an absolute limit. It varies according to time, and according to conditions of supply and demand. So, for example in respect of time, we saw Marx argue previously,

“When spinning-machines were invented, there was over-production of yarn in relation to weaving. This disproportion disappeared when mechanical looms were introduced into weaving.” (TOSV2 Note p 521)

In other words, the overproduction of yarn here was only a reflection of the inability of the market to absorb all of this production, given the state of development of the weaving industry, which constituted its consumers. Once the latter develops further, it can absorb all of the overproduction and more. These kinds of disproportions are common, as described earlier in relation to industries such as microchips, and shipping, and in relation to the Cobweb Theorem.

But, as Marx points out, that limit is elastic, because at lower market prices, the demand for any commodity will be higher, so the market will absorb a greater quantity of its production. The point here is that the elasticity of demand for any commodity will then determine, how low the market price must fall in order to absorb any given quantity of supply, and this price may be so low as to not be sufficient to cover the cost of production, so not only is the surplus value produced not realised, but the capital itself cannot be fully reproduced.

In other words, the capital has been over accumulated in this sphere; too many use values have been produced compared to what can be sold at market prices high enough to reproduce the capital. Ideally, before such a situation arises, the excess capital should have been allocated to some other sphere of production, where demand for the output would have been sufficient to guarantee market prices that would reproduce the capital consumed. That is exactly the point that Marx makes above both in the Grundrisse, and in Capital III, where he talks about the development of these new lines of production, using the surplus capital, and the relative surplus population.

The new lines of production are labour intensive, and they produce very high rates of profit. As a result, they also validate the capital in the existing industries, because they create the revenues sufficient to generate demand also then for the output of those old industries.

“On the other side, the production of relative surplus value, i.e. production of surplus value based on the increase and development of the productive forces, requires the production of new consumption; requires that the consuming circle within circulation expands as did the productive circle previously. Firstly quantitative expansion of existing consumption; secondly: creation of new needs by propagating existing ones in a wide circle; thirdly: production of new needs and discovery and creation of new use values. In other words, so that the surplus labour gained does not remain a merely quantitative surplus, but rather constantly increases the circle of qualitative differences within labour (hence of surplus labour), makes it more diverse, more internally differentiated...The value of the old industry is preserved by the creation of the fund for a new one in which the relation of capital and labour posits itself in a new form... This creation of new branches of production, i.e. of qualitatively new surplus time, is not merely the division of labour, but is rather the creation, separate from a given production, of labour with a new use value; the development of a constantly expanding and more comprehensive system of different kinds of labour, different kinds of production, to which a constantly expanding and constantly enriched system of needs corresponds.”

The real problem arises when not enough of these new spheres exist. Then instead of there being an overproduction in one sphere, there arises an overproduction in several, which can then cause workers to be laid off, aggregate demand falls, and so there arises a generalised overproduction.

“At a given moment, the supply of all commodities can be greater than the demand for all commodities, since the demand for the general commodity, money, exchange-value, is greater than the demand for all particular commodities, in other words the motive to turn the commodity into money, to realise its exchange-value, prevails over the motive to transform the commodity again into use-value.” (TOSV2 p 505)

Sunday, 22 June 2014

Capital II, Chapter 17 - Part 7

Thomas Tooke wrote a treatise on money and prices entitled, “An Inquiry Into The Currency Principle, The Connection Of The Currency With Prices, and The Expediency Of A Separation Of Issue From Banking”, 1844. Marx quotes from it extensively in his economic works, and it was probably the definitive analysis of prices and their movement of the time.

If we take the previous £500 of circulating capital, and assume this represents the total social capital, then it has engaged in production, creating a surplus product with a value of £100. So, £600 of commodities are now thrown into circulation. But, where does the additional £100 of money come from to circulate them?

Marx sets out a series of what he calls “plausible subterfuges”, which could be used to provide the answer. For example, not all capitalists replace their constant capital at the same time. So, a capitalist can obtain an amount of money, representing the value of their commodity, part of which is the value of the constant capital. If they do not spend that money to replace that constant capital immediately, this money is then surplus. But, this cannot be the answer because later they will be spending this money without putting its equivalent value back into circulation.

“It might be further said: Capitalist A produces articles which capitalist B consumes individually, unproductively. B’s money therefore turns A’s commodity-capital into money and thus the same sum of money serves to realise B’s surplus-value and A’s circulating constant capital. But in that case the question that still awaits solution is assumed still more directly to have been solved, namely: where does B get the money that makes up his revenue? How did he himself realise this portion of the surplus-value of his product?” (p 336)

Another suggestion might be that the money held by the capitalist for payment of wages is only paid out over a period of time, and so the money not actively being paid out could be available to realise surplus value. But, the larger the turnover period, the more money-capital the capitalist has to retain for that purpose meaning less is available to be thrown into circulation.

In fact, it is the money paid out to the workers as wages, which they then use to buy commodities, which is one means by which the surplus value is realised i.e. converted to money. That is because the price of the commodities they buy includes that surplus value. But, by the same token, it is also the purchases of capitalists that also realises the surplus value, in the commodities they buy. So, the question of where this additional money, in the hands of both workers and capitalists, comes from still remains. 

Nor can the answer be that when fixed capital is bought, a large amount of money is thrown into circulation, which is only withdrawn gradually. The fixed capital purchased, itself had part of its price comprising surplus-value. If the price was £600, with £100 being surplus-value, the question still remains, where this £100 initially came from.

“The general reply has already been given: If a mass of commodities worth x times £1,000 has to circulate, it changes absolutely nothing in the quantity of the money required for this circulation whether the value of this mass of commodities has been produced capitalistically or not. The problem itself therefore does not exist. All other conditions being given, such as velocity of the currency of money, etc., a definite sum of money is required in order to circulate commodities worth x times £1,000 quite independently of how much or how little of this value falls to the share of the direct producers of these commodities. So far as any problem exists here, it coincides with the general problem: Where does the money required for the circulation of the commodities of a country come from?” (p 337) 

It does, however, appear as a problem for capitalist production. That is because the capitalist appears to be the starting point. The worker has money in wages to throw into circulation, but only because they have been paid those wages from the capital of the capitalist, just as it is the capitalist who provides the capital to buy the means of production.

