The Blair-right sections of the Labour Party, together with their fellow travellers in the Tory media are talking nonsense over Jeremy Corbyn's statement that if he was Prime Minister, he would not push the nuclear button. They claim that, in doing so, he is pre-empting the party's discussion over whether Trident should be scrapped. Absolutely not. For that to be the case, you would have to believe that immediately upon becoming Prime Minister, Corbyn would be asked to press that button!
This is a bit like saying, if on becoming Prime Minister, the planet was about to be destroyed by an asteroid, would you offer the population euthanasia!!! The answer is, when the asteroid has actually been identified, is the time when someone has to answer the question. Until then its a pointless question. Neville Chamberlain, was ardently in favour of avoiding war at almost any costs with Germany. He remained as Prime Minister until after the war had started.
There is absolutely no reason why Jeremy Corbyn could not be a British Prime Minister, whilst being ardently opposed to using nuclear weapons, because it only in the most extreme conditions the question of whether to use such weapons would ever arise, and such conditions would not appear instantaneously, any more than WWII, broke out instantaneously. Margaret Thatcher was quite happy to use nuclear weapons, if necessary, and yet the knowledge of that fact, did not stop General Galtieri going to war with Britain, and occupying the Falkland Islands. It was touch and go, as to whether Britain would win that contest, and yet, Argentina could be fairly safe in assuming that even were Britain to be clearly losing, they would not respond with a nuclear strike against Argentina.
Any such action, would have made Britain a pariah state. But, even if global tensions were rising to such an extent that a new inter imperialist war seemed likely, say between western Europe and Russia, or the US against China, that might spill over into a new world war, such conditions are not going to materialise over night. Until such conditions exist, the question of whether Prime Minister Corbyn would or would not press the nuclear button are moot.
If such global conditions existed, and Britain still had nuclear weapons, and the Labour Party was committed to retaining them, then just as Chamberlain eventually stood down, and Churchill took over, as a warmonger prepared to pursue the war more vigorously (and actually from a military/strategic perspective usually disastrously) then prime Minister Corbyn, would have to consider his position. But, until such conditions exist, to suggest that he refrain from making such comments, is tantamount to the Blair-rights, and the Tory media, demanding that he abstain from the debate, and deny his own opinions.
In reality, in the period between now, and when the election takes place, which could be way before 2020, if the Tories lose their tiny majority, the party is likely to have changed its position. Len McCluskey is a unilateralist, who is subordinating his personal position to the majority position of UNITE, but that position is based on the sectionalist interest of UNITE's members who fear a loss of jobs in shipbuilding. But Corbyn has already set out the way the resources currently wasted on nuclear weapons could be better used to provide decent jobs for those workers, producing useful products required by the ordinary working people of Britain. Its time to dust off the old Lucas Plan, which can not only show us how to win the debate about defending jobs by a conversion to useful production, but can simultaneously demonstrate how Labour and the Trades Unions can have an approach that is truly "pro-business" and aspirational.
It shows how being "pro-business" should actually be about being supportive of the actual workers and managers in businesses, rather than merely pro the financial leeches, the money-lending shareholder capitalists, and their overpaid representatives, who are only interested in making a quick buck, rather than the long-term future of the business, and its workforce. It is aspirational, because it shows how the principle of democracy is not simply about placing a cross on a ballot paper every five years, but is about every citizen having a say in all aspects of their life, and control over it, whether at work, in their community or more generally.
If Labour, and socialists within the trades unions make this case, the fears about job losses will be removed. In that case, the door will be wide open for Labour to adopt a policy of scrapping Trident, and putting workers to work in useful productive activities.
Some Blair-right MP's have already excluded themselves from the Shadow Cabinet, because they cannot reconcile themselves to the moderate social-democratic policies that Jeremy Corbyn and his election represents. That is that prerogative. Indeed, it is the principled thing for them to do. But, similarly, if the party formally adopts these kinds of social-democratic positions, there will be many Blair-right MP's, who cannot reconcile themselves to those positions.
They will then have the same option as that they want to impose on Corbyn now - to abide by the decision or to step aside. In the coming months and years, the party is likely to formally adopt policies that are significantly different to the conservative policies that were pursued under New Labour. That will reflect the changed nature of the party, and the influx of hundreds of thousands of new members, standing behind those policies. The Blair-right MP's need to consider now whether they will be able to persuade their own CLP's, to back their personal position, or not. That is the position Corbyn, McDonnell and others have had over the last three decades.
The Tories boundary changes will make reselections necessary in the majority of constituencies. It is not a matter of a purge of Blair-right MP's, but of straight forward democracy. Some of them have already concluded that they cannot be members of the Shadow Cabinet, on the basis of the party's current policy direction. They should likewise decide whether they can remain as MP's, whilst being so out of step with the Party's changed policies, principles and ethics, just as they required of those seeking to join the party recently, and just as they did in expelling large numbers of party activists, closing down CLP's and so on in the past. There are after all hundreds of Labour councils, and thousands of Labour Councillors, who today, Neil Kinnock would have to lambast for handing out redundancies to their workforce, and their politics are far removed from those of the Militant Tendency!
Wednesday, 30 September 2015
Capital III, Chapter 15 - Part 21
So, we have two contradictory forces at work here. On the one hand, the rise in productivity increases the mass of surplus value, which acts to increase the mass of capital. On the other hand, that same rise in productivity acts to cheapen, newly produced capital, and to depreciate the existing capital, thereby reducing the total capital value.
“These two elements embraced by the process of accumulation, however, are not to be regarded merely as existing side by side in repose, as Ricardo does. They contain a contradiction which manifests itself in contradictory tendencies and phenomena. These antagonistic agencies counteract each other simultaneously.” (p 248-9)
It is this antagonism or rather series of antagonisms, that arise out of these contradictions, that provide the real meaning to Marx’s words, at the start of the chapter, about the breeding of crises. On the one hand, as capital expands the demand for labour rises, which eventually leads to rising wages and a squeeze on profit margins. That creates greater potential for crises of overproduction. This leads eventually to capital seeking to introduce labour saving technology. This is accompanied by a rising organic composition of capital, rising productivity and, therefore, a fall in the relative amount of labour-power employed, i.e. the conditions for the law of falling profits to operate. Meanwhile, higher wages encourages an increase in the working population. So, a relative over-population is produced. As capital expands, especially into new lines of production, this relative over-population is absorbed, but, in times stagnation, it is not, and causes a rise in the reserve army of labour, which reduces wages, and raises the rate of surplus value.
The corollary of the tendency for the rate of profit to fall is that the mass of capitals grows. The same process depreciates the existing capital, which acts to raise the rate of profit and to facilitate even greater accumulation, because any mass of surplus value buys a greater quantity of now cheaper productive-capital.
The above factors act to increase accumulation, but as part of that increased accumulation, the organic composition of capital rises, thereby tending to reduce the rate of profit.
“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.” (p 249)
“These two elements embraced by the process of accumulation, however, are not to be regarded merely as existing side by side in repose, as Ricardo does. They contain a contradiction which manifests itself in contradictory tendencies and phenomena. These antagonistic agencies counteract each other simultaneously.” (p 248-9)
It is this antagonism or rather series of antagonisms, that arise out of these contradictions, that provide the real meaning to Marx’s words, at the start of the chapter, about the breeding of crises. On the one hand, as capital expands the demand for labour rises, which eventually leads to rising wages and a squeeze on profit margins. That creates greater potential for crises of overproduction. This leads eventually to capital seeking to introduce labour saving technology. This is accompanied by a rising organic composition of capital, rising productivity and, therefore, a fall in the relative amount of labour-power employed, i.e. the conditions for the law of falling profits to operate. Meanwhile, higher wages encourages an increase in the working population. So, a relative over-population is produced. As capital expands, especially into new lines of production, this relative over-population is absorbed, but, in times stagnation, it is not, and causes a rise in the reserve army of labour, which reduces wages, and raises the rate of surplus value.
The corollary of the tendency for the rate of profit to fall is that the mass of capitals grows. The same process depreciates the existing capital, which acts to raise the rate of profit and to facilitate even greater accumulation, because any mass of surplus value buys a greater quantity of now cheaper productive-capital.
The above factors act to increase accumulation, but as part of that increased accumulation, the organic composition of capital rises, thereby tending to reduce the rate of profit.
“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.” (p 249)
Tuesday, 29 September 2015
Power and Principles
The Tory Media, as well as the Blairite right of the Labour Party, set up a false dichotomy between power and principles. They suggest that principles have to be secondary to power, because without power, principles cannot be put into practice. In the process, they forget that if principles are subordinated to the search for power, then the gaining of power leads not to the implementation of your own principles, but to the implementation of someone else's principles.
One young delegate to Labour's conference was quizzed on this today, by the BBC's "Daily Politics", and argued that power is more important, because "if we did not have power in 1945, we would not have been able to introduce the NHS in 1948." That is, of course, true, but begs the question. If in order to obtain power in 1945, Labour had to ditch the principle of the NHS, should it have done so, just in order to win the election?
There are many policies that today are considered to be popular, which not always have been so. The only reason that such ideas become popular is because someone has been prepared to put them forward, and argue for them consistently. In the early 1980's, when I was a City Councillor, I argued that the Council should organise a creche so that parents were able to attend Council meetings without worrying about whether they could organise child care for their children. For putting forward such radical suggestions, I was attacked by the right of the party, and by the local newspaper as a dangerous revolutionary. In fact, when I along with another Labour Party member took our toddlers along to the Full Council meeting, (which ended up with the sitting being suspended, and child care provided) the response of the local newspaper was to run a cartoon in its Saturday Sports edition, with a Stoke City player coming on to the pitch carrying a child on his back!
Similarly, some of the worst telephone abuse I received as Councillor came in response to my objection at a Council meeting to a proposal for the Council to give a subsidy to the running of the Miss Stoke on Trent competition. Yet, today such principles, not only are not considered to be ones only proposed by members of the loony left, but are mainstream ideas, objection to which would make their opponents appear to be completely out of step.
In fact, its only because some people stuck to their principles, and continued to argue for their acceptance that today we have things such as creches as standard, that the idea of beauty contests are recognised as offensive, and indeed that things such as homophobia and other forms of gender discrimination are considered unacceptable.
Moreover, the idea that it is necessary to obtain power (actually only governmental office) as the only means of bringing about such change is wrong. It has frequently been the case that ideas in society have been changed, before any governmental action catches up to rubber stamp it. An important aspect of that is that members of society often organise themselves in accordance with these principles, and thereby demonstrate the need for their generalisation.
In Greece, for example, a plethora of co-operatives have grown up in response to the crisis faced in the country caused by austerity. In the 18th. and early 19th century, workers formed trades unions, even when it was illegal to do so. It is not at all necessary to have governmental office, even to create a National Health Service, free at the point of use. Workers have the ability to create such an organisation by their own hands, based upon the principles of workers' self government, and co-operation. Indeed, in the 19th century, workers did precisely that, creating their own Friendly and Mutual Societies alongside the Trades Unions, to provide social insurance to cover periods of sickness, unemployment and old age.
Workers in the mid 19th century also created their own education facilities, often using Co-op premises, at a time when the capitalist state had no interest in providing such facilities. In fact, workers fought hard at the start of the 20th century, via the Plebs League, and the National Labour Colleges, to keep that education in workers hands, and out of the control of the capitalist state, even in respect of the WEA, which was supported by the TUC bureaucracy, and funded by the bourgeoisie, and staffed with bourgeois teachers. It is also why Marx and Engels argued for keeping control of the Friendly Societies, and against the introduction of National Insurance schemes.
That is not to say that winning governmental office is unimportant. Marx argued,
""Elementary education by the state" is altogether objectionable."
