Theories of Surplus Value, Part I, Chapter 3 - Part 20

It is this which puts the workers, as a class, in a different position to every other commodity owner. Take a peasant producer of grain. They expend 1,000 hours producing grain, which they exchange, in the market, for linen. The peasant only needs to work for 800 hours to produce enough value to reproduce their labour-power. When they exchange their grain for linen, they obtain in exchange, the equivalent of 1,000 hours of labour-time, expended by textile workers. These textile workers, like the peasant, only need to work 800 hours to produce sufficient value to reproduce their labour-power. It is this equivalent which is paid to them, in grain, as wages.

The peasant producer exchanges 1,000 hours of value, contained in their grain, for 1,000 hours of value contained in linen. The textile worker expends 1,000 hours of labour-time, but is paid only for 800 hours, equal to the value of their labour-power, and thereby obtains only 800 hours of value, in grain, whilst the textile capitalist appropriates the other 200 hours of value, in grain, for themselves.

When looked at in terms of an exchange of commodities, all the requirements of the law of value have been met. As a commodity owner, the peasant exchanged a commodity – grain – with 1,000 hours of value, for another commodity – linen – also with 1,000 hours of value. The worker, as a commodity-owner, has exchanged their commodity – labour-power – with a value equal to 800 hours, for another commodity – grain – also with a value equal to 800 hours. The difference resides in the fact that, in both cases, the value of the labour-power was equal to 800 hours, but the value of the output of that labour-power was equal to 1,000 hours, creating 200 hours of surplus value, in each case. But, the peasant, as owner of the means of production, sold the product of their labour, not their labour-power itself, and thereby appropriated to themselves, the surplus value they created. They expended 1,000 hours of labour, divided 800 hours of necessary and 200 hours of surplus labour, and it took the form of a quantity of grain, which they exchanged for an equal value of linen.

The worker, however, also expended 1,000 hours of labour, similarly divided 800 hours necessary, and 200 hours of surplus labour, which took the form of linen. But, because the worker sold their labour-power, rather than the product of their labour, this linen belongs not to the worker, but to the capitalist. The capitalist exchanges the 1,000 hours of value of linen, for 1,000 hours of value of grain. The capitalist then gives the worker 800 hours of value of grain, in exchange for the value of the labour-power provided, and retains the other 200 hours of value of grain for themselves.

In other words, looked at from the perspective of what labour-time is expended to obtain commodities in exchange, the peasant expends 1,000 hours of labour, and obtains 1,000 hours in return, whereas the worker expends 1,000 hours and obtains only 800 hours of value in return.

“Conversely, the money with which the capitalist buys labour contains a smaller quantity of labour, less labour-time, than the quantity of labour or labour-time of the workman contained in the commodity produced by him. Besides the quantity of labour contained in this sum of money which forms the wage, the capitalist buys an additional quantity of labour for which he does not pay, an excess over the quantity of labour contained in the money he pays out. And it is precisely this additional quantity of labour which constitutes the surplus-value created by capital.” (p 87) 

To be more precise, Marx should really have said appropriated by capital, rather than created by capital, because, for the reasons outlined, the surplus value already exists, as a consequence of the difference between the value of labour-power, and the value of the product of labour. Capital appropriates the surplus value, because the product is alienated by labour, and owned by capital, and consequently, capital appropriates the surplus value contained within it.

The capitalist buys labour-power, in exchange for a money wage, but this money wage is only a transmuted form of the commodities required for the reproduction of labour-power. At any one time, the society's consumption fund, or variable-capital, is just as much a fixed quantity of use values, which must be “reproduced in kind” as is the fund for means of production, or constant capital.

In fact, as Marx outlined in Capital, the variable capital is denoted precisely by the fact that it is a fixed sum of value, equal to the value of these necessities, which creates a larger sum of value. It would then be just the same if the capitalist paid the workers not in money, but in these commodities, in the necessities required for the reproduction of labour-power. That indeed was a situation that the Physiocrats encountered.

But, then it would be clearer that the workers had bought commodities representing one amount of labour-time, only with a greater quantity of their own labour-time; that, in order to obtain commodities with a value of 800 hours, they had to exchange 1,000 hours of their own living labour.

“It is Adam Smith’s great merit that it is just in the chapters of Book I (chapters VI, VII, VIII) where he passes from simple commodity exchange and its law of value to exchange between materialised and living labour, to exchange between capital and wage-labour, to the consideration of profit and rent in general—in short, to the origin of surplus-value—that he feels some flaw has emerged.” (p 87)

Back To Part 19

Forward To Part 21

Vote Down The Tory Brexit Bill

Political commentators on many sides are saying that Jeremy Corbyn and the Labour Party have an awkward position to deal with in relation to the triggering of Article 50. As a matter of principle they do not. The issue is simple. Brexit is against workers interests. The task of the Labour Party is to defend and extend workers' interests, and so the Labour Party should oppose and vote down the Tory Brexit Bill to trigger Article 50.

The argument that Labour is in an awkward position because the referendum gave a small minority for Brexit is facile. Socialists do not put a primitivist, and abstract support for bourgeois democracy above their responsibility to fight for workers' interests. But, more than that, what is being asked is not even consistent with bourgeois democracy; it is instead fundamental to all totalitarian and authoritarian regimes, i.e. that minorities cease fighting for their interests, and acquiesce in the rule of the majority.

The Tory MP, Ken Clarke, is quite right when he says that he has supported membership of the Common Market, and EU for fifty years, and that it would be ludicrous to suggest that just because of the referendum vote, he now had to act as though he was an opponent of it. He is also quite correct in saying that no such attitude is taken with any other bourgeois democratic election. On the day after a landslide Labour victory, such as that of 1945, or 1997, no one suggested that Tories like Clarke had to acquiesce in the rule of the subsequent Labour government. On the contrary, on the day after the election, not did Tories continue to be Tories, but it was their right and their duty, as Tories to fight tooth and claw to oppose the Labour government, to frustrate its policies and actions, and to try to overturn it, and turn it out of office at every opportunity.

In terms of principle, and in terms even of bourgeois-democracy, the idea that Labour has to roll over, and not only accept, but to adhere itself to the Brexit vote is ridiculous. Its like saying that if there was a referendum, as might have occurred in Nazi Germany, over sending Jews to the gas chamber, Labour, having lost the vote, would say, “Oh well, the people have spoken, and all we can do is to put down amendments, to call for them to be transported to their death in lorries, rather than cattle trucks”! Or, if Trump were currently, to hold a referendum, in the US, to garner support for his ban on Muslims entering the country, Labour would say, “Oh well, we lost that vote, so we will have to tag along behind Trump's racist and reactionary policies.”

The UKIP Leader, Paul Nuttall, has expressed support for the idea of a referendum to bring back the death penalty. If opinion polls are to be believed, such a referendum would probably go Nuttall's way. What then would Labour believe that it had to “respect” that vote, limiting itself only to trying to have “humane” executions, like it calls for “humane” immigration controls, rather than continuing to maintain a principled opposition to the policy itself, whatever “the people” had decided?

Labour can and should, obviously put down amendments to the Tories Brexit Bill, but they should do so on the basis of a continued, principled opposition to Brexit itself. Jeremy Corbyn was right back in June to say that the Tories should have come to Parliament to trigger Article 50. He was right, because it, was clear that back in June, the Tories had no plan to be able to do so, and calling on them to act, would have exposed the lunacy of the position Cameron and Johnson had created. Had the Tories been pressed to bring their proposal for triggering Article 50 to Parliament in June last year, we would already have had 7 months of debate, exposing the lack of a plan by the Tories, exposing all of the negative consequences that Brexit will have, and already bringing about all of those negative effects on the economy, that currently the Tories claim were forecast, but never happened.

