Saturday, 31 October 2015

Capital III, Chapter 16 - Part 3

“What is now the relation of this commercial capital to commodity-capital as a mere form of existence of industrial capital?” (p 269)

It appears at first sight that the merchant buys commodities from a productive-capitalist at their value, and sells them after adding their profit. As a capitalist, the merchant will want to obtain the same average profit on their capital as any other capitalist. They will want a share in the total surplus value produced in the economy, proportional to the size of their capital, and as was seen with all capitals in the formation of an average rate of profit, discussed in Chapter 9.

Yet, in reality, all the merchant is doing here is carrying out the same function, as a separate capital, that a portion of the manufacturer's capital previously performed, i.e. of selling what had been produced. But, as was seen previously, this function added no value to the commodity, and produced no surplus value.

The advantage, for the productive-capitalist, however, can already be seen. Previously, in order for their production to be continuous, they had to advance sufficient productive-capital, not only to cover the working period, but also to cover the circulation period, as was shown in Capital II, Chapters 15 and 16. But, if they can immediately sell their output to a merchant capitalist, at the end of the working period, they no longer have to advance a productive-capital of their own, to cover this part of the turnover period.

The manufacturer produces a certain quantity of linen and sells it to the merchant who uses their own capital to cover the circulation period, whilst it is being sold in the market. In the meantime, the manufacturer has already been paid, their capital has been reproduced, and they can use the proceeds to buy the required productive-capital to continue production.

“But while the sale of the linen, its metamorphosis into money, has taken place for him, as producer, it has not yet taken place for the linen itself. It is still on the market as commodity-capital awaiting to undergo its first metamorphosis — to be sold. Nothing has happened to this linen besides a change in the person of its owner. As concerns its purpose, as concerns its place in the process, it is still commodity-capital, a saleable commodity, with the only difference that it is now in the merchant's hands instead of the manufacturer's. The function of selling it, of effecting the first phase of its metamorphosis, has passed from the manufacturer to the merchant, has become the special business of the merchant, whereas previously it was a function which the producer had to perform himself after having completed the function of its production.” (p 269-70)

The fact that the task of selling the commodities has been taken over by a dedicated capital does not change anything. The producer may have sold their output to the merchant, but, if the merchant cannot sell the commodities, to some final consumer, the merchant will not reproduce their own capital, and so will not be able to buy further commodities from the producer. This is no different than had the producer had to maintain a portion of their total capital as commodity-capital. Until such time as that commodity-capital has been metamorphosed into money-capital, by the sale of the commodities, the capital value it represents could not be reproduced.

Looked at from the perspective of the total social capital, the merchant's capital is nothing more than this commodity-capital separated off as a special function, to facilitate the process of circulation.

“It is, indeed, easily seen here that the merchant's operations are really nothing but operations that must be performed at all events to convert the producer's commodity-capital into money. They are operations which effect the functions of commodity-capital in the circulation and reproduction processes. If it devolved upon the producer's clerk to attend exclusively to the sale, and also the purchase, instead of an independent merchant, this connection would not be obscured for a single moment.” (p 270)

Northern Soul Classics - Tracks To Your Mind - Sounds of Lane

Absolute monster Torch classic, instrumental version of "Hey Sa Loh Ney".

Friday, 30 October 2015

Friday Night Disco - Planting Seeds - Seeds Of The Earth

Capital III, Chapter 16 - Part 2

In Capital II, in examining these circuits of capital, and the nature of the turnover of capital, it was seen that, although the capital assumes these different forms, it is one and the same capital. The turnover period of the capital is divided into its working period, when it is in its productive form, and its circulation period, when it is in its commodity form or money form, but it was seen that the advanced capital must be sufficient to cover both periods so that production is continuous.

Its not just a reduction in the working period, therefore, that reduces the capital that needs to be advanced. A reduction in the circulation period also reduces the required amount of advanced capital. Capital, therefore, has an incentive to reduce the circulation period, as well as as the working period.

“Commercial capital is nothing but a transmuted form of a part of this capital of circulation constantly to be found in the market, ever in the process of its metamorphosis, and always encompassed by the sphere of circulation. We say a part, because a part of the selling and buying of commodities always takes place directly between industrial capitalists.” (p 268)

Every capitalist, of whatever form, is characterised by the fact that they appear in the market as the owner of a sum of capital. This is the difference with simple commodity production and exchange. Under the latter, commodity owners appear on the market as the owners of commodities, which they want to exchange for other commodities, to meet their needs. Money only intervenes here as a means of facilitating the exchange process, C – M – C.

But, the capitalist appears with a sum of money, not to buy commodities to meet their needs, but solely with the intention of turning it into a larger sum of money, M – C – M'. The merchant capitalist seeks to achieve this by buying low and selling high, taking advantage of inadequate market knowledge, by sellers and buyers, and arbitrage between varying prices in different markets. The productive capitalist seeks to achieve it by purchasing the value creating substance itself – labour – and extracting a surplus value in the production process. The money capitalist, as will be seen later, even cuts out any intervening process, going straight from M to M', as a result of providing the use value of money-capital itself.

For the merchant capitalist, the circuit of his capital begins as M – C – M'. But, as Marx set out in Capital II, it is only for newly employed money-capital, that the circuit begins with M. For already functioning productive-capital, the circuit is P...P, and for already functioning commodity-capital, it is C' – C'. That is commodity-capital is always capital that has been self-expanded, because it already contains surplus value. It has already gone through the production process, which embodies surplus value within it. But, if we consider the movement of the capital of the merchant capitalist it appears to be a continual repetition of this movement M – C – M'. That is, they appear in the market with a sum of money with which they buy commodities. They sell these commodities for a greater sum of money. With this greater sum of money, they appear in the market once more, and buy commodities once again, which they in turn sell for an even greater sum of money.

For the merchant capitalist, the production process plays no part for him, in the same way that for the productive-capitalist, the circuit is delayed by the circulation process.

Thursday, 29 October 2015

Scottish Labour

The idea that the Scottish Labour Party, should operate autonomously from Labour in the UK, or that the Labour Party should operate under some federal structure in the UK is a big mistake. It is a mistake that social-democratic parties have made in the past. The Second International itself was rendered next to useless as a result of operating under such a federal principle, whose purpose was to avoid the need for a thorough political debate over issues of contention, in favour of a diplomatic arrangement.

The issue of federalism and autonomy within a single state is different to the issue within the workers' party. Generally, even federalism within the state is to be considered as less preferable than a unified, one and indivisible state, but can be tolerated, as itself preferable to separation into different states. Within a unified state, maximum measures of regional autonomy, to allow for cultural variations, and so on, can be used as means of encouraging such unity, as well as preventing oppression of minorities.

But, the workers party is not a bourgeois instrument of pursuing such cultural-national democratic ideals. It is a combat organisation of the working-class, whose purpose is to present a united front against all of the forces of the bourgeoisie, and to do that, it must itself from the beginning being as unified as possible, allowing no division on national, regional, cultural or other such grounds. The only divisions within the workers' party should be political divisions, which should then be discussed and resolved out in the open.