Saturday, 21 June 2014

AWL – Apologists Without Logic

Last week, Tony Blair defended his and Bush's illegal invasion of Iraq, that has led to the current chaos, in the country, and the possibility that a large part of it, along with a large part of Syria, will be taken over by ISIS. Blair claimed that the current chaos, in Iraq, would have happened anyway, because Iraq would have been subject to the same forces that led to the Arab Spring. Blair's comments have led many commentators to wonder whether he has gone mad, because these comments are so far removed from the real world. Most recognise that his comments are really just a pathetic attempt to justify a disastrous policy, that has been proven to be so by history. But, Blair is not alone in having supported a disastrous policy, over Iraq, or in trying now to justify it, by an apologism that reflects that its advocates are without logic, or at least that they have to zig and zag so much, to justify their mistakes, that, like Blair, their comments leave them looking to be either mad, or simply totally divorced from reality. Such are the recent comments by the AWL.

In an article on 17th June Martin Thomas, writes,

“For us in Workers' Liberty, the horrible events confirm the arguments we made during the previous simmering sectarian civil war in Iraq (especially 2006-7) for slogans of support for the Iraqi labour movement and democracy against both the US forces and the sectarian militias, not the negative slogan "troops out". The two-word recipe "troops out" then certainly entailed a sectarian collapse like this one, only worse.”

But, of course, the AWL did not take a position of equal opposition to both US forces and sectarian militias. First of all, the AWL did not call for a defeat of the US forces by the working-class, but rather saw those US forces as the saviours of the Iraqi workers – Martin Thomas, at the time, even wrote articles about the Iraqi workers being provided with safe zones, and breathing space, within the Green Zone – against the sectarian militias. Secondly, the AWL did not even take an even handed approach to the sectarian militias themselves. Because the Shia militias were allied with US imperialism, the AWL effectively sided with them, more or less presenting the Sunni militias as being the only “insurgency”, despite the fact that it was clear that the Shia militias were playing a clever game of allying with the US against the Sunnis, whilst taking weapons and support from Iran, to launch attacks on the US and Britain, in majority Shia areas. In the same way, today, Maliki's sectarian Shia regime, having alienated every other sect in the country, is now requesting the US bail it out again, by bombing Sunni areas under the control of ISIS.

The AWL bigged up Shia politicians, like Sistani, describing him at the time as some kind of constitutionalist. This is the same Sistani who at the time was calling for gays and lesbians to be murdered on the streets, and who today is rallying the Shia for a sectarian Civil War against Sunnis.

This mealy mouthed approach, of claiming to be opposed to both sides, whilst, in practice, being obviously on one side, is typical of the approach the AWL have taken in other such cases. When the USSR was collapsing, the AWL sided with imperialism's representative in Russia, Yeltsin, rather than with the Russian workers opposing imperialism. In the Balkans, the AWL supported imperialism and the KLA against Milosevic, rather than supporting the workers, in the area, against both. In Iraq, the AWL supported the US and its Shia allies, rather than promoting the Iraqi working-class as the agent of change. Although. the AWL talk about supporting the Iraqi workers, that support was reduced to being simply a tepid Economism, as was the programme of action they proposed for the Iraqi workers.  In Libya, the AWL supported imperialism, the feudal Gulf states (who it ridiculously claimed were the agent for bringing bourgeois democracy to the region!) and the jihadists against Gaddafi. In terms which were almost identical to the apologism for political Islam used by the SWP to defend their uncritical support of Hezbollah, the AWL claimed that it was inevitable that the opposition to Gaddafi, after years of repression, would take the form of jihadism.  In Syria, it supported the same forces against Assad. In the Ukraine, it is openly siding with imperialism's chosen few, and minimising the role of the Ukrainian fascists. It has said little about the billions of dollars and direct intervention by the US in the Ukraine, which the US itself has openly admitted, whilst uncritically accepting the US's allegations about Russian intervention in the Ukraine.  Meanwhile the regime is carrying out the same kind of murderous attacks on the people of Eastern Ukraine, that the AWL would usually condemn.  On other occasions it would refuse to oppose intervention by outside forces against such atrocities, but it has attacked Russia for an armed  intervention that it has not even made. That's not to say that Russia has not been intervening in Ukraine, but its intervention has been no different than that made by the US.   Of course, what the AWL mean is that they would not oppose intervention by the forces of US imperialism in such cases. Failing to oppose intervention by Russian or other forces, is for the AWL quite a different matter, despite their claim to impartiality. For example, when Russia intervened in South Ossetia to stop the genocidal attacks of Saakashvili, only a week later did the AWL manage to put together a form of words to try to reconcile their opposition to Russian intervention with their studied refusal to oppose US intervention in similar cases elsewhere.

In each case, the consequences of their position has been disastrous for the workers of the particular country. In the USSR, the kleptocratic regime of Yeltsin followed the example of Thatcher, in Britain, in selling off state assets, on the cheap, to its cronies, creating a gangster regime, if anything far worse than that under the Stalinists. At the same time, the economic policies pursued by Yeltsin, under guidance from imperialism, cratered the economy, and left many Russians feeding themselves from rubbish bins!

In Kosovo, the ethnic conflict between Albanian and Serb Kosovans, that was stoked by the KLA, itself backed by the CIA, has been replaced by ethnic cleansing of Serbs by Albanians under the protection of US and EU imperialism.

