Friday, 21 July 2017

Theories of Surplus Value, Part I, Chapter 6 - Part 12

Marx gives a brief excursus here to distinguish the situation being discussed, here, of a return flow of money, to that where money flows back to a bank, which issues bank notes in return for discounting bills or advances notes by other means.

“In this case the transformation of the commodity into money is anticipated. It receives the form of money before it is sold, perhaps before it is produced. Or perhaps it has already been sold (for bills of exchange).” (p 327)

So, goods may have been produced, and are in the process of being shipped. As Marx and Engels describe in Capital III, during periods of speculation, banks would issue banknotes to sellers on the basis of Bills of Lading, or Dock Warrants, as collateral. In this case, the money was handed to the seller before the goods were sold, and the money would flow back to the bank if and when the sale took place.

Similarly, a bank may advance money to a capitalist on the basis that they will produce commodities, which when sold will realise a sum of money, out of which the bank will be repaid. Finally, the capitalist may have sold commodities on commercial credit, having received a Bill of Exchange for the amount of the sale. The bank discounts the bill, giving the seller bank notes in exchange, less their discounting fee, and the bank then obtains payment from the buyer of the commodities.

The return flow to the bank may be in the form of its own bank notes or else banknotes of some other bank, which are then redeemed either for the bank's own notes or for gold.

In all these cases, banknotes were put into circulation in anticipation of the sale of commodities, and once these commodities are actually sold, this money flows back to the bank, although it may pass through several hands before it does so, for example, where a bill of exchange has been used by several sellers as a means of circulation

As Marx and Engels set out in Capital III, some of these transactions represent an advance of money-capital, which attracts the payment of interest, whereas others represent only the advance of money.

Where they represent an advance of money-capital, the payment of interest is made possible out of the generation of surplus value by productive-capital.

Thursday, 20 July 2017

Theories of Surplus Value, Part I, Chapter 6 - Part 11

The miser seeks to draw more money out of circulation than they throw into it, but does not succeed. They accumulate more money, but only because they throw more commodities into circulation. They only take out in money, the same value that they throw into circulation. The capitalist succeeds in this venture because they produce surplus value in production. That is the value of the commodities they take out of circulation is less than the value of the commodities they throw back into circulation, and so the money they take out of circulation is also greater than the money they throw into circulation.

But, this then poses the question how then can all capitalists together take out more money than they throw in, because enough money must be thrown into circulation to buy the total value of commodities thrown into circulation.

The answer was given in Capital II, The capitalist throws a greater value of commodities into circulation than they took out, as a capitalist, and so, as a capitalist takes more money out of circulation than they throw in. But, the capitalist does not enter the market only as a capitalist. That is they do not only buy commodities to act as capital, i.e. to participate in production. The capitalist also enters the market as a consumer, and in this role, the money they throw into circulation is only equal to the value of the commodities they take out of circulation. Moreover, in this role, they throw no commodities into circulation, and so the value of the commodities they take out of circulation, is greater than they threw in, the money they throw in, greater than they took out.

On this basis, capitalists in total, may throw £80 into circulation, and take £80 of commodities out. They then throw £100 of commodities into circulation, and take £100 of money out. They can do this because, as consumers, they throw £20 of money into circulation, from their own pocket, and take £20 of commodities out, for their personal consumption, so that, in total, they have thrown £100 into circulation, and taken £100 of commodities out.

If we consider all of the commodities in circulation, in terms of being physical products, then, assuming simple reproduction, a proportion of these products will have to be taken out to replace the constant capital consumed in production, a further proportion will have to be taken out as means of subsistence for workers, and thereby replace the variable capital, and the remainder constitutes a surplus product, which belongs to the capitalist. The constant capital must be physically replaced on a "like for like basis", and the use values required to reproduce the labour-power is equally objectively determined. On this basis, the surplus product, and surplus value is equally objectively determined, as is its relation to the constant and variable capital, i.e. the rate of profit.

