Marx quotes an exchange between Wilson and Newmarch. The latter points out that although there was a flow of silver from Britain to India, Britain in 1855 had a trade surplus with India of nearly £1.4 million. Wilson responds that India exports commodities to Australia and North America, and this trade is financed via London. He also argues that,
“... when India and China are considered together, the balance is against England, since China has constantly to make heavy payments to India for opium, and England has to make payments to China, so that the sums go by this circuitous route to India.” (p 579)
Wilson, at this point of the questioning, asks Newmarch whether it would not be the case that there would be the same effect on the exchange rate whether the capital went to India in the form of precious metal, or as rails or rolling stock?
“Newmarch correctly answers:
"The £12 million which have been sent during the last few years to India for railway construction served to purchase an annuity which India has to pay at regular intervals to England. "But as far as regards the immediate operation on the bullion market, the investments of the £12 million would only be operative as far as bullion was required to be sent out for actual money disbursements."” (p 579)
Weguelin asks Newmarch how the provision of rails etc. could affect the exchange rate, if no payment is made for it? Newmarch replies that it does not affect the exchange rate because it could only be affected where there was no immediate flow of payments, be it of money, or via bills of exchange.
However, Newmarch points out this is not the case as regards a transfer of money-capital. Firstly, money would be withdrawn from circulation, in Britain, as part of the subscription, then this money would be put into circulation in India. It would go to pay wages, to buy materials and so on.
“... now, if the nature of the transaction was such that the whole of that £12,000,000 was required to be laid down in Calcutta, Bombay, and Madras in treasure ... a sudden demand would very violently operate upon the price of silver, and upon the exchange, just the same as if the India Company were to give notice tomorrow that their drafts were to be raised from £3,000,000 to £12,000,000.” (p 579)
However, he points out, half of this money could flow back to Britain for the purchase of rails and other material. But, that would only be money put into circulation in Britain, that had already been removed from circulation. Weguelin then comes back to ask whether then the production of these commodities in Britain would not itself require the import of large quantities of commodities, so that this would reduce the exchange rate? To which Newmarch agrees.
Following on from this idea, Wilson believes that the production of iron, to a large extent, is solely down to labour, and so the production of iron rails would necessarily involve an increase in imports and deterioration of the exchange rate, as wages were spent on imported wage goods. But, Newmarch points out that this is what happened in the railway boom of the 1840's. £30 million was spent on railway construction, much of it going to cover wages, and the workers spent some of this on tea and sugar, and other imported commodities. More workers were, in fact, employed in this railway construction, during this period, than were employed in the rest of industry combined. Yet, despite the fact that these workers were spending money to buy imported commodities, whilst producing no commodities to be exported, in exchange, there was an influx of precious metal. The exchange rate moved in favour of Britain, not against it.
However, I'm not entirely sure what point Marx is really trying to make here in quoting Newmarch's evidence. It clearly was not the case that there was this improvement in Britain's exchange rate and an influx of bullion because of the expenditure on railway construction. The influx was due to the fact that the rest of British industry was exporting on a massive scale, large enough to more than offset the imports. There seems to be no obvious connection between the two, other than a peripheral one that workers employed in railway construction also created a demand for British made goods, which facilitated capital accumulation and production on a larger scale , which meant lower cost production, and greater international competitiveness. Railways may also have facilitated that by creating larger domestic markets, and reducing distribution costs and turnover time, but only when they were completed.
If we were to isolate the two phenomenon, then it would seem undeniable that an advance of variable capital, which is used as wages to buy imported commodities, but which does not result in the production of commodities that are exported, to at least an equal value, must result in a deterioration of the trade balance, and thereby the exchange rate. The only way the latter would not arise, is if the financing of the railway construction came from external investment, causing an inflow of money-capital, for example, to buy railway company shares.
The point that Marx seems to be making is only that you cannot take any phenomenon on its own, and say this must result in a deterioration of the exchange rate, because other phenomenon may be having an opposite effect. But, that seems a weak point to make, because throughout Capital, he has demonstrated the way individual phenomenon, taken in isolation, have particular effects, even if he has then gone on to show how those effects are negated by other, often related phenomenon.
For example, if wages fall this will result in profits and the rate of profit rising. Does this mean that a fall in wages must be followed by a rise in the rate of profit? No, because independently the price of constant capital may rise, so that even a large mass of profit represents a lower rate, as against this higher value of constant capital. Yet, it remains the case that a reduction in wages, all other things being the same, produces a higher rate of profit, just as, all other things being equal, a higher price of constant capital, causes the rate of profit to fall.
No comments:
Post a Comment