The fundamental principle that Labour should uphold is that of the right of free movement of workers. But, it is also central to the interests of workers that they operate within the same regulatory frameworks of rights to pay, conditions, and benefits. The political reality is that those rights can only be guaranteed on the basis of continued membership of the EU. Whatever, amendments Labour may put down to the Tory Brexit Bill, the reality is, as EU negotiators have said, there is no choice between a hard Brexit and soft Brexit, only between a hard Brexit and no Brexit. Given that a hard Brexit is against workers' interests, the starting point for labour should then be to oppose Brexit itself.

But, what then about the other aspect that might the vote over Article 50 difficult for Labour? That is the fact, that although 65% of Labour voters voted for remain, 65% of Labour held constituencies voted to Leave. For socialists, it should always be adhering to your principles that outweighs opportunistic, short-term, electoral considerations. But, even in terms of those electoral considerations, there is no real basis for failing to oppose Brexit.

According to a recent survey presented on Newsnight, more than half of Labour seats that voted for Leave, have a Labour majority of more than 10,000. In other words, if Labour sticks by its principles and opposes Brexit, the chances of losing these seats as a result, particularly given that experience shows that leaving the EU, is only a minor concern for Labour voters compared to the issues of jobs, the NHS, housing etc., is remote.

But, even where Labour does not have such a large majority, the chance of losing the seat as a result of Labour now opposing Brexit, is also remote. Take a seat with 100,000 voters, where Labour obtains 55,000 votes as against 45,000 Tory votes. Nationally, 65% of Tory voters voted Leave, as opposed to only 35% of Labour voters. We might expect that in a seat voting Leave, both these percentages would be higher. Suppose, then that 80% of Tory voters voted leave in this constituency – that is 44,000 votes. A 65% vote for Leave in the constituency then equates to 65,000 votes. To make up the difference then requires 21,000 Labour voters to vote Leave. That would mean 38% of Labour voters, voting Leave in this seat. That would be higher than the national average for Labour voters, but is still way below 50%.

In other words, even in such seats, its likely that only a minority of Labour voters would be supporters of Leave. Even from a strategic or tactical political consideration, therefore, it would not seem to make sense for Labour to abandon a principled position of opposing Brexit, simply for short term electoral advantage.

Labour should oppose Brexit. Even if labour were to succeed in making amendments to the Tory Brexit Bill, as soon as the process is underway, Labour's hands may be tied. Labour is proposing an amendment to require that after any negotiations on the terms of Britain's exit, Parliament would be able to vote and thereby reject any deal that May negotiates. But, May has made it clear that the alternative in any such vote would simply be to accept the deal she negotiates or to leave without any deal, and thereby to fall back on WTO rules.

Labour is trying to get a commitment that instead, if any deal is not acceptable to Parliament, Article 50 could be revoked. However, it is not clear that this is possible. It will only be possible to challenge the meaning of Article 50, at the point that such revocation was requested. Workers cannot put their futures in such jeopardy, and uncertainty. Labour should come out clearly, now. Vote down the Tory Brexit Bill.

Theories of Surplus Value, Part I, Chapter 3 - Part 19

The specific characteristic of capitalism is not that labour-power is a product with a value, or that it produces surplus value. It is that this product – labour-power – becomes a commodity, sold by wage workers, with nothing else to sell, and bought by capital, and it is the specific nature of this relation between wage labour and capital, which thereby enables capital to appropriate the surplus value produced by labour.

A comparison could be made with Marx’s analysis of capitalist rent. It is not, Marx says, the existence of landed property which explains rent. Rent exists because of the existence of surplus profits. However, it is the existence of landed property, which determines that these surplus profits take the form of rent, appropriated by the landowner. Similarly, it is not the existence of capitalism which explains surplus value, but it is capitalism which explains the fact that the surplus value takes the form of profit, and its appropriation by the owners of capital.

The worker, when they buy commodities, required for the reproduction of their labour-power, does so, not as a worker, but only as a buyer, an owner of money, just as the capitalist, when they sell these commodities to them, does so not as a capitalist, but merely as an owner of commodities like any other. The worker and capitalist confront each other only in these roles, at the point that the worker sells their labour-power. The capitalist makes the profit in the production process, not in the process of selling their output. At the point they sell these commodities, their value already contains the surplus value, and so, in selling them, at their value, they only realise the pre-existing surplus value.

The worker, in buying the commodities they need,

“... carries through only the act M—C, which indicates a change of form, but, as a general rule, by no means a change in magnitude of value.” (p 86)

If we take all workers together, their total output of use values, setting aside those simply transferred as constant capital, is greater than the total use values consumed by the workers. The total labour-time expended by workers in producing these use values is greater than the labour-time expended on producing the use values consumed by the workers. This is the basis for the existence of a surplus product, and a surplus value. What is true of workers as a whole is true of workers individually. The labour-time they contribute to the production of commodities is greater than the labour-time represented by the commodities they consume.

“Since however, by his labour materialised in the product, he has added not only as much labour-time as was contained in the money he received, he has paid not only an equivalent but has given surplus-labour gratis—which is precisely the source of the profit—he has thus in fact (the mediating process, the sale of his labour-power, is not relevant when we are dealing with the result) given a higher value than the value of the sum of money which forms his wages. In return, he has bought with more labour-time the quantity of labour realised in the money which comes to him as wages.” (p 86-7)

In other words, although when the exchange is examined at the level of the sale of the workers' commodity – labour-power – the worker has received its value, i.e. the labour-time required for its production, in the form of money wages, when things are examined in terms of the labour-time that the worker provides to capital, and the labour-time that the worker receives back from capital, things are quite different. Then it becomes clear that the worker has given capital a greater quantity of labour-time than they receive back from capital, in the form of wages.

“It can therefore be said that in the same way he has indirectly bought all the commodities into which the money (which is only the independent expression of a definite quantity of social labour-time) he received is converted with more labour-time than they contain, although he buys them at the same price as any other buyer or possessor of a commodity in its first transformation.” (p 87)

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Forward To Part 20

Brexit and the Great British Break-up

We have a process involving a movement of opposites. The EU began as six countries that has grown to twenty-eight, and is set to expand further, even if Britain leaves. It is gradually, if painfully, becoming more integrated, as it heads in the direction of becoming a federal state. As this process of integration continues, and with already the world's largest market and economy, it looks set to raise the living standards of all its people, and to play an increasingly important role on the world stage.

By contrast, Britain, whose role on the world stage has been declining for over a century, looks set to accelerate that process, as it cuts itself off from the EU. For the same reason, its economy is likely to weaken, and living standards of its people, at least relatively, to decline. That is all the more likely as Theresa May's government proposes dealing with the isolation by turning Britain into a version of Batista's Cuba.

Whilst the EU is strengthening and integrating, Britain is weakening and disintegrating. The years of Tory neglect and decay, caused by their policies of austerity, and concentration on the interests of the money-lending capitalists, in London, (a policy inherited by Blair and Brown) fuelled short-sighted demands for those problems to be dealt with by separation, leading to the rise of the SNP. Instead of dealing with that reactionary nationalism, Labour pandered to it, by introducing devolution, which was no solution to the decay and austerity, simply fuelling the demands for independence even more.

The Scots were told that, to stay in Europe, they had to vote to stay in the UK. As they now rightly protest, they are being taken out of the EU, because they voted to stay in the UK. In fact, 62% of Scots voted to stay in the EU compared to only 55% who voted to stay in the UK.

As Theresa May is refusing to even make any concessions to the Scots, reflecting the overwhelming vote to stay in the EU, it is then not surprising that the prospect of Scotland leaving Britain is on the agenda once more. But, Scotland is not the only part of Britain to have heavily voted to stay in the EU. Northern Ireland, for fairly obvious reasons, also voted heavily to stay in the EU. Whilst not part of Britain, Gibraltar, again for obvious reasons, voted by over 90% to stay in the EU.