For the same reason he believed that the intervention of the state in all such aspects of society was objectionable. But, he also argued,
"Defining by a general law the expenditures on the elementary schools, the qualifications of the teaching staff, the branches of instruction, etc., and, as is done in the United States, supervising the fulfillment of these legal specifications by state inspectors, is a very different thing from appointing the state as the educator of the people!"
"Government and church should rather be equally excluded from any influence on the school. Particularly, indeed, in the Prusso-German Empire (and one should not take refuge in the rotten subterfuge that one is speaking of a "state of the future"; we have seen how matters stand in this respect) the state has need, on the contrary, of a very stern education by the people."
One young delegate to Labour's conference was quizzed on this today, by the BBC's "Daily Politics", and argued that power is more important, because "if we did not have power in 1945, we would not have been able to introduce the NHS in 1948." That is, of course, true, but begs the question. If in order to obtain power in 1945, Labour had to ditch the principle of the NHS, should it have done so, just in order to win the election?
There are many policies that today are considered to be popular, which not always have been so. The only reason that such ideas become popular is because someone has been prepared to put them forward, and argue for them consistently. In the early 1980's, when I was a City Councillor, I argued that the Council should organise a creche so that parents were able to attend Council meetings without worrying about whether they could organise child care for their children. For putting forward such radical suggestions, I was attacked by the right of the party, and by the local newspaper as a dangerous revolutionary. In fact, when I along with another Labour Party member took our toddlers along to the Full Council meeting, (which ended up with the sitting being suspended, and child care provided) the response of the local newspaper was to run a cartoon in its Saturday Sports edition, with a Stoke City player coming on to the pitch carrying a child on his back!
Similarly, some of the worst telephone abuse I received as Councillor came in response to my objection at a Council meeting to a proposal for the Council to give a subsidy to the running of the Miss Stoke on Trent competition. Yet, today such principles, not only are not considered to be ones only proposed by members of the loony left, but are mainstream ideas, objection to which would make their opponents appear to be completely out of step.
In fact, its only because some people stuck to their principles, and continued to argue for their acceptance that today we have things such as creches as standard, that the idea of beauty contests are recognised as offensive, and indeed that things such as homophobia and other forms of gender discrimination are considered unacceptable.
Moreover, the idea that it is necessary to obtain power (actually only governmental office) as the only means of bringing about such change is wrong. It has frequently been the case that ideas in society have been changed, before any governmental action catches up to rubber stamp it. An important aspect of that is that members of society often organise themselves in accordance with these principles, and thereby demonstrate the need for their generalisation.
In Greece, for example, a plethora of co-operatives have grown up in response to the crisis faced in the country caused by austerity. In the 18th. and early 19th century, workers formed trades unions, even when it was illegal to do so. It is not at all necessary to have governmental office, even to create a National Health Service, free at the point of use. Workers have the ability to create such an organisation by their own hands, based upon the principles of workers' self government, and co-operation. Indeed, in the 19th century, workers did precisely that, creating their own Friendly and Mutual Societies alongside the Trades Unions, to provide social insurance to cover periods of sickness, unemployment and old age.
Workers in the mid 19th century also created their own education facilities, often using Co-op premises, at a time when the capitalist state had no interest in providing such facilities. In fact, workers fought hard at the start of the 20th century, via the Plebs League, and the National Labour Colleges, to keep that education in workers hands, and out of the control of the capitalist state, even in respect of the WEA, which was supported by the TUC bureaucracy, and funded by the bourgeoisie, and staffed with bourgeois teachers. It is also why Marx and Engels argued for keeping control of the Friendly Societies, and against the introduction of National Insurance schemes.
That is not to say that winning governmental office is unimportant. Marx argued,
""Elementary education by the state" is altogether objectionable."
For the same reason he believed that the intervention of the state in all such aspects of society was objectionable. But, he also argued,
"Defining by a general law the expenditures on the elementary schools, the qualifications of the teaching staff, the branches of instruction, etc., and, as is done in the United States, supervising the fulfillment of these legal specifications by state inspectors, is a very different thing from appointing the state as the educator of the people!"
That is because,
"Government and church should rather be equally excluded from any influence on the school. Particularly, indeed, in the Prusso-German Empire (and one should not take refuge in the rotten subterfuge that one is speaking of a "state of the future"; we have seen how matters stand in this respect) the state has need, on the contrary, of a very stern education by the people."
Socialists do not believe that the state should have a role in negotiating between workers and employers, but we do believe that its necessary to have laws that enable trades unions to operate freely, and conduct free collective bargaining, as opposed to having anti-union laws, which restrict the rights of workers.
Herein, resides the difference between the revolutionary politics of Marxism, and the reformist politics of statism in its various forms. Marxists are in favour of the self-activity, and self-government of workers as the means of the own emancipation. The only role of governmental office in that respect is to facilitate that self-organisation and self-government. We do not require a labour government to do things for us, such as nationalising and running businesses, providing us with education, health and housing and so on. Indeed, we know that the capitalist state, even with a labour government will only provide these things in a bureaucratic and inefficient manner, only to meet the needs of capital, and thereby susceptible to being withdrawn whenever they no longer fulfil that function.
We only need governmental office to limit the extent to which the capitalist state can stand in the way of us organising for ourselves, collectively providing for ourselves, governing ourselves, and thereby liberating ourselves.
Capital III, Chapter 15 - Part 20
For any given mass of capital, the extent to which it can be increased depends upon the rate of profit, because the rate of profit is the proportion of the surplus value to the value of the productive-capital advanced to produce it. But, this too is a contradictory process. In order to increase this proportion, productivity must rise. But, a consequence of a rise in productivity is that the value of commodities falls, including those commodities that comprise the productive-capital. So, a rise in productivity increases the rate and mass of surplus value, which acts to increase the mass and rate of profit, which thereby increases the potential accumulation, which thereby increases the mass and value of capital. But, the same process, by cheapening all commodities simultaneously reduces the value of the existing mass of capital.
The larger the capital stock, therefore, the more any rise in productivity will reduce its value by moral depreciation, and also by a reduction in the value of the circulating capital. The more, therefore, will any given percentage rise in productivity reduce the value of C, and thereby raise the rate of profit.
“The increase in the productiveness (which, moreover, we repeat, always goes hand in hand with a depreciation of the available capital) can directly only increase the value of the existing capital if by raising the rate of profit it increases that portion of the value of the annual product which is reconverted into capital. As concerns the productivity of labour, this can only occur (since this productivity has nothing direct to do with the value of the existing capital) by raising the relative surplus-value, or reducing the value of the constant capital, so that the commodities which enter either the reproduction of labour-power, or the elements of constant capital, are cheapened. Both imply a depreciation of the existing capital, and both go hand in hand with a reduction of the variable capital in relation to the constant. Both cause a fall in the rate of profit, and both slow it down. Furthermore, inasmuch as an increased rate of profit causes a greater demand for labour, it tends to increase the working population and thus the material, whose exploitation makes real capital out of capital.” (p 248)
However, as described above, this process has to be understood within the overall social context of the labour process. It simply is not the case, that increasing amounts of capital continue to accumulate in the same spheres, so that the organic composition of capital rises, causing the rate of profit to fall. The very process of the rise in social productivity causes increasing amounts of money-capital to be released, and to be employed in new lines of production with low organic compositions, and very high rates of profit. That process implies also, therefore, the production of ever greater ranges of use values, both as consumer products and as capital, so that this growing mass of profit becomes represented in a growing mass and diversity of capital.
“Indirectly, however, the development of the productivity of labour contributes to the increase of the value of the existing capital by increasing the mass and variety of use-values in which the same exchange-value is represented and which form the material substance, i.e. , the material elements of capital, the material objects making up the constant capital directly, and the variable capital at least indirectly. More products which may be converted into capital, whatever their exchange-value, are created with the same capital and the same labour. These products may serve to absorb additional labour, hence also additional surplus-labour, and therefore create additional capital. The amount of labour which a capital can command does not depend on its value, but on the mass of raw and auxiliary materials, machinery and elements of fixed capital and necessities of life, all of which it comprises, whatever their value may be. As the mass of the labour employed, and thus of surplus-labour increases, there is also a growth in the value of the reproduced capital and in the surplus-value newly added to it.” (p 248)
The larger the capital stock, therefore, the more any rise in productivity will reduce its value by moral depreciation, and also by a reduction in the value of the circulating capital. The more, therefore, will any given percentage rise in productivity reduce the value of C, and thereby raise the rate of profit.
“The increase in the productiveness (which, moreover, we repeat, always goes hand in hand with a depreciation of the available capital) can directly only increase the value of the existing capital if by raising the rate of profit it increases that portion of the value of the annual product which is reconverted into capital. As concerns the productivity of labour, this can only occur (since this productivity has nothing direct to do with the value of the existing capital) by raising the relative surplus-value, or reducing the value of the constant capital, so that the commodities which enter either the reproduction of labour-power, or the elements of constant capital, are cheapened. Both imply a depreciation of the existing capital, and both go hand in hand with a reduction of the variable capital in relation to the constant. Both cause a fall in the rate of profit, and both slow it down. Furthermore, inasmuch as an increased rate of profit causes a greater demand for labour, it tends to increase the working population and thus the material, whose exploitation makes real capital out of capital.” (p 248)
However, as described above, this process has to be understood within the overall social context of the labour process. It simply is not the case, that increasing amounts of capital continue to accumulate in the same spheres, so that the organic composition of capital rises, causing the rate of profit to fall. The very process of the rise in social productivity causes increasing amounts of money-capital to be released, and to be employed in new lines of production with low organic compositions, and very high rates of profit. That process implies also, therefore, the production of ever greater ranges of use values, both as consumer products and as capital, so that this growing mass of profit becomes represented in a growing mass and diversity of capital.
“Indirectly, however, the development of the productivity of labour contributes to the increase of the value of the existing capital by increasing the mass and variety of use-values in which the same exchange-value is represented and which form the material substance, i.e. , the material elements of capital, the material objects making up the constant capital directly, and the variable capital at least indirectly. More products which may be converted into capital, whatever their exchange-value, are created with the same capital and the same labour. These products may serve to absorb additional labour, hence also additional surplus-labour, and therefore create additional capital. The amount of labour which a capital can command does not depend on its value, but on the mass of raw and auxiliary materials, machinery and elements of fixed capital and necessities of life, all of which it comprises, whatever their value may be. As the mass of the labour employed, and thus of surplus-labour increases, there is also a growth in the value of the reproduced capital and in the surplus-value newly added to it.” (p 248)
Monday, 28 September 2015
Capital III, Chapter 15 - Part 19
But, if we take the reality of the situation, the consequence of the change in the labour process, resulting from these technological changes is that the labour of the 2 workers at time t+1, is not necessarily comparable with the labour of the 24 workers at time t. As Marx sets out in the Grundrisse, in describing another aspect of this process, in relation to the civilising mission of capital, the very process by which rising productivity necessitates that an increasing range of use values are produced and sold to workers, of itself changes the nature of the workers as human beings, and thereby of their labour. They necessarily become more educated, more cultured etc. and along with it, their labour is also transformed, creating more value in any period of time compared with their predecessors. In other words, the labour of current workers stands in relation to the labour of workers in the past in the same relation that complex labour stands to simple labour, in the same way that labour in a developed economy stands to labour in a less developed economy.