The proposal to establish a Scottish Labour Party, or other such national parties, and even regional parties is inimical to that requirement of a workers' party, because from the beginning, it tries to hide real political differences, and avoid their resolution, by a separation into separate party units. If Blair got anything right, it was to follow the example of Lenin in “What Is To Be Done?”, in insisting upon the Labour Party operating as a “professional party”. The idea that the workers' party should discuss political differences, arrive at a resolution of those differences, and then from the centre, organise to pursue them, in a disciplined and professional manner, is a sound one. It was the means by which the German SPD built its strength at the start of the 20th century, and the model that Lenin based himself upon in “What Is To Be Done?”,for the building of the Russian Social Democratic Labour Party. There is nothing professional about a free for all, as a means of avoiding a sharp political fight over serious issues of principle.

The debacle of Labour in Scotland was not down to its lack of independence from the party in the rest of the country. It had been developing over a long time, and stemmed from the corrupt and moribund nature of the party in Scotland. In addition, the reason that Labour lost seats in Scotland was the same reason that it had lost 7 million votes in the UK as a whole, as it abandoned its working-class base, and adopted conservative rather than social-democratic ideas. The solution to that problem, is not to run away from a hard assessment of those facts, and the need to rebuild the party upon sound ideological principles, by creating separate party organisations. In fact, it was that kind of approach in the Second International, which allowed each party, in the end, to pursue separate national interests as opposed to the interests of the working-class as a whole, and thereby facilitated the collapse into national chauvinism, and World War I.

Its quite easy to see how such a federal structure, could create a dynamic, as indeed devolution and federalism itself creates, for a race to the bottom, as a Scottish parliament seeks to attract business to Scotland by offering lower taxes, less protection for workers and so on, similar to the Tories proposals for Enterprise Zones, and which a Scottish Labour Party, under pressure from the SNP would be led to advocate, just as an English Labour Party, under pressure from the Tories and UKIP would be pressured to do also. This is the opposite of the kind of centralisation, and unity of the working-class that a workers' party should be aiming to achieve.

In fact, rather than seeking to divide and fragment the labour movement further in this way, what is required is for the workers movement across Europe to be coming together, as a single movement. We need a single European Workers Party, along with a single European Trade Union Movement, and Co-operative Movement.

As ever, rather than national, regional or cultural separation, the principle of the Labour movement should be Workers of the World Unite.

Capital III, Chapter 16 - Part 1

Commercial Capital

Merchant's, or trading, capital breaks up into two forms or sub-divisions, namely, commercial capital and money-dealing capital, which we shall now define more closely, in so far as this is necessary for our analysis of capital in its basic structure. This is all the more necessary, because modern political economy, even in the persons of its best exponents, throws trading capital and industrial capital indiscriminately together and, in effect, wholly overlooks the characteristic peculiarities of the former. ” (p 267)

In Capital II, it was seen how industrial capital is divided into three distinct forms of capital-value. Money-capital, productive-capital, and commodity-capital. The circuit of industrial capital is the fusion of the separate circuits of these three forms of capital value. Industrial capital is simultaneously in each of these three forms.

For any industrial capital, a portion is constantly in the form of money-capital, being metamorphosed into productive-capital, by the purchase of means of production and labour-power; a portion is in the form of productive-capital being metamorphosed by the production process into commodity-capital; a final portion is in the form of commodity-capital being metamorphosed into money-capital by the sale of commodities in the market.

It is only the productive-capital that produces surplus value, in the production process, but without the sale of the commodities that comprise the commodity-capital, that surplus value is not realised, and without the money-capital there is no purchase of productive-capital to produce surplus value.

The commodity-capital and the money-capital represent capital in circulation, but even a productive-capital must devote a portion of its capital to the circulation process, even though it adds nothing to the value of its product, and creates no surplus value.

A manufacturing firm will need to employ workers who deal with the metamorphosis of the money-capital into productive-capital. That is they will require buyers. It will also need workers who deal with the metamorphosis of the commodity-capital into money-capital. That is they will require sales and marketing staff.

What Marx demonstrates, in this chapter, is how these specific functions become increasingly specialised, as capital expands, and how these functions thereby become separated off into specific individual capitals that perform these functions.

“Inasmuch as this function of capital in the process of circulation is at all set apart as a special function of a special capital, as a function established by virtue of the division of labour to a special group of capitalists, commodity-capital becomes commercial capital.” (p 267)

The functions of this commercial capital should not be confused with the function of the transport and communications industry, as was demonstrated in Capital II. Transport and communications are themselves productive activities, which create value and surplus value. This function, which is inevitably intertwined with the process of selling and buying, because commodities have to be moved from where they are produced to where they are sold, has to be separated from the pure costs of selling itself.

“Sometimes they are, indeed, practically bound up with these distinct, specific functions, although with the development of the social division of labour the function of merchant's capital evolves in a pure form, i.e., divorced from those real functions, and independent of them.” (p 268)

Wednesday, 28 October 2015

Labour and Tax Credits

The decision of the House of Lords to delay the government's proposals to reduce Working Tax Credits, was undemocratic. But, then all actions by the House of Lords are undemocratic, by definition, because it is an unelected institution. Its action now is just as undemocratic, therefore, as when, in the past, stuffed with Tory hereditary peers, whose power went back to feudal times, it was used to vote down any progressive measures agreed in the House of Commons. The Tories and the Tory media want to focus on these constitutional issues, so as to divert attention from the actual issues that affect millions of working people, arising from the proposal to remove those Tax Credits.

Little time need be wasted on the constitutional issue. If the Tories want to propose the only rational response to the undemocratic actions, and nature of the Lords, i.e. to immediately abolish it, then socialists, social democrats, and even consistent bourgeois democrats will be the first to congratulate them. Such abolition is more than two centuries overdue, and should be just part of other long overdue democratic measures, such as abolition of the Monarchy. The Tories should either do that, or stop whining.

The Tories proposals in respect of Tax Credits had to be opposed, not because Tax Credits are themselves something that should be supported, but because the Tories proposals required an immediate, and severe attack on workers living standards. From a Marxist perspective, Tax Credits are not defensible. Tax Credits, like all other in-work benefits, are a direct subsidy to low paying employers. They tend to hamper the process by which inefficient small capital is replaced by larger more efficient, more profitable larger capital, which is able to pay higher wages, and provide better conditions.

The Tories stated aim was to remove this subsidy to those low paying employers, and to replace it with a higher Minimum Wage. However, all of the studies that have been undertaken, have shown, contrary to all of the assertions that the Tories have made over recent days, that the increases in the Minimum Wage, in tax allowances, in the provision of free childcare and so on, would still have left the average family more than £1,000 a year worse off, more than 3 million people around £1,300 a year worse off, and some people around £1,600 a year worse off, even by 2020. Because all of these other measures do not take full effect until 2020, whereas the removal of Tax Credits happens straight away, from April next year, the immediate effect on all these families would be much worse.

Its not the removal of Tax Credits that Marxists oppose, but this immediate, and significant attack on workers' living standards. The Tories dress up their proposals with talk about the need to reduce debt, so as not to burden future generations, but all they are doing is reducing public debt, by inflating private debt even further! Private debt is already about twice the figure for the public debt, as a result of thirty years of falling wages, and the encouragement of private debt to finance housing, university tuition and so on. If the Tories really wanted to reduce this debt, they would have introduced a much higher Minimum Wage immediately, so that workers did not have to make up the difference each week between their income and expenditure by resort to credit cards, and pay day lenders, and so that they could begin to pay down some of the accumulated private debt that has arisen over thirty years.

