Boffy's Blog: December 2016

Saturday, 31 December 2016

Theories of Surplus Value Part I, Chapter 2 - Part 6

In Capital III, the process by which pre-capitalist rent evolved from Labour Rent, through Rent In Kind, to Money Rent was described. Money Rent was shown to be the means by which feudal rent is dissolved and capitalist rent arises. Feudal rent is the form of surplus value, in a feudal economy. It is based upon a legal right of the landlord to be paid tribute on the basis of their rank and status.

Money rent, along with the development of landed property, which itself comes to be bought and sold as a commodity, therefore, becomes the natural form of capitalist rent, whose basis is now surplus profit. Land is now no longer owned by individuals who have inherited legal right to rent as tribute, but by capitalist landowners, who claim rent as payment for the use of their land, as part of the productive process.

“The starting-point is the feudal landowner, but he comes on to the stage as a capitalist, as a mere owner of commodities, who makes profitable use of the goods exchanged by him for labour, and gets back not only their equivalent, but a surplus over this equivalent, because he pays for the labour-power only as a commodity. He confronts the free labourer as an owner of commodities. In other words, this landowner is in essence a capitalist. In this respect too the Physiocratic system hits the mark, inasmuch as the separation of the labourer from the soil and from the ownership of land is a fundamental condition for capitalist production and the production of capital.” (p 51)

Whilst this analysis of the relations within agriculture laid bare the source of surplus value as being the appropriation by capital of the product of labour, and so the surplus of those products, paid by capital as wages, to the worker, the material conditions in which that analysis is undertaken, for the same reason, limit it to an understanding of this surplus value only in terms of this surplus product.

“... it conceived value merely as use-value, merely as material substance, and surplus-value as a mere gift of nature, which returns to labour, in place of a given quantity of organic material, a greater quantity. On the one hand, it stripped rent — that is, the true economic form of landed property — of its feudal wrapping, and reduced it to mere surplus-value in excess of the labourer’s wage. On the other hand, this surplus-value is explained again in a feudal way, as derived from nature and not from society...” (p 52)

Back To Part 5

Forward To Part 7

Northern Soul Classics - Up and Down The Ladder - The Intruders

Its 1968, in France workers have taken over factories and placed them under workers control; students have taken over the universities and provide free lectures to workers; the Prague Spring has erupted, as workers challenge the oppression of stalinist rule; in the US, university campuses are alight as students and progressive lecturers challenge the Vietnam War, and civil rights abuses, and the Black Panthers spear an uprising of mostly black workers in the industrial conurbations such as Detroit, against a backing track also provided by Motown; in Britain, workers engage in spontaneous action to defend their wages and conditions, whilst students every week flock into the London Squares, like Grosvenor Square, Red Lion Square and so on, to protest the Vietnam War outside assorted embassies.

Its mirrored for me, still at school, as some of us side unconditionally with the workers and students, whilst others argue that the workers should all go back to work, and the students restrict themselves to their studies. But its not the only division. The early 1960's, had been marked by the weekend battles between Mods and Rockers. It was a bit of a conflict for me. My Dad had been a motorbike dispatch rider, in Italy, during the war, he grew up with motorbikes, and so did I. But, there was no doubt that, despite that, I was going to be a Mod.

By the early 1960's, my elder sister had long since gone past chart music. Instead she was going out to the George Hotel in Burslem, and other venues, listening to R&B in various forms be it the Soul Sisters, Gino Washington, or Long John Baldry. Her reel to reel tape recorder, which I took over, was filled with the sounds of motown and other soul tracks.

By 1968, the mods and rockers battles were at their tail end, but the Torch was ruled over by King of the Mods, Tombo, and he Sparky, Chat and Walter led an army of Potteries Mods that still engaged in skirmishes every week or so with with Potteries rockers that led to scooters being trashed outside the Torch, and motorbikes thrown through cafe windows. It culminated in a pitched battle one Saturday afternoon, as a load of Hell's Angels from elsewhere turned up, tooled up with bike chains and other implements, and Hope Street through to Cobridge traffic lights resembled a scene from the Battle of Waterloo, as Mods, Rockers, police and police dogs confronted each other, moving in one direction then another.

The DJ's at the Torch were Keith Minshull and Davo. Keith's brother Geoff had recently started work at Bill Eardley's barbers shop in Goldenhill, where we could still get a haircut, on our way home, from school (for most of us a two minute walk into the village back streets) for the equivalent of around £0.10 in today's money! Geoff drove a Mark II Zephyr 6 like those appearing in "Z Cars". He started to offer new hair styles to the short back and sides that was Bill's stock in trade. Shortly after, Geoff set up his own "salon" in part of the old Co-op in Sandyford, next to another part that had been turned into a launderette, where we would go and wash our Levis. Ironically, in later years both bits were turned into a motorbike shop.

A couple of nights a week, we would walk the mile down to the Torch, where mid-week, you could often get in for free. This week's Northern Classic is one that reminds me of that period in the late 60's, when we would go to these mid-week sessions on school nights. I'd recently come second in a Potteries Judo competition, and had also just taken up Yoga. The Judo taught me how to fall and roll, which was useful for practising forward rolls off stacked school tables, as preparation for doing that from jacknives. The Yoga was useful for suppleness, for dropping easily into backdrops, and flipping into forward presses, and back, all of which were practised in the school hall. All of which moves, I hasten to add were being undertaken as part of our dancing, at that time, long before anyone in Britain had even heard of Bruce Lee, whose popularity only started after the release of "Enter the Dragon" in 1973.