In Iraq, we now have the likelihood of the country breaking into three, which has been likely since 2003. We have the working-class marginalised, as a sectarian civil war develops, and we have the possibility of 12th century medievalists having control over a sizeable portion of the middle east, with access to some of the latest weapons, provided to them by imperialism, and their allies in the gulf states, as well as access to hundreds of millions of dollars obtained from Iraqi banks, with which to finance jihadist attacks across the globe, and to finance large scale recruitment campaigns.

In Libya, imperialist bombing virtually levelled the country, not to mention the devastation to come, in future decades, as a result of the use of depleted uranium munitions. The intervention of imperialist special forces on the ground, eventually destroyed the regime, only, as in Iraq, to then leave the door wide open to the only truly organised forces in the country, to take over – the jihadists.

In Syria, the country has been reduced almost to rubble even without the imperialist bombing that took place in Libya, as a result of the large scale arming of jihadist forces by the CIA, by the Gulf states, and by the historic power house behind Islamic reaction in the area, Turkey. Only as the US itself seemed to begin to realise the danger it had created, as political Islam began to take over regime after regime in Egypt, Tunisia etc., and as the jihadists took heart from this to spread out into Mali, and other neighbouring states, to begin to threaten the regime in Jordan, etc., with the inevitability that ultimately Israel would be in the firing line, did the AWL change its stance of uncriticial support for the “rebels” in Syria.

This is very similar to the mistakes that the Left made in 1979 in relation to the Iranian revolution. In a desperate desire to be on the side of a revolution, the Left forgot the basic Marxist requirement of analysing the nature of the social forces involved, and of analysing the material conditions under which the revolution was taking place, to determine what the likely outcome of it was. The reality is that in societies that have such powerful vertical cleavages that cut across class lines, and where there exist ideological organisations with powerful messages around which to organise their masses, with well organised cadres able to act in a disciplined manner, the kinds of result that have been seen are virtually inevitable.

Indeed, that is why Bonapartist regimes were established in these countries. But, that brings us to the other lack of logic in the AWL's position. They argue that they were right not to call for “Troops Out” of Iraq, because the current sectarian conflict was an inevitable result from it. We'll leave aside the fact that, on this basis, Britain should still have been ruling India, because the previous 200 year rule had not been sufficient for colonialism to have established a stable regime! But, the other point here is that, using this argument, neither should they have called for the removal of Gaddafi in Libya or Assad in Syria, or Mubarak in Egypt, or indeed Saddam in Iraq, and so on, because the removal of these strong men is what really opened the door to sectarian civil war!!!  If the AWL policy is based on not calling for actions that will have consequences contrary to those you desire, in most places around the world, they should not be calling for the removal of the Bonapartist and militarist regimes that keep a lid on this kind of sectarian conflict!

The point is not should socialists call for the removal of dictators, or colonial rulers, or imperialist military forces, but who they direct their call to to bring about such removal. In all cases, Marxists direct that call to the working-class, both the working-class of the particular country or region, and the working-class of the entire globe. But, the AWL, like their fellow third-campists of the SWP, are unable to do that, because they have lost faith in the ability of the working-class to act as the major agent of historical change. Both look to other larger forces – various “anti-imperialist” forces in the case of the SWP, “democratic imperialism” and the capitalist state for the AWL.

The reality is, of course, that the US did not leave Iraq because the SWP, or Stop The War, demanded they do so! If the SWP, and the working class in Britain or the US, really did have the power to bring that about, then it would have been absolutely correct to have demanded “Troops Out”, because such a seismic defeat of imperialism by the British and US working-class, would have far outweighed the undoubtedly unfortunate consequences for Iraq that flowed from it. As Lenin put it, the interests of one small fraction of the global working-class can never be placed higher than the interests of the working-class as a whole.  But if the British and US workers were so powerful that they could have brought about such a defeat of imperialism and forced a retreat, the issue of “Troops Out” of Iraq, would have been reduced to a minor matter. Rather what would have been the order of the day would have been the survival of capitalism in the US and Britain itself.

But, this again reflects how far sects like the AWL are from reality. Any sane person, looking at the ranting of an organisation of less than a hundred people, about how this or that demand might affect world events, in the way the AWL propose, in relation to “Troops Out”, really would have to question their sanity. They engage in such discussion as though they were the same organisations that, in the first 40 years of the 20th century, were able to mobilise millions of workers behind them, and thereby really could affect world events. Whether its because the members of these organisations are suffering from some kind of Napoleon complex, having been large fish in very tiny ponds for so long that they continually suffer from such gross delusions of grandeur, or whether it is just part and parcel of the fantasy they have to maintain, in order to retain their student recruits for a while longer, is hard to say.

In truth, I have some sympathy with the idea that, under the conditions, in Iraq, the demand for Troops Out might not have been the top of my list, just as given the reality under Saddam, the demand for Saddam Out would not have been a top priority either. After all, all Marxists want a socialist revolution, but it would be senseless to make its advocacy the first part of your propaganda at all times. Lenin only raised the demand for "All Power To The Soviets" when he believed the time was right to do so, and Trotsky sets out why its not right to continually demand the setting up of Workers Councils.  A shop steward who day after day called on their members to strike, no matter what the situation, would be a bad leader, and likely to lead them to disaster. That is not the same, however, as that shop steward explaining at every opportunity that the workers had to rely on their own strength, that ultimately the union's bargaining strength is only as great as the willingness of the members to take action to achieve its demands.  What was wrong with the AWL's opposition to Troops Out was the argument and the politics behind that opposition.  It was an opposition based on the idea that the occupation was a lesser evil than the jihadists, it was an opposition based on the AWL's repeated refusal, if not tacit support for, the intervention of imperialism to carry out the historic tasks of the working-class.  It reflects the AWL's lack of faith in the historic agency of the working-class, which is also reflected in their economistic programme for the British working-class, and its repeated nationalistic and reformist demands for the capitalist state to act on its behalf, by nationalistic measures such as nationalisation, rather than calling for the self-activity and self-determination of the workers themselves.