This can be seen by thinking about some particular type of labour. Take something such as furniture making. At time t, the makers of furniture produce fairly rudimentary articles. Even if we assume no technological change, leading to higher productivity, over several generations the skill of the furniture makers improves as it is passed down, and each new generation is taught by the last. If we then compare a chair produced, in a week, by a worker of the first generation with a chair produced, in a week, by this latter generation, we will find that they are not the same. The use value of the latter will be much higher. Although both will have taken a week to produce, the exchange value of the latter will be much higher than that of the former, which means that the labour of the latter stands in relation to the former in the same way that complex labour stands to simple labour.
For the same reason it is simply not possible to say that the technological processes which result in a reduction in the number of workers employed in some particular line of business is the same as a reduction in the quantity of labour undertaken, because these are two different things. The first only measures how much of some concrete labour is employed, whereas the latter measures how much abstract labour is employed.
If we take the above example, of a furniture maker, and assume no change in the value of labour-power, both workers may require 2 days of abstract labour-time to reproduce their labour-power. Assuming a five day week, the chair produced by the first has five days of added labour included in it, giving a rate of surplus value of 150%. But, if the chair produced by the second sells for twice the price of the former, it is as though it comprises 10 days of abstract labour-time. In that case, it would contain the equivalent of 8 days of surplus labour, so the rate of surplus value would be 400%. In fact, it would contain more abstract labour, than the amount of concrete labour in total in a week!
Put another way, a current furniture maker, even without consideration of any rise in the rate of surplus value due to rises in productivity, would produce more surplus value in one week of their labour than would 2 workers in a week of their labour-time previously. If we think about a range of concrete labours today compared to their past equivalents, its clear that this is true. For example, the value of an hour's teaching today is several times greater than that of an hour's teaching 100 years ago. The product of an hour's labour by a Premier League footballer, or a top entertainer and so on, is thousands of times greater today than that of their equivalents 50 years ago.
If we take the social context in which the labour is performed into account, in other words, if we look at the reality of the labour process for the total social capital, rather than for some individual capital, in a static sense, then it becomes clear that the more labour becomes employed in those activities that are high value, even as the number of workers employed falls, either relatively or absolutely, the complex nature of the labour employed means that a greater quantity of abstract labour is performed, so that even with relatively high wages, the rate and mass of surplus value rises, and the rate of profit rises along with it. (See the final part of my response to Dr. Paul Cockshott).
The extent of this process can be seen by Marx's comments in the Grundrisse, and later in Capital III. The way capitalist development itself changes the nature of the worker as a human being, and thereby changes the nature of the labour they provide is captured by Marx when he says,
“...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.” (Grundrisse).
And in Capital III, Chapter 17, Marx writes,
“The commercial worker, in the strict sense of the term, belongs to the better-paid class of wage-workers — to those whose labour is classed as skilled and stands above average labour. Yet the wage tends to fall, even in relation to average labour, with the advance of the capitalist mode of production. This is due partly to the division of labour in the office, implying a one-sided development of the labour capacity, the cost of which does not fall entirely on the capitalist, since the labourer's skill develops by itself through the exercise of his function, and all the more rapidly as division of labour makes it more one-sided. Secondly, because the necessary training, knowledge of commercial practices, languages, etc., is more and more rapidly, easily, universally and cheaply reproduced with the progress of science and public education the more the capitalist mode of production directs teaching methods, etc., towards practical purposes. The universality of public education enables capitalists to recruit such labourers from classes that formerly had no access to such trades and were accustomed to a lower standard of living. Moreover, this increases supply, and hence competition. With few exceptions, the labour-power of these people is therefore devaluated with the progress of capitalist production. Their wage falls, while their labour capacity increases.”
Marx is talking here about commercial workers employed in the process of realising rather than producing surplus value, but the same principle applies, probably to an even greater extent to the huge expansion in the number of such skilled workers that capital requires for the production of surplus value too.
This can be seen by thinking about some particular type of labour. Take something such as furniture making. At time t, the makers of furniture produce fairly rudimentary articles. Even if we assume no technological change, leading to higher productivity, over several generations the skill of the furniture makers improves as it is passed down, and each new generation is taught by the last. If we then compare a chair produced, in a week, by a worker of the first generation with a chair produced, in a week, by this latter generation, we will find that they are not the same. The use value of the latter will be much higher. Although both will have taken a week to produce, the exchange value of the latter will be much higher than that of the former, which means that the labour of the latter stands in relation to the former in the same way that complex labour stands to simple labour.
For the same reason it is simply not possible to say that the technological processes which result in a reduction in the number of workers employed in some particular line of business is the same as a reduction in the quantity of labour undertaken, because these are two different things. The first only measures how much of some concrete labour is employed, whereas the latter measures how much abstract labour is employed.
If we take the above example, of a furniture maker, and assume no change in the value of labour-power, both workers may require 2 days of abstract labour-time to reproduce their labour-power. Assuming a five day week, the chair produced by the first has five days of added labour included in it, giving a rate of surplus value of 150%. But, if the chair produced by the second sells for twice the price of the former, it is as though it comprises 10 days of abstract labour-time. In that case, it would contain the equivalent of 8 days of surplus labour, so the rate of surplus value would be 400%. In fact, it would contain more abstract labour, than the amount of concrete labour in total in a week!
Put another way, a current furniture maker, even without consideration of any rise in the rate of surplus value due to rises in productivity, would produce more surplus value in one week of their labour than would 2 workers in a week of their labour-time previously. If we think about a range of concrete labours today compared to their past equivalents, its clear that this is true. For example, the value of an hour's teaching today is several times greater than that of an hour's teaching 100 years ago. The product of an hour's labour by a Premier League footballer, or a top entertainer and so on, is thousands of times greater today than that of their equivalents 50 years ago.
If we take the social context in which the labour is performed into account, in other words, if we look at the reality of the labour process for the total social capital, rather than for some individual capital, in a static sense, then it becomes clear that the more labour becomes employed in those activities that are high value, even as the number of workers employed falls, either relatively or absolutely, the complex nature of the labour employed means that a greater quantity of abstract labour is performed, so that even with relatively high wages, the rate and mass of surplus value rises, and the rate of profit rises along with it. (See the final part of my response to Dr. Paul Cockshott).
The extent of this process can be seen by Marx's comments in the Grundrisse, and later in Capital III. The way capitalist development itself changes the nature of the worker as a human being, and thereby changes the nature of the labour they provide is captured by Marx when he says,
“...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.” (Grundrisse).
And in Capital III, Chapter 17, Marx writes,
“The commercial worker, in the strict sense of the term, belongs to the better-paid class of wage-workers — to those whose labour is classed as skilled and stands above average labour. Yet the wage tends to fall, even in relation to average labour, with the advance of the capitalist mode of production. This is due partly to the division of labour in the office, implying a one-sided development of the labour capacity, the cost of which does not fall entirely on the capitalist, since the labourer's skill develops by itself through the exercise of his function, and all the more rapidly as division of labour makes it more one-sided. Secondly, because the necessary training, knowledge of commercial practices, languages, etc., is more and more rapidly, easily, universally and cheaply reproduced with the progress of science and public education the more the capitalist mode of production directs teaching methods, etc., towards practical purposes. The universality of public education enables capitalists to recruit such labourers from classes that formerly had no access to such trades and were accustomed to a lower standard of living. Moreover, this increases supply, and hence competition. With few exceptions, the labour-power of these people is therefore devaluated with the progress of capitalist production. Their wage falls, while their labour capacity increases.”
Marx is talking here about commercial workers employed in the process of realising rather than producing surplus value, but the same principle applies, probably to an even greater extent to the huge expansion in the number of such skilled workers that capital requires for the production of surplus value too.
Sunday, 27 September 2015
Capital III, Chapter 15 - Part 18
To the extent that the quantity of labour-power is reduced, this acts to reduce the quantity of surplus value and rate of profit. But, to the extent that this is a consequence of a rise in productivity, which reduces the paid portion of labour, and so raises the rate of surplus value, it increases the quantity of surplus value and rate of profit.
“Two labourers, each working 12 hours daily, cannot produce the same mass of surplus-value as 24 who work only 2 hours, even if they could live on air and hence did not have to work for themselves at all. In this respect, then, the compensation of the reduced number of labourers by intensifying the degree of exploitation has certain insurmountable limits. It may, for this reason, well check the fall in the rate of profit, but cannot prevent it altogether.” (p 247)
Which, of course, is true if nothing else changes. But, of course, as has been seen, in the course of Marx's elaboration here, this contradictory process means that not only may it be the case that other things change, but it must be the case that other things change. Specifically, what changes here is the nature of the labour itself and the social context in which it operates.
Let us take these two workers and compare them, in reality, to the 24 workers whose labour they now replace. As Marx sets out in Capital I, if this is in the context of a single firm, which employs some new machine, that can produce as much with 2 workers as was previously produced with 24, the situation is that the higher productivity of these workers makes it as though their labour were complex labour, in other words, it is as though each worker produced as much value in an hour as the workers in other firms produce in 12 hours.
The consequence here is that the rate of profit rises rather than falls. The labour employed produces 12 times as much new value as that of other firms, and yet is paid the same amount. So, in the industry, we have,
c 1000 + v 1000 + s 1000. s' = 100%, r' = 50%.
but, in this firm we have
c 12,000 + v 1,000 + s 23,000. s' = 2300%, r' = 176.92%.
The same situation applies, Marx sets out in Capital I, in relation to the higher productivity in more developed economies compared to less developed economies. For example, as was set out in relation to Marx's example in Capital III, Chapter 13.
He sets out that, in the one case, the capital is comprised 80 c + 20 v, and in the other 20 c + 80 v. In the former country a total of 40 hours of labour processes £80 of constant capital. In the latter, 120 hours of labour process just £20 of constant capital. On that basis 1 hour of labour in the first country processes 12 times as much constant capital as an hour of labour in the second. On a purely value basis then, labour in the first country is 12 times as productive as that in the latter. But, this underestimates the difference. As Marx repeatedly points out, as the technical composition of capital rises, the organic composition rises but not in the same proportion, because the constant capital becomes cheaper, it is used more efficiently, and fewer, better machines replace a larger number of less efficient machines.
But, let us proceed on the basis that labour in the former country is just 12 times more productive than in the latter, and that, therefore, on the basis of what Marx sets out in Volume I, the value of an hour's labour in country 1 is equal to 12 hour's of labour in country 2. In that case what we would actually have is.
Country 1
c 80 + v 20 + s 460 = 560, s' = 2300%, r' = 460%
Country 2
c 20 + v 80 + s 40 = 140, s' = 50%, r' = 40%.
So, in other words, the workers in country 1 undertake 40 hours of labour, but because the value of an hour's labour for country 1 is equal to 12 hour's of labour in country 2, this 40 hours creates a value equivalent to 480 hours of labour in country 2.
If the workers in country 1 were only paid the value of their labour-power they would be paid £20, which, as with the example Marx gives, of the firm that enjoys the advantage of being the first to introduce a machine, means that the capitalists in country 1 would make an even greater rate of surplus value.
“Two labourers, each working 12 hours daily, cannot produce the same mass of surplus-value as 24 who work only 2 hours, even if they could live on air and hence did not have to work for themselves at all. In this respect, then, the compensation of the reduced number of labourers by intensifying the degree of exploitation has certain insurmountable limits. It may, for this reason, well check the fall in the rate of profit, but cannot prevent it altogether.” (p 247)
Which, of course, is true if nothing else changes. But, of course, as has been seen, in the course of Marx's elaboration here, this contradictory process means that not only may it be the case that other things change, but it must be the case that other things change. Specifically, what changes here is the nature of the labour itself and the social context in which it operates.
Let us take these two workers and compare them, in reality, to the 24 workers whose labour they now replace. As Marx sets out in Capital I, if this is in the context of a single firm, which employs some new machine, that can produce as much with 2 workers as was previously produced with 24, the situation is that the higher productivity of these workers makes it as though their labour were complex labour, in other words, it is as though each worker produced as much value in an hour as the workers in other firms produce in 12 hours.