The only reason that the capitalists have to throw money into circulation, to take out this surplus product, is because none of them consume all of their profit in their own product. This is also essential to understanding Marx's theory of crises of overproduction, because, as he sets out in Capital III, Chapter 15, the realisation of the produced surplus value depends upon all of the produced use values being sold, and a large part of the demand for those use values comes from those classes whose revenues derive from this surplus value.

“But this last-named is not determined either by the absolute productive power, or by the absolute consumer power, but by the consumer power based on antagonistic conditions of distribution, which reduce the consumption of the bulk of society to a minimum varying within more or less narrow limits. It is furthermore restricted by the tendency to accumulate, the drive to expand capital and produce surplus-value on an extended scale.” (Capital III, Chapter 15)

But, in reality, this surplus product comes to them for free. At the same time that they throw £20 into circulation, as a consumer of this surplus product, they take the same £20 out of circulation as the capitalist seller of this product, a product which has been produced for them for free by workers.

Wednesday, 19 July 2017

Theories of Surplus Value, Part I, Chapter 6 - Part 10

Where money is spent as revenue, it always results in commodities that are consumed rather than in a return of money. Whether it is the worker, or landlord who buys commodities, or the capitalist who buys them for his own consumption, rather than to act as capital, the circuit is C-M-C. Each sells a commodity – labour-power, rent in kind, or produced commodities in order to obtain money, so as to buy commodities for personal consumption.

Marx then gives an example, which I don't think is logically consistent. We have seen previously that revenue is equal to the new value created by labour. Its equivalent resides in a mass of products contained in the consumption fund, and available for consumption. But, the producers of these commodities do not consume their revenue all in their own product. There is an exchange of revenue with revenue so that a portion of A's product is consumed by B, and likewise a portion of B's product is consumed by A.

The example that Marx gives here is of a butcher and baker. Suppose both create new value equal to £50. The butcher may consume £30 of meat in kind, and exchange the other £20 of meat with the baker. In turn, the baker consumes £30 of their own product, selling £20 to the butcher, in exchange for meat.

If both keep accounts with each other, these transactions require no intervention of money, and would cancel each other out. However, Marx says, suppose they do not cancel out, so that instead the baker may buy £40 of meat, whilst selling only £30 of bread to the butcher. In that case, the baker would owe £10 to the butcher, which they pay in cash. The butcher uses the £10 as revenue to buy clothes from the tailor. The tailor then buys bread etc. from the baker, with this £10. Now, Marx says, this £10 flows back to the baker, not as revenue, but as capital.

But, Marx's example here seems confused and logically inconsistent. He begins by setting out this exchange of revenue with revenue as described above, but then says,

“It is however possible that the meat bought by the baker from the butcher replaces not the latter’s capital but his revenue—that part of the meat sold by him which not only represents his profit but the part of his profit which he wants to consume himself, as revenue. The bread that the butcher buys from the baker is also an expenditure of his revenue.” (p 326)

On this basis of what he had said, both were exchanging revenue with revenue, rather than revenue with capital. Moreover, at the end of the example, it is not the butcher's capital that is being replaced but the baker's.

“In this way the money flows back to the baker, no longer however as a replacement of revenue, but as a replacement of capital.” (p 326)

But, on the basis of the information provided, this does not necessarily follow, only that with the addition of the tailor, the revenues are consumed differently. In other words, the butcher, instead of consuming £40 of bread etc. consumes £30 of bread and £10 of clothes, whilst the baker consumes £40 of meat and £10 of bread, whilst the tailor now consumes £10 of bread.

The only way in which Marx's conclusion would follow would be this. The butcher consumes £30 of bread, £20 of meat and £10 of clothes. The baker consumes £30 of meat and £20 of bread, but buys an additional £10, of meat, which they use as capital for pie filling etc. The butcher then buys £10 of clothes, and the tailor buys £10 of bread, pies and so on.