As the EU is expanding and integrating, Britain is breaking up.

At the time of the Scottish referendum, I argued that socialists should defend the right of the Scots to leave, but we should argue against them deciding to do so. I still hold that position. Labour and the entire British working-class should resist Brexit, because it is reactionary and threatens the interests of workers. Scottish workers should stand alongside English, Welsh and Irish workers, having a shared and equal common interest.

But, if that struggle fails, and Brexit happens, what then? I have previously argued, after the Scottish referendum, that because Britain is a single state, whereas the EU is only a proto-state, the argument stands that socialists should argue for Scotland to stay in the UK, as part of a single, unified working class. However, Marxists have to view the world dynamically, to understand things not statically, and in isolation, but as a process. Its necessary to consider the direction of travel. In that context, the dynamic of a growing, integrating EU, as opposed to a declining, fragmenting Britain has to be taken into consideration. Moreover, its necessary to consider, within this process, what the relation of the EU will be to a hostile British power, sitting off its border.  (And May's threats, and cosying up to Trump shows it will be, and will be viewed as, hostile.)

In this latter context, its quite easy to see why, and how, the EU could act to hasten the process of British disintegration whilst integrating an independent Scotland, Ireland and Gibraltar. Let's consider these separately and collectively, starting with Scotland.

The obstacle to the EU encouraging or facilitating an independent Scotland joining has always been considered to be Spain. Spain is worried that recognising an independent Scotland would encourage the separatist movements in Spain, for example, in Catalunya. Another problem for Scotland is the question of finance. That is exacerbated by the fall in the oil price, which slashes Scotland's North Sea oil revenues.

Considering the issue of finance first, although the oil price is way below its peak of $147 a barrel, it is also now well above its recent low price of $25, and global prices are likely to now stabilise between $60-$80, at which price North Sea Oil is profitable.

But, with England and Wales out of the EU, and Scotland in the EU, it would have other significant economic advantages. For example, the long Scottish coastline would give it, and the EU, a lion's share of British territorial waters, for fishing etc. The extent of English and Welsh territorial waters would be restricted due to the proximity to other countries, on the European mainland, and to Ireland.

In addition to fishing, the EU could provide Scotland with development grants to develop large-scale, off and on-shore wind farms, as well as tidal power generation, as a replacement for oil revenues.

But, Scotland also has far more immediate economic potential. It has always been an important centre for the UK finance industry, particularly in Edinburgh. Already, large banks and finance houses are looking to leave London ahead of Brexit. There would be huge advantages for them to simply move or expand their existing UK operations within an independent Scotland, inside the EU. The same could be said for Scotland's long history of educational excellence through its Universities etc., and the potential to concentrate EU co-operation on that, and scientific development, in Scotland, encouraging the development of a high value added, high wage Scottish economy, in contrast to the bargain basement economy that the Tories envisage for England and Wales.

In encouraging such a break-up of Britain, the EU would not only enhance its own internal unity, but it would seriously weaken an independent England, as an economic, political and military competitor.

That, however, leaves the question of Spain's concerns. But, Spain has other concerns, namely its long held claim to Gibraltar. A quid pro quo could be arranged, with Spain supporting an independent Scotland, inside the EU, in return for the EU supporting Spain for a deal over Gibraltar.

More than 90% of Gibraltarians voted to remain in the EU, and its economy is closely tied to that of Spain, without which it would be strangled. However, Gibraltar is not going to concede to becoming part of Spain any time soon. There is, however, no reason why Gibraltar should not occupy a position as an independent territory, within the EU, similar to say Andorra. That would mean that a large part of Spain's objection, that Gibraltar acts as a British enclave in Spanish territory, could be dealt with.

A similar solution could be offered by the EU to Northern Ireland, which also voted heavily to stay in the EU. Because the EU economy is nearly ten times the size of the economy of England and Wales, it will have the economic and political firepower to be able to offer such generous deals to Scotland, Northern Ireland, and Gibraltar, in a way that England and Wales could never afford.

In the 1980's, I supported the idea of a federal Ireland, as a means of protecting the minority rights of both catholic and protestant workers, in the two parts of Ireland. But, today, and one reason the Good Friday Agreement could hold, the underlying conditions that required that have largely been removed, as a result of EU membership. Indeed, that's one reason Brexit is so dangerous for Northern Ireland.

In the 1980's, still, Protestants had built-in privileges over Catholics, in the North. Some of the worst discrimination, in terms of voting rights had gone, but discrimination in housing, jobs etc. continued. The historical connection of the Protestant establishment, in Northern Ireland, with sections of the British state, and Tory Party underpinned that discrimination and superiority of the protestant community.

But, since then, the power of the British state, and establishment is countered by the role of the EU proto-state, which has no such historical linkages. The rights of both Protestants and Catholics are underpinned by EU law, by European human rights provisions, and by the ECJ.

In the South, in the 1980's, the Catholic Church and establishment still held considerable sway, and for similar reasons that influence has been weakened. Particularly in the South, but flowing over naturally into the North, along with a large-scale free movement of people on a daily basis (as with Gibraltar and Spain) across the border, there has been a significant investment of foreign capital, particularly from Asia and the US, and specifically into high-value, high tech industries, encouraged by EU membership, and access to the world's largest market and economy.

These foreign multinationals have no historical linkages to the old regimes and the discrimination that flowed from them. Indeed, as discussed recently, these large multinational capitals are antipathetic to those old, inherited bigotries that act as limitations on its ability exploit labour freely.

With a large proportion of Northern Ireland, including Protestants (despite the policy of the DUP) voting to stay in the EU, the rational solution is to create a united Ireland., thereby also formalising the unity of the Irish working-class and labour movement, North and South of the border. It is perhaps unlikely that a majority of Protestants would currently vote to join a united Ireland, so as to stay in the EU, but the EU could provide considerable inducements for them to do so, within the context of a transitional arrangement.

Northern Ireland could first occupy a position similar to Andorra, or that suggested in relation to Gibraltar, with the North becoming part of a United Ireland, with London continuing to have some role, alongside Dublin, reversing the current situation.

Whatever arrangements actually develop, even with Britain outside the EU, the task of socialists will remain to forge the widest and deepest unity possible, of workers across Europe. Our task will be to work with our European comrades to harmonise rights and conditions, to fight for the interests of workers, including the right of free movement, and for the construction of a Workers Europe.

Given that direction of travel, it may well be that socialists could support a break-up of a Britain headed in the direction of reaction, in order to salvage those parts of the British working-class headed in the direction of progress and unity with their EU brothers and sisters.

Theories of Surplus Value, Part I, Chapter 3 - Part 18

4. Smith’s Failure to Grasp the Specific Way in Which the Law of Value Operates in the Exchange between Capital and Wage-Labour

As Marx describes, in Capital III, the key to understanding social reproduction is, as the Physiocrats recognised, that it involves the reproduction of material balances. The total social product divides into means of production and means of consumption, and surplus product. In the terms Marx uses to analyse capitalism, that is constant capital, variable capital, and surplus value. In relation to the constant capital, as Marx sets out in Capital III, Chapter 49, it “must be replaced in kind by a new specimen of the same kind, if not in quantity and form, then at least in effectiveness.” But, the same is true in relation to the variable capital.

As Marx again describes, the basis of surplus value resides in the difference between the value of the commodity labour-power and the value of the commodity-product, produced by that labour-power. If we set to one side the value of the constant capital, which is merely reproduced within the value of the commodity-product, its value is equal to the new value created by labour. In order for social reproduction to occur, all of the commodities required for the reproduction of labour-power must be paid out as wages to workers for that purpose.

The proportion of the social commodity-product, required for that purpose will depend upon the value of those commodities, i.e. the amount of current social labour-time required for their production. What is left then constitutes the social surplus product and surplus value. If wages were paid in kind, this would be more obvious. The reality is that the capitalist buys labour-power with wages, and these wages are equal to the value of the labour-power. They comprise the required quantity of necessities to ensure the reproduction of the labour-power.