The same is true in Iraq. The first priority of socialists in Iraq was to build the strength of the Iraqi workers, and that means not subordinating their interests to some limited bourgeois democratic interests. As Lenin put it, our goal is not the self-determination of peoples, but the self-determination of the working-class. If the former contradicts the latter, we act to achieve the latter. That cannot be achieved simply by limiting yourself to purely trade unionist, economistic demands.  The reality also is that socialists in Iraq, would have to have been explaining to workers, why both the US occupation and the sectarian militias, and Saddam and his regime before were all equally their enemies. It would not be possible to do that, if like the AWL you were opposing withdrawal of the US troops on the basis that they were protecting the workers from their other enemies. To the extent that Iraqi workers themselves were wanting to kick out the US occupation, it would have been up to socialists to support them, whilst arguing for doing so in an intelligent way, building their own forces, economically, socially and politically, so as to be able to successfully achieve that goal without risking handing over power to another enemy. The AWL could never do that, because kicking out the occupation was something they opposed full stop.

In Iraq, the AWL have been able to justify their mealy mouthed approach because they did oppose the invasion. But, that opposition has to be put in the context of the AWL's position in every other situation. Whether it is in Kosovo, Libya, or Syria, the AWL did not openly call for imperialist intervention, but they made clear that they would not oppose it either. On the contrary, they argued that such intervention, if it defeated, the opponents of “democratic imperialism” would be a good thing. In the case of Iran, they even tried to provide pre-emptive support for a possible Israeli strike on Iran's nuclear facilities! They argue that this is justified because we should not oppose measures that achieve goals we have set for ourselves.

That is completely at odds with the Marxist method. For Marxists, the ends do not justify the means. It is not at all inconsequential for us how history's tasks are achieved. That is the typical position of the Liberal not the Marxist. When Russian Liberals like Miliukov and Kirillovich adopted that position in relation to the Balkans, Trotsky opposed them in clear terms.

"But it is not at all a matter of indifference by what methods this emancipation is being accomplished. The method of “liberation” that is being followed today means the enslavement of Macedonia to the personal regime in Bulgaria and to Bulgarian militarism; it means, moreover, the strengthening of reaction in Bulgaria itself. That positive, progressive result which history will, in the last analysis, extract from the ghastly events in the Balkans, will suffer no harm from the exposures made by Balkan and European democracy; on the contrary, only a struggle against the usurpation of history's tasks by the present masters of the situation will educate the Balkan peoples to play the role of superseding not only Turkish despotism but also those who, for their own reactionary purposes, are, by their own barbarous methods, now destroying that despotism...

Our agitation, on the contrary, against the way that history's problems are at present being solved, goes hand in hand with the work of the Balkan Social Democrats. And when we denounce the bloody deeds of the Balkan 'liberation' from above we carry forward the struggle not only against liberal deception of the Russian masses but also against enslavement of the Balkan masses.”

(Trotsky on The Balkan Wars, p 293-4)

And he writes, removing the arguments of those like the AWL that non-opposition to intervention excuses them,

“It is necessary to vindicate the possibility for these peoples themselves to settle their own affairs, not only as they wish and see fit but also by their own strength, in the land where they are established. This means that European democracy (he means here social democracy or the Marxists) has to combat every attempt to subject the fate of the Balkans to the ambitions of the Great Powers. Whether these ambitions be presented in the naked form of colonial policy or whether they be concealed behind phrases about racial kinship, they all alike menace the independence of the Balkan peoples. The Great Powers should be allowed to seek places for themselves in the Balkan Peninsula in one way only, that of free commercial rivalry and cultural influence.

The Balkans for the Balkan Peoples! But this point of view signifies nonintervention. It means not only opposition to the territorial ambitions of the Great Powers, but also rejection of support for Balkan Slavdom in its struggle against Turkish rule. Isn't this a policy of narrow nationalism and state egoism? And doesn't it mean democracy renouncing its very self?

Not at all. Democracy has no right, political or moral, to entrust the organisation of the Balkan peoples to forces that are outside its control – for it is not known when and where these forces will stop, and democracy, having once granted them the mandate of its political confidence, will be unable to check them.” (p 148-52)

And in a fitting description of the aftermath of such intervention, and as an epitaph for the policy of the liberal interventionists and Third Campists like the AWL, Trotsky describes what such liberation from above results in, in terms that today could describe Iraq, Afghanistan, Libya, Syria and everywhere else that imperialism has destroyed.

“If you don't see the link between today's disgrace and yesterday's 'glory', that's because you imagine that in the Balkans somebody is conducting a policy and answering for its reasonableness. In actual fact, policy is making itself down there, just like an earthquake. It was precisely the first war, the 'war of liberation' that reduced to insignificance, to a negligible quantity, all the factors of calculation and political discretion. Blind, unthinking spontaneity came into its own – not the benign spontaneity of awakened mass solidarity, which already has so many good deeds to its credit in history, but malign spontaneity, the resoluteness of which is only the other side of blind despair.” (p 327)

“'Free'! And to whom, pray, are the Macedonians to pay the costs of their 'liberation'? And exactly how much do these costs amount to? How easily people operate with words, and now with living concepts, when they are not involved themselves! You, Ivan Kirillovich, say that peace is not an end in itself and so on, but you are letting your vision of reality be obscured. 'Free'! Have you any idea what the areas that were recently the theatre of war have been turned into? All through those places a terrible tornado has raged, which has torn up, broken, mangled, reduced to ashes everything that man's labour had created, has maimed and crushed man himself, and mortally laid low the young generation, down to the baby at the breast and even further to the foetus in the mother's womb. The Turks burned and massacre as they fled. The local Christians, where they had the advantage, burned and slaughtered as the allied armies drew near. The soldiers finished off the wounded, and ate up or carried off everything they could lay their hands on. The partisans, following at their heels, plundered, violated, burned. And, finally, along with the armies, epidemics of typhus and cholera advanced across the 'liberated' land.” (p 330)

Northern Soul Classics - C'mon Train - Don Thomas

Another Wigan classic, this time from Don Thomas.