The £10, which the baker gave to the butcher for meat, as raw material, thereby flows back, via the tailor not as revenue, but to replace this capital. The butcher then produces £50 of new value, as before, all of which is consumed as revenue. The tailor produces at least £10 of new value, consumed as revenue. The baker also creates £50 of new value, consumed as revenue, but the total value of their production rises to £60, because it now includes £10 of constant capital, in the shape of meat bought from the butcher, for pie filling. In other words, there is an exchange here between the revenue of the butcher, and the capital of the baker.

Tuesday, 18 July 2017

The Wrong End of HS2

HS2 is yet another example of how the capitalist state in Britain uses vast amounts of taxpayers money to benefit private money-owning capitalists, without actually benefitting the real economy. The most grotesque example, in recent years was the bailing out of the banks in 2008/9.  That cost the state around £1 trillion, and has provided the Tories ever since with a stick to beat Labour with, over the deficit.  The latest government figures for HS2 put the cost at around £55 billion, but others believe the cost could turn out as high as £100 billion.

You can go back to the construction of the Caledonian Canal, and probably before, to see examples of such malinvestment.  The canal had been commissioned to reduce the lengthy and risky journey taken by ships around the top of Scotland.  But, by the time it was completed, its purpose had already passed into history.  With HS2, the government does not even have that excuse.  In the age of the Internet, the government is proposing a communications solution that harks back to the age of the train!  That would not be so bad if the government was also investing in an adequate broadband and ICT infrastructure for the country, but currently the governments aspirations in that direction do not even reach a tenth of the height of what already currently exists in places like Singapore!

In the 1950's, when the actual rail network in Britain was being upgraded, as the state came into provide billions of pounds of capital that private owners had previously failed to invest, the government again demonstrated that its motives were geared not to what best met the needs of the real economy, but what best met the interests of money-lending capitalists, i.e. the shareholders in various companies.  Across a devastated Europe, capitalist state's with a history of state capitalism, under Louis Bonaparte, and Bismark, took a different approach.  In scrapping their outmoded steam trains, they invested in the latest, most efficient technology of the time.  They electrified their networks.  In Britain, the state largely shunned electrification, and instead settled for introducing expensive, and inefficient diesel engines as a replacement for steam.  The decision in no small part was driven by the interests of Britain's large oil companies, and their shareholders.

Once again, Britain is only now investing in a high speed rail network, half a century after the rest of Europe rolled out such a system.  But, the question is why?  HS2 will not transport goods, it will only transport people.  By moving long distance passenger transport off the existing lines it may, thereby enable goods to move more quickly on those old routes, but the decimation of the rail network in the 1960's, and the focus on road transport ever since has made the rail network ill equipped to deal with a lot of freight requirements.  In an age where driverless vehicles are being developed, that is likely to be even more the case.

As far as passenger transport is concerned, its also difficult to see how HS2 helps.  A high speed rail network only has real time benefits if it is used to run non-stop services over long distances, but nowadays such journeys can often be achieved faster and cheaper via internal flights.  HS2 does nothing to assist the vast majority of passenger journeys, which occur across smaller distances, and which require the development of more effective mass transit systems, again potentially the development of electrically powered, driverless vehicles will meet this requirement more effectively. And, for Britain's real transport problems, which arise because extensive North-South transport routes have been developed, whilst virtually no effective East-West routes exist, HS2 will only make matters worse, because it will dump even larger numbers of people at points down that backbone, who will then be unable to move away from it in an East-West direction.

The government and backers of HS2 have sold it on the basis of the idea that it will assist in the economic development of the North of the country, but it will do just the opposite.  The real purpose of HS2 is to provide London with an answer to its problem of finding workers, given the astronomical inflation of property prices in London and its environs.  What HS2 will do is to ship City workers into London, in large quantities, from the rest of the country.  It will facilitate the continued growth of the London economy, whilst turning the rest of the country into merely dormitory towns, which have no other purpose than to supply the workers required by London, whilst the economy of much of the rest of the country will decay.

It will mean that more desirable parts of the country will become gated highly priced residential communities, where those highly paid City workers can enjoy lower living costs than in London, whilst surrounding towns and villages will become ghettos, their economy having been decimated, and which will provide the unskilled workers, often on zero-hours contracts, or in fake self-employment, working as domestic servants, gardeners, cleaners and so on, for the inhabitants of these gated communities.  Some of them can already be seen in development, such as at Wychwood Park near Crewe.