The consequence here is that the rate of profit rises rather than falls. The labour employed produces 12 times as much new value as that of other firms, and yet is paid the same amount. So, in the industry, we have,
c 1000 + v 1000 + s 1000. s' = 100%, r' = 50%.
but, in this firm we have
c 12,000 + v 1,000 + s 23,000. s' = 2300%, r' = 176.92%.
The same situation applies, Marx sets out in Capital I, in relation to the higher productivity in more developed economies compared to less developed economies. For example, as was set out in relation to Marx's example in Capital III, Chapter 13.
He sets out that, in the one case, the capital is comprised 80 c + 20 v, and in the other 20 c + 80 v. In the former country a total of 40 hours of labour processes £80 of constant capital. In the latter, 120 hours of labour process just £20 of constant capital. On that basis 1 hour of labour in the first country processes 12 times as much constant capital as an hour of labour in the second. On a purely value basis then, labour in the first country is 12 times as productive as that in the latter. But, this underestimates the difference. As Marx repeatedly points out, as the technical composition of capital rises, the organic composition rises but not in the same proportion, because the constant capital becomes cheaper, it is used more efficiently, and fewer, better machines replace a larger number of less efficient machines.
But, let us proceed on the basis that labour in the former country is just 12 times more productive than in the latter, and that, therefore, on the basis of what Marx sets out in Volume I, the value of an hour's labour in country 1 is equal to 12 hour's of labour in country 2. In that case what we would actually have is.
Country 1
c 80 + v 20 + s 460 = 560, s' = 2300%, r' = 460%
Country 2
c 20 + v 80 + s 40 = 140, s' = 50%, r' = 40%.
So, in other words, the workers in country 1 undertake 40 hours of labour, but because the value of an hour's labour for country 1 is equal to 12 hour's of labour in country 2, this 40 hours creates a value equivalent to 480 hours of labour in country 2.
If the workers in country 1 were only paid the value of their labour-power they would be paid £20, which, as with the example Marx gives, of the firm that enjoys the advantage of being the first to introduce a machine, means that the capitalists in country 1 would make an even greater rate of surplus value.
Saturday, 26 September 2015
Capital III, Chapter 15 - Part 17
The total mass of profit is equal to the mass of surplus value. But, the total mass of surplus value depends both on the rate of surplus value and the mass of labour employed. So, if the rate of surplus value is 100%, then 100 hours of labour-power produces 100 hours of new value, divided into 50 hours of necessary labour and 50 hours of surplus labour. However, if productivity rises so that relatively less labour-power is employed, the mass of surplus value may still rise. If the labour-power employed falls to 90 hours, but the rate of surplus value rises to 133%, then 60 hours of surplus will be produced. The proportion of labour-power may fall, so that even with the same rate of surplus value, the mass of surplus value would fall. Yet, this same process, by expanding the mass of capital, would still result in an increase in the mass of surplus value.
If a capital is made up of c 1000 + v 1000 + s 1000, and the capital expands to c 5000 + v 2000 + s 2000, the quantity of labour-power employed has fallen relative to the constant capital, from 1:1 to 5:2, and as a proportion of the total capital from 50% to 28.57%. The rate of surplus value has remained unchanged, and yet the mass of surplus value has doubled. The effect of rising productivity, caused by a rising organic composition of capital, resulting from an increase in the mass of capital, is therefore, on the one hand, to tend towards a lower rate of profit, because v shrinks, as a proportion of C (the total advanced capital), but on the other hand to tend towards a higher rate of profit because s rises relative to v, and therefore, relative to C.
The rise in productivity reduces v relative to C, but raises s relative to v, and, therefore, C. Whether the rate of profit rises or falls, as a result of this process, which raises the organic composition of capital, depends on the relative strength of each force. A reduction in v, for example, might arise, not due to any change in the technical composition of capital, but simply due to a cheapening of wage goods.
For example, when the Corn Laws were abolished that cheapened food, meaning wages could be reduced. But, the same quantity of labour-power was required to process any given quantity of material. The ratio of v to c and C fell because wages fell, but the ratio of c to v+s remained unchanged. But, that means that s rose relative to c+v, because c remained constant whilst v fell. So, the rate of profit rose.
If we have,
c 1000 + v 1000 + s 1000, then s' = 100%, r' = 50%.
If capital accumulates and social productivity rises, we may have,
c 5000 + v 2000 + s 2500. s' = 125%, r' = 35.71%.
or
c 5000 + v 2000 + s 4000. s' = 200%, r' = 57.14%.
In other words, the rise in the rate of surplus value must outweigh the relative fall in the proportion of variable capital. Of course, this assumes that the same processes that raise the rate of surplus value by cheapening wage goods do not also reduce the value of constant capital. But, of course, they will. When the Corn Laws were abolished, then, as Marx described, this also significantly reduced constant capital costs. That was true not just in industries like bakery, where Corn was used as a raw material. It was also true in the textile industry where huge amounts were used as an auxiliary material for size. But, it was not just on corn that tariffs were removed. They were removed on many other raw materials such as cotton.
The very process of raising productivity also reduces the value of constant capital. That is the process involved in moral depreciation of fixed capital. However, it also applies to the reduction in value of materials, the reduction in the quantity of materials consumed, as a consequence of more efficient methods of production, and in the case of auxiliary materials, used to produce energy etc. more efficient machines etc. It applies to the development of more durable, cheaper materials and so on, and to new types of products that require less materials than their predecessors. It applies also to the development of new industries where the organic composition of capital is lower.
The process of increasing social productivity will then tend to raise the mass of material processed relative to the fixed capital and the variable capital, but will also reduce the value of that material. Whether the total value of the circulating constant capital (raw and auxiliary materials) rises or falls will then depend on the extent to which its mass rises or falls as a result of this process, compared with the rise or fall of the value of the commodities of which it is composed. If the fall in the latter is greater than the rise in the former, the total value of the circulating constant capital will fall, causing the rate of profit to rise and vice versa.
If a capital is made up of c 1000 + v 1000 + s 1000, and the capital expands to c 5000 + v 2000 + s 2000, the quantity of labour-power employed has fallen relative to the constant capital, from 1:1 to 5:2, and as a proportion of the total capital from 50% to 28.57%. The rate of surplus value has remained unchanged, and yet the mass of surplus value has doubled. The effect of rising productivity, caused by a rising organic composition of capital, resulting from an increase in the mass of capital, is therefore, on the one hand, to tend towards a lower rate of profit, because v shrinks, as a proportion of C (the total advanced capital), but on the other hand to tend towards a higher rate of profit because s rises relative to v, and therefore, relative to C.
The rise in productivity reduces v relative to C, but raises s relative to v, and, therefore, C. Whether the rate of profit rises or falls, as a result of this process, which raises the organic composition of capital, depends on the relative strength of each force. A reduction in v, for example, might arise, not due to any change in the technical composition of capital, but simply due to a cheapening of wage goods.
For example, when the Corn Laws were abolished that cheapened food, meaning wages could be reduced. But, the same quantity of labour-power was required to process any given quantity of material. The ratio of v to c and C fell because wages fell, but the ratio of c to v+s remained unchanged. But, that means that s rose relative to c+v, because c remained constant whilst v fell. So, the rate of profit rose.
If we have,
c 1000 + v 1000 + s 1000, then s' = 100%, r' = 50%.
If capital accumulates and social productivity rises, we may have,
c 5000 + v 2000 + s 2500. s' = 125%, r' = 35.71%.
or
c 5000 + v 2000 + s 4000. s' = 200%, r' = 57.14%.
In other words, the rise in the rate of surplus value must outweigh the relative fall in the proportion of variable capital. Of course, this assumes that the same processes that raise the rate of surplus value by cheapening wage goods do not also reduce the value of constant capital. But, of course, they will. When the Corn Laws were abolished, then, as Marx described, this also significantly reduced constant capital costs. That was true not just in industries like bakery, where Corn was used as a raw material. It was also true in the textile industry where huge amounts were used as an auxiliary material for size. But, it was not just on corn that tariffs were removed. They were removed on many other raw materials such as cotton.
The very process of raising productivity also reduces the value of constant capital. That is the process involved in moral depreciation of fixed capital. However, it also applies to the reduction in value of materials, the reduction in the quantity of materials consumed, as a consequence of more efficient methods of production, and in the case of auxiliary materials, used to produce energy etc. more efficient machines etc. It applies to the development of more durable, cheaper materials and so on, and to new types of products that require less materials than their predecessors. It applies also to the development of new industries where the organic composition of capital is lower.
The process of increasing social productivity will then tend to raise the mass of material processed relative to the fixed capital and the variable capital, but will also reduce the value of that material. Whether the total value of the circulating constant capital (raw and auxiliary materials) rises or falls will then depend on the extent to which its mass rises or falls as a result of this process, compared with the rise or fall of the value of the commodities of which it is composed. If the fall in the latter is greater than the rise in the former, the total value of the circulating constant capital will fall, causing the rate of profit to rise and vice versa.
Northern Soul Classics - I've Lost You - Jackie Wilson
The Northern Classics from Jackie Wilson just keep coming.
Friday, 25 September 2015
Capital III, Chapter 15 - Part 16
Overproduction constitutes a crisis for capitalism for exactly the reason that Marx described in the previous section – production has occurred, the workers have been exploited and produced a surplus value (usually at such points a large surplus value) but not all of the output can be sold, or it can be sold only at prices below the cost of production, so the produced surplus value cannot be realised. Too much social labour-time was spent on its production, because, as Marx points out, the determination of that is not just in terms of the time required for each commodity unit, but for the mass of such units. Each unit may have been produced using the minimum amount of labour-time possible, but if 1,000 units are produced, and only 500 units can be sold, at their market value, half the time spent on their production was not socially necessary. Robinson might produce 200 fish in just 4 hours, but if after the 100th fish, he feels sick at the thought of eating another, he has wasted 2 hours of his labour-time.
The fact that, in a capitalist economy, this point might be reached, even where there are thousands of people who could consume the surplus production, if only they had the means to buy them, is irrelevant, because, as Marx points out, capitalism only knows one kind of demand, and that is effective demand, i.e. the ability to back it up with the ability and willingness to pay the market value. As Marx says, overproduction is always, under capitalism, only relative, it is an overproduction at certain prices. If prices were lower, more would be demanded, but if prices were lower, they may not cover the cost of reproducing the consumed capital.
As Marx points out, to understand this its important to understand the nature of demand under capitalism as,
“...consumer power based on antagonistic conditions of distribution, which reduce the consumption of the bulk of society to a minimum varying within more or less narrow limits.” (p 244)
That is, for any particular commodity, there may be thousands who would buy it if they had the means to do so, or if its price were lower, whilst simultaneously there are thousands who have the means to buy more, but who choose not to, because their demand, at current prices, is already sated, and they choose to use any further reduction in its price to save money rather than to expand their demand. In other words, this is the situation Marx described earlier that there is no reason to buy six knives when only one is required, just because the price has fallen. In fact, as Marx points out that situation can apply to all, or the majority, of commodities simultaneously. It only requires that consumers prefer to hold money rather than to spend it, buying commodities.
“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)
The contradictory forces arising out of this process of rising social productivity not only exist simultaneously, one pulling in one direction, one in another, but they also interact on each other.