Thursday, 19 June 2014

The Law of The Tendency For The Rate of Profit To Fall - Part 18

Fall In the Value Of The Variable Capital (2)

Suppose, the quantity of labour-power employed is reduced. It could be that this is because the scale of operation for this capital is itself reduced. In other words, from an initial situation of 

c 1000 + v 1000 + s 1000,

the capital is reduced to,

c 500 + v 500 + s 500.

In that case, the variable capital has been reduced by 50%, and the surplus value has been reduced by 50% along with it. The rate of profit is not changed here, because the organic composition of capital has not changed. It was 1:1 initially, and remains 1:1 after the reduction in the size of the advanced capital.

There are other potential ways this could arise in theory. Suppose, the initial situation represents a condition where a number of very skilled workers work with a large quantity of fixed capital in the form of complex tools, to process a relatively small quantity and value of material. The example might be Chippendale's carpentry workshop. But, a new machine is introduced, which replaces all of these tools, and means that the machine can be operated instead by unskilled workers. On this basis, the advanced constant capital value falls because although the same quantity of material is processed, the value of the advanced fixed capital falls by a very large amount. In addition, although perhaps even the same number of workers are employed, these are now unskilled, lower paid workers, so the value of variable-capital falls. Because, these are unskilled workers providing simple rather than complex labour, the quantity of new labour they perform is reduced proportionately, the new value they produce is thereby reduced, and so even though they are lower paid, the rate of surplus value remains the same.

However, in practice this situation would not arise, because, as Marx sets out in Capital I, capitalist enterprises will never introduce such a new machine unless the cost of the machine is less than the paid portion of the labour-time it replaces. In other words, unless it acts to increase profits. This is a significant difference, between capitalist firms and worker-owned co-operatives. The latter always have an incentive to introduce new machines that save labour.

If, the quantity of labour-power employed is then reduced, as a result of some new machine being introduced, it can only be because this new machine acts to increase the amount of profit. Now, it can be that this is the case for the individual firm, because it reduces its costs, whilst the market value of the commodity it produces remains the same, but this continues only so long as other firms do not follow suit. Once other firms adopt this new machine, the market value of the commodity falls, and the consequence is that the rate of profit in the industry then falls.

But, there are a number of forces at work here that contradict this conclusion. Some of them have already been discussed. Firstly, the introduction of such new machines, it has been shown, increases rather than reduces the annual rate of profit, because not only do they mean a reduction in the quantity of fixed capital employed, but they imply a relative reduction in the value of that fixed capital. But, more importantly, they necessitate an increase in the rate of turnover of capital, such that although the mass of surplus value produced for any turnover period may fall in relation to the advanced capital, the total mass of surplus value produced in the year increases, relative to the advanced capital.

The increase in social productivity signified by the introduction of the new machine also reduces the value of other commodities, even if only indirectly, and therefore acts to reduce the value of constant and variable capital, thereby tending to increase the rate of profit. By reducing the value of labour-power, it also acts to increase the rate of surplus value, and, therefore, the rate of profit.

But, for modern capitalism there is another factor. Marx was writing about a situation where there was a plethora of small capitals each competing against each other, and each being a price-taker from the market. But, as soon as capital becomes dominated by a few very large socialised capitals, in the form of the joint stock companies etc., this changes. The production of these companies becomes so large that their supply itself acts to influence the market-value and market price of the commodities they produce. In other words, these companies know themselves in advance the consequences for market prices of any investment decisions they make. As part of the calculations they make, in deciding whether to introduce any such new machine, factory etc., they also consider the effect that any increased supply will have on market prices, and, therefore, profits, so they will not increase investment unless it acts to increase rather than reduce profits.

As Engels puts it, at this stage, which arises towards the end of the 19th. century, the kind of free market competition, which lies behind Marx's analysis of the earlier stages of capitalism, no longer applies to these huge companies that dominate the economy. That kind of free market competition becomes replaced by planning.

“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.”

A similar point is made by Andrew Kliman,

“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.” (Note 4, Page 16, The Failure Of Capitalist Production)

A similar point is made by Simon Clarke,

“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.”

(Capital and Class Winter 1990)

Wednesday, 18 June 2014

Capital II, Chapter 17 - Part 6

The laws relating to money and the circulation of money were set out in Volume I. Basically, the amount of money required depends on the value and quantity of the commodities to be circulated, the value of money, the requirements for money as means of payment, the velocity of circulation and the need to retain certain money hoards and reserves. That means the amount of money required constantly fluctuates, a proportion circulating, another portion in hoards. A way of thinking about it might be in relation to a canal, though its not an accurate analogy. The amount of water required depends on the length and depth of canals. But, it also depends on the number of boats navigating them. The more, bigger boats, the more water is displaced. It would be inefficient to keep reducing and then refilling the canals, so instead, excess water drains into reservoirs. It is then fed back in when required.

“What must be paid in money in so far as there is no balancing of accounts — is the value of the commodities. The fact that a portion of this value consists of surplus-value, that is to say, did not cost the seller of the commodities anything, does not alter the matter in any way.” (p 333)

Suppose, we have a system of commodity production, with only individual producers. Ignore any constant capital involved in their production. The value of their output is then equal to the time it takes to produce. So, A produces, in 5 weeks, 100 kilos of spun yarn. But, this is commodity production, and during this 5 weeks, they must eat, and do so by buying food from some other commodity producer. Let us say that in order to work for this 5 weeks, they require the equivalent of 3 weeks labour to produce that food. We have then here the equivalent of the situation under capitalism. The 3 weeks constitutes necessary labour, and the other 2 weeks of the spinner constitutes surplus labour i.e. had they only produced 3 weeks worth of yarn they would have sold it for just enough to cover their subsistence. The other 2 weeks production is a surplus over that.