Its one of the things I've found a bit jarring with both "Soul Boy" and "Northern Soul" because although Northern Soul is described as an underground music phenomena, it was only that for the general public. If you were aged between 13-20 at any time after 1968, and lived in Stoke, or other similar cities in the North, you would have to have been some kind of recluse not to have been aware of Northern, even before Dave Grodin coined that label for it. Even those of our school friends who were into what we then called "Fribbo Music" were aware of it, and could hardly be anything other, because every morning, dinner-time and evening at the youth club held in the school, it boomed out from the school record player. And every youth club, workingman's club and other venue played virtually nothing else.

My wife started going to the disco at Trentham Gardens, in 1968, when she was 13, and it was run by Bob "Smiler" Morris, from Trent Vale, another Torch regular. I started collecting records at around that time, even though I didn't have a record player! I remember as a result lending a number of pressings on Jeff King's Soul Sounds to my friend Phil Churton, who was DJ'ing at a number of places, and later went on to DJ at the 100 Club in London. So many memories I could fill several books, just from that period.

Friday, 30 December 2016

Friday Night Disco - Tighten Up - Archie Bell and the Drells

Theories of Surplus Value Part I, Chapter 2 - Part 5

[2. Contradictions in the System of the Physiocrats: the Feudal Shell of the System and Its Bourgeois Essence; the Twofold Treatment of Surplus-Value]

The contradictory nature of the Physiocratic system arises because of the historical period in which it is developed, and the specific conditions existing at that time.

“It is in fact the first system which analyses capitalist production, and presents the conditions within which capital is produced, and within which capital produces, as eternal natural laws of production. On the other hand, it has rather the character of a bourgeois reproduction of the feudal system, of the dominion of landed property; and the industrial spheres within which capital first develops independently are presented as “unproductive” branches of labour, mere appendages of agriculture.” (p 49-50)

The precondition of capitalist production is that the direct producer is separated from the land. This process unfolds classically in England, but also across Europe. On the back of this process arises landed property. The landowners then confront the producers as a distinct and separate class. The surplus value created by the producers is appropriated by the landowners as rent.

“The Physiocrats therefore present the landowner as the true capitalist, that is, the appropriator of surplus-labour. Feudalism is thus portrayed and explained from the viewpoint of bourgeois production; agriculture is treated as the branch of production in which capitalist production — that is, the production of surplus-value — exclusively appears. While feudalism is thus made bourgeois, bourgeois society is given a feudal semblance.” (p 50)

The same historical context of a transitional period during which bourgeois society breaks out of the shell of feudal society explains why the Physiocratic system, which focusses on production, develops in France, whereas Britain, which was the more capitalistically developed society remained bound within the ideas of Mercantilism, and the Monetary System, which focussed on exchange.

Sir James Steuart

“In the latter country attention was naturally concentrated on circulation, on the fact that the product acquires value, becomes a commodity only when it becomes the expression of general social labour, money. In so far, therefore, as the question concerned not the form of value, but the amount of value and the increase of value, profit upon expropriation — that is, relative profit as Steuart describes it — is what catches the eye. But if the creation of surplus-value in the sphere of production itself is what has to be established, it is necessary first of all to go back to that branch of production in which surplus-value is found independently of circulation — that is, agriculture.” (p 50)

At this point, the situation presents itself to the Physiocrats in fairly simple terms. The labourer is paid wages that comprise only of the minimum of means of consumption required for the reproduction of their labour-power. But, they produce a greater quantity of these same products, the surplus product then being appropriated by the owners of the land as rent. This surplus value, for the Physiocrats, appears only as a surplus product, a surplus of use values, produced over and above what the labourer requires for their reproduction. The surplus appears to stem from a gift of Nature, and the rent is appropriated by the owner of that Nature.

“On the other hand, it is taken for granted that the landowner confronts the labourer as a capitalist. He pays for the labour-power, which the labourer offers to him as a commodity, and he receives in return not only an equivalent, but appropriates for himself the enlarged value arising from the use of this labour-power.” (p 51)

Back To Part 4

Forward To Part 6

Thursday, 29 December 2016

Theories of Surplus Value Part I, Chapter 2 - Part 4

The Physiocrats, having identified production as the source of surplus value, also identified that only that labour which produces surplus value is productive.

“Quite correctly they lay down the fundamental principle that only that labour is productive which creates a surplus-value, in whose product therefore a higher value is contained than the sum of the values consumed during the production of this product.” (p 46)

But, for the reasons set out earlier, the Physiocrats wrongly considered that only agricultural labour was productive, just as rent for them was the form of surplus value. In reality, as Marx describes in Capital III, under capitalism, it is the extraction of surplus value by capital from wage labour, which is the basis of profit, and rent and interest are merely portions of this surplus value, which the landowner and the owner of money-capital are able to extract from the industrial capitalist.

But, for the Physiocrats, it is rent which is the form that surplus value takes, and for them, industrial profit appears as nothing more than a special form of wages paid to the industrial capitalist.

Turgot

Mirabeau The Elder

Similarly, it is declared by one section of the Physiocrats, “such as Mirabeau the elder, to be usury and contrary to nature. Turgot on the other hand derives his justification of it from the fact that the money capitalist could buy land, that is, rent, and that therefore his money capital must bring him in as much surplus-value as he would receive if he converted it into landed property.” (p 47)

In this respect, the Physiocratic theory reflects later development as though in a mirror. With the later development of capitalism, the private capitalist becomes removed from their social function, in production, and becomes merely the provider of money-capital, in receipt of interest, whilst the role of “functioning capitalist” is taken over by professional managers who are paid a wage, “the profit of enterprise” then appearing clearly as a surplus extracted from the workers.