The idea that HS2 is designed to strengthen the economy of the North is nonsense.  If that were the case, then why not start the construction from the North, rather than from London?  Why not first construct the necessary East-West communication links across the north of the country before constructing yet another North-South communications link?  The truth was let slip by the Chairman of HS2, Sir David Hartmann Higgins, in an interview on Ian King Live, on Sky News on Monday, when asked that question.

Higgins replied that there would be no point in starting HS2 "from the wrong end", i.e. from the North, because it would mean that all of those passengers attempting to get to London, would have to disembark at Crewe, or Birmingham etc., and transfer on to the existing rail system.  The use of the term "wrong end", shows exactly what the purpose of HS2 is.  It is not to ship potential workers or customers to the North, but to ship City workers from these luxury gated communities in the North into London.

But, even on this basis, HS2 is misconceived.  This is the 21st century, not the 19th or even 20th century.  The vast majority of work today can be done by workers sitting at a computer terminal in their own home, without the need to travel long distances to a formal workplace.  Or at least it could be if we had a 21st century broadband infrastructure like that in Singapore where more or less everyone has 1 Gbps internet connections, that would allow people to live conference, whilst sharing data etc.

Once again a British government is spending vast amounts of taxpayers money in a vanity project that will have no real benefit for the actual economy, but which will certainly benefit the share and bondholders of the companies undertaking the work, some of whom, for example, at Carillion have seen a significant capital loss on their shares in recent weeks.  And, if anything showed the totally unplanned and haphazhard way the British government goes about such spending of other people's money it was the news that development had had to be stopped on a new housing development that lies on the planned route of HS2!  How on Earth was it possible to even consider giving planning permission for such a housing development on a potential route for HS2.  Its bad enough that there is such a lack of co-ordination and planning that leads to Councils resurfacing roads that then get dig up the next week by utility companies, but this is a waste of money and resources on a much larger scale, and for those people who have already bought their houses on that development it now means a period of uncertainty, and disruption, alongside the immediate cost.  The compensation arrangements being provided by HS2 are wholly inadequate for the majority of people that will be affected up and down the country by its construction.

This particular planning decision is akin to all of those housing developments that have been allowed to go ahead in flood plains, and for which there is repeated surprise by the media whenever houses within them get regularly flooded.  Or its like the surprise that was shown a few years ago, when a hospital suffered flooding, and its was discovered that its operating theatre had been built over a stream!  And, of course, the most tragic recent example of this wanton disregard for people, in the use of public money by the capitalist state has come in the Grenfell Tower disaster and the discover therefrom that pretty much every similar tower block in the country, along with some hospitals, has been clad in the same materials, and represent a similar risk for their inhabitants.

It seems to be Britain that suffers most from this kind of waste of public money by the state.  Possibly it is down to the fact that in Europe, under the Bonapartist regimes of Louis Bonaparte and Bismark, the state took a leading role in the industrialisation and economic development of the country, whereas in Britain, the state was always connected to the moneyed class, and its role in the real economy was seen as only providing a safety net, in the form of second rate services for those who could not afford their own private provision.  In Britain the emphasis has always been on the short-term solution, and the cheap solution, and Grenfell is one of its consequences.  But, what appears cheap in the short term often turns out to be very expensive in the longer-term.

A state that is geared to looking after the interests of the moneyed and landed classes is likely to make such decisions that come back to bite it in the arse, because ultimately, it is the need for real economic development that provides the basis for all revenues, including interest, and rents.  A similar approach can be seen in the US, where one commentator said recently that the approach to infrastructure was to wait until a bridge collapsed, often killing lots of people, and then to think about the need to replace worn out bridges.  It comes from a total lack of real democratic control over the expenditure of vast amounts of socialised capital.