And that should be the position that Labour adopts. Rather than allowing the Tories to put the debate on the ground of the retention of Tax Credits, and thereby be able to continually ask Labour how it would make up the £4 billion cost, Labour should instead make the spearhead of its attack a massive rise in the Minimum Wage. If the Minimum Wage were raised, not to £9.20 per hour, but immediately to £11 per hour, with the tax threshold raised to £20,000, then the issue of Tax Credits would melt away. If, the Minimum Wage were raised to £15 per hour, with a corresponding rise in the tax allowance, then this would mean that Housing Benefits, could also be abolished.

In the meantime, the savings made on providing Tax Credits, Housing Benefits and other such subsidies to low paying employers, and to landlords, could be used to ensure that unemployment benefit, and sickness benefit was raised to a decent level. The Tories say that work should pay so let them prove their commitment to that principle!

But, there is another issue at stake here. Wages, Marx demonstrates, are the phenomenal form of the value labour-power. That is they appear as though what capital is buying is labour, or that they are the price of labour. But, this appearance is not the reality. For one thing, Marx says the concept of a “price of labour” is irrational, as irrational as a yellow logarithm, because labour has no value. Rather labour is value, its essence and its measure, and so to ask what the price of labour is, is no more rational than to ask how long is length?

What workers sell as a commodity is not labour, but labour-power, the ability to perform labour, and thereby to create new value. The value of this labour-power, as with any other commodity is the labour-time required for its production, which, under capitalism, amounts to the same thing as the amount workers have to pay to buy all of the things required for their existence, and the production of new generations of workers to replace them.

As Marx describes, if workers work beyond the normal working day, then they need more food and so on to replenish their ability to work. Beyond a certain length of day, at any given level of intensity, no amount of additional food and so on, will suffice to cover the depletion of their bodily resources. Workers will wear out more quickly, die sooner and so on, and so the actual value of labour-power will rise, so that wages themselves have to rise, which causes the rate of surplus value, and the rate of profit to fall.

However, the same is not true in the other direction. If objectively, the normal working day is 8 hours, given a certain intensity of labour, but workers only work for 6 hours, or 4 hours, this will not reduce the value of labour-power. The worker does not stop living during the time they are not working, and so they will still need to eat as much, still need to pay for somewhere to live, still need to have clothes to wear, education for their children and so on, whether they work for the normal working day of 8 hours, or a reduced working day of 4 hours! The value of their labour-power will not have changed, and nor therefore, should their wages.

If a slave master owns a slave, the slave will need to consume as many of these commodities, whether they work for 8 hours or 4 hours. If the slave owner fails to provide the slave with these necessary means of subsistence, the slave will lose their ability to work, and eventually die, which will appear as a direct loss of wealth to the slave owner. Similarly, a capitalist who buys a machine has to pay the owner of the machine its value, its price of production, whether he intends to use it for 8 hours per day or 4 hours per day. If the capitalist says “I only want to pay you £500 for your machine, rather than the £1,000 which is its price, because I only intend to use it for half the time its designed to be used”, the machine maker would look at the capitalist as though they were nuts.

“I am selling you a commodity,” would say the machine maker. “If you choose to only use it for only half the time it is designed to be used, that is your problem. Either pay the price, or don't buy it.”

The same should be true for the sale of labour-power. Labour-power has a value based objectively upon its reproduction cost, and the normal working-day. If capital does not use the labour-power for the full extent to which it is designed to be used that is the problem of the capitalist. The minimum wages that the worker requires to cover the reproduction of their labour-power, is still the same.

Consequently, this should be taken into consideration when discussing and setting the level of the Minimum Wage. The Minimum Wage could be set at £50 an hour, but if a worker only, on average, was provided with 2 hours a week of work, by the employer, this would still be inadequate to reproduce their labour-power, to buy the food they need, to pay the rent and so on.

Either the Minimum Wage should be set at a minimum weekly or monthly amount, irrespective of the number of hours worked, or else it should be set as a minimum daily amount, with the right of the worker to register as unemployed for those days of the week when they are not employed.

Capital III, Chapter 15 - Part 49

As stated earlier, the monopoly of private capital represented a fetter on its further development. But, the development of joint stock companies burst asunder that fetter. By mobilising the resources of millions of individual shareholders, it mobilised far more money-capital than even the wealthiest of private capitalists could muster. It meant that those providing the money-capital need know nothing about running the business in which they were investing, and that social function could be left to the professional manager. Whilst the share and bond capital provided the main strategic finance for the company, credit provided it with the day to day working capital, again mobilising the tiny savings of millions of people.

Marx then sets up the scene for his later exposition of how this background leads to the “expropriation of the expropriators” via the rise of the joint stock companies and workers co-operatives. Both these latter represent socialised capital and transitional forms of property on the way to the associated mode of production. Both represent the abolition of private capital within the capitalist system itself.

He sets out three cardinal facts about capitalist production.

  1. Capitalism brings about socialised production because it removes it from the hands of individual peasant and artisan producers. It concentrates the means of production in a few hands. But really, the capitalist in whose hands it rests is only its temporary guardian.

    “Even if initially they are the private property of capitalists. These are the trustees of bourgeois society, but they pocket all the proceeds of this trusteeship.” (p 266)
  2. Capitalist production, via the division of labour makes all labour co-operative, and, therefore, labour itself is turned into a social power. The productivity and the production of each worker is in reality dependent on the labour of every other worker in the global economy.

    “In these two senses, the capitalist mode of production abolishes private property and private labour, even though in contradictory forms.” (p 266)
  3. Capitalist production continues to expand at an increasing pace in terms of use values produced, if not value created. That comes into conflict with the ability of markets to absorb all these use values, which leads to crises. But, it also leads to the development of a world market, as they continually need to find new markets as this mass of use values continually increases.

Tuesday, 27 October 2015

Socialised Capital - Part 2 of 2

From the perspective of economic analysis, therefore, profit is produced by capital, whereas interest is the market price that has to be paid for the use-value of capital. Consequently, those who loan capital to a firm are only entitled to the average rate of interest on the money equivalent of the capital they have loaned, whereas the firm itself, the socialised capital is entitled to the remaining profit, after the deduction of this interest.

If we take a co-operative, for example, it may be established by consumers, who each contribute a certain amount of money, which they loan to the firm to buy premises, equipment and stock to sell. Considered, purely from an economic perspective a) all of this productive capital is the collective property of the co-op, not of the individual members, b) each member who has loaned capital to the co-operative is entitled to receive the average rate of interest on the capital they loaned to it, c) any profit over and above this belongs to the co-operative, and not to the members.

The same is true if the money loaned to the co-operative comes from its workers, rather than from consumers, i.e. if it is a worker co-operative rather than a consumer co-operative. But, the same is true if the capital is borrowed by a company that issues shares generally to the public, i.e. a public limited company, or joint stock company. Considered from a purely economic standpoint, the only thing that any such shareholder is entitled to receive is the average rate of interest on the money-capital they have loaned to the company, and for which they have received, in return, a share certificate. The share certificate is not a certificate indicating a part ownership of the firm's capital, but only a certificate indicating an entitlement to a share of the firm's future profits, payable as a dividend. But that share of future profits is not itself an entitlement to a share of all of those profits, but only a portion equal to the average rate of interest, on the money-capital loaned. The rest of the firm's profits over and above this, belongs economically to the firm itself. It is, as Marx describes it, the profit of enterprise”

But upon these different social forms that arise in the way the capital is loaned to the company, arise different structures of corporate governance. In a consumer co-operative, it is the individual customers of the business, who, as members, exercise the right to elect the governing boards, who exercise control over the socialised capital; in a worker co-operative, it is the workers in the enterprise itself; in a joint stock company it is the shareholders; and in a nationalised industry it is the capitalist state.