But, also, as land itself becomes a commodity that is bought and sold, increasingly also, by urban capitalists, its price is determined on the basis of capitalised rent. However, its not now that interest can be justified on the basis that the money lender could have bought land and earned rent, but that this money-capital could have been loaned to productive-capitalists, could have been used to buy bonds or shares etc., so that the purchase of land, and the obtaining of rent becomes just one in a range of alternative uses to which this money-capital could have been put.

In fact, its on this basis that the interaction of demand and supply for this money-capital brings about a risk adjusted equalisation of yields between different asset classes, via the rise and fall of the prices of these assets.

There were other good reasons why the Physiocrats saw rent as the form of surplus value, and only agricultural labour as productive. Rent only appears as transitory in industrial production. But, in agriculture, rent appears as a surplus when the cost of employing labour and capital have been met, because rent arises on the basis of surplus profit.

Moreover, as Marx set out in Capital III, it is undeniably true that a fundamental requirement for labour to be set free to engage in alternative activities is that agricultural labour must first be able to produce a surplus. Those employed on the land must be able to produce enough food not just to feed themselves, but also to feed all those not employed on the land.

The idea understandably arises, therefore, that the industrial workers are only able to exist, and produce, because their need for food is met by the surplus produced by the agricultural workers, and that the profits of the industrial capitalist and interest paid to the money-capitalist are only possible because they are able to extract a portion of the rent.

But, there was another feature of agriculture, which facilitates this view. Surplus value depends upon the ability of the labourer to create a greater quantity of value than is required for the reproduction of their labour-power. This has two consequences in agriculture. Firstly, as seen earlier, the manifestation of this in agriculture is that the labourer produces more food (use values) than are required for their own reproduction. The industrial labourer, however, produces commodities, which are use values, which may not be part of their own consumption at all. It is only when the analysis is conducted on the basis of value, rather than use values, that it becomes obvious that the industrial labourer as much as the agricultural labourer can produce a greater value than is required for the reproduction of their labour-power.

Secondly, it is apparent in agriculture that the ability to produce this surplus product in part arises from the gifts of nature. More food is produced on fertile land than on barren land. Even the production of absolute surplus value depends upon the minimum level of productivity, so that more can be produced in a day than the labourer needs to consume in a day.

In industry, however, it is only in its later development that the forces of nature can be seen to be harnessed as a free gift, so as to increase this level of productivity (the use of water wheels, windmills, steam-power) and thereby increase the size of the surplus product.

Once again, therefore, the nature of this surplus product appears to be inextricably linked to the nature of agricultural production and its direct relation to nature.

Back To Part 3

Forward To Part 5

Wednesday, 28 December 2016

Predictions For 2017

At the end of last year, as I had done the previous year, I made ten predictions for the year ahead. Again, as I did last year, before setting out ten predictions for the coming year, its only right to look at how the predictions for this year worked out.

1. The prediction was that the material conditions favouring socialised productive-capital over fictitious capital were growing, and this would be reflected in a growing strength of social-democratic as against conservative forces. The underlying thesis has been proved correct.

Whether Clinton or Trump won in the US, the outcome was going to be that the need for an expansion of fiscal stimulus would impose itself. Moreover, Bernie Sanders came much closer to winning the Democratic nomination than anyone was predicting at the end of last year. He was able to bring into existence a large social-democratic movement, similar to that created behind Corbyn. Only the full force of the Democrats bureaucracy, mobilised behind Clinton prevented Sanders taking the nomination.

In Britain, Corbyn easily saw off a challenge from the old conservative/Blair-right wing of the party, despite their entrenched position in the PLP and party bureaucracy. The party continued to grow at the grass roots, strengthening this social-democratic wing against the conservative wing. The Tories also dropped austerity as their mantra, and committed themselves to a large-scale infrastructure programme and fiscal stimulus.

Across the globe, the centres of decision making, including within the central banks themselves, have recognised that monetary policy has run its course, and that fiscal policy must now be used to encourage economic growth, as a prerequisite for capital accumulation, which itself is the prerequisite for the payment of interest, so as to justify financial asset prices. The effect, as predicted, has been to see a sharp rise in interest rates. Not only has that been seen in the real market rates of interest, for example in relation to LIBOR, and other similar overnight lending rates across the globe, but it has also even been seen in the heavily manipulated sovereign bond yields. In August, I wrote a blog talking about UK 10 Year Bond Yields, being at 0.60%, and US 10 Year Treasuries being at 1.60%. Today, the UK 10 Year Gilt Yield has more than doubled to 1.40%, whilst the US 10 Year has risen by 50% from 1.60% to 2.60%.

A turn to fiscal expansion will cause bond yields to spike higher still, and the bond bubble to burst. For now, as is often the case, the decline in bond prices has seen the money move from bonds to shares, pushing stock markets higher. The prospect of fiscal expansion, and lucrative contracts for construction companies, and of rising demand to provide increased revenues and profits for all companies, has fuelled stock market rallies across the globe. That will be short-lived, as the increased revenues will be seen to come at the cost of even higher input costs, especially of rising wages, and a lower rate of surplus value, squeezing profits, and as higher interest rates, bring about lower capitalised prices of all financial assets and property.

We have not yet seen a visible growth of social-democratic political forces in France, Italy and Germany. Indeed, it might be argued that the potential for Le Pen to win the Presidency in France, like Trump's win in the US, and the vote for Brexit in the UK, represent the opposite. But, this only shows that such reflections of the underlying conditions are complex and contradictory, and not mechanistic. Trump won by a populist appeal to get the economy going via Keynesian fiscal stimulus, particularly an appeal to US workers in the rust belt. The Brexiteers promised to spend £350 million a week extra on the NHS, Le Pen proposes a large scale fiscal expansion. But, in fact, it is only social-democrats that could consistently undertake such a programme.