So, they would need to have enough money-capital to cover their need to buy food, over the five week period, i.e. the equivalent of variable capital. When, at the end of the five weeks, they sell the yarn, they will get back the equivalent of 5 weeks labour-time in money. The fact that 2 weeks of this represents surplus labour-time does not change how much money is required to circulate these commodities. Let us say this money is £50. From it, they will need to use £30 = 3/5, to cover their need to buy food over the next five week period. The other £20 they can spend on luxuries or on expanding their production.

Looked at from the perspective of “many capitals”, they all throw more value into circulation, in the form of commodity-capital, than they previously took from it, in the form of productive-capital. Consequently, they can all, on aggregate, take more money out than they previously threw into it, for the purchase of that productive capital. The amount of money itself has to expand so as to cover the increased amount of value being circulated.

Each capitalist withdraws money that is equal to the value of the productive-capital they previously withdrew, but also equal to the surplus-value they have produced. This money equivalent of the surplus value itself has its physical equivalent in the form of the surplus product, thrown into the market. That surplus product is comprised of commodities that may form additional productive capital, i.e. an amount of constant capital (means of production) and variable capital (means of subsistence) greater than was used in the previous cycle, as well as other commodities to meet the needs of unproductive consumption by the capitalists.

Each producer produces a surplus product, a product whose value is greater than is required to reproduce those commodities – means of production and labour-power – that created it. In so doing, it creates the surplus production that other producers require to expand their own production, or consume unproductively. At the same time, each producer, in realising their own surplus value, acquires the means to purchase that surplus product, and thereby to expand their own production, or to consume unproductively.

“But the commodity-capital must be turned into money before its reconversion into productive capital and before the surplus-value contained in it is spent. Where does the money for this purpose come from? This question seems difficult at the first glance and neither Tooke nor any one else has answered it so far.” (p 335)

Monday, 16 June 2014

The Law of The Tendency For The Rate of Profit To Fall - Part 17

Fall In the Value Of The Variable Capital (1)

There are a number of ways in which the value of the variable capital may fall. Some imply a fall in the rate of profit, some imply a rise in the rate of profit, and some imply no change in the rate of profit. The value of the variable capital might fall because fewer workers are employed, or unskilled workers replace skilled workers; it may fall because wages are cut, which may be simply an effect of the condition of supply and demand, or may reflect a reduction in the value of labour-power; it may fall in relative terms because the working day is extended or made more intensive, so it falls relative to the material processed by it.

The basis of the process which brings about the tendency for the rate of profit to fall is that the social productivity of labour continually rises, because new technologies are introduced, such that one machine replaces several older machines and the workers that minded them. On this basis, its clear that the quantity of workers employed, must continually tend to fall relative to the quantity of material processed. However, as described in previous sections, not even this tendency is absolute, because the same technological changes that stand behind the process of a falling rate of profit, also causes both the volume and value of the material processed to fall relatively too. As Marx sets out, and was seen earlier, this relative decline in the number of workers employed, goes along with an absolute increase in the number of workers employed, because the mass of capital rises, including the mass of variable capital. In just the same way, the absolute mass of material processed may rise, and yet its relative quantity and value fall. For example, more oil is consumed absolutely, but less oil is consumed relative to the amount of energy generated, petro-chemicals produced and so on.

If everything else remains the same, this relative reduction in the value of the variable capital, caused by the relative decline in the quantity of labour exploited, must cause the rate of profit to fall. If the ratio of v:c falls, then with a constant rate of surplus value, s', then s:c must also fall, which means that s must also fall relative to c+v. However, from what has already been said, its clear that the process which reduces the ratio of v:c, precludes everything else remaining the same. Firstly, as has been seen, the ratio v:c falls because of technological improvements. That means the quantity of fixed capital employed falls relative to the laid out circulating constant capital. It increases relative to the advanced circulating constant capital, but only because this results from an increase in the rate of turnover of capital. That same increase in the rate of turnover means that rather than the general annual rate of profit falling, it rises, despite the reduction in the variable capital, and surplus value produced during the turnover period, as was demonstrated in Part 5.

But, its also clear that this same rise in the productivity of labour has other contradictory effects that likewise cause the rate of profit itself to rise not fall. Firstly, as seen already, that rise in productivity reduces the value of the fixed capital, and the circulating constant capital. That causes the rate of profit to rise. Whether that effect is sufficient to offset the tendency for the rate of profit to fall resulting from the relative reduction in the value of the variable capital, depends upon the relative strength of each of these contradictory forces. However, the process which creates the tendency for the rate of profit to fall, as a result of the relative fall in the value of the variable capital, is a single force working in that direction, but the same process leads to a series of these forces working in the opposite direction. Even if any one, or several of these was not enough to counteract the downward tendency, its unlikely that all of them combined would not be sufficient to do so. The only reason this is not manifest is because, as Marx points out, these various forces work sometimes side by side, sometimes one after another, sometimes reinforcing each other, sometimes opposing each other.

So, its not just the relative reduction in the quantity of fixed capital, or the fall in its value, nor the fall in the value of the circulating capital, and possibly also of its quantity, nor the effect of the rise in the rate of turnover that acts to raise the rate of profit. The same rise in productivity must also act to reduce the value of labour-power, by cheapening wage goods. Marx, in describing this process, refers to a situation where the rise in productivity does not affect wage goods, but its impossible to see, outside the production of luxury goods, how any such change in productivity does not affect the value of wage goods. If the value of steel is reduced, for example, that affects the value of canned goods, it affects the value of lathes used to produce various engineered commodities whether they be consumer goods, or producer goods. If it is the latter, then these producer goods will also be used to produce consumer goods, or else to produce yet other producer goods required for producing consumer goods.