In other words, the worker exchanges one commodity – labour-power – for other commodities of equal value. But, this actual exchange is hidden, as a result of wages being paid in money.

“Wages or the equivalent with which the capitalist buys the temporary disposal of labour-power are not a commodity in its immediate form, but the commodity metamorphosed, money, the commodity in its independent form as exchange-value, as the direct materialisation of social labour, of labour-time in general. With this money the labourer naturally buys commodities at the same price as any other possessor of money He faces the seller of commodities as does every other possessor of money—as a buyer.” (p 86)

It is not capitalism which creates this surplus value. Capitalism merely gives it its particular historical form. A peasant producer works for a portion of the day engaged in necessary labour, simply to reproduce their own labour-power. They also spend a portion of the day engaged in surplus labour, over and above it, during which time they create a surplus product. If they live in a feudal regime, a portion of this surplus product will be appropriated as feudal rent, but another portion they may be able to retain, for their own accumulation. It is not feudalism here, which creates the surplus product, and surplus value, but simply the fact that the value of labour-power (the amount of labour-time required for its reproduction) is less than the value which that labour-power can create.

In all societies, labour-power exists as a use value, and as a use value, which is itself the product of labour – as opposed to being provided free by nature – it exists as a product with a value, determined by the labour-time required for its reproduction. In all societies, surplus value exists, as the difference between this value, and the value of the products created by that labour-power. As Marx sets out in Capital III, Chapter 47, the defining characteristic of every mode of production is the specific form by which this surplus value is pumped out of the labourers.

“The specific economic form, in which unpaid surplus-labour is pumped out of direct producers, determines the relationship of rulers and ruled, as it grows directly out of production itself and, in turn, reacts upon it as a determining element. Upon this, however, is founded the entire formation of the economic community which grows up out of the production relations themselves, thereby simultaneously its specific political form. It is always the direct relationship of the owners of the conditions of production to the direct producers — a relation always naturally corresponding to a definite stage in the development of the methods of labour and thereby its social productivity — which reveals the innermost secret, the hidden basis of the entire social structure and with it the political form of the relation of sovereignty and dependence, in short, the corresponding specific form of the state.”

Back To Part 17

Forward To Part 19

Theories of Surplus Value, Part I, Chapter 3 - Part 17

Now, we can analyse the situation instead, in terms of value, rather than use value. To do so, we must assign an amount of available social labour-time, for this production. What this amount is does not matter, as the principle remains the same whether we choose 100 hours, or 1 million hours. Let us assume that the workers here work for 900 hours. On this basis, the above use values have the following values. Initially,

c 100 + v 500 + s 400 = 1,000 hours.

As Marx sets out, in Capital I, in analysing such situations, the constant capital, as a constant value, can be set to zero, so as to only focus on the variables. The value of the output is equal to 1,000 hours of labour-time, even though only 900 hours of social labour-time is available, precisely because 100 hours of this value is comprised of the constant capital which was produced in previous year's. However much labour-time was previously expended on its production, i.e. whatever its historic cost, is irrelevant, because in order for social reproduction to occur, this physical quantity of constant capital (100 kg) must be replaced out of the current year's production, and the proportion of current value set aside for this replacement is, therefore, based on its current value/reproduction cost. 

The value of this constant capital has been set at 100 hours of labour, because the 900 hours of living labour has produced an additional 900 kg of grain, so that 1 kg of grain has a value equal to 1 hour of labour – 1,000 kg of output has a value of 1,000 hours of labour. If we then analyse the situation where, due to a poor harvest, output falls to 600 kg of grain, we have then 900 hours of new value created by labour, which is represented in 500 kg. of additional output. If we take the total labour expended in producing the 600 kg it is 1000 (100 seed plus 900 new labour) The value per kg, therefore rises to 1000/600 = 1.67 hours) This means that the value of the commodities (grain) which comprise the constant and variable capital, has risen by two-thirds. More of current production, and so current social labour-time is required for their reproduction.

To reproduce the 100 kg of seed now requires 167 hours of labour, and to reproduce the 500 kg of grain required for wages requires 833 hours. All of the new value created by labour, equal to 900 hours, is now required to reproduce the capital, leaving nothing left over as profit. Yet, the surplus value produced is actually equal to 67 hours. The reason is that an additional 67 hours of value is now also required to replace the consumed constant capital (seed). It creates the illusion of a loss due to a tie-up of capital, which I will discuss shortly. The 100 kg of seed consumed as constant capital, is physically reproduced out of the current production, but its value is now equal to 167 hours of labour, rather than 100 hours. This illustrates Marx's point that the value of the commodities that comprise the constant and variable capital are not determined by the labour-time previously used in their production, but the labour-time currently required for their reproduction. 

“If the price of raw material, for instance of cotton, rises, then the price of cotton goods — both semi-finished goods like yarn and finished goods like cotton fabrics — manufactured while cotton was cheaper, rises also. So does the value of the unprocessed cotton held in stock, and of the cotton in the process of manufacture. The latter because it comes to represent more labour-time in retrospect and thus adds more than its original value to the product which it enters, and more than the capitalist paid for it...

The reverse takes place when the price of raw material falls. Other circumstances remaining the same, this increases the rate of profit.”

(Capital III, Chapter 6) 

Here, its clear that, on a value basis, as opposed to the physical basis of use value, used by the Physiocrats, the fall in output, which means a reduction in social productivity, results in a rise in the value of each kilogram of output. Although the physical quantity of use values required for social reproduction to occur does not change, here, the value of both the constant and variable capital does rise, (by 67%), precisely because of the rise in value of the commodities that comprise it. The amount of new value created by labour does not rise, it remains constant at 900 hours, but now the value of the labour-power that creates this new value, has risen to 833 hours, leaving only 67 hours surplus value.

Marx describes this situation of falling productivity, which causes the value of labour-power to rise, in Capital III, Chapter 50.

“In this case, the total value in which the same labour, paid and unpaid, would be incorporated, would remain the same. But the mass of products in which this quantity of labour would be incorporated would have decreased so that the price of each aliquot portion of this product would rise, because each portion would contain more labour. The increased wages of 150 would not represent any more product than the wages of 100 did before; the reduced surplus-value of 100 would represent merely ⅔ the former product, i.e., 66⅔% of the mass of use-values formerly represented by 100. In this case, the constant capital would also become dearer to the extent that this product would enter into it.” 

That is the case above, because the product of the labour in question is grain, and this grain also comprises the seed, which represents the constant capital. Its value is determined by its current reproduction cost, not its historic price. We have 600 kg of output, and each kg has a value of 1.67 hours, giving a total value of output of 1,000 hours. That is comprised of 900 hours of new value, and 100 hours previously consumed in the production of constant capital. In the terms of the Physiocrats, the amount of value would have fallen, because, for them, value is measured by the quantity of use values, but, in reality, although the mass of use values has fallen, from 1,000 kg. to 600 kg., the value of this output has remained constant. It represents an increase in the unit value of grain.

For social reproduction to continue on the same scale, as Marx says in Capital III, Chapter 49, 

“In so far as reproduction obtains on the same scale, every consumed element of constant capital must be replaced in kind by a new specimen of the same kind, if not in quantity and form, then at least in effectiveness.”