Theories of Surplus Value, Part I, Chapter 6 - Part 9

It is then not the fact that these commodities form a part of capitalproductive-capital or constant capital – that is significant in these exchanges, but only the fact that they are commodities. As Marx sets out in Capital II, it is not capital that is bought and sold, but only commodities, even where these commodities form the components of capital. Where capital itself is sold as a commodity, then, as Marx describes in Capital III, it is not capital as a machine, quantity of raw material etc., that is being sold, but only the use value of capital itself, as self-expanding value.

This has caused confusion to Proudhon and other writers, as Marx describes.

Suppose the average rate of profit is 10%, then a capital value of £1,000 will produce a profit of £100. It does not matter whether the capital value is in the form of a sum of money, a machine or a quantity of material. Provided any of these things act as capital, they have the ability to produce this £100 of profit. It is this use value of capital, to self expand in value that is sold as a commodity.

This use value has no value, because it is not the product of labour. But, its clear that the owners of the capital will not give this use value away for free. If I have a machine worth £1,000, which could produce £100 of profit, I will not let someone borrow the machine without them compensating me for the loss of this £100 of profit. Its price, the rate of interest, is then determined solely on the basis of supply and demand for this use value of capital to produce profit.

At the same time, someone who may want to borrow the machine will not be prepared to pay £100 for the ability to do so, because that would take up all of their profit. In fact, what the price of this capital will be, the rate of interest, is somewhere between £0 and £100, or 0 and 10%, determined by the supply and demand for the capital.

“But although M—C—M, representing the money circulation between capitalist and labourer, in itself does not imply any act of reproduction, nevertheless this is implied by the continuous repetition of this act, the continuity of the return circuit. There cannot be a buyer continually becoming a seller without the reproduction of the commodity which he sells. In fact, this holds good for everyone except those who live on rent or interest or taxes.” (p 325)

Monday, 17 July 2017

Theories of Surplus Value, Part I, Chapter 6 - Part 8

The capitalist cannot make a profit simply by having this money flow back to them. On the contrary, as Marx says here, in the very process of circulation, various costs will be incurred so that its likely that less money would actually flow back. The capitalist can no more make a profit out of this process of exchange with workers than they can from such exchange with any other commodity owner. Rather it is in the act of production that the worker creates the surplus value, and it is only the realisation of this surplus value that is effected in circulation.

“For example, say that he has paid 10s. for wages. The labourer buys goods from him with this 10s. He has given the labourer goods to the value of 10s. for his labour-power. If he had given him means of subsistence in kind to the price of 10s., there would have been no circulation of money, and therefore no return flow of money. This phenomenon of money returning has therefore nothing to do with the enrichment of the capitalist, which only arises from the fact that in the production process itself the capitalist appropriates more labour than he has expended in wages, and that his product is consequently larger than the costs of producing it;” (p 322-3)

This circuit M-C-M reflects a purchase followed by a sale, and as Marx says above, as such it almost inevitably means that less money flows back. If I buy a bunch of bananas, and then come to sell them again, I am likely to get back less money than I spent. Not only will a passage of time lead to a deterioration of the bananas, but I will have costs in trying to sell them.

Yet, this process of buying in order to sell, but to sell at a higher price, so that the circuit is M-C-M', is the basis of merchant capital. It is clear then that here the profit once more does not arise from the mere act of exchange itself. The merchants profit arises from the fact that they have been able to buy a commodity below its value, or to sell it above its value or both. Yet, there is no guarantee they will be able to achieve this.

“It is possible that the buyer—M—is unable to sell the commodity, rice for example, at a higher price than he bought it at; he may have to sell it below its price. Thus in such a case a simple return of the money takes place, because the purchase turns into a sale without the M having established itself as value that increases value, that is, as capital.” (p 323) 

The same is true in relation to those commodities that comprise the constant capital. Suppose an iron producer sells £1,000 of iron to a machine maker. The machine maker, in turn, sells £1,000 of machines to the iron maker. In effect, the iron has acted as money, in the hands of the iron maker. It was the means for them to buy the machines. If they mutually exchange these commodities, as with barter, then, in the same way, the machines have acted as money for the machine maker. They are the means of him buying the iron.

