Tuesday, 9 December 2014

Fictitious Capital - Part 1

In order to understand what fictitious capital is, it is necessary to look again at what capital itself is. According to Marx, capital is a social relation between capital and wage labour, but Marx also describes it as self-expanding value. In fact, the two statements amount to the same thing, because the means by which value self-expands, is only via this social relation.

The social relation amounts to this. In its pure form, the ownership of the means of production and the means of consumption resides solely with capitalists. The corollary of this is that the only thing that the workers own, is their labour-power. In order for the workers to produce they require the means of production (constant capital such as buildings, machines, raw material) which is in the hands of capital; in order for the workers to live, they require the means of consumption (food, shelter, clothing and so on) which are also in the hands of capital. But, for the capitalists to be able to use the means of production in their possession, and to create a surplus value, they require the labour-power in the hands of the workers. In order for the capitalists to realise the surplus value contained in the means of consumption they possess, they must be able to sell those commodities to workers.

The reason that it is only via this social relation that the capital value can self expand, is because it is only labour which can create new value. Capital can only create new value if it employs wage labour; it can only produce surplus value if the new value created by that labour is greater than the value of the labour-power bought by the capitalist. The means of production in the possession of the capitalist has value, because it is the product of labour. But, it is labour that has already been performed. It is not the creation of new value. The same is true of the means of consumption in the hands of the capitalists. It has a value equal to the labour-time required for its production. It contains a surplus value, as part of this value, only because this value – the labour-time required for its production – is greater than the value actually advanced by the capitalist, and the reason for that is that workers provided a quantity of unpaid labour to capital. The new value they created, was greater than the value of the commodity they sold – labour-power. This labour-power in the possession of capital, represents a variable capital, precisely because what is a constant value – the value of labour-power – becomes in the production process a variable value, dependent for its mass on the quantity of labour provided by that labour-power.

In theory, it does not matter whether this constant value of labour-power, finds its equivalent as an exchange directly with the means of consumption owned by the capitalists, or whether this exchange is mediated by the intervention of wages paid in money form. In a society where capitalist production is still restricted to agricultural production, such as that analysed by the Physiocrats, the wage fund used by capital to pay the agricultural workers can take the form of actual commodities, in the ownership of the capitalist farmer. The workers are paid not with money, but with food etc. Provided the workers constitute free labour, able to sell their labour-power to the highest bidder, then competition will ensure that these wages are equal, on average, to the value of labour-power. That is they will be adequate to ensure the reproduction of that labour-power. The wages here constitute revenue, a portion of the consumption fund of the society.

If, instead of wages being paid directly in the form of commodities, that constitute means of consumption, these wages are paid in money form, then, as Marx sets out in Capital II, the only difference here is that money mediates this exchange with labour-power. Each individual capitalist buys labour-power with a sum of money equal in value to the commodities that constitute the necessary means of consumption for workers, to ensure the reproduction of their labour-power. The workers then use these money wages to buy those necessary commodities, from other capitalists in whose possession those particular commodities reside.

By means of this process, the labour-power bought by each capital performs labour, and thereby creates new value greater than the value of that labour-power bought by the capitalist. It produces surplus value. Simultaneously, the workers buy back some of those commodities they have produced, and which contain a portion of the surplus value they have produced, and in so doing realise that portion of the surplus value. The remaining portion of surplus value, created by the workers, is realised by the capitalists themselves, who throw revenue into circulation to buy the means of consumption they require themselves, in order to live. Under simple reproduction, this revenue is continually reproduced for the capitalist, because the surplus value produced by their own workers is itself continually being realised for them by this process.

What capital buys, when it buys labour-power, is a use value – the ability of labour to produce new value, and thereby surplus value. As with any other use value that is a commodity, it pays the market price, for that commodity. Wages are only the phenomenal form of the value of labour-power. This is important, because the basis of fictitious capital is similar. The basis of fictitious capital is that capital itself becomes a commodity, which is bought and sold on the market, and which thereby has a market price. The use value of capital that is bought and sold is its ability to self-expand. The market price that is paid for it, is the market price of being able to provide this use value, which is the interest rate.

An examination of this shows the difference between actual capital and fictitious capital. The circuit of industrial capital comprises the circuits of money-capital, productive-capital, and commodity-capital. Each of these represent capital-value in each of its separate forms. The capital-value advanced is equal to the total of all of this capital, because the capital-value tied up in the circulation period, is equal to the capital value of productive-capital that must be advanced during that period. When the commodity-capital part of this circuit takes on an independent existence, in the form of merchantcapital, and when the portion of the circulation period required for transforming commodity-capital into money-capital, and then money-capital into productive-capital, takes on an independent existence in the form of money-dealing capital, therefore, the basis upon which these independent forms of capital share in the surplus value, is established.

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