All of these different structures of corporate governance mean that those who exercise this control are able to make decisions over the distribution of revenues irrespective of the economic laws, up to a point.

Marx says that this is clear in respect of the worker owned co-operatives that were formed in the Lancashire textile factories, compared with the capitalist factories. In the co-operatives, the manager's – functioning capitalists, as Marx describes them - whose social function, in the labour process, was rather like that of a conductor in an orchestra, were employed by the workers to undertake that work, and were paid wages accordingly. Sometimes, these managers were the former owners of these factories, but their wages, as owners, were far higher, reflecting the fact that they had taken a portion of what economically, was profit, belonging to the firm, and converted it into their own wages.

“The wages of management both for the commercial and industrial manager are completely isolated from the profits of enterprise in the co-operative factories of labourers, as well as in capitalist stock companies. The separation of wages of management from profits of enterprise, purely accidental at other times, is here constant. In a co-operative factory the antagonistic nature of the labour of supervision disappears, because the manager is paid by the labourers instead of representing capital counterposed to them. Stock companies in general — developed with the credit system — have an increasing tendency to separate this work of management as a function from the ownership of capital, be it self-owned or borrowed. Just as the development of bourgeois society witnessed a separation of the functions of judges and administrators from land-ownership, whose attributes they were in feudal times. But since, on the one hand, the mere owner of capital, the money-capitalist, has to face the functioning capitalist, while money-capital itself assumes a social character with the advance of credit, being concentrated in banks and loaned out by them instead of its original owners, and since, on the other hand, the mere manager who has no title whatever to the capital, whether through borrowing it or otherwise, performs all the real functions pertaining to the functioning capitalist as such, only the functionary remains and the capitalist disappears as superfluous from the production process.”

(Capital III, Chapter 23)

These managers, or functioning capitalists, that Marx describes, here, who are paid only wages in the co-operatives and joint stock companies have to be distinguished from the Boards of Directors, appointed by shareholders, and the top executives appointed by those boards. The former “functioning capitalists” are the personification of the socialised capital itself as productive-capital, whereas the latter directors and executives are the representatives of shareholders, and so the personification of the interests of fictitious capital.

“Co-operative factories furnish proof that the capitalist has become no less redundant as a functionary in production as he himself, looking down from his high perch, finds the big landowner redundant. Inasmuch as the capitalist's work does not originate in the purely capitalistic process of production, and hence does not cease on its own when capital ceases; inasmuch as it does not confine itself solely to the function of exploiting the labour of others; inasmuch as it therefore originates from the social form of the labour-process, from combination and co-operation of many in pursuance of a common result, it is just as independent of capital as that form itself as soon as it has burst its capitalistic shell. To say that this labour is necessary as capitalistic labour, or as a function of the capitalist, only means that the vulgus is unable to conceive the forms developed in the lap of capitalist production, separate and free from their antithetical capitalist character. The industrial capitalist is a worker, compared to the money-capitalist, but a worker in the sense of capitalist, i.e., an exploiter of the labour of others. The wage which he claims and pockets for this labour is exactly equal to the appropriated quantity of another's labour and depends directly upon the rate of exploitation of this labour, in so far as he undertakes the effort required for exploitation; it does not, however, depend on the degree of exertion that such exploitation demands, and which he can shift to a manager for moderate pay. After every crisis there are enough ex-manufacturers in the English factory districts who will supervise, for low wages, what were formerly their own factories in the capacity of managers of the new owners, who are frequently their creditors.”


Whilst the wages of these managers are determined by the same laws as those governing all other wages, and, Marx outlines, tend to fall, as public education is extended by capitalism, the remuneration of the directors is governed by no such laws, but rather tends to their inverse.

And Marx details this.

“On the basis of capitalist production a new swindle develops in stock enterprises with respect to wages of management, in that boards of numerous managers or directors are placed above the actual director, for whom supervision and management serve only as a pretext to plunder the stockholders and amass wealth. Very curious details concerning this are to be found in The City or the Physiology of London Business; with Sketches on Change, and the Coffee Houses, London, 1845.

"What bankers and merchants gain by the direction of eight or nine different companies, may be seen from the following illustration: The private balance sheet of Mr. Timothy Abraham Curtis, presented to the Court of Bankruptcy when that gentleman failed, exhibited a sample of the income netted from directorship ... between £800 and £900 a year. Mr. Curtis having been associated with the Courts of the Bank of England, and the East India House, it was considered quite a plum for a public company to acquire his services in the boardroom" (pp. 81, 82). 

The remuneration of the directors of such companies for each weekly meeting is at least one guinea. The proceedings of the Court of Bankruptcy show that these wages of supervision were, as a rule, inversely proportional to the actual supervision performed by these nominal directors.”

(Capital III, Chapter 23)

Similarly, these Boards of Directors, and the executives they appoint act in the interests of shareholders, i.e. fictitious capital, rather than of the the actual productive-capital, in the shape of the business itself, but the laws of capital again place limits upon this. The ways that these directors may work against the interests of the business and in the interests of the fictitious capital are by paying out higher dividends than are justified by the average rate of interest; by transferring the firm's capital to shareholders by various means; by using profits to buy back shares merely to boost share prices, and earnings per share figures, and so on.

But, in doing so, and undermining the actual capital, they ultimately undermine the interests of the owners of that fictitious capital too, because ultimately it depends upon the ability of capital to expand, and thereby to produce ever larger masses of profit. As the price of this fictitious capital rises, purely on the back of speculation, in the hope of capital gain, so the yield on this fictitious capital falls further and further, unless an ever increasing proportion of what economically belongs to capital is appropriated, as dividends, by the owners of fictitious capital. This is the process of “capital eating itself” described by Andy Haldane, but which should more correctly be described as capital being devoured by fictitious capital, capital being devoured as revenue.

It indicates a need for the forms of corporate governance of this social capital to be changed to reflect the social and economic reality. It requires that socialised capital, the capital that belongs collectively to the business, as a collection of associated producers, should be under the control of those associated producers, and not external forces, be they capitalist shareholders, consumers, or the capitalist state. All of these external forces are merely lenders of capital and entitled only to the average rate of interest on the capital they lend, and nothing more.

In the consumer co-operative, the atomised nature of the members means that control can fall into the hands of a relatively small group of activist members with a similar interest, and into the hands of a permanent bureaucracy. Not only can this happen, but it usually quickly does happen. In a joint stock company, it is the simple possession of larger concentrations of shares in a small number of hands, which brings about this control. This may be a small group of individual private money-capitalists, or as Marx says, here, and as Hilferding analysed in Finance Capital, it may be via the banks and financial institutions themselves, who wield control over such shares. The situation today in respect of those institutions' control over workers' pension funds, illustrates how this can be done.

Marx comments,

“However, this expropriation appears within the capitalist system in a contradictory form, as appropriation of social property by a few; and credit lends the latter more and more the aspect of pure adventurers. 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.”