But, even if they do not exchange in this way, but via commercial credit, the same thing applies. The iron maker sells the iron to the machine maker, recording a debt in his books, for £1,000. When the machine maker supplies the machines, that debt is cancelled out in his books. The debt here acted like money, and flowed back to the iron maker, in the form of machines.

Yet, the fact that the iron forms a part of the iron maker's commodity-capital, and of the machine maker's constant capital, in no way enables the iron maker to make a profit out of this iron, as a consequence of the exchange. It has a value of £1,000 and that is exactly what flows back to them, in the form of the machine. In respect of this transaction, the iron acted as money, not as capital. The same is true in respect of the machine. It forms part of the commodity-capital of the machine maker, and of the constant capital of the iron maker, but, in this transaction, it acts only as money not as capital. It has a value of £1,000 and that is exactly the value that it buys in the form of iron.

Nothing is changed here, if these exchanges are mediated by money, in the form of gold or silver or of bank notes. The iron maker sells £1,000 of iron to the machine maker, and obtains £1,000 in notes or coins, C-M. They then use these notes and coins to buy £1,000 of machines from the machine maker, M-C.

£1,000 in notes and coins was initially in the hands of the machine maker, and passed into the hands of the iron maker, and then flowed back to them, as the iron maker bought machines. But, the same £1,000 that was put into circulation flowed back from it without any increment, i.e. it acted as money not capital.

The only difference here is that where the two producers directly exchanged their commodities, only £2,000 of value had to be present, but if gold or silver coins are used, £1,000 of value in this form must also be present. Only £1,000 of coins is required, even though £2,000 of commodities are exchanged, because the money acts twice, once in the hands of the machine maker, to buy iron, and then again in the hands of the iron maker, to buy machines.

“If paper money or credit money (bank-notes) circulate, then there is one difference in the transaction. £1,000 still exist in bank-notes, but they have no intrinsic value. In any case here too there are three [times £1,000]: £1,000 iron, £1,000 machinery, £1,000 in bank-notes. But as in the first case these three only exist because the machine builder has had [£l,000] twice—machinery £1,000 and money— in gold and silver or bank-notes—£l,000. In both cases the iron producer returns to him only number two (the money); because the only reason why he received it at all was that the machine builder, as buyer, did not immediately become seller; he did not pay for the first commodity, the iron, in commodities, and so he paid for it in money.” (p 324)

Sunday, 16 July 2017

Theories of Surplus Value, Part I, Chapter 6 - Part 7

[(b) Commodities Which the Labourer Buys from the Capitalist. A Return Flow of the Money Which Does Not Indicate Reproduction]


The money paid as wages to workers by capitalists also flows back. The capitalist buys labour-power from the worker, who then engages in production. Taken collectively, the workers produce all of the commodities, which they themselves consume. The workers take the wages that have been paid to them, and buy those commodities required for their own reproduction. Because the sellers of these commodities are the capitalists, the money they had previously paid out as wages now flows back to them in payment for those commodities.

The money actually flows into the banks.

“But the bankers in fact represent, in relation to the individual capitalist, the aggregate capital in so far as it takes the form of money.” (p 321)

In the Physiocratic system, this relation could be seen quite clearly. The worker is given a certain quantity of food required for their reproduction. The worker, through their labour produces a quantity of food, out of which their wages are once more deducted. In reality, money only acts as means of circulation to mediate and facilitate this process of exchange, in a more complex economy, where a much wider range of commodities are produced and consumed by workers.