2. The second prediction was that global growth would be higher than predicted. That was the case, and the perennial predictions of some that the world would fall into another recession, or even a “Long Depression”, were once again proved to be false, and more down to wishful thinking than reality.

3. The prediction was that interest rates would rise faster than expected. Some were predicting that the rise in official rates undertaken by the Federal Reserve would have to be reversed. To that end, stock markets crashed in January, but when that did not result in the Federal Reserve reversing the increase, they began to climb higher, on the back of the idea that they had done at least enough to stave off any further rises in the official rates. But, as the year progressed, and the need for fiscal stimulus became ever more obvious, market rates continued to climb. That was especially the case, as employment levels across the globe continued to rise, and unemployment fell. That also meant that wages began to move higher.

4. Following on from what has been said above, the prediction was that the prices of financial assets and property would fall sharply. In January, stock markets did fall sharply and then rose during the rest of the year. Bond prices have begun to fall significantly, as bond yields and other interest rates rise. Commercial property prices have been falling, notably by around 40% in London after the Brexit vote. The prices of very expensive houses in London have also been falling by similar amounts. The rise in interest rates in the US has also begun to affect housing demand, and property prices there. But, the main fall is yet to happen.

5. Predicted that inflation would be higher than expected. At the time, the main concern of economists and pundits was the spectre of deflation in Britain and Europe, and potentially in the US. It was one of the reasons given for maintaining very loose monetary policy (wrongly as the money printing was causing an inflation of asset prices and deflation of commodity prices). As predicted, inflation has risen more than expected, and continues to gather pace. The sharp falls in primary product prices caused by overproduction resulting from the earlier higher prices, came to an end, and prices of oil, iron ore, copper, foodstuffs etc. began to rise. Rising global employment and wages meant higher demand for wage goods, and with lots of liquidity sloshing around, and with productivity growth stagnant, market prices rose. In Britain that was exacerbated by the sharp fall in the pound following the Brexit vote. US core inflation is already at the required 2% level and rising. Inflation is rising across the EU, and in the UK, its estimated that the average Christmas dinner this year is about 20% more expensive than it was last year!

6. Predicted a continuation of the process of new commodities based around new technology, including gene and biotechnology etc. That has again been proved correct, and is reflected in the growing number of books and articles about the role of this technology.

7. Not only has this prediction been proved correct, but we have seen a growth in further alternatives such as Uber, and other sharing systems.

8. Predicted that Labour would do much better in the local elections than was predicted. Remember at the time that Corbyn had only just been elected leader, and the PLP were doing everything they could to undermine him. As predicted, Labour did at least as well as they had done in their previous best year, under Miliband, they also won parliamentary by-elections, extending their majorities, as forecast in Labour seats, and also won Mayoral elections.

9. Has proved correct, but its full impact is yet to be seen. As the Government party in Scotland, the SNP have pushed through Tory austerity, in their budget, when they had the opportunity to have used their tax raising powers to oppose it.

10. The prediction here has been fully born out. ISIS defeated in Syria, but more entrenched in Libya; the Kurds have asserted their separate interests; that caused fractures in NATO and the continuation of the break-up of Iraq; “as Russia secures the existing Syrian regime in power, and the West has to accept it”.

Now on to the predictions for the year ahead.

As the material conditions continue to impose themselves, the political meat grinder will rein in Trump, Brexit and right-wing populism across the EU. Real economic and political power resides in cities, and the larger urban conurbations.

In the US, the Mayors of these large cities have already come out to say they will resist any attempts to implement Trump's policies on immigration etc. In order to push through his policies for fiscal expansion and infrastructure spending, Trump will probably have to rely on support from Democrats against the opposition of Tea Party and fiscally conservative Republicans.

Brexit is already being put through the political meat grinder, including through the courts. Tories on the pro-EU/Social democratic wing of the party are already lining up with Liberals and Labour to restrict the ability of the Tory right to impose a damaging hard Brexit. Germany and France will have an increasing interest in proposing a large fiscal expansion, and infrastructure programme. Both large economies need to see off the right-wing populists in their own countries, and the danger of the EU fragmenting. Both large economies need to prevent a meltdown of the Italian economy, and Germany in particular, needs the EU economy to grow faster, so as to provide a growing market for its manufactured exports.
The EU fights back. The EU is a political project, driven by economic realities and necessities. The reality is that global capitalism long since outgrew the fetters of the nation state. As I wrote more than thirty years ago, if it could, capital would forge a global state, providing a level playing field for all capital to operate within, on the basis of a single market, single currency and common laws and regulations, and a single fiscal and monetary framework.

It can't, for all the reasons that meant that forging those things out of the separate states of the US required a Civil War, and led to repeated European wars between states, and now has prevented a rational framework being established in the EU. Global capitalism – imperialism, the most dynamic phase of capitalism – has progressed from being a system of states, however, to being a system of regional economic and political blocs, and a series of para state global bodies, e.g. IMF, World Bank, WTO etc.

The EU, and these global para-state bodies were expressions, in the post-war period, of the dominance of big socialised capital, and of the development of the social-democratic state as the political expression of its needs and interests. The rise of conservatism and nationalism, in the last thirty years, represents a reflection of the temporary, conjunctural weakening of that socialised capital, as part of the long-wave cycle, and an assertion of the interests of the owners of fictitious capital – shares, bonds, property – whose political representatives the conservatives are and have always been.