(Capital III, Chapter 49, p 849)

100 kg of grain is physically removed from current output to replace, “in kind”, the 100 kg consumed in production. It has a value of 167 hours. That leaves 500 kg, which is required to replace, “in kind”, the grain required to reproduce the consumed labour-power. It, and so the labour-power, now has a value of 833 hours. That accounts for all of the physical production, and all of its value, leaving no surplus product, and no profit. That means that no accumulation of capital can occur, but similarly, no contraction of capital arises either. If we then relate this to the other situations discussed, if output fell to 700 kg, this would mean that the 900 hours of labour would have produced an additional 600 kg. The total labour expended is still 1000 hours (100 hours seed plus 900 hours new labour) The value of each kg would then be 1.43 hours. The total value of output would be 1,000 hours. The value of the 100 kg of constant capital would rise to 143 hours, and the value of labour-power would rise to 714 hours. That gives a cost of production of 857 hours, leaving 143 hours of profit, which is contained in the remaining 100 kg of output.

In the case where output falls to just 500 kg, the value of output remains 1,000 hours, giving a value per kg. of 2 hours. The value of the consumed constant capital is 200 hours, and the value of the consumed labour-power is 1000 hours. In other words, the cost of production here is greater than the value of the output, so the capital makes a loss, equal to 200 hours, which is represented by 100 kg of grain. In order to continue production, on the same scale, this capital would have to inject an additional capital, in the form of 100 kg of grain, with a value of 200 hours. As Marx put it, in Capital III, Chapter 49.

“This entire portion of constant capital consumed in production must be replaced in kind. Assuming all other circumstances, particularly the productive power of labour, to remain unchanged, this portion requires the same amount of labour for its replacement as before, i.e., it must be replaced by an equivalent value. If not, then reproduction itself cannot take place on the former scale.” 

(Capital III, Chapter 49, p 835)

Its important to note, here, that the living labour, in all cases, has worked for 900 hours and thereby, in each case, created 900 hours of new, positive value. The fact that, in this last case, the capital makes a loss is not due to the labour creating a negative value! It is due to the fact that the positive new value it creates, is less than the value of the labour-power itself. That is, the new value created is equal to 900 hours, but to reproduce the labour-power requires 1000 hours. Indeed, as Marx states in Capital III, all surplus value, even absolute surplus value, comes down ultimately to relative surplus value, because it is only when social labour reaches a minimum level of productivity that it can begin to create a greater quantity of output than is required for its own reproduction. In the last case, the productivity of labour has fallen to such a degree that this no longer applies. The labour-time required just to reproduce the labour-power is greater than the labour-time undertaken by that labour, the necessary labour exceeds the labour performed. In addition, the illusion of a further loss arises because of the rise in the value of the constant capital, which causes a tie-up of capital. The actual loss (negative surplus value) is only equal to 100 hours, and yet the loss appears to be 200 hours. That is because to reproduce the 100 kg of seed, an additional 100 hours is tied up as capital.

Unless, the additional 100 kg of seed is injected as constant capital, social reproduction does not take place. The capital shrinks, in just the same way that, inversely, accumulated surplus value causes it to grow. Some of the grain paid to workers as wages would have to be withheld, and used as seed, but not all of the 100 kg. could be made up this way. If 100 kg was withheld from wages, then only 80% of the previous labour-power could be bought with the remaining 400 kg. That would be insufficient to cultivate the 100 kg. of seed. The technical composition of the capital requires that c:v is equal to 1:5, so, of the available 500 kg, 83.33 could be used as seed, leaving the remainder to pay as wages. Because less labour-power is then employed, the surplus value produced in the following year would be reduced, even if productivity returned to its original level.

Marx notes in Capital III, Chapter 6, and in Theories of Surplus Value, Chapter 22, dealing with Ramsay, that these situations in which the value of the components of capital rise, leads to an illusion of losses, because of a tie-up of capital. That is that, if a commodity has been sold, and its value realised, but then the value of, say, cotton required for its reproduction rises, this rise in value will mean that the capital, realised in the previous sale, will not now be adequate to physically reproduce the consumed capital. More capital must now be “tied-up”, so as to ensure reproduction on the same scale. This additional capital has the appearance of being a loss, even though, in fact, there has been no change in the surplus value produced. It may take the form of a reduction in the amount of profit available after the capital is reproduced. This loss is illusory, Marx demonstrates, because there is no change in the amount of surplus value produced. Similarly, if the value of cotton falls, it can be reproduced, whilst a portion of the realised value of yarn, is now no longer required for this reproduction. It creates the illusion that additional profit has been created, even though the surplus value remains exactly as it was before. This represents a release of capital, which now creates an additional revenue, as capital is converted to revenue. This same process applies also to changes in the value of the variable-capital. However, because surplus value is the difference between the new value created by labour, and the value of labour-power, which equals the variable-capital, if the value of variable-capital rises, this will result, also, in a real fall in surplus value, and vice versa. In all cases, whether the tie-up of capital results only in a an illusory loss, or a real fall in surplus value, because the value of variable-capital rises, it will result in a fall in the rate of profit, because, even if the amount of surplus value remains constant, the total value of capital (c + v) will have risen so that s/(c + v) will have fallen. The opposite applies where there is a release of capital.

This led to a confusion by Ramsay, due to his use of historic prices to calculate profits and the rate of profit. The same error is made by the proponents of historic pricing today.

For the Physiocrats, the source of the surplus value is Nature, and so the form of surplus value is rent, payable to the landowner, who provides this gift of nature. For Smith, the source of the surplus value is social labour, and it assumes the form of profit, or rent dependent upon whether it is the owners of capital or land which set to work this labour, and thereby appropriate their surplus labour. It assumes the form of interest only as a secondary form, as a portion of profit or rent.

“When I speak of surplus-value, in relation to the total sum of capital advanced, as profit on capital, this is because the capitalist directly engaged in production directly appropriates the surplus-labour, no matter under what categories he has subsequently to share this surplus-value with the landowner or with the lender of capital. Thus the farmer pays the landowner directly. And the manufacturer, out of the surplus-value he has appropriated, pays rent to the owner of the land on which the factory stands, and interest to the capitalist who has advanced capital to him.” (p 85-6)

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May's Britain Is Now More Supine Than Mexico

Donald Trump is one of the most obnoxious world leaders, and given the nature of many world leaders that is quite some feat. If Trump were the President of many countries around the globe, Theresa May would be calling upon “the international community” to treat him as a pariah, to isolate his country, and to consider various kinds of sanctions against it. Trump is a racist, misogynist, who has also ridiculed disabled people, talked about sexually assaulting women, now talks about calling on US forces to use torture, and appears to be threatening to steal money from Mexico, by some means, so as to pay for the cost of his ridiculous border wall. And Theresa May is rushing head first to meet him, and to grovel, as Britain's representative, in front of him. This is the servile, supine state that the Tories have reduced Britain to, as it isolates itself from the EU. Even Mexico, which borders on the US, and is closely economically tied to it, had the backbone to stand up to Trump, and to cancel its Presidential visit.

What we see is not that surprising. Its been seen before. In the 19th century, when Marx talks, in the Communist Manifesto, about capitalism and says,

“The cheap prices of commodities are the heavy artillery with which it batters down all Chinese walls, with which it forces the barbarians’ intensely obstinate hatred of foreigners to capitulate”,

many have taken this to be Marx talking literally about the expansion of capital into places like China, or India and so on. In actual fact, what Marx was particularly referring to were those Central European kingdoms and principalities that tried to erect protectionist barriers to the outside world, to prevent the spread of capitalism into their midst. What we see with Trump, and with Brexit is a re-emergence of these old bigotries, and the “intensely obstinate hatred of foreigners”, as it is whipped up and harnessed by right-wing, xenophobic, populist politicians for their own aggrandisement.

But, as Marx indicates here, all such attempts are doomed to fail, as with Canute's endeavour to hold back the tide. As life inside the wall ossifies, and living standards fall, ultimately, the wall collapses not from pressure from outside to get in, but from the clamour from inside to get out. That is the case, whether the “wall” is the limitations placed on the movement of serfs during the middle ages, or the movement of peoples trapped behind the Iron Curtain, risking their lives to get out. And the protectionist measures necessitate that life inside the wall will ossify, that costs of production will rise, that innovation will slow down, and that living standards will fall.