“For the capitalist, the movement here is M—C—M. He buys a commodity (labour-power) with money; with the product of this labour-power (a commodity) he buys money; in other words, he sells this product in turn to his former seller, the labourer. For the labourer, on the other hand, the movement of circulation is C—M—C. He sells his commodity (labour-power), and with the money he gets for it he buys back a part of his own product (a commodity).” (p 321)

The difference between the position of the worker and the capitalist here, which determines that the sequence takes the form it does, is that the aim of the worker is consumption (use value) whereas the aim of the capitalist is expansion of exchange value. The worker must consume to live. To consume they need money, and to obtain money they must sell the only commodity they have – labour-power. The capitalist, as a human being must also consume to live, but, as a capitalist, as the personification of capital, their aim is not consumption. They only consume commodities productively – labour-power and means of production – in order to expand the value of that capital via the production process. The aim of that consumption is only to expand value, which can then be realised in money form, once more so that it can again buy commodities, and so on.

The same is true in relation to the farmer's exchange with the landlord. The landlord effectively owns a part of the product, even though it is in the possession of the farmer, i.e. the portion of the product which represents rent in kind. The farmer buys this product from the landlord, and the landlord then buys commodities with this money. So, for the farmer this appears as M-C-M, and for the landlord C-M-C.

In neither case of the return of money to the capitalists from landlords or workers of itself indicates a process of reproduction. In both cases, it represents only the actions of buyers and sellers. In fact, the exchange between landlords and farmers does not represent a process of reproduction, whereas the exchange between workers and farmers does, but this can only be determined on the basis of the nature of the exchange and the social relation not simply on the basis of the return of the money. 

And, for the same reason, nor does this return of money signify that the money here is capital.

“On the contrary, it merely expresses the formal return of the same amount of money (often even less) to its starting-point. (By capitalist here, of course, is meant the class of capitalists.) I was therefore wrong in saying in the first Part that the form M—C—M must always be M—C—M'. It may express merely the formal return of the money, as I indicated there already, by showing that the return circuit of the money to the same starting-point arises from the fact that the buyer in turn becomes seller.” (p 322)

By “first part”, here, Marx is referring to the first two paragraphs of the section on money in A Contribution to the Critique of Political Economy.

Saturday, 15 July 2017

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

But, the apologists for capital cannot admit this real basis for the existence of surplus value, because it would be to admit that it rests upon the exploitation of labour. So, all of these various subterfuges must be established to make the actual relation appear to be something which it is not.

So, for example, the matter is presented that the worker has produced a proportion of the total product, and so of value, and effectively sells it to the capitalist, being paid for it accordingly. This is at root what lies behind Smith's cost of production theory of value, but also behind the marginal productivity theory of value. In other words, according to the latter, each factor of production – land, labour, and capital – contribute different quantities of additional physical product, according to their application. The Marginal Revenue Product of each is equal to the physical product contributed by the last unit of that factor, multiplied by the market price of the output. Each factor will then be applied up to the point where its price is equal to its MRP. In this way, each factor gets out of production an amount of value only equal to what it has contributed to production.

But, as Marx sets out, if this actually were the case, it would be devastating for capital.

“He [the labourer] will now say to the capitalist: “Of these 5 lbs. of twist, say three-fifths represent constant capital. They belong to you. Two-fifths, that is, 2 lbs., represent my newly-added labour. Therefore you have to pay me the 2 lbs. So pay me the value of 2 lbs.” And thereby he would pocket not only the wages but also the profit, in short, a sum of money equal to the quantity of labour newly added by him and materialised in the form of the 2 lbs.” (p 316)

The capitalist would complain that they had advanced the constant capital, in the form of cotton and machines, whose value is equal to 60% of the commodity, i.e. 3 lbs of twist. But, says the worker, that is exactly the value you will get back, if you keep 3 lbs, and pay me for the other 2 lbs. The capitalist may then complain that the worker could not spin without the cotton, or the spinning machines. No, says the worker, but without my labour, your cotton would rot, and your machines would rust, and you would have no yarn to sell. As a result of my labour, not only are your cotton and your machines turned into yarn that you can sell, but my very action prevents your cotton and your machines deteriorating, and thereby suffering a depreciation of its value. I am charging you nothing for that beneficial effect of my labour, because it also costs me nothing. I am only asking that you pay me for the portion of the total product that is attributable to my labour.