An economic reality, as Marx sets out in Capital, is that ultimately productive-capital dominates, and merchant capital and money-capital are subordinated to it, as is landed property, because it is productive-capital which produces the surplus value, on which these other revenues depend. As this productive-capital is now dominated by big socialised capital, its interests, and the need for a large, social-democratic state, to defend them, forms the base-line, and it is then only a matter of to what extent, at any moment, within the long wave, conservative forces can restrict or inhibit the role of the state, in fulfilling that function, or utilise it to defend their own specific immediate interests as against those of the socialised industrial capital.

For example, they have used the state, via the central banks, to keep the prices of that fictitious capital astronomically inflated. But, the economic reality ultimately asserts itself. Even the central bankers and representatives of the speculators realise that monetary policy has run its course in being able to keep asset prices inflated. Only an expansion of capital, and rise in the production of surplus value can provide a basis for future payments of interest and rent.

The long wave conjuncture has shifted. The EU will now be forced to press ahead with the rational development of political structures required to meet the needs of its economic base. That means consolidating the Eurozone, and speeding up the integration of other EU currencies within it; firming up the Banking Union, which will also involve a rationalisation of European banks into a much smaller number of big banks, and as the UK pulls away, Frankfurt will become the rational financial centre of Europe; the development of an EU Debt Management Office, and move to the issuing of EU Bonds, rather than sovereign bonds issued by individual states.

With a continuation of the migrant crisis, the EU will have to set up a unified border force as the precursor to a European Army. But, it will also be led to use fiscal policy to stimulate the economies of the Southern periphery, and to return to the policy of establishing an economic relationship with the states of the Middle East and North Africa that border the Southern shores of the Mediterranean. Expect that new arrangements will be established with newly entrenched Bonapartist regimes in those states of MENA.
UKIP disintegrates. The much hyped threat to Labour from UKIP will be shown to be a pipe-dream. The 30% of the population that hold bigoted views (which surveys show overlap on a range of issues from the EU, immigration, feminism, homosexuality and the environment) are more motivated than the other 70% of the population to vote, when the issue is restricted to these themes, but less motivated to vote solely on that basis, in more general elections. So, for example, Remainers have been more motivated to turn out to vote for pro-Remain candidates in by-elections than have Leavers to turn out to vote for pro-Leave candidates. That reflects the fact that these issues are still lower priorities for voters than issues such as jobs, wages, public services and so on. It also reflects the fact that Remainers are more aware of the threat to jobs, etc. from Brexit than that Brexiteers are confident that Brexit might improve those conditions.

UKIP, to the extent they are not just closet racists and fruitcakes, are just right-wing Tories. A look at the policies of UKIP's new leader, Paul Nuttall, a former right-wing Tory himself, shows that on these wider issues, they have no policies attractive to workers. Farage was the glue that held these mavericks together. Nuttall's nutters are heading for oblivion.
This will be a decisive year for Corbyn and his supporters. The specific conditions of the Copeland By-Election may again mean its not that instructive. More significant will be how Corbyn and co. respond to the triggering of Article 50, in March, the rising tide of calls for tighter immigration controls, and limits on free movement, and how Labour does in local elections. So far, those around Corbyn, more than Corbyn himself, have been vacillating, either making outright retreats or else answering questions with evasive responses that both appear weak, and confusing, and remind people of the old politics. Corbyn and his supporters need to provide a strong, clear, unequivocal message, in the next few weeks and months of support for workers in defending their pay and conditions, whether those workers are employed at Sports Direct or at Southern Rail; no concession on free movement; no support for a Brexit that restricts free movement, or threatens other workers' rights and benefits (which effectively means opposition to Brexit itself).

Its time for Corbyn and his supporters to turn the ideas about building a social movement into action. We should see regular large rallies and demonstrations, joining with other European workers and organisations for the defence and advancement of workers' rights and interests, across Europe. We should join with these other forces to demand action by the EU to end austerity and introduce stimulative investment, particularly in the peripheral economies, to cut unemployment and spur growth, whilst demanding no more bail-outs for the banks.

Labour should mobilise its half million members, and its resources, to physically support every strike, every community action against austerity etc. If Corbyn and his supporters do that, Labour's standing in the polls will rise, as voters see a credible answer being provided. If not, Labour will become irrelevant; its membership will evaporate, and Tory reaction will triumph.
As happened in similar conditions, in the mid 1960's, inflation will spike sharply higher. As interest rates rise, the price of financial assets, land and property will fall sharply. Money will flow out of those things quickly, as no one will want to be left holding a rapidly depreciating asset, and for those assets that are illiquid, such as property and junk bonds, this crash will be more pronounced as everyone rushes for the exit.

Whether the money flows into the purchase and circulation of commodities for personal consumption (revenue) or the purchase of commodities for productive purposes (capital) the result will be that the money demand for these commodities will rise, causing market prices to rise.