“The two movements not only go hand in hand, but mutually influence one another and are phenomena in which the same law expresses itself. Yet they affect the rate of profit in opposite ways.” (p 247)
The fact that, in a capitalist economy, this point might be reached, even where there are thousands of people who could consume the surplus production, if only they had the means to buy them, is irrelevant, because, as Marx points out, capitalism only knows one kind of demand, and that is effective demand, i.e. the ability to back it up with the ability and willingness to pay the market value. As Marx says, overproduction is always, under capitalism, only relative, it is an overproduction at certain prices. If prices were lower, more would be demanded, but if prices were lower, they may not cover the cost of reproducing the consumed capital.
As Marx points out, to understand this its important to understand the nature of demand under capitalism as,
“...consumer power based on antagonistic conditions of distribution, which reduce the consumption of the bulk of society to a minimum varying within more or less narrow limits.” (p 244)
That is, for any particular commodity, there may be thousands who would buy it if they had the means to do so, or if its price were lower, whilst simultaneously there are thousands who have the means to buy more, but who choose not to, because their demand, at current prices, is already sated, and they choose to use any further reduction in its price to save money rather than to expand their demand. In other words, this is the situation Marx described earlier that there is no reason to buy six knives when only one is required, just because the price has fallen. In fact, as Marx points out that situation can apply to all, or the majority, of commodities simultaneously. It only requires that consumers prefer to hold money rather than to spend it, buying commodities.
“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)
The contradictory forces arising out of this process of rising social productivity not only exist simultaneously, one pulling in one direction, one in another, but they also interact on each other.
“The two movements not only go hand in hand, but mutually influence one another and are phenomena in which the same law expresses itself. Yet they affect the rate of profit in opposite ways.” (p 247)
Thursday, 24 September 2015
Capital III, Chapter 15 - Part 15
2) Conflict Between Expansion Of Production And Production Of Surplus-Value
As already shown, the process which tends towards a lower rate of profit – the rise in social productivity – is contradictory. It leads not only to a tendency for the rate of profit to fall, but also for it to rise; it leads to an inevitable rise in the rate of surplus value; it necessitates a rise in the mass of profits and of capital. So, the mass of the existing means of production increases in quantity and in value, even as the value of each building, machine, piece of material falls. But, this increase in mass also implies a rise in the organic composition of capital, spurred on by competition. Each capital, to be competitive, seeks to reduce costs. The bigger capitals, for the reasons set out in Chapter 11, have an even bigger incentive to reduce the costs of their fixed and circulating constant capital than do the smaller capitals. They seek to develop better, cheaper machines, so that one machine replaces many, and the cost of machines itself falls – the process of “moral depreciation”.
The same process raises productivity so that not only does one machine process as much or more material as several did before, but, by the same token, only one worker is needed to operate that one machine, whereas previously several workers were required to operate the several machines.
The increase in productivity means that a relatively smaller quantity of labour-power is then required to mobilise any given size of capital. But, as the quantity of material processed thereby increases, in mass and value, proportionately, so then capital seeks to reduce the cost of that material – bringing in cheaper material from overseas, reducing tariffs and other impediments to access; developing new more productive sources of supply; and raising productivity of existing sources.
The same process reduces the value of labour-power. Higher productivity means that the workers means of subsistence become cheaper. A smaller portion of the working day is required for their production. So, wages can fall whilst living standards remain constant. A greater portion of the working day, therefore, constitutes surplus labour-time. This is just like Robinson Crusoe using his surplus 2 hours to produce a fishing net, which meant his consumption could rise, but the time he spent catching fish fell so much that his surplus labour-time then more than doubled. Under capitalism, this increase in the rate of surplus value, and in the mass of surplus value, is appropriated by capital, and the additional surplus value is then thrown into yet further accumulation of means of production, increasing the quantity of output even further.
But, the corollary of this, as was seen above, is that less labour-power is then required to process any given quantity of material. The quantity of labour-power continues to rise, because the mass of capital continues to increase – existing industries continue to expand, new industries with low organic compositions are continually being created as new capitals – but the proportion of labour-power continues to fall.
The result of Robinson Crusoe creating his net was that instead of it taking him 8 hours to catch the fish he needed, it only required 4. His surplus labour-time rose from 2 hours to 5.75, as a result. He could choose to use this additional time to catch more fish, and thereby increase his consumption, or to reduce his working day, or to produce some other means of production or consumption. For example, he may decide to increase his consumption by varying his diet, collecting roots and berries, or to increase his future consumption by producing more means of production, creating stock pens, and cultivating an area of land.
He might spend time producing another fishing net, but this might constitute over production if he can only use one net at a time. Yet, such an additional net could be productive if it could be used by Friday. Even if Robinson could use the additional net himself, it could still constitute over production, because the additional fish he catches with it may be surplus to his requirements. He can only stomach so many fish in a day, even if he has caught them in a fraction of the time.
As Marx put it in its capitalist context.
"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.”
(Theories of Surplus Value III)
Robinson will tend not to make such mistakes because he will know, in advance, to allocate his available labour-time to the production of those things that will provide him with the most use value. He may have accidental over production, in the same way that peasant producers have bumper harvests some times, but unlike overproduction under capitalism, such events are not a source of crisis.
But, for capitalism, because it is production for profit and not for consumption, production always proceeds consumption, and production decisions always proceed consumption decisions, and the allocation of available social labour-time – though this is not necessarily the case for big industrial capital today, which only develops its investment and production plans on the basis of detailed understanding of what future consumption patterns are likely to be, much as would socialist planning of the economy.
Particularly, in the era that Marx is describing, the many individual capitals, without this kind of future knowledge of the market, simply responded to what was currently profitable, and invested additional capital in expanding that production. Small capital today, which is still numerically predominant, still bases its decisions on that foundation, which is why when any crisis erupts it is this small capital that suffers most and first.
Wednesday, 23 September 2015
Questions For VW Workers
The scandal at VW, appears to have many similarities with the scandals that have hit the banking and finance industry over recent years. As with those scandals, the likelihood is that the scope will extend much deeper, as far as VW is concerned, and much wider, as far as the car industry as a whole is concerned. Despite the fact of criminal activity by bankers and financiers that almost collapsed the global financial system, not one of them has gone to gaol. It will be interesting to see whether any VW executives go to gaol. But, the revelations about VW cheating also raise questions that VW workers also need to answer.
Germany is the country where bourgeois social democracy perhaps takes its most mature form. Part of the reason for that is the fact of the almost complete construction of its polity after WWII. That construction occurred under conditions in which big industrial capital, had already gained hegemony over previous forms of capital, such as money and merchant capital, as well as this big industrial capital also taking the form of socialised capital, in the shape of joint stock companies. That hegemony, after WWII, was also manifest in the hegemony of the US, where this form of industrial capital was most developed, spreading itself out across the globe in the shape of the multinational corporation. It was also manifest in the development by these developed industrial societies of welfare states, the significant involvement of the state itself in the regulation of economic life, including the extension of the same kind of planning that these corporations engaged in to the planning of the national economy.
That was reflected in the dominance of Keynesian theories, and that in turn was even extended to the international sphere, with the creation of global para-state bodies intended for such regulation and intervention, such as the IMF, World Bank, GATT and so on.
The material foundations of this bourgeois social democracy resides in the development of this socialised capital in place of private capitalist property, in the latter half of the 19th century, as described by Marx and Engels, as a transitional form of property, standing between capitalist private property, and the co-operative commonwealth. The political and social foundations of this bourgeois social democracy as the form of state appropriate to this transitional form of property, were also established during that time, as Engels described.
“... these circumstances had turned the English working class, politically, into the tail of the ‘great Liberal Party’, the party led by the manufacturers. This advantage, once gained, had to be perpetuated. And the manufacturing capitalists, from the Chartist opposition, not to Free Trade, but to the transformation of Free Trade into the one vital national question, had learnt, and were learning more and more, that the middle class can never obtain full social and political power over the nation except by the help of the working class. Thus a gradual change came over the relations between both classes. The Factory Acts, once the bugbear of all manufacturers, were not only willingly submitted to, but their expansion into acts regulating almost all trades was tolerated. Trades Unions, hitherto considered inventions of the devil himself, were now petted and patronised as perfectly legitimate institutions, and as useful means of spreading sound economical doctrines amongst the workers. Even strikes, than which nothing had been more nefarious up to 1848, were now gradually found out to be occasionally very useful, especially when provoked by the masters themselves, at their own time. Of the legal enactments, placing the workman at a lower level or at a disadvantage with regard to the master, at least the most revolting were repealed. And, practically, that horrid People’s Charter actually became the political programme of the very manufacturers who had opposed it to the last. The Abolition of the Property Qualification and Vote by Ballot are now the law of the land. The Reform Acts of 1867 and 1884 make a near approach to universal suffrage, at least such as it now exists in Germany; the Redistribution Bill now before Parliament creates equal electoral districts-on the whole not more unequal than those of France or Germany; payment of members, and shorter, if not actually annual Parliaments, are visibly looming in the distance and yet there are people who say that Chartism is dead.”
Preface To The Second German Edition of “The Condition Of The Working Class
That became all the more the case, as the role of the old capitalists in production was taken over by a class of professional managers, increasingly drawn from the working-class, whilst the capitalists became simply money-lending coupon clippers, whose activities revolved around stock market speculation, and whose own interests not only diverged from those of productive-capital, but were also left up to a group of company directors and executives, which formed a bureaucracy with its own set of interests.
The post-war German state was created in this image. In order to emphasise the dominance of the big industrial capital, as socialised capital, the power of the shareholders was limited by the creation of Works Councils in the largest plants, and in 1976 the Co-determination Law was passed, which requires all German companies, that employ more than 2000 people, to have half of their supervisory boards elected by the workforce. But, it is this fact which means that there are questions that the VW workers themselves need to address, as to why they did not, identify these practices. After all, what we know already, poses considerable risks to the employment of tens of thousands of VW workers, but also to many more workers in associated industries.
VW has set aside around €8 billion to cover the immediate costs involved in recalling cars in the US. However, this is totally inadequate for the total costs that will be faced. Already, the US has set out that VW faces fines of around $18 billion. There are already around 50 class action suits being planned in the US by individuals. Just as, years after the event, we still have large numbers of cases of compensation for PPI mis-selling, so we face the same for car mis-selling, as lawyers launch cases on behalf of environmentalists, who have been traumatised at having bought a car, they thought was environmentally friendly, only to find that they have been polluting the atmosphere by up to forty times the amount they previously thought.
Moreover, given the extent to which the cars, on normal running, are pumping out noxious gases, compared to the rigged emissions, its hard to see how VW can quickly bring about the necessary modifications to the cars it recalls, in order to make them comply. The cars when run under the test mode, apparently suffer a considerable deterioration of their fuel consumption. Resolving these technical issues will require the investment of huge amounts of productive-capital, on top of the financial losses the firm will suffer.
In addition, only a very small proportion of new cars are actually bought nowadays. The vast majority are either leased, or else bought on various forms of car plan. Every car producer finances these schemes through various forms of securitisation of the debt. In the US, its already known that a similar development of sub-prime car loans has occurred, as happened with sub-prime mortgages. If millions of cars are returned, and the loans on these cars goes bad, then all of this securitisation, much of which goes through illiquid junk bond markets, will threaten to cause a cascade of credit failures throughout the financial system. There have already been some very sharp spikes in yields for some of these products.
But, in fact, this is only a reflection of what probably lay behind this crisis in the first place. Oligopolies do not compete on the basis of market prices, unless they have to, because such competition is massively destructive of their profit margins. Instead, they try to raise their rate of profit by reducing their production costs by continual innovation. They also attempt to capture market share by such continual innovation, either real or imagined. In other words, if they can create some entirely new type of product they can create a new market for it, and thereby capture market share. When that is not possible they try to convince consumers that their latest manifestation of an existing product is something new. Hence various versions of iPhone, regular launches of new car versions, rather than new models, and so on. All of this is backed up by large amounts of advertising and marketing, to create a brand image.