(Capital III, Chapter 27)

As Engels points out, since Marx had made these comments, this concentration had developed even further.

“And in every country this is taking place through the big industrialists of a certain branch joining in a cartel for the regulation of production. A committee fixes the quantity to be produced by each establishment and is the final authority for distributing the incoming orders. Occasionally even international cartels were established, as between the English and German iron industries. But even this form of association in production did not suffice. The antagonism of interests between the individual firms broke through it only too often, restoring competition. This led in some branches, where the scale of production permitted, to the concentration of the entire production of that branch of industry in one big joint-stock company under single management.”


The most developed form of this kind of socialised capital, where control is exercised by external forces, is the nationalised industry, or state capitalism. Here the control is exercised by the capitalist state on behalf of the capitalist class as a whole.

Engels notes in Anti-Duhring,

“The modern state, no matter what its form, is essentially a capitalist machine, the state of the capitalists, the ideal personification of the total national capital. The more it proceeds to the taking over of productive forces, the more does it actually become the national capitalist, the more citizens does it exploit. The workers remain wage-workers – proletarians. The capitalist relation is not done away with. It is rather brought to a head” (p 360).

As Kautsky put it, in the Erfurt Programme,

“If the modern state nationalises certain industries, it does not do so for the purpose of restricting capitalist exploitation, but for the purpose of protecting the capitalist system and establishing it upon a firmer basis, or for the purpose of itself taking a hand in the exploitation of labour, increasing its own revenues, and thereby reducing the contributions for its own support which it would otherwise have to impose upon the capitalist class. As an exploiter of labour, the state is superior to any private capitalist. Besides the economic power of the capitalists, ii can also bring to bear upon the exploited classes the political power which it already wields.

The state has never carried on the nationalising of industries further than the interests of the ruling classes demanded, nor will it ever go further than that. So long as the property-holding classes are the ruling ones, the nationalisation of industries and capitalist functions will never be carried so far as to injure the capitalists and landlords or to restrict their opportunities for exploiting the proletariat.”

It is then only in the shape of the worker co-operative that the nature of the socialised capital is reflected in the governance structure of the company. 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)

As Kautsky put it in the Erfurt Programme,

“It is supported by facts of economic development that show an actual growth toward Socialism. It was Marx and Engels who first set forth these facts and explained the scientific laws that govern them…

“The corporation renders the person of the capitalist wholly superfluous for the conduct of capitalist undertakings. The exclusion of his personality from industrial life ceases to be a question of possibility or of intention. It is purely a question of POWER.

This preparation for Socialism through the concentration of capital is meanwhile only one side of the process of gradual growth into the future state. Along with it there is proceeding an evolution within the working class that is no less of an indication of growth in the direction of Socialism.”

Capital III, Chapter 15 - Part 48

Even if we take the above example, originally £10,000 of capital is advanced, but after the introduction of the new machine, this falls to £6,900, meaning £3,100 of capital is released, which can be used for additional accumulation. Suppose then this released capital is used to buy 2 additional machines, and employ 2 additional workers. In that case, the 10,000 pieces are produced in 2 weeks not 6. The rate of turnover of the capital is thereby trebled.

Because the turnover period is now 2 weeks rather than 6 weeks the capital advanced previously in 6 weeks is now advanced in two weeks. The £5,000 of material previously processed in 6 weeks are now processed in 2 weeks, and so this £5,000 is advanced during this 2 week period. Three workers are now employed rather than 1, but the wages advanced are for 2 weeks, not for 6, so the amount advanced in wages remains the same. The surplus value produced in these 2 weeks is the same as was previously produced by 1 worker in 6 weeks. That is £400. But now the capital turns over 24 times rather than 8. the annual rate of profit is then:

£400 x 24 = £9,600 surplus value, advanced capital = Fixed capital £4500, Material £5,000, Wages £400 = £9900. So, 9600/9900 = 96.97%.

So, it can be seen how even in the most extreme conditions such as those chosen above, where the replacement machine costs 50% more than the ten machines it replaces, and where this causes a huge fall in the rate of profit, it establishes the basis for a release of capital which can be used for additional accumulation in machines, so that the working period is reduced, the rate of turnover of capital increased, and the annual rate of profit thereby also increased. The huge expansion of production that this would result in, would put even more pressure on the rate of profit. The consequence is clear from what was stated earlier. The profit margin would fall to a level, where the least efficient producers would be producing at a loss. They would go out of business, and this would be one means by which the capital employed in the industry would be reduced. It leads to a further huge concentration of capital into a smaller number of hands.

“All the circumstances which lead to the use of machinery cheapening the price of a commodity produced by it, come down in the last analysis to a reduction of the quantity of labour absorbed by a single piece of the commodity; and secondly, to a reduction in the wear-and-tear portion of the machinery, whose value goes into a single piece of the commodity. The less rapid the wear of machinery, the more the commodities over which it is distributed, and the more living labour it replaces before its term of reproduction arrives. In both cases the quantity and value of the fixed constant capital increase in relation to the variable.” (p 265)

As Marx set out in Capital I, the reason that the value of wear and tear of fixed capital falls, as a proportion of the value of each commodity unit, and, therefore, of the total laid-out capital, is not just that one new machine replaces several older machines, nor that its value falls as a result of rises in productivity, nor that its higher productivity means that its value is spread over far more commodity units. Besides all these things, it is also that technological improvements mean that the machines themselves are more durable and reliable. As he says here, a machine that has a longer lifespan, because its made of metal rather than wood, for example, will transfer its value over a longer period, and, therefore, less to any individual commodity unit. Moreover, as set out in Capital II, the maintenance costs of machines is included as part of the fixed capital cost. The more reliable the machine, the less that needs to be spent on it, for repairs, the less the overall fixed capital value advanced.

The importance of the rate of profit for the total social capital is the extent to which it enables capital accumulation, and thereby economic growth. However, as the example above demonstrates, it is really the annual rate of profit, not the rate of profit that is really decisive here.

On the one hand, a higher rate of profit means that the surplus forms a greater proportion available for expansion. But, as set out earlier, this is not the only consideration. Other factors include the rate of interest, rent, and taxes which are deductions from the industrial profit available for re-investment. There is also the question of how much the capitalist devotes to productive as opposed to unproductive consumption out of their profits.

Its possible then that a higher rate of profit might go along with a lower rate of accumulation and vice versa. Marx quotes Richard Jones to this effect.

“"All other things being equal, the power of a nation to save from its profits varies with the rate of profits: is great when they are high, less, when low; but as the rate of profits declines, all other things do not remain equal.... A low rate of profits is ordinarily accompanied by a rapid rate of accumulation, relatively to the numbers of the people, as in England ... a high rate of profit by a slower rate of accumulation, relatively to the numbers of the people. Examples: Poland, Russia, India, etc." (Richard Jones, An Introductory Lecture on Political Economy, London, 1833, p. 50 ff.)” (p 265-6)

Marx continues,

“Jones emphasises correctly that in spite of the falling rate of profit the inducements and faculties to accumulate are augmented; first, on account of the growing relative overpopulation; second, because the growing productivity of labour is accompanied by an increase in the mass of use-values represented by the same exchange-value, hence in the material elements of capital; third, because the branches of production become more varied; fourth, due to the development of the credit system, the stock companies, etc., and the resultant case of converting money into capital without becoming an industrial capitalist; fifth, because the wants and the greed for wealth increase; and, sixth, because the mass of investments in fixed capital grows, etc.” (p 266)

This says a lot in a relatively few words, and the implications are probably not widely recognised.