To the extent that the value of labour-power is reduced, therefore, by this same process, the ratio of s:v rises, so that even as the organic composition of capital rises, the rate of profit may also still rise.

Sunday, 15 June 2014

Capital II, Chapter 17 - Part 5

Suppose the circulating capital is £500, the turnover time 5 weeks, made up of a working period of 4 weeks, and a circulating period of 1 week. The circulation period here is not made up of the time to sell the commodity, because it is immediately money. It is the period prior to production required to buy the productive capital. In this case, as in previous ones discussed, this £500 to cover the 5 weeks turnover time, must be available in advance, to buy the productive capital.

Consequently, £100 is laid out for productive capital each week. With a working period of 4 weeks, the output at the end of week 5 has a value of £400. But, £500 had been advanced. When at the beginning of week 6, the £400 value of production returns – immediately as money – therefore, as in previous cases it also releases £100 of money capital, equal to the additional £100 capital advanced to cover the circulation period. This £100 of additional money-capital here, just like the £400, however, is actual new money, produced as part of the labour process.

With a turnover time of 5 weeks, and a 50 week year, there are 10 turnovers and a total value of output of £5,000 in gold, i.e. 50 weeks x £100. In every other sphere of production, with a similar £500 of capital, and turnover time, every 4 weeks, money is withdrawn from the market, in exchange for the commodities thrown into it. Similarly, that money is thrown back into the market as other commodities – means of production and labour power (means of subsistence) - are withdrawn from it. Here, by contrast, every four weeks, £400 of output is produced and thrown into the market, but does not withdraw £400 of money from the market, precisely because this product is the money-commodity. The output, as money, goes to buy new means of production and labour-power.

If the workers are paid £20 a week, or £100 for a five week period, that is £1,000 a year. But, this £1,000 is not a converted form of their output. It is a portion of their actual output. In other words, the workers are paid with a portion of the gold they produce.

“The £1,000 thus expended annually in labour-power and thrown by the labourers into circulation do not return therefore via this circulation to their starting-point.” (p 332)

The fixed capital required for starting the mine is a considerable sum that must be thrown into circulation from the start. The value of fixed capital passes into the value of the end product only gradually, as wear and tear. For other commodities, that value is reflected in the value of the commodity, which results in an equivalent amount of money being withdrawn from the market, which is then hoarded to cover the cost of replacement. But, for gold production, the wear and tear is not just transferred to the value of the end product, it is represented by a physical quantity of gold itself. In other words, if the wear and tear amounts to £10, then this is represented in the output of £10 worth of gold. This has to be the case for the reason set out at the beginning, i.e. the value of the output is equal to the circulating capital, plus wear and tear of fixed capital, plus surplus value. But, the value of the output is equal to its unit value x the number of units produced.

“In other words, it gradually assumes its money-form not by a withdrawal of money from the circulation but by an accumulation of a corresponding portion of the product. The money-capital so restored is not a quantity of money gradually withdrawn from the circulation to compensate for the sum originally thrown into it for the fixed capital. It is an additional sum of money.” (p 332-3)

Similarly, the portion of the total output that is equal to the surplus product, and is therefore, equal to the surplus value, does not have to be sold, but is immediately available to the capitalist as money. He throws this money directly into circulation, buying articles of luxury, and unproductive consumption with it.

Saturday, 14 June 2014

ISIS – The Fruit Of Liberal Intervention and Third Campism

ISIS, the jihadist forces that seek to establish an islamic Caliphate in the territory of Iraq and El Sham, what in the West would be called the Levant, have in recent days walked almost unopposed into several major Iraqi cities, and are threatening to do the same with Baghdad. These are the same forces that have been fighting with western backing for the last few years in Syria. They are marked both by their extreme brutality, and their desire to take the society over which they rule even further back in time – to around the 13th century – than other mediaevalist Islamic forces. In 2003, there were essentially no jihadist forces in Iraq, today after the US and UK war to depose Saddam Hussein, they are on the verge of taking over a sizeable part of the country, as well as of Syria, and expanding their reach within the region.

This disaster for liberal interventionism comes on top of the other disasters arising from liberal intervention. In Afghanistan, the west supported Osama Bin Laden and Al Qaeda against the USSR, which was attempting to build a secular state by its own typically bureaucratic means. The US provided Bin Laden with the latest weapons via Pakistan, and in the process helped build the Pakistani Taliban. Not only is the Taliban now posed to take over again in Afghanistan, as the US leaves, but it is carrying out daily attacks in Pakistan too, where it is becoming increasingly likely to be able to take over a nuclear armed state.

In Libya, having obtained UN approval by the deceptive means of claiming only to be seeking a no-fly zone, the US, UK and France bombed the hell out of the country, and with their feudal gulf allies, supplied the Libyan jihadis with weapons to overthrow Gaddafi. When the small numbers of those forces were still unable to make much headway, the imperialists and their feudal allies sent in their own special forces to do the job for them. In a similar way that Trotsky described the situation in Spain during the Civil War, where bourgeois politicians were able to obtain the support of the Stalinists in a Popular Front, whilst the actual Spanish bourgeoisie had deserted them, the Libyan bourgeois politicians found support not only from western imperialism, which had created them, but from sections of the Left.

These sections of the Left, to the extent they had ever understood Marxist analysis and principles, forgot them in their rush to support anything that looked like a revolution. In their desperate attempts to put themselves on the side of a revolution, they instead found themselves in the role of “useful idiots” supporting a social counter-revolution. First among equals amongst these useful idiots was the AWL. It had two powerful forces attracting it in that direction. Never slow to be on the side of anything that was being promoted by US “Democratic Imperialism”, it could be relied upon to support the attacks on Libya, and the feudal and jihadist forces being used to carry them out. And, its politics determined by a subjective moralism, whose categorical imperative is to oppose anything that smacks of Bonapartism and authoritarianism, it repeatedly finds itself placing itself in the camp of all sorts of reactionary forces fighting those regimes.