In the US, tight legal emission limits on cars, has given an advantage in this regard to all those producers, most notably the Japanese, who have developed hybrid, or wholly electric cars. It is quite clearly difficult to produce a wholly diesel or petrol engine car that can have the same emission levels as a car that runs on electric for all or part of the time. But, German manufacturers have not put the same kind of productive investment into developing such cars as have the Japanese. It would always then be difficult for VW, which wanted to seriously expand its US market share, to do so in competition with all of these electric and hybrid cars. The temptation to cheat on the emission figures was then quite high. Instead of putting productive investment into actually reducing the pollution, VW simply introduced software that enabled it to cheat.
This is, in fact, symptomatic of the problem, of capital “eating itself” discussed recently. The owners of fictitious capital, having engaged in massive speculation in shares, bonds and property, over the last thirty years, have pushed up the prices of all these asset classes, and thereby reduced the yield to be obtained from them. By attempting to compensate for that by taking out a larger proportion of produced surplus value as rents, and interest, leaving a smaller proportion to be reinvested in productive-capital, they have continually narrowed the base upon which their revenues depend. They have killed the goose that lays the golden eggs.
But, the question that VW workers have to ask, is why this has happened in Germany, where this bourgeois social democracy is most developed, and where, therefore, the avaricious nature of the money-lending capitalists (shareholders) should have been more under control. Of course, it may well be the case that it has been, and that we will find that the situation in other economies has been even worse, leaving a huge chasm of productive investment that needs to be filled, which will push interest rates up sharply once it is uncovered, and thereby crush asset prices.
Part of the reason that workers at VW did not identify this situation is fairly obvious. The workers do not have a majority position on the supervisory board, where the shareholders appoint the Chair who has a casting vote. Moreover, if the capitalist shareholders in companies do not always have the necessary oversight and control of the actions of executives, as the instances of Enron, Tyco and so on demonstrate, then it is not surprising that Worker Directors are unable to undertake such oversight. What this demonstrates is the need for Committees of Workers Inspection, to be established, who can undertake such supervision, on a day to day basis over the activities of the company.
But, that would require that workers themselves were in a strong enough position to be able to demand such an arrangement, which amounts effectively to the establishment of workers control. Yet, as Trotsky points out, workers control is impossible outside a revolutionary situation.
“If the participation of the workers in the management of production is to be lasting, stable, “normal,” it must rest upon class collaboration, and not upon class struggle. Such a class collaboration can be realized only through the upper strata of the trade unions and the capitalist associations. There have been not a few such experiments: in Germany (“economic democracy”), in Britain (“Mondism”), etc. Yet, in all these instances, it was not a case of workers’ control over capital, but of the subserviency of the labor bureaucracy to capital. Such subserviency, as experience shows, can last for a long time: depending on the patience of the proletariat.”
Workers’ Control of Production
Which is the situation that already exists in Germany.
“The closer it is to production, to the factory, to the shop, the less possible such a regime is, for here it is a matter of the immediate, vital interests of the workers, and the whole process unfolds under their very eyes. workers’ control through factory councils is conceivable only on the basis of sharp class struggle, not collaboration. But this really means dual power in the enterprises, in the trusts, in all the branches of industry, in the whole economy.
What state regime corresponds to workers’ control of production? It is obvious that the power is not yet in the hands of the proletariat, otherwise we would have not workers’ control of production but the control of production by the workers’ state as an introduction to a regime of state production on the foundations of nationalization. What we are talking about is workers’ control under the capitalist regime, under the power of the bourgeoisie. However, a bourgeoisie that feels it is firmly in the saddle will never tolerate dual power in its enterprises. workers’ control consequently, can be carried out only under the condition of an abrupt change in the relationship of forces unfavorable to the bourgeoisie and its state. Control can be imposed only by force upon the bourgeoisie, by a proletariat on the road to the moment of taking power from them, and then also ownership of the means of production. Thus the regime of workers’ control, a provisional transitional regime by its very essence, can correspond only to the period of the convulsing of the bourgeois state, the proletarian offensive, and the failing back of the bourgeoisie, that is, to the period of the proletarian revolution in the fullest sense of the word.”
(ibid)
It is clear then that such Workers Control is impossible, outside a revolutionary situation, unless the workers themselves own the means of production, in other words, although both joint stock companies and worker owned co-operatives constitute socialised capital, are both the transitory form of property, it is only the worker owned co-operative which enables the workers to exercise their own control over production. As Marx puts it,
“The capitalist stock companies, as much as the co-operative factories, should be considered as transitional forms from the capitalist mode of production to the associated one, with the only distinction that the antagonism is resolved negatively in the one and positively in the other.”
(Capital III, Chapter 27)
Of course, even were VW a worker owned co-operative, this would not of itself prevent the kind of situation now revealed. The very fact that such an enterprise would need to compete within the global capitalist economy, would drive it towards the same kind of activities, if that was what was required to survive. That is the consequence of alienation, as the workers, as producers of commodities, are separated from themselves as consumers of products. It is why worker owned co-operatives need to develop close links with the consumers of their products on a human level rather than simply on the level of the purely cash nexus of the market.
Germany is the country where bourgeois social democracy perhaps takes its most mature form. Part of the reason for that is the fact of the almost complete construction of its polity after WWII. That construction occurred under conditions in which big industrial capital, had already gained hegemony over previous forms of capital, such as money and merchant capital, as well as this big industrial capital also taking the form of socialised capital, in the shape of joint stock companies. That hegemony, after WWII, was also manifest in the hegemony of the US, where this form of industrial capital was most developed, spreading itself out across the globe in the shape of the multinational corporation. It was also manifest in the development by these developed industrial societies of welfare states, the significant involvement of the state itself in the regulation of economic life, including the extension of the same kind of planning that these corporations engaged in to the planning of the national economy.
That was reflected in the dominance of Keynesian theories, and that in turn was even extended to the international sphere, with the creation of global para-state bodies intended for such regulation and intervention, such as the IMF, World Bank, GATT and so on.
The material foundations of this bourgeois social democracy resides in the development of this socialised capital in place of private capitalist property, in the latter half of the 19th century, as described by Marx and Engels, as a transitional form of property, standing between capitalist private property, and the co-operative commonwealth. The political and social foundations of this bourgeois social democracy as the form of state appropriate to this transitional form of property, were also established during that time, as Engels described.
“... these circumstances had turned the English working class, politically, into the tail of the ‘great Liberal Party’, the party led by the manufacturers. This advantage, once gained, had to be perpetuated. And the manufacturing capitalists, from the Chartist opposition, not to Free Trade, but to the transformation of Free Trade into the one vital national question, had learnt, and were learning more and more, that the middle class can never obtain full social and political power over the nation except by the help of the working class. Thus a gradual change came over the relations between both classes. The Factory Acts, once the bugbear of all manufacturers, were not only willingly submitted to, but their expansion into acts regulating almost all trades was tolerated. Trades Unions, hitherto considered inventions of the devil himself, were now petted and patronised as perfectly legitimate institutions, and as useful means of spreading sound economical doctrines amongst the workers. Even strikes, than which nothing had been more nefarious up to 1848, were now gradually found out to be occasionally very useful, especially when provoked by the masters themselves, at their own time. Of the legal enactments, placing the workman at a lower level or at a disadvantage with regard to the master, at least the most revolting were repealed. And, practically, that horrid People’s Charter actually became the political programme of the very manufacturers who had opposed it to the last. The Abolition of the Property Qualification and Vote by Ballot are now the law of the land. The Reform Acts of 1867 and 1884 make a near approach to universal suffrage, at least such as it now exists in Germany; the Redistribution Bill now before Parliament creates equal electoral districts-on the whole not more unequal than those of France or Germany; payment of members, and shorter, if not actually annual Parliaments, are visibly looming in the distance and yet there are people who say that Chartism is dead.”
Preface To The Second German Edition of “The Condition Of The Working Class
That became all the more the case, as the role of the old capitalists in production was taken over by a class of professional managers, increasingly drawn from the working-class, whilst the capitalists became simply money-lending coupon clippers, whose activities revolved around stock market speculation, and whose own interests not only diverged from those of productive-capital, but were also left up to a group of company directors and executives, which formed a bureaucracy with its own set of interests.
The post-war German state was created in this image. In order to emphasise the dominance of the big industrial capital, as socialised capital, the power of the shareholders was limited by the creation of Works Councils in the largest plants, and in 1976 the Co-determination Law was passed, which requires all German companies, that employ more than 2000 people, to have half of their supervisory boards elected by the workforce. But, it is this fact which means that there are questions that the VW workers themselves need to address, as to why they did not, identify these practices. After all, what we know already, poses considerable risks to the employment of tens of thousands of VW workers, but also to many more workers in associated industries.
VW has set aside around €8 billion to cover the immediate costs involved in recalling cars in the US. However, this is totally inadequate for the total costs that will be faced. Already, the US has set out that VW faces fines of around $18 billion. There are already around 50 class action suits being planned in the US by individuals. Just as, years after the event, we still have large numbers of cases of compensation for PPI mis-selling, so we face the same for car mis-selling, as lawyers launch cases on behalf of environmentalists, who have been traumatised at having bought a car, they thought was environmentally friendly, only to find that they have been polluting the atmosphere by up to forty times the amount they previously thought.
Moreover, given the extent to which the cars, on normal running, are pumping out noxious gases, compared to the rigged emissions, its hard to see how VW can quickly bring about the necessary modifications to the cars it recalls, in order to make them comply. The cars when run under the test mode, apparently suffer a considerable deterioration of their fuel consumption. Resolving these technical issues will require the investment of huge amounts of productive-capital, on top of the financial losses the firm will suffer.
In addition, only a very small proportion of new cars are actually bought nowadays. The vast majority are either leased, or else bought on various forms of car plan. Every car producer finances these schemes through various forms of securitisation of the debt. In the US, its already known that a similar development of sub-prime car loans has occurred, as happened with sub-prime mortgages. If millions of cars are returned, and the loans on these cars goes bad, then all of this securitisation, much of which goes through illiquid junk bond markets, will threaten to cause a cascade of credit failures throughout the financial system. There have already been some very sharp spikes in yields for some of these products.
But, in fact, this is only a reflection of what probably lay behind this crisis in the first place. Oligopolies do not compete on the basis of market prices, unless they have to, because such competition is massively destructive of their profit margins. Instead, they try to raise their rate of profit by reducing their production costs by continual innovation. They also attempt to capture market share by such continual innovation, either real or imagined. In other words, if they can create some entirely new type of product they can create a new market for it, and thereby capture market share. When that is not possible they try to convince consumers that their latest manifestation of an existing product is something new. Hence various versions of iPhone, regular launches of new car versions, rather than new models, and so on. All of this is backed up by large amounts of advertising and marketing, to create a brand image.
In the US, tight legal emission limits on cars, has given an advantage in this regard to all those producers, most notably the Japanese, who have developed hybrid, or wholly electric cars. It is quite clearly difficult to produce a wholly diesel or petrol engine car that can have the same emission levels as a car that runs on electric for all or part of the time. But, German manufacturers have not put the same kind of productive investment into developing such cars as have the Japanese. It would always then be difficult for VW, which wanted to seriously expand its US market share, to do so in competition with all of these electric and hybrid cars. The temptation to cheat on the emission figures was then quite high. Instead of putting productive investment into actually reducing the pollution, VW simply introduced software that enabled it to cheat.