May's supine crawling on her knees in front of Trump is also a necessary consequence of the diminished condition that Britain, facing life outside the EU, now looks to. That too was described by Marx and Engels in relation to those small central European kingdoms and principalities. Some of these small nations had failed to establish the necessary conditions to become nation states. They looked to larger existing states, particularly in relation to the Slavic peoples, to Russia. Wherever, a people are led to have to look to such external support for their future, it means that they have to adopt a supine position to their external benefactor, and to acquiesce in, or be party to the most grotesque policies of reaction.

And, of course, its not just a supine attitude that May must assume in front of Trump. A Britain looking to life outside the wider remit and power it enjoys as part of the EU, is led to look to continue to obtain the favours of the unsavoury feudal rulers of Saudi Arabia, to be able to continue to sell them billions of dollars of arms to suppress their own peoples, and the peoples of the surrounding area; to continue to funnel billions of dollars of oil revenues through the City of London; and to encourage those tyrants to continue to buy up multi-million dollar properties in London, to spend vast amounts on luxury goods from Harrods and Oxford Street; to continue their purchases of luxury yachts and planes; and to continue to buy the services of high class escorts. 

May's Britain as an increasingly diminishing power, has to put itself in hock to Trump's America, which means that in order to garner some scraps from its table, it will have to do Trump's bidding in the world. In order to trade with the US, Britain will have to surrender all of its own controls and regulations, on things like privatisation of the NHS, use of genetic crops and meat, environmental controls that Trump is shredding, and all protections for workers' rights. Ironically, for now, that also means putting the UK in hock to Putin's Russia, vicariously, as Trump appears in hock for now to Putin.

Whether, this latter relation is simply a matter of a meeting of two giant egos (it is impossible to talk of a meeting of minds in Trump's case, because it is increasingly clear that nothing cerebral is going on under that huge ridiculous thatch, he simply spurts forth, from his mouth, a series of unconnected words, that may be contradicted the following minute) or whether the Kremlin actually does have something on Trump, enabling them to use him as a puppet is for now unknown. Either way tying Britain into such an unstable arrangement is dangerous.

If the Kremlin has something on Trump, then at some point, the US ruling class will remove him by one means or another. If his relation to Putin is simply two right-wing demagogues, with large egos, grooming each other, that is a recipe for a large scale falling out on a personal level at some point. Anyone who watches Trump will recognise the psychological traits that have led some psychologists to analyse him not just as a narcissist, but as psychologically unstable. One day he describes the Washington Post as a terrible organisation whose business is in a state of collapse, the next day he describes it as a vital national institution; one day he describes the US intelligence agencies as acting like the Nazis, and the next says he is there greatest supporter. With Trump anything and everything is either the worst of things or the best of things, depending upon whether in that instant of time he sees it as supportive or critical of his own position and desires. What might be wonderful and astounding today, tomorrow will be awful and on the state of collapse tomorrow. In a world in which there is no need for factual verification, only emotional outburst, nor is there any room for anything but extremes of black and white.

This is rather like the wild swings that Stalin's politics endured in the 1920's and 1930's, going from industrialisation at a snail's pace, to be dropped for forced march industrialisation; the politics of the Third Period, dropped and swapped for the Popular Front. And, of course, whenever the policy zigged from one position, or zagged back from another, all those sycophants that were dragged along in its train, risked not switching their own position quickly enough, finding themselves on the wrong side of Stalin's true course, and thereby liable to become overnight an enemy of the people, put up to a show trial and summarily shot.

That is the world that Theresa May is taking Britain into. Mexico was well shot of its visit to Trump, well shot of occupying the position of being the next bit of “pussy” for Trump to grab with his tiny podgy fingers.

Engels and the Non-Historic Peoples

One of the most common means of toning down Marx and Engels is to claim that ideas they propounded in their early lives they later rejected. Its true that in the light of changed conditions Marx and Engels did change some of their positions. That is precisely what you would expect a historical materialist to do! For example, Engels stated clearly, later, that much of the Communist Manifesto was redundant, a historical monument. Many of its demands had already been accomplished by capitalism, reflecting the extent to which they were really state-capitalist rather than socialist demands. The document also reflected the extent to which Hegelianism still affected their ideas, but not without cause. There is, in fact, a close link here with their ideas on the National Question.

In 1848 when they wrote the Manifesto the working class in Europe was still in its infancy. Even in Britain, the most developed capitalist state, workers living standards were still lower than they were before the Industrial Revolution. Certainly, as Marx demonstrates in Capital the condition of the average worker was worse than that of the average peasant in the 18th century, and even much earlier. It was only by the middle of the century, and beyond, that workers living standards rose significantly. This was fundamental to their ideas, as it was later to Lenin. A look at their writing on the National Question shows the train of thought.

Engels, in particular, argues that it was the ruling classes that had determined “historicity”. In Europe, it was the large centralising Monarchies that had been the progressive force driving civilisation forward, and in the case of Hungary and Germany driving a wedge through the Slav lands, and thereby protecting Europe from the danger of Muslim barbarism from the South, in the shape of the Ottomans. It was these ruling classes then that had been the driving force of history, developing culture and ideas etc. And as they had driven this wedge through the Slav lands it had been German and Hungarian “Magyar”, ruling classes that had set themselves up as also the ruling classes of these Slav lands that consequently lacked any ruling classes of their own. Hence their lack of “historicity”. It was also these centralising Monarchies that had created the necessary conditions for the development of trade, and subsequently of capitalism.

As Marx and Engels believed that it was capitalism, in the mid 19th century, which was the great revolutionising force, which, with its low prices, was the battering ram knocking down the walls of the barbarian nations, by which they had in mind those Central European mountainous regions, still attempting to keep out civilisation, it was these capitalist classes that they saw as now the vehicle of historicity, and the Slav nations lacked such classes of their own, they were German or Hungarian. It was these capitalist classes allied with sections of the nobility, and with the working class that were the forces of progress and revolution that would first carry through the bourgeois revolution to be followed, they believed, after a short period of capitalist accumulation, by socialist revolution.

It is not surprising then to see why with this view of history from above, with a small impoverished working class, Marx and Engels', original conception of socialist revolution was a statist one, just as, in similar conditions, Lenin adopted those ideas in Russia. But, as good historical materialists, as material conditions changed, their view of socialist transformation changed too. So it is that in their more mature writings, in particular in Capital, this statist view of socialist transformation is abandoned.

Concentrating on Britain, where capitalist relations were most developed, and pointed the way for other capitalist nations, Marx instead, seeing the development of a large working class, that now had shown itself capable of accumulating resources, had already established its own co-operative industries, in Lancashire, which it was able to run more efficiently than the former capitalist owners had done, seeing the potential for the use of credit, seeing a working class that was increasingly educated, and politically as well as industrially organised, saw the way forward as being for that working class to establish its own co-operative enterprises, thereby abolishing within them the contradiction between capital and labour, to use its resources and increased social weight to buy up using credit the joint stock companies, and thereby to transform the basic material conditions of its existence.

It was on that basis that Marx and Engels believed that the working class could translate its de facto social dictatorship into political rule by purely parliamentary means, though having to put down a slaveholders rebellion. It was because of this more advanced development of the working class in Britain, and those material conditions that they believed this process could be accomplished in Britain, though not yet in Europe, and certainly not the ludicrous claim, put forward by Lenin, that they only believed this because the British state at that time was not properly developed!

But they did not change their views on the Non Historic peoples in a similar way, and for good reason. They continued to see the task of nation building as being one that was the task of ruling classes. It was those ruling classes that continued to be the historical forces that had the power to create the economic and social conditions for a nation to be viable. Any nation that had not, by the end of the 19th century, already developed its own capitalist class, capable of developing those economic and social conditions, would simply be swallowed up, just as small companies were swallowed up by larger ones. Socialists do not try to hold back that process.