The sharp rise in demand for commodities, and of commodity prices, will lead to an increase in investment, initially in circulating capital (materials and labour-power), as existing fixed capital is used more intensively, driving up capacity utilisation rates. This causes a further rise in demand for these commodities, pushing market prices higher again, which also leads to wages rising, to compensate. The astronomical amounts of liquidity pumped into the system by central banks, facilitates the sharp spike in this commodity price inflation, just as previously it caused asset price hyper-inflation.
The three-year cyclical slow-down sets in again, in the fourth quarter of 2017, but, for the reasons set out in 5), it will be manifest in relative rather than absolute terms, i.e. growth in general will be strengthening, whilst the period Q4 2017 – Q4 2018 will be just slower than this quickening trend. Specific economies, such as the UK, may suffer greater effects, because of particular conditions, such as Brexit.
Fillon wins the French Presidency, but the Socialist Party splits, leading to a realignment. A Corbynite movement develops within it, attracting sections of the French Left to it.
Merkel wins again, but the SPD increases its relative position, as the AFL takes some votes away from other right-wing parties. Germany is already at full-employment, largely due to the boost to domestic demand that the influx of migrants has given to the economy. German wages are rising as a result. There is a strong incentive for German capital to consolidate its position in the EU, as the UK withdraws, by investing in productive capacity in lower cost EU countries. Expect companies like BMW, Siemens etc. to relocate production from Britain into Ireland, Spain, Portugal, Italy etc.
Within days of Trump's inauguration, China flexes its muscles by starting to sell some of its huge holdings of US sovereign and corporate bonds.
Trump's cosying up to Putin, and coolness to NATO, strengthens the incentive for the EU to also look to its own greater economic ties to Russia, and its own defence and strategic interests, particularly as it tries to create a more stabilised economic buffer zone around its periphery.

The EU will have greater success in establishing a modus vivendi with Russia, with which it has far greater economic ties, than will the US. That leads to a fit of pique on Trump's part, and a rupture between him and Putin. Putin will lose no sleep over it, as Russia's economy starts to grow on the back of increased trade and investment from the EU and China.

Theories of Surplus Value Part I, Chapter 2 - Part 3

Like other economists, the Physiocrats looked at capitalist agriculture, and saw in its forms, not something historically specific, but something universal. The Physiocrats were studying a form of capitalist production in capitalist agriculture, which is historically a transition between feudal production and capitalist industrial production. That is why they see rent as the form of surplus value, because at the point of their analysis, as Marx set out in Capital III, examining pre-capitalist forms of rent, this indeed was the form in which surplus value was manifest.

For the peasant farmer, rent first took the form of labour rent. That is the peasant had to devote a portion of their own output to replacing their means of production – seeds etc. – and another portion of their output and current labour-time had to be devoted to producing the use values required for their own reproduction. Only the time they had left over after these more or less fixed material requirements had been met, was available as surplus labour-time that could be used to cultivate the land of the landlord.

This was not fundamentally changed when this was replaced by the payment of rent in kind, and then money rent, other than that, as productivity rose, the amount of necessary labour-time declined and surplus labour-time rose so that some peasants were able to accumulate means of production, and turn themselves into capitalist farmers.

The fact was that surplus value was represented by rent, which here was the form in which this surplus labour-time was extracted. For the Physiocrats, it is rent which constitutes surplus value, not profit, because at this point, profit appears merely as a deduction from rent. It is industrial capitalists obtaining a share of the rent, appropriated by landlords and capitalist farmers.

But, the achievement of the Physiocrats is that they locate the source of surplus value in the production process, rather than in the process of circulation. The source of this surplus value they identify is that the value of labour-power is fixed, because it comprises a given minimum quantity of use values, required for the reproduction of the worker, and yet that same worker is able to produce a greater quantity of these same use values.

The fact that they saw this minimum quantity of use values as an “unchangeable magnitude” does not significantly undermine this concept, because, as productivity rises, and a general improvement ensues, as history progresses, not only does this physical minimum rise, but the physical output of the worker rises too, so that even as the physical minimum rises, the difference between it and the workers output grows even wider.

The Physiocrats also were responsible for establishing a number of other concepts, essential for future economic thought. They developed the concept of fixed capital, which they termed Avances Primitive, as distinct from the circulating capital, which they termed Avances Annuelles. These concepts were inherited by Adam Smith.

“His service — in this connection — is limited to fixing the abstract categories, to the greater consistency of the baptismal names which he gave to the distinctions made by the Physiocrats in their analysis.” (p 44-5)

The problem with Smith's analysis in this regard, as Marx set out in Capital II, was that he confuses constant capital with fixed capital, and circulating capital with capital in circulation.

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Tuesday, 27 December 2016

Theories of Surplus Value Part I, Chapter 2 - Part 2

The Physiocrats did not understand the concept of value, Marx says, but they did not need to, in order to understand the nature of surplus value on this basis. All that an understanding of value adds to this analysis is to put a quantified figure of value on to these respective physical quantities of use values, that appear alternately as constant capital, variable capital, and surplus value, and thereby facilitate their representation as amounts of exchange value and money.

For example, suppose we represent all agricultural production in terms of grain. We might then have, in physical quantities:

c 100 units + v 500 units + s 600 units.

The rate of surplus value here equals 120%, and the rate of profit 100%. Suppose we represent these quantities of use values instead as values, in terms of labour-time. We may then have either:

c 100 + v 500 + s 600, or

c 200 + v 1000 + s 1200, or

c 50 + v 250 + s 300.

In each case, nothing has fundamentally changed, because the value of the grain, whether it is used to reproduce the constant capital, the variable capital or is left over as surplus product, is the same in each case, and consequently, the proportional relations remain the same in each case.

“Therefore the foundation of modern political economy, whose business is the analysis of capitalist production, is the conception of the value of labour-power as something fixed, as a given magnitude — as indeed it is in practice in each particular case. The minimum of wages therefore correctly forms the pivotal point of Physiocratic theory. They were able to establish this although they had not yet recognised the nature of value itself, because this value of labour-power is manifested in the price of the necessary means of subsistence, hence in a sum of definite use-values. Consequently, without being in any way clear as to the nature of value, they could conceive the value of labour-power, so far as it was necessary to their inquiry, as a definite magnitude.” (p 45)

Of course, the constant and variable capital was not comprised only of grain, but the point remains. A quantity of agricultural produce, be it grain, vegetables or whatever is produced, and out of this product, a given proportion must be set aside to replace those same products that were consumed as constant and variable capital, in its own production.