This is, in fact, symptomatic of the problem, of capital “eating itself” discussed recently. The owners of fictitious capital, having engaged in massive speculation in shares, bonds and property, over the last thirty years, have pushed up the prices of all these asset classes, and thereby reduced the yield to be obtained from them. By attempting to compensate for that by taking out a larger proportion of produced surplus value as rents, and interest, leaving a smaller proportion to be reinvested in productive-capital, they have continually narrowed the base upon which their revenues depend. They have killed the goose that lays the golden eggs.
But, the question that VW workers have to ask, is why this has happened in Germany, where this bourgeois social democracy is most developed, and where, therefore, the avaricious nature of the money-lending capitalists (shareholders) should have been more under control. Of course, it may well be the case that it has been, and that we will find that the situation in other economies has been even worse, leaving a huge chasm of productive investment that needs to be filled, which will push interest rates up sharply once it is uncovered, and thereby crush asset prices.
Part of the reason that workers at VW did not identify this situation is fairly obvious. The workers do not have a majority position on the supervisory board, where the shareholders appoint the Chair who has a casting vote. Moreover, if the capitalist shareholders in companies do not always have the necessary oversight and control of the actions of executives, as the instances of Enron, Tyco and so on demonstrate, then it is not surprising that Worker Directors are unable to undertake such oversight. What this demonstrates is the need for Committees of Workers Inspection, to be established, who can undertake such supervision, on a day to day basis over the activities of the company.
But, that would require that workers themselves were in a strong enough position to be able to demand such an arrangement, which amounts effectively to the establishment of workers control. Yet, as Trotsky points out, workers control is impossible outside a revolutionary situation.
“If the participation of the workers in the management of production is to be lasting, stable, “normal,” it must rest upon class collaboration, and not upon class struggle. Such a class collaboration can be realized only through the upper strata of the trade unions and the capitalist associations. There have been not a few such experiments: in Germany (“economic democracy”), in Britain (“Mondism”), etc. Yet, in all these instances, it was not a case of workers’ control over capital, but of the subserviency of the labor bureaucracy to capital. Such subserviency, as experience shows, can last for a long time: depending on the patience of the proletariat.”
Workers’ Control of Production
Which is the situation that already exists in Germany.
“The closer it is to production, to the factory, to the shop, the less possible such a regime is, for here it is a matter of the immediate, vital interests of the workers, and the whole process unfolds under their very eyes. workers’ control through factory councils is conceivable only on the basis of sharp class struggle, not collaboration. But this really means dual power in the enterprises, in the trusts, in all the branches of industry, in the whole economy.
What state regime corresponds to workers’ control of production? It is obvious that the power is not yet in the hands of the proletariat, otherwise we would have not workers’ control of production but the control of production by the workers’ state as an introduction to a regime of state production on the foundations of nationalization. What we are talking about is workers’ control under the capitalist regime, under the power of the bourgeoisie. However, a bourgeoisie that feels it is firmly in the saddle will never tolerate dual power in its enterprises. workers’ control consequently, can be carried out only under the condition of an abrupt change in the relationship of forces unfavorable to the bourgeoisie and its state. Control can be imposed only by force upon the bourgeoisie, by a proletariat on the road to the moment of taking power from them, and then also ownership of the means of production. Thus the regime of workers’ control, a provisional transitional regime by its very essence, can correspond only to the period of the convulsing of the bourgeois state, the proletarian offensive, and the failing back of the bourgeoisie, that is, to the period of the proletarian revolution in the fullest sense of the word.”
(ibid)
It is clear then that such Workers Control is impossible, outside a revolutionary situation, unless the workers themselves own the means of production, in other words, although both joint stock companies and worker owned co-operatives constitute socialised capital, are both the transitory form of property, it is only the worker owned co-operative which enables the workers to exercise their own control over production. As Marx puts it,
“The capitalist stock companies, as much as the co-operative factories, should be considered as transitional forms from the capitalist mode of production to the associated one, with the only distinction that the antagonism is resolved negatively in the one and positively in the other.”
(Capital III, Chapter 27)
Of course, even were VW a worker owned co-operative, this would not of itself prevent the kind of situation now revealed. The very fact that such an enterprise would need to compete within the global capitalist economy, would drive it towards the same kind of activities, if that was what was required to survive. That is the consequence of alienation, as the workers, as producers of commodities, are separated from themselves as consumers of products. It is why worker owned co-operatives need to develop close links with the consumers of their products on a human level rather than simply on the level of the purely cash nexus of the market.
Capital III, Chapter 15 - Part 14
“However, this requires a simultaneous concentration of capital, since the conditions of production then demand employment of capital on a larger scale. It also requires its centralisation, i.e. , the swallowing up of the small capitalists by the big and their deprivation of capital. It is again but an instance of separating — raised to the second power — the conditions of production from the producers to whose number these small capitalists still belong, since their own labour continues to play a role in their case.” (p 246)
This process of concentration would lead to a collapse of capitalist production were it not for forces operating in the other direction. In Capital I, Marx sets out some of those, as the splitting up of capitals as different members of these big private capitalist families established their own businesses, whilst others expanded their existing businesses into related lines of production. Moreover, particularly at times of boom, when the rate of profit is high, new capitals are always being formed as managers and even workers try their luck with establishing new businesses.
But, also as socialised capital, in the shape of the joint stock company or co-operative, itself expropriates the expropriators, the ownership of productive-capital becomes diffused. It is by definition no longer the private property of individuals, but the collective property of the business itself, i.e. as Marx puts it, of the associated producers within that business.
"The capital, which in itself rests on a social mode of production and presupposes a social concentration of means of production and labour-power, is here directly endowed with the form of social capital (capital of directly associated individuals) as distinct from private capital, and its undertakings assume the form of social undertakings as distinct from private undertakings. It is the abolition of capital as private property within the framework of capitalist production itself."
(Capital III, Chapter 27)
The ownership of this productive-capital, by these associated producers is quite separate from the ownership of share capital by shareholders, who are merely lenders of money-capital to the business.
"A company is an entity distinct alike from its shareholders and its directors.” (Shaw & Sons (Salford) Ltd v Shaw [1935] 2 KB 113 by Greer LJ.
As Engels put it in his Critique of the Erfurt Programme,
“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.”
Moreover, the ownership of share capital itself becomes diffused via share ownership (though the shares (fictitious capital) themselves then become concentrated in a few hands), the potential thereby of establishing “new lines” of production becomes much greater. Even if the mass of profits in one area is low, or low in relation to the need for productive-capital, this is no longer a restriction, because, so long as the mass of profits within the economy is high, it can be mobilised via the issuance of new shares, in those areas where it is required.
But, this creates further contradictions, as Marx and Engels describe later, because now, profits can be diverted into stock market speculation, rather than into productive investment. For example, in 1847, the financial crash was partly the result of massive speculation in railway shares that diverted large realised profits in the rest of the economy, away from the businesses that created those profits, and into stock market speculation.
“This is the abolition of the capitalist mode of production within the capitalist mode of production itself, and hence a self-dissolving contradiction, which prima facie represents a mere phase of transition to a new form of production. It manifests itself as such a contradiction in its effects. It establishes a monopoly in certain spheres and thereby requires state interference. It reproduces a new financial aristocracy, a new variety of parasites in the shape of promoters, speculators and simply nominal directors; a whole system of swindling and cheating by means of corporation promotion, stock issuance, and stock speculation. It is private production without the control of private property.”
(Capital III, Chapter 27)
And, this in turn creates further contradictions, separate from those which exist within the realm of production.
“Since property here exists in the form of stock, its movement and transfer become purely a result of gambling on the stock exchange, where the little fish are swallowed by the sharks and the lambs by the stock-exchange wolves. There is antagonism against the old form in the stock companies, in which social means of production appear as private property; but the conversion to the form of stock still remains ensnared in the trammels of capitalism; hence, instead of overcoming the antithesis between the character of wealth as social and as private wealth, the stock companies merely develop it in a new form.”
(ibid)
As Marx and Engels describe later, older capitalist societies tend to have a larger number of people who have accumulated wealth, and for whom the risks and stresses of active involvement in productive-investment is no longer attractive. They have sufficient loanable money-capital to be able to live off the interest on it, in the shape of coupon-clipping. The objective laws, which apply to the accumulation of productive-capital, do not apply to the ownership of this fictitious-capital. There is no reason, why its owners will not engage in the kind of speculation referred to above, rather than the provision of money-capital for productive investment. In fact, the very nature of speculation as providing large, rapid capital gains, mitigates against its use for productive investment. It leads to the process of capital "eating itself" described by the Bank of England's Andy Haldane recently, whereby an increasing proportion of realised profits is used unproductively to boost share prices, to pay out as dividends or other forms of returns to shareholders, which thereby slows the accumulation of capital, and potential to expand the mass of profits, and so to pay dividends and interest. In a world where capitalist competition depends upon businesses continually innovating to produce new commodities and to improve the quality of existing commodities, a failure to do so, may also lead to the kind of cheating that has been seen with VW recently.
Back To Part 13
Forward To Part 15
Tuesday, 22 September 2015
Capital III, Chapter 15 - Part 13
In the former case, where development is at a low level, the rate of profit may be high because the rate of surplus value is high, resulting from the extraction of absolute surplus value, based on very long working days. Under such conditions, wages may be very low, reflecting the undeveloped condition of the workers and their labour-power, and consequently the limited nature of what they require to reproduce it.
But, the consequence of this is that this labour-power is itself not very productive. It is the same situation as that described in Capital I, where the labour in country A appears as complex labour compared to the labour in country B, simply because country A is developed and its labour is highly productive compared to country B, which is not developed.
“So far as it is based on a high rate of surplus-value, a high rate of profit is possible when the working-day is very long, although labour is not highly productive. It is possible, because the wants of the labourers are very small, hence average wages very low, although the labour itself is unproductive. The low wages will correspond to the labourers' lack of energy. Capital then accumulates slowly, in spite of the high rate of profit. Population is stagnant and the working-time which the product costs, is great, while the wages paid to the labourer are small.” (p 245-6)
This process is inextricably linked to the process of the concentration and centralisation of capital described in Capital I. The process, which creates a tendency for the rate of profit to fall, is one in which a greater proportion of what is produced has to go to simply replacing the capital that has been consumed, leaving a smaller proportion left over as surplus.
This is the same process as described earlier, in relation to Robinson Crusoe. On the one hand, he creates means of production in the shape of stock pens and a stock of animals, which thereby raises his productivity, so that he can consume more, but on the other he now has to devote some of his available time to maintaining his pens and stock, where previously he devoted none. But, although the proportion of his available time, and what he produces in it, has to now go to this function, in increasing amounts, and the proportion of his day left over as surplus time thereby shrinks in proportion to it, the very fact that it has revolutionised the productivity of his labour, means that his total production increases significantly, so that the mass of what he produces in that surplus labour-time increases hugely too.
And, this is similar to the situation in respect of the developed and undeveloped economies discussed earlier. As a result of this higher level of productivity it may even be the case that his “rate of profit”, the relation of his surplus labour-time to the time he spends maintaining his means of production and meeting his consumption needs, increases rather than falls.
Suppose previously he needed to spend 8 hours per day catching fish, in order to live, and had 2 hours of surplus labour-time, so that his rate of profit was 25%. He uses this 2 hours to produce a net, on which he needs to spend .25 hours per day maintaining. But, with the net, he catches the fish he requires in 4 hours not 8. He then spends .25 hours maintaining his means of production (c) and 4 hours producing means of consumption (v), leaving him 5.75 hours of surplus labour-time. His rate of profit has now risen to 5.75/4.25 = 135.29%. As with the developed economy, versus the less developed economy, he may now increase his consumption (higher wages) and yet despite these higher wages, he now receives, his rate of profit will still be much higher.