What does Marx mean when he says that the growing relative over-population provides an incentive to accumulation? He certainly doesn't mean that rising unemployment induces capital to provide work for the unemployed! Its necessary to remember what Marx means by this relative surplus population. It is, in fact, a corollary of the rising social productivity of labour, which leads to a falling rate of profit, but which also leads to a rising mass of profit, of the rate of turnover of capital, and to the release of advanced capital.

In other words, as with the example given above, even as the rate of profit falls, the rate of turnover rises, capital is released, which means that the additional capital can be accumulated, and the corresponding relative overpopulation set to work. As Marx describes in Chapter 14, particularly in times of rapid technological change, the areas in which this released capital is employed, and where the relative over population is absorbed, is in the “new lines” of production, where the organic composition of capital is low and where, consequently, a larger proportion of labour is absorbed.

That is also the point Marx is making here, when he talks about the branches of production becoming more varied. His second point re-emphasises that it is the physical amount of material to be processed which is decisive for how much labour-power is employed, given any set of technical conditions, not the value of those materials. As productivity reduces the value of materials, a greater quantity can be bought, to be processed, and so a greater quantity of labour-power is required to process it. The same is true of the value of machinery, and in a sense this is more significant, as the example above demonstrated.

If two machines can be employed for the previous cost of one, this halves the working period. In other words, the same amount of advanced circulating capital can mobilise twice the previous quantity of material and labour-power. As the price of fixed capital falls, this provides a strong incentive for accumulation.

Monday, 26 October 2015

Socialised Capital - Part 1 of 2

Socialised capital is capital which does not exist in the form of private property. If we take the capital of any small producer, such as a peasant producer, all of this capital takes the form of private property. It does not matter whether this capital is fixed capital or circulating capital, constant capital or variable capital, it belongs to the individual capitalist owner, and can be used by them as they choose. That is not the case with socialised capital.

A small capitalist producer can use a building in their possession for any purpose they choose, from carrying on production to holding a private party for their family and friends; they can use any of the machines in their workshop to produce commodities for sale, or to produce items for consumption by themselves, family and friends; they can use any of the materials in their possession for productive purposes, or for their own consumption; they can take any of the commodities that the business produces, and which constitutes its commodity-capital, and consume them themselves or in any way they choose.

This is true whether this capital is the private property of a sole trader, a family business, or even a large business that is privately owned by an individual or family. But, there are obvious limitations to such forms of private capital. As Marx puts it in Capital Volume I,

“The monopoly of capital becomes a fetter upon the mode of production, which has sprung up and flourished along with, and under it. Centralization of the means of production and socialization of labour at last reach a point where they become incompatible with their capitalist integument. This integument is burst asunder. The knell of capitalist private property sounds. The expropriators are expropriated.” (p 714-5)

This expropriation of capitalist private property occurs in the form of the rise of socialised capital, in the shape of joint stock companies, and co-operatives. The socialised capital refers to the actual capital of the business. That is the money-capital in its bank account and cash box, the productive-capital in the shape of buildings, machines, materials and labour-power, and the commodity-capital in the shape of the finished products waiting to be sold. All of this capital is the property of the business, as a corporate entity in its own right, and not to any particular individual or group of individuals.

Unlike capital in the form of private property, no individual or group of individuals owns this capital, and so has no right to use it for their own purposes. That right now belongs to the firm itself. This is set down clearly in English Law.

"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,

“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.”

Or as Marx put it,

“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...

It is the point of departure for the capitalist mode of production; its accomplishment is the goal of this production. In the last instance, it aims at the expropriation of the means of production from all individuals. With the development of social production the means of production cease to be means of private production and products of private production, and can thereafter be only means of production in the hands of associated producers, i.e., the latter's social property, much as they are their social products.”

(Capital III, Chapter 27)

This form of capital as socialised capital, rather than as capitalist private property, arises naturally from the very laws and dynamic of capitalist production, and the development of the means of production as social means of production.

“The contradiction between the general social power into which capital develops, on the one hand, and the private power of the individual capitalists over these social conditions of production, on the other, becomes ever more irreconcilable, and yet contains the solution of the problem, because it implies at the same time the transformation of the conditions of production into general, common, social, conditions. This transformation stems from the development of the productive forces under capitalist production, and from the ways and means by which this development takes place.”

(Capital III, Chapter 15)

The socialised capital develops as the only logical means upon which accumulation can proceed on an adequate basis, given the large scale upon which production takes place. The different forms that this socialised capital assumes do not reflect the actual ownership of the capital itself, but different forms of corporate governance, and so control over that capital. Whether the socialised capital takes the form of a worker owned co-operative, a consumer co-operative, a public limited company, a trust, or a nationalised industry, the capital in each case, itself is owned by the company.

This is important for the reasons Marx sets out in Part V, of Capital Volume III. Capital produces profit, the phenomenal form of surplus value under capitalism. But, in order to function and produce profit, a firm must first acquire the use of that capital, as well as acquire land upon which to undertake production. Where a firm borrows capital, what it actually does, as Marx sets out, is to buy the use value of capital to produce profit. In other words it buys capital itself as a commodity. This is different to buying the commodities that comprise constant capital, or variable capital. When a firm buys a machine, that subsequently forms part of its constant capital, it is not buying capital, but only a machine as a commodity.

A machine has a value as a commodity, like every other commodity. But, what makes this machine capital is the subsequent historical and social context in which it functions. That is to produce profit, to be self-expanding value. That is its use value, its nature as capital, as opposed to its use value simply as a machine. But, this specific use value of capital, of being self expanding value, in itself has no value, because it is not the product of labour. The price of capital, therefore, as a commodity – the rate of interest – is not determined by the labour-time required for its production, nor by its price of production, because neither of these things apply. It is determined solely by the demand for capital, and the supply of capital.

Capital III, Chapter 15 - Part 47

But, where the cost of the machine is less than the wages of the labour it replaces, this will result in a rise in the mass of profit, and for the reasons outlined above, will also mean a rise in the annual rate of profit for the firm.

Suppose previously we had:-

Wear and tear of machines £0.10

Material £0.50

Wages £0.40

Profit £0.40

The price per unit is £1.40, and the rate of profit is 40%. The firm takes the price from the market. The new machine replaces 10 machines with a combined value of £1,000 and has a value itself of £1,500. We then have:-

Wear and tear of machine £0.15

Material £0.50

Wages £0.04

Profit £0.71

The market price is £1.40, the firm's cost price is £0.69, giving a profit of £0.71, and a rate of profit of 102.90%. The firm would have a considerable incentive then to introduce this machine. In fact, the incentive would be far greater than shown here. The example, as with the example given by Engels earlier is designed to show that a firm will introduce a machine that is more expensive than its current machines provided its cost is less than the wages of the labour it replaces. Here, that meant assuming that this one machine was more expensive than the ten machines it replaced. For the reasons Marx gives earlier, that is very unlikely.