In order to refute the claims that Marx and Engels dropped their theory of the Non – Historic Peoples, put forward by later Marxists, Rosdolsky offers the following two comments by Engels which came much later in his life than the original 1848 formulations.

“That my letter does not convert you is quite understandable, since you already had certain sympathies for the ‘oppressed’ South Slavs. We all, indeed, had originally carried over such sympathies for all ‘oppressed’ nationalities, in as much as we first passed through stages of liberalism or radicalism. And I know how much time and study it has cost me to get rid of them, but I ultimately got rid of them once and for all.”

Engels letter to Bernstein 22nd February 1882. MEW,35:278

And,

“Now you could ask me whether I have, then, no sympathy at all for the small Slavic peoples and ruins of peoples who are split up from one another by the three wedges driven into Slavdom:the german, Magyar and Turkish wedges. In fact, I have damned little. The Czech-Slovak cry of distress – ‘Boze!….Ach nikdo neni na zemi, kdoby Slavum spravedlivost cinil?’ (O God, is there no one left on earth who will do the Slavs justice?) – is answered in Petersburg, and the entire Czech national movement is aimed at getting the Tsar (to do them justice) spravedlivost ciniti. It is the same with the others too: the Serbs, Bulgarians, Slovenes, and Galician Ruthenians (Ukrainians AB) [at least in part]. And this is a goal we cannot champion. Only after the collapse of tsardom, when the national aspirations of these dwarf-peoples cease to be mixed up with pan-slavic tendencies to world domination, only then can we allow them to be free; and I am sure that six months of independence will suffice to induce most of the Austro-Hungarian Slavs to implore to be taken back once more. But in no case will one concede to these little peoples the right that they have ascribed to themselves in Serbia, Bulgaria and Eastern Rumelia: to hinder the extension of the European railway network to Constantinople.”

Letter to Kautsky 7th February 1882. MEW, 35:272-73.

Marx and Engels objection to all these small non-historic peoples, and the reason they talked about an entire people being reactionary (though clearly they did not mean this literally) was that, as Engels says above, in order to try to achieve statehood, that their own resources did not permit, they were led to look to any large power they thought might come to their assistance to achieve that end.  In particular, as slavic nations, they looked to the main slavic power Russia.  Trotsky also discusses this in relation to the slavic peoples of the Balkans that looked to Russia during the Balkan Wars of the early 20th century.

The problem was that these large powers whose support might be enlisted by the small non-historic peoples, had their own fish to fry.  They sought to expand their own colonial empires.  This is a point that Lenin refers to in his own analysis of the question of self-determination.  Many demands for self-determination, he says amount to the intrigues only of foreign monarchies and so on, and cannot be supported.  Today, it is the US that often plays this role of intrigues in the affairs of other nations, under cover of "liberal intervention" etc. as a means of expanding its own global strategic power. Like Marx and Engels, Lenin saw the small nations as historically reactionary, because they were led to lend their support to larger reactionary states, in the hope of such succour.  Its why Lenin argued that communists could give no support to the creation of new bourgeois states, except in the most exceptional circumstances.

I have also referred in the past to the situation in regard to the Palestinians, who would be classified as such a non-historic people.  But, in a world of huge states such as the US, China, India, Russia, Brazil etc., and also of huge proto-state/economic blocs, such as the EU, many more existing states, that were viable, in the 19th and 20th centuries, increasingly become unviable, or viable only by acting as a client of some larger state.

Theories of Surplus Value, Part I, Chapter 3 - Part 16

[3. Adam Smith’s Extension of the Idea of Surplus-Value to All Spheres of Social Labour]

The advance made by Adam Smith over the Physiocrats is that he analyses surplus value in terms of value rather than use value. For the Physiocrats, it is only concrete agricultural labour which is productive, because it is only this labour which creates and provides the basic material required for all other production. It is agriculture, which produces the food which all other producers require, just to exist, it is agriculture which produces the materials which all other industries merely manipulate and transform. For the Physiocrats, the value of all commodities comprises the value of the materials consumed in production, plus the value of the labour used in production, but the value of this labour is only equal to the value of the commodities required for its own production.

These values then are only equal to the physical use values consumed. Surplus value is then only equal to the increase in those use values that arises from the process. For example, if 100 kg of grain is used as seed, and a further 500 kg of grain are required for the consumption of the workers, but 1000 kg of grain are the result of this production, the surplus value is equal to 400 kg of grain. However, its clear that if the value of the seed is 100 kg and of labour 500 kg, the surplus value of 400 kg must have come from somewhere, and for the Physiocrats, it comes as a free gift of nature.

But, Smith is in advance of that for the simple reason that he recognises that value is not use value, but is social labour-time, and that all social labour – in so far as it is socially necessary – is productive. (What it is productive of, will be discussed later in the discussion on productive and unproductive labour.) The advantage that the Physiocrats have over Smith is that they recognise social reproduction as a process of the reproduction of these physical material components, whereas Smith's failure to understand this leads him into the error of his Trinity Formula, whereby all the value of output is reduced merely to that newly created by labour. However, the advantage Smith has over the Physiocrats is that, by understanding value as necessary social labour, he is able to understand that all such labour, and not just agricultural labour produces value, and in the process also produces surplus value.

As Marx indicated earlier, the difference between an analysis based on use value, as opposed to value, could not be obviously seen by the Physiocrats, precisely because of their concentration on understanding a process of social reproduction. Take the following example, based on that given above, but using Marx's categories of constant capital, variable capital, and surplus value.

c 100 kg + v 500 kg + s 400 kg = 1000 kg.

We will assume simple reproduction so that all of this 400 kg of surplus grain is consumed, as rent, by the landlord.

Suppose there is a poor harvest, so that only 600 kg of grain is produced. The advantage of the Physiocrats analysis, as Marx describes, set out in the Tableau Economique, is that they understood that this year's constant capital and variable capital, i.e. the commodities that comprise it, are advanced from last year's production. But, likewise, to ensure social reproduction occurs, on the same scale, this constant and variable capital, to be advanced next year, has to be taken out of the current year's production.

Consequently, if production next year is to take place on the same scale, the same physical quantity of constant and variable capital must be advanced, because it is this physical quantity of capital, and not its value that determines the scale of production. In other words, out of this year's production of 600 kg of grain, 100 kg will again have to be set aside, as constant capital, as seed, and 500 kg of grain will have to be set aside to cover the wages of agricultural workers in the next year.

That means that there will be no grain left, out of this year's production, to constitute a surplus value, appropriated by the landlord. This would seem quite rational for the Physiocrats, because indeed no additional use values would have resulted from this process. 600 kg was what existed, at the start, and 600 kg existed at the end, so although there is no potential to expand production, nor does production contract in the following year.

Had production fallen to 700 kg, a surplus value, equal to 100 kg, would have been produced, and had it fallen to 500 kg. there would not have been enough produced for social reproduction to occur on the same scale. The amount of seed planted would have to be reduced, and the number of labourers employed to cultivate it reduced in the same proportion, determined by the technical composition of capital. Instead of a surplus value being produced, a negative value would have been produced, and the capital would have contracted, as a result.

Back To Part 15

Forward To Part 17

The Death Spasm of British Colonialism - Part 2 of 2

Its no wonder that the most advanced representative of this multinational industrial capital – the United States – after World War II, sought to break apart all of the old protected colonial markets, and monopolies, not only as potential markets in which its produced surplus value could be realised, but also as vast new reservoirs of potentially exploitable labour-power, from which it could also produce large quantities of additional surplus value. Roosevelt, who openly described Churchill as a gin-soaked colonialist, even proposed a deal with Stalin to break apart the British and French colonies.