Third Campism of the sort that determines the politics of the AWL on the one hand, and the SWP on the other, as Trotsky pointed out, has nothing to do with Marxism. Its actions are determined by nothing more than petit-bourgeois moralism, dressed up in the language of kitsch Marxism. It arose from the revulsion of petit-bourgeois moralists at the reality of the deformed workers state in Russia, particularly after it entered into the Stalin-Hitler Pact. To justify its abandonment of the defence of that deformed workers state, it then engaged in frantic attempts to theorise its actions on the basis of pseudo-Marxist analysis of the class nature of the Soviet State, as being either state capitalist or some form of new class state ruled by a bureaucratic collectivist class, never before seen in history, that somehow sprang form nowhere in the space of a few years to become a ruling class; a concept, which in itself is quite alien to Marx's method of analysis, and theory of historical materialism.

Its this subjectivism and moralism that determines the politics and positions adopted by third campist organisation such as the SWP and AWL. That is why depending on the moral imperative – opposition to Imperialism for the SWP, opposition to Bonapartism/authoritarianism for the AWL – they end up on opposing sides of conflicts. But, that same method leaves them driven into support for whichever reactionary class camp represents the force on the ground fighting their chosen corner. The SWP to oppose Israel, proclaim “We are all Hizbollah now”, whereas the AWL declare that the feudal Gulf monarchies were doing God's work in bringing bourgeois democracy to Libya, and in terms that the SWP would be proud of, claimed that it was inevitable that the jihadists would take the lead in the fight against Gaddafi, after years of repression!

What both organisations have in common is that they are led into this kind of popular frontist stance, because they have lost faith in the ability for the working-class to provide the solutions itself. In their rush to support something that looked like a revolution, they forgot, if they ever understood, the basic Marxist lessons about the difference between appearance and reality. They mistook electoralism and parliamentarism for the reality of the balance of social forces. So, they were happy to see the electoral victory of the bourgeois politicians in Libya as the end of the story, even though it was clear that the electoral victory meant nothing given that real political power rested with the jihadist and other militias in the streets, who had the weapons, the discipline, the organisation, and the ideological drive to impose their will, in a way that the petit-bourgeoisie that had simply voted for the bourgeois politicians never had, even during the conflict against Gaddafi.

When the fighting broke out in Syria, therefore, they made all of the same mistakes, and now in Ukraine, they are making the same mistakes all over again. Despondent at the working class organising to impose its will, they instead look to other more powerful forces. In the process, by placing themselves in to one of the opposing camps of the bourgeoisie, rather than in the admittedly weak camp of the working-class, they act only to store up greater problems for the future.

For centuries, the Hapsburg Empire was viewed with disdain both by the other European Monarchies, and then in the 19th Century, by the emerging bourgeois democratic regimes. But, as Rosdolsky describes in his essay on the “Non-Historic Peoples”, they were tolerated for one simple reason, which is that they performed a useful function for Europe, in acting as a buffer against the potential incursions of Islamic reaction from the Ottoman Empire. In a sense, the Bonapartist regimes in the Middle East arose both because of the existence of these reactionary, and frequently antagonistic and schism ridden forces, and at the same time acted as a means of keeping them in check.

The societies over which these Bonapartist regimes ruled, were riven with sectarian division, and a series of cross cutting cleavages, divided not just horizontally on the basis of class and status, but vertically on the basis of religion, sect, tribe, region, as well as the other vertical divisions of gender and sexual orientation. These multitude of vertical divisions prevented the formation in many cases of strong class allegiances able to outweigh them. Given the economic history of the region, as societies frequently dominated by foreign powers, and with rent based economies dominated by revenues determined by the extraction of oil, that favoured the continuation of feudal type political regimes, rather than the development of industrialised economies that required the development of bourgeois democracy, it was inevitable that the major classes of bourgeois society – the bourgeoisie and proletariat – would be weak. Its no wonder that where that rent based nature of the economy is most predominant – in the Gulf – is where feudal political regimes continue to dominate.

The inability of any class to be able to exert social hegemony, is the prime condition for the state itself to rise above society, and that is precisely what happened in many of the countries where some measure of industrial development occurred. The brutality of many of these regimes was a brutality whose material basis was the need to suppress the ferocity of the social antagonisms that existed beneath, based upon these vertical cleavages.

In much the same way that the Hapsburg's were looked on by their European peers with disdain, but were tolerated because they acted to provide a buffer against Islamic reaction, so the Bonapartist regimes fulfilled a similar function. That the US has been at the forefront of opposing those regimes, and, at the same time, funding and supporting the development of the jihadists, that have provided the shock troops of the assault, is also not surprising. The Middle East is a long way from the US. Its main allies in the region, in the Gulf, are under no immediate threat from the jihadists, and there is no suggestion that the US sees any irony in supporting such undemocratic regimes, whilst decrying others. In fact, the gulf states are the biggest backers of the jihadist forces that do the work of fighting a proxy war for the US in Libya, Syria etc.

In just the same way that the US has created the conditions for the conflict in Ukraine, by pushing the borders of NATO right up to those of Russia, and by pumping, on its own admission, billions of dollars into the coffers of Ukrainian forces it seeks to cultivate, so too the US, by its actions in the Middle East, has pushed the forces of jihad right up to the borders of the EU, and increasingly inside it too.

The Liberal Interventionists and Third Campists have, by giving succour to these reactionary forces, helped bring about the current state of affairs, whereby 12th century social forces, armed with 21st century weapons, now stand at the gates of Baghdad, on their way through Istanbul to Vienna. Stopping them requires not a further undeclared popular front with the forces of the bourgeoisie and democratic imperialism, but an uncompromising commitment to building the forces of the working class and socialism, and a defence of the ideas on which that relies, along with an uncompromising battle against the ideas of the reactionaries.