First, the same technological processes which made the new, better machine possible, also bring about rises in productivity that reduce the value of the machine itself. Consider something like a personal computer. A modern PC has far more power, is far more productive, than the kind of mainframe computer my wife operated in the 1970's, or even up to 20 years ago. Yet, the mainframe computers cost millions of pounds, whereas a PC costs just a few hundred pounds.

Secondly, even if a machine is absolutely more expensive than the machine it replaces, it will be relatively cheaper, precisely because of its much higher productivity. In fact, the process of moral depreciation, described by Marx, is impossible unless that is the case.

But, this competitive process that leads to the need to introduce these new methods, at the level of the firm, can be counter-productive at the level of the industry. Take the previous example. We have:-

Wear and tear of machine £0.15

Material £0.50

Wages £0.04

If this is then the average position for the industry, and assuming the rate of surplus value remains at 100%, the surplus value would also then be £0.04 per unit. The price per unit would fall to £0.73, and the rate of profit would fall to 5.80%. What was highly profitable for the individual firm is not when it is adopted as the standard across the industry. The fall in the rate of profit will then cause capital to leave this industry, reducing supply and thereby raising prices until the average profit is achieved, and as the capital moves to other areas of production, it will raise their supply, reducing prices and profits accordingly.

But, finally, its necessary to consider the situation here not from the standpoint of the rate of profit, but also from the standpoint of the annual rate of profit. Let us assume that the capital produces 10,000 pieces in a working period of 6 weeks. There is a 48 week year, and no circulation time, so the capital turns over 8 times. In this 6 week period, £5,000 is advanced for material and £4,000 for wages. The fixed capital has a value of £1,000.

The annual rate of profit is then £4,000 x 8 = £32,000/ £10,000 (£1,000 fixed capital + £5,000 material + £4,000 wages). That is 320%.

The new machine produces these units in the same period, but now 1 worker not 10 is employed. Variable capital falls to £400 for the working period, and surplus value falls accordingly. So the annual rate of profit is £400 x 8 = £3,200/ £6,900 (£1500 fixed capital + £5,000 material + £400 wages) = 46.38.

So, the annual rate of profit still falls, but not as drastically as the rate of profit. Moreover, this is unrealistic for the reasons Marx sets out earlier. Capital, certainly not the earlier capital Marx was analysing, does not accumulate capital in new machines, simply to keep producing at the same scale. It does so to produce on an enlarged scale and to produce larger quantities in shorter periods.

Sunday, 25 October 2015

Energy Security

The decision, earlier in the week, to give the contract for the construction of a new nuclear power station, at Hinckley Point, to a consortium comprising French energy company EdF, and the Chinese government, has raised questions about energy security from a number of angles.

There has been widespread under-investment in UK infrastructure for a very long-time. Despite, all the advantages of the bonanza of North Sea oil that Britain enjoyed from the early 1980's onwards, which brought huge amounts of tax revenues into the coffers of the Treasury (£69,838 million between 1980 and 1997), the Tory governments from 1979 to 1997, squandered nearly all of it. Instead of using this windfall to repair the roof of Britain's crumbling infrastructure, whilst the sun was shining, the Tories instead allowed the infrastructure to rot even further, imposing austerity measures that not only prevented necessary investment, but even undermined vital maintenance. 

Roads were left to crumble, hospitals were closed and those remaining, many of which were built in Victorian or Edwardian times, were left unmodernised, and often even unmaintained. Its not surprising that satisfaction and support for the NHS fell to their lowest levels by the mid 1990's. The findings of the Social Trends Survey, found that the percentage of those satisfied with the NHS stood at 55% in 1983, and fell steadily until 1994, when it stood at 44%. It then fell again sharply down to 34% in 1997.

After Labour came to power satisfaction rose steadily to an all-time high of 64% in 2009. The same was true of schools. For years, school class sizes were too large, often averaging more than 30, compared to an average of about 10, in Public Schools. At a time when school rolls, in the early 1980's, were falling, the oil bonanza could have been a perfect opportunity to invest in the education of Britain's future workers, so as to provide the kind of highly educated and skilled labour required to work in high value production, that could have been competitive in the world market. Instead, falling school rolls were used as an excuse to close schools, and to leave class sizes unchanged, whilst the schools themselves often literally had leaky roofs. When I was teaching in the early 1980's, many classes were even in portacabins rather than actual school buildings.

At the same time, the Tory government created vast amounts of additional fictitious capital, through its privatisation process. The justification for fictitious capital, in the shape of shares, is that a firm that needs to buy productive-capital has to borrow money to buy the buildings, machines, materials and labour-power that comprise this productive-capital. The firm borrows this money from owners of loanable money-capital, in various ways, such as issuing bonds, or shares. But, all of the industries that were privatised by the Tories in the 1980's and 90's, already had all of this productive-capital! It had already been bought, over previous decades, by the taxpayer. All that selling shares in these companies did, therefore, was to allow the owners of those shares to be able to draw a revenue from them, which itself was only payable as a result of the profit generated by the real productive-capital that had previously been bought by the taxpayer.

Despite all of this, the Tories still managed to run budget deficits during all but two of the years they were in office, and to run an average deficit to GDP ratio that was twice what it was under the succeeding Labour government, despite the fact that the Labour government had to begin to make up for all of the neglect that those Tory governments had been responsible for over the previous eighteen years.

There is nothing new in that. There were Tory governments from 1951 through to 1964, during a period of rapid economic growth and prosperity, yet the Tories only managed budget surpluses in three of those years (1951,1955 and 1958). Moreover, the surpluses were tiny compared with the deficits they ran in the other years. The total surpluses came to just £177 million, whereas the total deficits came to £5,031 million! Yet, during that period, Britain suffered a series of shortages. As the TV series, Planet Oil, showed recently the great smog of 1952 was a result of Britain burning too much coal inefficiently, when it lost control over its oil supplies from Iran. It was that, which led Britain to enlist the support of the US to undertake a dirty tricks campaign, followed by a coup to overthrow the Mossadegh government, so as to regain control over the oilfields.

Even as late as the early 1960's, there were regular power outages, not just of electric, but also of gas, prior to the introduction of North Sea gas.

Once again, Britain is living on the edge of such power outages, due to lack of investment, just as lack of investment in sufficient reservoirs, maintenance of water mains and so on, means that, even with Britain's rainy climate, every time there is a few dry weeks, the country faces a drought! The UK now imports a lot of its natural gas, and has very little in terms of storage capacity compared to other European countries. The safety margin for electricity supply is now also very narrow, so that a very bad winter could cause blackouts due to lack of capacity.

That is why large scale investment in new capacity is required. But, energy security requires that a mix of different energy sources is used. (I wrote a feature article on this for Socialist Organiser, back in the 1980's, that I will reproduce at some point).  The ideas coming out of the Corbyn camp to reject the old, bureaucratic, state owned forms of energy production and supply are interesting. Its long been known, for example, that a lot, up to 30%, of power is lost in transmission of electricity across the national grid. It makes sense, therefore, to look towards more community based power generation, so that power is transmitted shorter distances, though it would be necessary to maintain a national grid, in order to provide the security of supply needed, in case of problems at any local level. That opens up the possibility not just of combined heat and power generation systems, but also of the use locally of biomass, and other forms of energy. It also means at this local level that instead of either ownership and control by private capitals, or by the capitalist state, the possibility opens up of ownership and control by the workers themselves in various forms of co-operative, or other mutual organisation.