But, as was seen earlier, beyond a certain level, he cannot expand his means of production effectively without employing additional labour. As was seen in Capital I, this process of the need to continually expand the physical quantity of means of production and labour-power, and to mobilise ever larger capitals, for this purpose, first squeezes out the direct producers, then the small capitalists, and then even the big private capitalists, as the expropriators are themselves expropriated by the huge socialised capitals of the joint stock companies, corporations and co-operatives.
But, the consequence of this is that this labour-power is itself not very productive. It is the same situation as that described in Capital I, where the labour in country A appears as complex labour compared to the labour in country B, simply because country A is developed and its labour is highly productive compared to country B, which is not developed.
“So far as it is based on a high rate of surplus-value, a high rate of profit is possible when the working-day is very long, although labour is not highly productive. It is possible, because the wants of the labourers are very small, hence average wages very low, although the labour itself is unproductive. The low wages will correspond to the labourers' lack of energy. Capital then accumulates slowly, in spite of the high rate of profit. Population is stagnant and the working-time which the product costs, is great, while the wages paid to the labourer are small.” (p 245-6)
This process is inextricably linked to the process of the concentration and centralisation of capital described in Capital I. The process, which creates a tendency for the rate of profit to fall, is one in which a greater proportion of what is produced has to go to simply replacing the capital that has been consumed, leaving a smaller proportion left over as surplus.
This is the same process as described earlier, in relation to Robinson Crusoe. On the one hand, he creates means of production in the shape of stock pens and a stock of animals, which thereby raises his productivity, so that he can consume more, but on the other he now has to devote some of his available time to maintaining his pens and stock, where previously he devoted none. But, although the proportion of his available time, and what he produces in it, has to now go to this function, in increasing amounts, and the proportion of his day left over as surplus time thereby shrinks in proportion to it, the very fact that it has revolutionised the productivity of his labour, means that his total production increases significantly, so that the mass of what he produces in that surplus labour-time increases hugely too.
And, this is similar to the situation in respect of the developed and undeveloped economies discussed earlier. As a result of this higher level of productivity it may even be the case that his “rate of profit”, the relation of his surplus labour-time to the time he spends maintaining his means of production and meeting his consumption needs, increases rather than falls.
Suppose previously he needed to spend 8 hours per day catching fish, in order to live, and had 2 hours of surplus labour-time, so that his rate of profit was 25%. He uses this 2 hours to produce a net, on which he needs to spend .25 hours per day maintaining. But, with the net, he catches the fish he requires in 4 hours not 8. He then spends .25 hours maintaining his means of production (c) and 4 hours producing means of consumption (v), leaving him 5.75 hours of surplus labour-time. His rate of profit has now risen to 5.75/4.25 = 135.29%. As with the developed economy, versus the less developed economy, he may now increase his consumption (higher wages) and yet despite these higher wages, he now receives, his rate of profit will still be much higher.
But, as was seen earlier, beyond a certain level, he cannot expand his means of production effectively without employing additional labour. As was seen in Capital I, this process of the need to continually expand the physical quantity of means of production and labour-power, and to mobilise ever larger capitals, for this purpose, first squeezes out the direct producers, then the small capitalists, and then even the big private capitalists, as the expropriators are themselves expropriated by the huge socialised capitals of the joint stock companies, corporations and co-operatives.
Monday, 21 September 2015
So How Close To Collapse Is The US Economy?
In 1930,
after the 1929 Wall Street Crash, and well into the the Depression
that hit the United States, the Federal Reserve's Discount Rate stood
at 2.5%. In fact, the Depression had begun, in Europe, a decade
earlier, in the 1920's. Alongside it, went global political turmoil.
The aftermath of the Russian Revolution, and the revolutions in
other parts of Europe, was still being felt; the German Revolution, of
1923, occurred; the Chinese Revolution took place; in Britain, the
1926 General Strike happened. By the late 1920's, the Nazis had
become a powerful force, taking power, in the early 1930's, in Germany, fascists having taken power, in the 1920's, in Italy. In the 1930's, the
fascists also took power in Spain, as Hitler undertook a dry run, for
the start of World War II. Between 1940 and 1947, the Federal
Reserve's Discount Rate stood at 1%.
At its last
meeting, the US Federal Reserve, kept its Discount Rate at zero.
This is now six years after the global financial panic of 2008. The
reason the Fed gave was that, although the US economy is growing
currently at around 2.5% - 3%, despite the fact that the unemployment
rate has continually fallen, and is now way below the level at which
it said that a rise in interest rates would be warranted, and jobs
are increasing at twice the rate required for stable employment;
despite the fact that labour shortages are being reported in
various areas and so on, they do not feel that the US economy could
yet withstand even a quarter point interest rate! They claim that a
further factor is the extent of global uncertainty.
Yet, its
hard to see how the current state of the US economy is worse that it
was in 1930, as it was in the midst of the Depression, when its
official interest rate stood at 2.5%; its also hard to see how global
uncertainty today is greater than it was in the 1930's, as wars and
revolutions were racking major countries, or the period of the
1940's, when the globe was ablaze with World War II, when interest
rates were at 1%.
The other
argument made by the Federal Reserve for keeping official interest
rates at zero is that US CPI is below its 2% target level. That is
true, but the core CPI is much higher than the headline figure, and
has been rising. Moreover, the CPI figure, as in the UK, does not
take into account all prices. It does not take into account the
price of houses, or pensions, for example. As I've indicated
recently, the prices of financial assets and property has been in a
massive bubble, in the US as in the UK, and this increases the cost
of houses to workers, and the cost of providing pensions. Moreover,
with monetary policy having around a 2 year lag, before its affects
actual market prices, it is unwise to wait until the nominal
inflation figure reaches the target before taking action, because by
that time its too late, and as was seen in 1963, a price-wage spiral
can quickly accelerate to high levels, once it begins. Given that
the US Federal Reserve has an unprecedented $4 trillion of assets on
its own balance sheet, the equivalent of the money it has put into
circulation, the potential for this turning into hyper inflation,
once such a price-wage spiral begins is fairly obvious.
But, also
the US, at the moment does not have deflation. It has low, but
rising levels of inflation. In the 1930's, by contrast, it actually
did have deflation. In 1930, prices fell 3.96%; in 1931, 10%; in
1932 11.38%; and in 1933 2.96%. That gave real rates of interest in
those years of 7.87%, 14.04%, 15.92% and 4.54%. So, its hard to see
on the basis of the information that the Federal Reserve and the US
Government provides how the situation today justifies interest rates
of zero, compared with the interest rates levied in the 1930's, or
1940's. Still less is it clear why such emergency levels of
interest, and monetary stimulus are required seven years after the
financial panic of 2008.
If I were
asking a question at the Federal Reserve's press conference, after
its last meeting, and wanted to be mischievous, therefore, I would
have asked, “Just how close is the US economy to collapse, then?”
Because, the Fed's policy would suggest that there is something very
nasty, lurking in the woodpile of the data that it is not telling us
about. How else could such policies be justified for this long,
compared with the conditions of war, revolution, depression and
deflation that existed in the 1930's and 1940's?
That may
have been one reason that after the Fed's decision, the US stock
market sold off, followed by a 300 point drop on the Dow Jones Index,
the following day. If, the US economy cannot withstand even an
official interest rate of 0.25%, which would mean a real rate of –
1.25%, then it must, indeed be close to collapse, if only the truth
were told. In that case, why wouldn't speculators try to get their
money out now. That could also be one reason that in the UK, the
Bank of England says that around £3 billion is being hoarded by
households, or around £350 per person. It is one reason that around
£1,000 in banknotes, per person has now to be put into circulation
in the UK, despite the fact that, the UK's modern banking system,
essentially makes the use of notes and coins redundant.
Nearly
everyone in the UK is paid directly into their bank account, and most
payments are now paid by electronic bank transfer, or by credit and
debit cards. People are hoarding actual notes and coins, because the
near zero rate of interest on savings means there is no reason to
keep money in the bank, and savers have seen what happened in Cyprus
and Greece, where, despite the supposed Deposit Guarantee Scheme,
people's savings were simply expropriated by the government, or
limits on withdrawals were put in place. Everyone knows that the
European banks are bankrupt, and that another financial crash is
inevitable, and possibly imminent, so why wouldn't they want to hang
on to cash, despite the risks of theft, when they face the open theft
of their money, by the banks and the government themselves?
As even the
Bank of England admits, such hoarding was once the preserve of
criminals, and those anxious to avoid the tax man, but now, it has
become common for anyone with a bit of cash who has lost faith in
governments and the banking system. That impression can only be
strengthened, when we see exercises such as the Bank Stress Tests
that are a clear publicity exercise, which is normally followed by
the failure of several of those banks that were cleared by the tests.
It can only be strengthened when seven years after the financial
crisis central banks claim that interest rates have to be kept at
zero. Things must be much, much worse than they are letting on,
indeed much, much worse than during the 1930's Depression or during
WWII!!!
But, in
fact, they are not. The real reason for the US Federal Reserve
keeping interest rates at zero, for keeping $4 Trillion of paper on
its balance sheet, for the Bank of England, keeping its official
interest rates near zero, and £375 billion of paper on its balance
sheet, and the central banks in Japan and the Eurozone doing
something similar is not because the real global economy is that bad,
and global uncertainty is nothing like it was in the 1920's –
1940's. In fact, all of the money printing, and near zero interest
rates, if anything, have actually damaged the real economy, for the
reasons described in previous posts, that they have drained liquidity
out of the real economy, away from productive investment, in order to
fuel speculation, and the maintenance of massive asset price bubbles,
in shares, bonds, property and any other speculative asset that
people could put their money into, not for the purpose of obtaining
yield, but only in the hope of obtaining quick, large capital gains.
A glaring
example of that is London. It has seen a massive amount of
speculation in property, often from those same Chinese and Asian
investors who have been losing their shirts in search of quick and
illusory capital gains on the Chinese stock market, having also lost
their shirts on collapsing property markets in those countries. Most
of these high value properties that have been constructed in London
remain unoccupied. Average occupancy in them is around 20%! But,
the speculators that have bought into them, did not do so to obtain
rents. They assumed that the prices of these properties would
continue to rise by 20% or more a year, so why be bothered about
making a measly 5% in rent?
There are
currently, 54,000 properties, of around £1 million each, either being
built or planned, in these expensive parts of London, according to the
FT. Yet, how many properties of that type were sold in London last
year? Just 3,900. This is just like the situation that has been
seen with oil, and other commodities. Prices go through the roof,
there is then a splurge of investment and then a collapse of prices,
followed by crises and panic.
According to
Rightmove, the average number of properties in the expensive SW8 area
of London coming on to the market, is around 350 per month. This
month, the figure is around 2,000! A graph of the change, this year, over previous years, shows the same kind of parabolic rise that is
always seen with any kind of bubble ahead of it bursting.
Central
banks are not keeping official interest rates at zero, and
maintaining huge amounts of monetary accommodation for the benefit of
the real economy. If they were interested in the real economy, and
preventing deflation they would be wholeheartedly behind Jeremy
Corbyn's proposals for “People's Q.E”, which would use such
liquidity for effective investment in all of those things that the
real economy needs, to make it more productive and efficient.
Instead, the same people who defend QE, and monetary intervention on
the basis of the need to fight deflation, attack “People's QE”,
on the basis that it would cause inflation!!!!!
No, the real
reason for “Bankers QE”, of the kind that has been undertaken for
the last 30 years, is not to protect the real economy, but to protect
the illusory wealth of the owners of fictitious capital, to keep the
prices of shares, bonds and property propped up, at the expense of
the real economy, and of the majority of the population.
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