“It was their great merit that they conceived these forms as physiological forms of society: as forms arising from the natural necessity of production itself, forms that are independent of anyone’s will or of politics, etc. They are material laws, the error is only that the material law of a definite historical social stage is conceived as an abstract law governing equally all forms of society.” (p 44)

In other words, this is essentially a restatement of The Law of Value, as Marx outlined it, in his letter to Kugelmann. The Law of Value determines that society has a given quantity of available social labour-time to be allocated to the production of new value. The value of existing means of production is automatically transferred to the value of current production, but must be physically replaced, like for like, out of that current production. Of the new value created, a portion must go to the reproduction of the labour-power used in its production, leaving the remainder as a surplus value.

This physical division of each society's physical production into a fund to replace the consumed means of production, a fund to reproduce labour-power, and a remainder that constitutes a surplus product and surplus value is a natural law that applies to all societies, and all that changes is the form in which it is materialised under different modes of production.

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Monday, 26 December 2016

Theories of Surplus Value Part I, Chapter 2 - Part 1

The Physiocrats

[1. Transfer of the Inquiry into the Origin of Surplus-Value from the Sphere of Circulation into the Sphere of Direct Production. Conception of Rent as the Sole Form of Surplus-Value]

“The analysis of capital, within the bourgeois horizon, is essentially the work of the Physiocrats. It is this service that makes them the true fathers of modern political economy.” (p 44)

One of the great elements of the Physiocratic theory was that, in transferring the inquiry of the nature of surplus value, and the basis of social reproduction, into the realm of production, rather than circulation, they laid bare the material foundations upon which that rested.

As Marx sets out, particularly in the concluding chapters of Capital, this process of social reproduction takes place under several material and physical constraints.

The material elements of constant capital must be reproduced in kind
the material elements of variable capital, i.e. the commodities required for the reproduction of labour-power must be reproduced in kind
the total output of society depends upon the given level of productivity and technology, its accumulated capital, and the available social labour-time.

If the level of productivity and technology is constant, the proportion of total output that must be allocated for the physical reproduction of the constant and variable capital is thereby fixed. On this basis, the amount of surplus product and surplus value is thereby objectively determinable. But, even the division of this surplus product and surplus value, into profit, interest and rent is calculable, on the basis of the laws of competition, and, however it is thereby divided, its total mass cannot exceed that determined by these physical constraints.

This material, physical foundation, for social reproduction, and the production of surplus value, was obvious to the Physiocrats, whereas it is lost sight of by later economists, Marx says, precisely because the Physiocrats were studying agriculture, where production “can be thought of in complete separation from and independently of circulation, of exchange; and which presupposes exchange not between man and man but only between man and nature.” (p 49)

The Physiocrats, in studying agriculture, witness this fundamental aspect of social reproduction that it is a reproduction of physical products. This is particularly apparent where the agricultural labourer is paid themselves in kind rather than money wages. The capitalist farmer then not only physically reproduces the material elements of their constant capital, in kind, from their output, but pays the workers in kind from that same output.

The surplus value is then most clearly viewed as the surplus of this output over and above what has had to be taken out of it to physically reproduce the constant and variable capital.

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Sunday, 25 December 2016

Theories of Surplus Value Part I, Chapter I

Sir James Steuart [Distinction Between “Profit Upon Alienation” and the Positive Increase of Wealth]

In many ways, the debate over the nature and source of surplus value reflects the contradictory duality of the commodity as both use value and exchange value. This comes out in a number of the studies of the ideas of bourgeois economists undertaken by Marx, and presented in Theories of Surplus Value.

On the one hand, there are those such as the Monetary School and the Mercantilists, who see profit as deriving from an excess of the selling price of the commodity above its cost, i.e. that commodities sell at prices above their values, which locates the source of profit in the realm of exchange. Modern, orthodox economics has essentially been unable to get beyond this delusion. On the other hand, the Physiocrats, by studying the first manifestations of capitalist production, in agriculture, grasped the idea that it is in the realm of production, by being able to produce a physical surplus product, which can be used for the purpose of accumulation, that the true essence of surplus value resides. But, the problem here is not just that the Physiocrats failed to recognise that this surplus product can be produced in a whole range of industries, besides agriculture, but that one reason they fail to recognise this is that the concept of surplus is focussed solely on the existence of a physical surplus, i.e. a surplus of use values rather than a surplus of value.

“Before the Physiocrats, surplus-value — that is, profit in the form of profit — was explained purely from exchange, the sale of the commodity above its value. Sir James Steuart on the whole did not get beyond this restricted view; he must rather be regarded as the man who reproduced it in scientific form.” (p 41)

The division described above is essentially mirrored in Steuart's analysis. He talks about profit in two senses. Firstly, he talks about positive and relative profit. A relative profit is one that involves a profit for one party at the expense of a loss to another. If the source of profit is that commodities are sold at prices above their value, that profit is derived from exchange, then all profit must be 'relative profit', because a profit obtained from a seller, from selling is matched by the equivalent loss made by the buyer in buying.

But, Steuart recognised what some modern, orthodox economists have failed to notice, which is that if exchange is the source of profits, by all commodities being sold at prices above their value, then profit itself is impossible, because the profits made by sellers are cancelled out by the losses made by buyers.