The question that has been asked in relation to Hinckley point is should the UK allow China to play a role in the provision of a power station, because it might use it as a weapon at some point in the future. But, that issue arises also with domestic private capitals.

In 2000/2001, California suffered a series of energy blackouts. It was subsequently discovered that the cause of these blackouts was deliberate manipulation by Enron. The market manipulation was itself a consequence of deregulation of the energy production and supply industry. As contracts came up for renegotiation, over the prices to be paid, Enron, took power stations off line, under cover of the requirement for maintenance, so that shortages arose, and blackouts occurred. Between April 2000 and December 2000, wholesale electricity prices rose 800%!.

This deliberate action by Enron caused a number of business, depended on secure energy supplies, to go bust, but it also caused the bankruptcy of some larger companies such as Pacific Gas and Electricity. A subsequent investigation, which discovered taped telephone conversations, showed that the taking off of power stations for maintenance at peak times, was a thinly veiled cover for this manipulation .

This indicates why the labour movement needs to spend time drawing up its own longer term plan for energy security, and for ensuring that such vital strategic industries are brought under the direct ownership and control of workers themselves. The lessons of the 1984-5 Miners Strike show why such vital industries cannot be placed in the hands of the capitalist state either, not only because it has no reason to run these industries in the interests of workers, or to allow workers any control over them, but because the capitalist state can actually use such industries against workers.

For example, as Marx sets out, when workers created their textile co-operatives in Lancashire, or the agricultural co-operative at Ralahine, they were charged higher rates of interest on the money they borrowed. Its also the experience indicated in the film  “Chance of a Lifetime”.

If workers are to develop their own property in opposition to capitalist property, they have to be aware of the danger of the capitalist state doing everything in its power to frustrate their efforts. That requires a strategy for bringing about direct workers ownership and control of these strategic industries.

Capital III, Chapter 15 - Part 46

The fact of the need for such state intervention is itself an expression of the degree to which capital as a social power is manifest in the shape of the capitalist, and yet grows in such proportion as to exceed any such individual capitalist. Initially, the industrial capitalists were indistinguishable from their workers. A large part of their income came from their own labour itself. But, rapidly, via the process of secondary accumulation, as surplus value is converted into capital, that stops being the case. The capitalist first then becomes a manager, and then even that function is taken over by professional workers, on their behalf. The capitalists' wealth and power stems then solely from their ownership of fictitious-capital.

“Capital comes more and more to the fore as a social power, whose agent is the capitalist. This social power no longer stands in any possible relation to that which the labour of a single individual can create.” (p 264)

First, the process of concentration and centralisation leads to the various scattered capitals becoming concentrated in the hands of a relatively few big capitalist families who exercise what Marx describes, in Capital I, as a “monopoly of private capital”. But, even this comes to represent a fetter on the further development of capital. This fetter is "burst asunder", as the monopoly of private capital is destroyed by the rise of socialised capital in the form of the joint stock company and the co-operative. By the latter part of the 19th century, this process of the “expropriation of the expropriators”, with the development of these socialised capitals, in the form of the joint stock companies and co-operatives creates the condition, which is the means, Marx says later, by which capitalist private production is abolished within the confines of capitalism itself.

“It becomes an alienated, independent, social power, which stands opposed to society as an object, and as an object that is the capitalist's source of power. The contradiction between the general social power into which capital develops, on the one hand, and the private power of the individual capitalists over these social conditions of production, on the other, becomes ever more irreconcilable, and yet contains the solution of the problem, because it implies at the same time the transformation of the conditions of production into general, common, social, conditions. This transformation stems from the development of the productive forces under capitalist production, and from the ways and means by which this development takes place.” (p 264)

It was earlier indicated that capitalists will only introduce some new machine if it increases their profits. That cannot simply be because this machine is cheaper than the machine it replaces, at least for the industry as a whole, because we know that constant capital only transfers its value to the end product, by means of the gradual transfer of wear and tear, in the case of fixed capital. So, if the machine is cheaper, this would simply reduce the value of the end product, rather than increase the profit. What it would do, of course, is to raise the rate of profit, because the same mass of surplus value would now be produced by a smaller quantity of advanced capital.

On this basis, firms do have an incentive to introduce cheaper machines than the ones they already have, and this is part of the process of moral depreciation. But, the question is why would a firm introduce a more expensive machine?

There are several reasons. Firstly, as Marx sets out, although a new, better machine may be more expensive in absolute terms, than existing machines, it may be cheaper in relative terms, because of its higher level of productivity.

Suppose an existing machine has a value of £1,000 and produces 10,000 pieces per year. It gives up £0.10 of its value to each piece it produces. If a new machine is introduced that has a value of £1,500, but produces 100,000 pieces a year, it only transfers £0.015 of its value per piece. The second machine, therefore, is relatively much cheaper than the first, and would push it out of the production process.

Secondly, the more expensive, but more productive machine also brings about a consequent saving in labour-power. Suppose this is a straightforward swap of one machine for the other. It does not result in any workers being laid off, because this machine requires one worker to operate it just as did the last. The difference is that, just as the new machine now produces 10 times as many pieces as the old machine, and thereby processes 10 times as much material, so does the worker's labour-power that operates it. Put another way, even though this one worker is still employed, they produce as much in 1 hour as previously they produced in 10. It is as though the machine has replaced 90% of their labour-power.

Suppose, the normal quantity of commodities produced for a working period is 10,000 pieces. Previously that required a year to produce. Suppose the workers wage was £10,000 for the year. That is the variable capital that had to be advanced. Suppose also that the material processed for these 10,000 units costs £10,000, so that is the circulating constant capital that must be advanced. But, now, the new machine produces 10,000 units in just a tenth of a year, say 5 weeks. For that period, the wages advanced amount to only £1,000. That is all the variable capital that now needs to be advanced, because assuming no circulation time, at the end of this 5 weeks, the 10,000 units are sold, and their sale, provides the firm with the money-capital with which to pay wages for the next 5 weeks, and to buy the materials for the next 5 weeks.

Because, as much material is now processed in 5 weeks as was previously processed in 50 weeks, the same amount is advanced as circulating constant capital, as before, but now it is advanced for this 5 week period. Assuming a 100% rate of surplus value, the £1,000 advanced will produce £1,000 of surplus value. But, the same £1,000 of surplus value will be produced in each of the other 9 working periods. The total surplus value produced will be £10,000 as it was before, but now it will be made, by advancing just £1,000 of variable capital. In reality, the rate of surplus value, or the annual rate of surplus value, will have increased ten fold. The consequence is that the annual rate of profit rises.

That can probably be best understood if we think about the new machine replacing 10 existing machines. In that case, as the machines are replaced, so the workers that operated them are made superfluous. The new machine replaces 90% of the labour-power previously employed.

But, under what conditions would it be possible for this new machine to increase the amount of profit obtained by the firm, rather than just for the rate of profit to be increased? The cost of the new machine must be lower not just than the value produced by the labour it replaces, it must be less than just the paid part of that labour. That is because it is only the paid part of the labour that is a cost for the firm. If the additional cost of the machine is greater than the saving in wages, the firms cost will rise, and its profit will fall.

“No capitalist ever voluntarily introduces a new method of production, no matter how much more productive it may be, and how much it may increase the rate of surplus-value, so long as it reduces the rate of profit.” (p 264)