Increasingly, what this large-scale industrial capital requires, therefore, is the breaking down of all artificial monopolies and restrictions, so that capital and labour can move to where it can be most profitably employed. It is the function of social-democracy to create the kind of stable, regulated frameworks within which such conditions can exist. It is why one of the products of that social-democracy – the EU – has at its heart the four freedoms of freedom of movement of capital, labour, goods and services.

Colonialism developed on the material foundations of Mercantilism, on the basis of the material interests of the existing feudal ruling class that obtained its revenues from rents, and could only expand those rents by owning larger areas of land; of a rising merchant class that obtained its profits from unequal exchange – buying low and selling high – and a financial oligarchy, whose revenue from interest is the most direct form of unequal exchange.

But, imperialism developed on the material foundations of industrial capital, and specifically on the developed, mature form of that industrial capital, when it has become socialised capital, and has become multinational and transnational in nature, and where it has created a global economy within which to operate, and where, therefore, it requires those same basic conditions that formerly capital required for its development within the bounds of the nation state.

As a necessary corollary of the Law of the Tendency for the Rate of Profit to Fall, which lies behind the process which establishes an average annual rate of profit, this industrial capital seeks out labour to exploit, via production, and the creation of relative surplus value, now not within national borders, but within this entire global economy. It is not, as Lenin assumed, some kind of terminal crisis of capitalism that leads to the export of capital, as a way out, but merely the normal search of capital for the highest annual rate of profit available from its investments. That indeed, is one reason that the majority of overseas investment from “imperialist” countries goes not to less developed economies, but to other developed “imperialist” economies, where high levels of social productivity, and higher than average rates of turnover of capital, produce higher than average annual rates of profit.

The backlash against the EU, signified by Brexit, is the death spasm of that old colonialist past, and the reactionary ideas it implanted in British society. It is no coincidence that by far the largest support for Brexit, and for the associated bigotry that went with it, came from those older sections of society, particularly those that grew up prior to the collapse of the British colonial empire, or still in its afterglow, whilst those overwhelmingly in favour of Remain, and less infected with bigotry, come from amongst the youth, and those that have grown up in the era of this globalised industrial economy, and the progressive ideas it engenders. Nor is it any surprise that this pattern is mirrored across Europe, where there is a reservoir of similar ideas in those countries that share the same mercantilist and colonial heritage such as the Netherlands and France.

By contrast, the interest of imperialism are undermined by Brexit. In fact, its more or less irrelevant to talk about British imperialism, or French imperialism any longer, because both have become subsumed under a single EU imperialism, which itself forms an integral part of an imperialist hierarchical system of states and proto-state/economic blocs. In the same way, it has made no sense to talk about Scottish imperialism separate from English imperialism for the last couple of centuries, because Scottish industrial capital grew alongside English industrial capital intertwined with it, as British capital. 

If EU imperialism/industrial capital could simply construct a state to meet its requirements, it would be only an expanded version of existing nation states, or as with the United States, a federal state as a mid-way compromise. But, it cannot. The US endured a brutal and bloody civil war to establish even its current federal system; Europe endured several wars in the 19th century, and two world wars in the 20th century, as part of a process of trying to bring about the necessary European unification of the political framework to coincide with the existence of a unified European industrial capital, economy and market.

Brexit is hostile to the interests of the dominant section of capital – large-scale, socialised, industrial capital – and for that reason alone is hostile to the interests of British workers,  and workers in general, whose future depends on the most complete and rational development of the forces of production, and productive relations, which that large-scale, socialised, industrial capital represents.

It is then no surprise that 65% of Labour voters voted Remain; it is no surprise that those sections of the middle-class, the professional managers, or “functioning capitalists”, that are the personification of that socialised capital, and their equivalents in other areas of society – and who comprise what the reactionaries and bigots call “the metropolitan elite” - also voted heavily for Remain.

And, for that reason, the equivocating position of Labour, in relation to Brexit, is self-defeating. If the referendum had been to agree to send Jews to the gas chamber, would Labour have said, “sorry, the people have spoken, we have to accept and respect the will of the people”? No, of course, not, Labour would have said straight away that it would do all in its power to prevent the result of that referendum being implemented, and the same is true for a whole host of issues over which “the people” might be consulted. Labour's role is not to passively tail the result of popular polls, but to actively shape public opinion, by doggedly fighting for a set of principles based on defending and extending the interests of workers. Brexit will damage workers interests, and Labour should oppose it, as a reactionary measure.

Labour's position should be unequivocally to oppose Brexit on the basis that it is hostile to workers interests in the short, medium and long-terms. It should stand shoulder to shoulder with the 48% of voters that voted Remain, with all of those 16-18 year-olds that were undemocratically denied a vote in the referendum, and all those in the rest of society that oppose Brexit, and who represent social progress and reject reaction.

Nor, therefore, is it a surprise that the Tories who represent the interests of that old feudal and mercantilist ruling class, and the sections of small private capitalists, saw 65% of their supporters back Brexit. On a purely rational basis that 65% of Labour voters voted Remain and 65% of Tory voters voted Leave, it seem suicidal for Labour to abandon its position and that 65% of its voters, and acquiesce in the Tories onslaught! What is more, if the referendum were held today, with newly enfranchised young workers, and a large number of the old Leave voters having shuffled off their mortal coil, the result could well go to Remain! Even when taking out credit or other finance, there is a two week cooling off period, so you can change your mind, so surely the same should apply here.

The conservatives represent the interests of the backward looking, reactionary sections of society and that includes all of those that form the reservoir in which those old discriminatory, bigoted ideas handed down from the era of mercantilism and colonialism continue to reside. The forces that pushed through Brexit are historically doomed, just as mercantilism and colonialism was doomed. But, a dying animal can still lash out, as the natural instinct for self-preservation remains to the end, implanted in the most primitive parts of the brain. Its no surprise that Theresa May apparently sees herself as a modern Elizabeth I, or that the Brexiteers have fantasies about restoring Britain's colonial fortunes on the basis of a restoration to glory of the Commonwealth, or that May's empty threat to the EU, were they not to concede to her demands, is that she would turn the UK into an equivalent of Batista's Cuba.

Incidentally, the comparison made by some Labour figures and others with May's proposal in that regard with Singapore is way off the mark. As I discussed back in the 1980's , the policies pursued by the Bonapartist regime in Singapore have been far more consistent with social-democracy than any that many social-democratic governments have pursued in the last thirty years. They endeavoured to move production increasingly up the value chain, by encouraging higher wages and discouraging low-wage/low value added/low skill production; they invested heavily in productivity raising infrastructure and education programmes and so on. The result is that Singapore has a broadband system that provides all its citizens with around 1,000 mbps, has per capita income of $52,000 ($80,000 on PPP basis), compared to a per capital income in Britain of just $41,000 ($39,000 on PPP basis), and has a higher average life expectancy of 82.14 years as opposed to 81 years in Britain.

If May was proposing such a programme it would not be so bad, but she isn't. As her and Hammond's pronouncements indicate, they only propose an intensification of the policies which, over the last thirty years, destroyed the UK's productive capacity, destroyed its infrastructure and undermined its productivity. Their policy simply means turning the UK into a sanctuary for the world's criminals, kleptocrats and tax dodgers, earning a living from gambling, money laundering and prostitution; seeking whatever handouts can be obtained from the Trump White House, and creating misery for the millions of ordinary workers that have to live here, much as was the case for the mass of the population in Batista's Cuba. And after Brexit, British workers will be unable to escape this hell-hole by emigrating to other EU countries, as free movement will have ended.

That offers no hope for British workers, and it is not in the interests of large-scale, industrial capital either. That is one reason Brexit may never happen, but if it does, it will only be temporary. Ultimately, Britain will be integrated within an EU state. It would be better to enter it positively and enthusiastically, with British workers standing alongside their EU comrades to shape a social Europe, than for Britain to be dragged into it by far more powerful historical forces.

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