As Marx points out,

“Even the Monetary system, however, thinks of this profit as arising not within a country, but only in exchange with other countries In this it remains stuck in the Mercantile system [which assumed] that this value takes the form of money (gold and silver) and the surplus-value is therefore expressed in the balance of trade, which is settled with money.” (Note *, p 43)

Steuart, therefore, counterposes positive profit to this relative profit. A positive profit arises where no one loses at the expense of the gain of someone else. The modern equivalent of this in orthodox economics is the idea of consumer surplus, or the conditions that establish Pareto Optimality. In other words, that, as a consequence of an exchange, the two participants are able to move to a higher level of welfare, because A exchanges a commodity in their possession, for another commodity, which for them possesses greater utility, which is in the possession of B, and vice versa.

But, for Steuart, the idea of positive profit involves an increase in utility deriving from an increase in the actual mass of use values. If

“Positive profit arises from “augmentation of labour, industry and ingenuity”. How it arises from this Steuart makes no attempt to explain. The further statement that the effect of this profit is to augment and swell “the public good” seems to indicate that Steuart means by it nothing but the greater mass of use-values produced in consequence of the development of the productive powers of labour, and that he thinks of this positive profit as quite distinct from capitalists’ profit—which always presupposes an increase of exchange-value.” (p 41)

Steuart seems to grasp, therefore, the idea that for a society as a whole 'profit' can only be this 'positive profit', whereby the physical product expands, but gets no further than this, either in understanding how this increase in this physical product, is achieved, - other than a general 'augmentation' brought about by 'labour', 'industry', and 'ingenuity' – or in how this increase in the physical product is related to an increase in value and surplus value.

The concept of surplus value here then remains locked within the confines of surplus use value, or surplus product.

Marx quotes Steuart, to show that for him the profit of each individual capitalist is 'relative profit', or 'profit on alienation', i.e. a profit obtained by the sale or exchange of commodities.

Marx is right that this is the consequence of Steuart's argument, because on the basis of the argument put forward, as with Adam Smith, it is impossible for surplus value to be produced in the production process. If the value of commodities is determined by the labour-time required for their production, and if this is determined on the basis of the cost of production of the elements involved in the commodities' production, i.e. the means of production and the labour-power, then there is no scope left for surplus value.

“The “real value”, he says, is determined by the “quantity” of labour, which “upon an average, a workman of the country in general may perform … in a day, a week, a month”. Secondly: “the value of the workman’s subsistence and necessary expense, both for supplying his personal wants, and … the instruments belonging to his profession, which must […] taken upon […] average as above …” Thirdly: “… the values of the materials …” (l.c., pp. 244-45). “These three articles being known, the price of manufacture is determined. It cannot be lower than the amount of all the three, that is, than the real value; whatever is higher, is the manufacturer’s profit. This will […] be in proportion to demand, and therefore will fluctuate according to circumstances” (l.c., p. 245). “Hence appears the necessity of a great demand, in order to promote flourishing manufactures … the industrious […] regulate their living and expense according to their certain profit” (l.c., p. 246).” (p 42)

This excess, according to Steuart, is greater or lesser depending upon the extent of demand for the commodity. However, its not entirely clear to me that this was actually Steuart's intention in the argument he was presenting. As Marx says, Steuart specifically rejected the idea that surplus value could arise from the process of exchange.

“Steuart on the one hand rejects the conception of the Monetary and Mercantile systems, according to which the sale of commodities above their value, and the profit resulting therefrom, creates surplus-value, a positive increase of wealth.” (p 43)

In which case, Steuart would indeed be left in what appears an inexplicable contradiction, if as Marx says,

“On the other hand he holds to their view that the profit of the individual capital is nothing but this excess of the price over the value, the profit upon alienation. This however according to him is only relative, the gain on the one side being compensated by the loss on the other, and consequently this movement is nothing more than “a vibration of the balance of wealth between parties”. (p 43)

The other interpretation could be that Steuart, like Smith and others, simply had a confused and incomplete theory about how the surplus value itself arose in production. In other words, it seems completely tenable to me for Steuart to hold the same position as Marx, that commodities exchange at their values, and those values themselves contain an element of surplus value. The difference is that, for Marx, this surplus value arises because labour-power creates a greater mass of new value than is required for its reproduction, whereas, for Steuart, it arises because a given mass of use values is transformed in the production process into a greater mass of use values, as a consequence of their augmentation, by 'labour', 'industry' and 'ingenuity'.

In fact, this mistaken notion of the identity of surplus value with surplus product, or with the augmentation of the mass of use values, is to be found in the writing of others dealt with by Marx in Theories of Surplus Value, such as Torrens.

Its quite possible then for Steuart to believe that a surplus value arises in production, as a consequence of this 'augmentation', but that, as with Marx, the resultant mass of use values thereby already embody this surplus value, as part of their value. Steuart's profit on alienation then becomes nothing more than the excess of the market price above this value.

As Marx says,

“His theory of “vibration of the balance of wealth between parties”, however little it touches the nature and origin of surplus-value itself, remains important in considering the distribution of surplus-value among different classes and among different categories such as profit, interest and rent.” (p 42)

However confused, or incomplete, the notion of where a social surplus value might have come from, the very recognition that it exists, as a physical reality, means that the question of of how it is thereby distributed arises. In this respect, a theory of competition, and of demand, comes into its own, as Marx describes in Capital III. It provides the basis for an understanding of surplus profits, and on the back of it, rent, as well as the rate of interest. Indeed, it is fundamental to the very mechanism for establishing a general annual rate of profit, and prices of production, so as thereby to bring about a sharing out of this social surplus, on a proportionate basis.

Steuart's main contribution, Marx says, is that his studies showed how, particularly in agriculture, the means of production are separated from labour-power, and how this process leads to the concentration of ownership of the former in the hands of the capitalist class, “... without as yet seeing it directly as the genesis of capital, although he sees it as a condition for large-scale industry.” (p 43)

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