The capitalist, backed into a corner argues that the 2 lbs of twist have a value of £0.10, but, he says, can I be asked to give you that amount before I have sold it, because I am taking the risk of not selling it, or selling it for less. Of course, in fact, the capitalist has taken on this risk voluntarily, and may also sell this yarn above its value, as well as they might sell it below, but they do not compensate the worker for that fact. Moreover, the real risk here lies with the worker, because they have no control over what and how much is produced with their labour, and they risk not only not being paid for the labour they have advanced, but also of not having employment.

For the capitalist, a failure to sell may result in a failure to realise their profit, or even a loss of capital, but for the worker, it means a loss of their livelihood, and the ability to sustain the life of themselves and their family. But, the capitalist's argument that the worker should sell their portion of the product below its value is again dangerous for the capitalist. The relation being proposed here is that of commodity owners. The workers own a portion of the product, i.e. 2 lbs of twist, with a value of £0.10 and the capitalist owns money. He wants the workers to sell it to him for £0.05. But, in that case, he should say to the capitalists who sell him cotton, or machines that they too should sell him their commodities for half their value! And, in that case, they would lose more because, they would lose 50% of the total value not just the value added. After all, there is the same risk he may not recover their value, when he comes to sell his product either.

Nor can this be justified on the basis that an amount of value of a commodity is less than its money equivalent, on the basis that the commodity does not have to be converted first into money.

“Wouldn’t the sharp cotton jobber and your jovial colleague from Oldham have had a good laugh at you, if you had demanded that they hand over to you for nothing a part of the cotton and spindles, or what is the same thing, sell you these commodities below their price (and their value), on the ground that you were transforming commodities for them into money but they were transforming money into commodities for you, that they were sellers, you buyer? They risked nothing, for they got ready money, exchange-value in the pure, independent form. You, on the other hand, what a risk you were taking!” (p 319)

The capitalist may reply that they bought the cotton on credit via a bill of exchange, and had it spun and sold before payment was due to the Liverpool cotton merchant. Fair enough say the workers, but they had to discount your bill, and that may have cost them 3% p.a., which amounts to much less for the actual period the bill was running. In that case, there are 100 of us, and for a week the total value of the product attributable to our labour is equal to £60. Give us £60, less £0.04 for the interest, and we will call it equal!

The workers point out that if the transaction were conducted on this basis, the capitalist would make nothing worth mentioning, in the way of profit, but they the workers would rapidly accumulate their own capital.

“If—turning the actual relationship upside-down—wages are to be derived from the discount on the part of the value of the total product that belongs to the workmen—that is, from the fact that the capitalist pays them this part in advance in money—he would have to give them very short-term bills of exchange, such as for example he pays to the cotton jobber, etc. The workman would get the largest share of his product, and the capitalist would soon cease being a capitalist. From being the owner of the product he would become merely the workmen’s banker.” (p 320)

In fact, that is the case with worker owned co-operatives, and should be the case with socialised capital in the shape of the joint stock company, except the money-capitalists exert undue influence via the role of their representatives on boards of directors, because their political power has enabled the laws of corporate governance to be framed so as to give shareholders (money-lending capitalists) control over property they do not own.  The shareholders own merely shares, paper certificates to say they have loaned money-capital.  They are free to do with those certificates what they will - sell them, give them away or burn them - but they do not own the actual capital that the firm bought with the money raised from selling those shares, any more than the bank that provides a mortgage owns and has control over a house that is bought with the money borrowed by the homeowner.

By contrast, as Marx points out.

“It never enters anyone’s head to suggest that the farmer, because he has to pay rent in money, or the industrial capitalist, because he has to pay interest in money —and therefore in order to pay them must first have converted his product into money—is on that account entitled to deduct a part of his rent or his interest.” (p 321)

Northern Soul Classics - I'm Satisfied With You - The Furys

Friday, 14 July 2017

Friday Night Disco - September - Earth, Wind and Fire

Theories of Surplus Value, Part I, Chapter 6 - Part 5

[3. On the Circulation of Money between Capitalist and Labourer]


[(a) The Absurdity of Speaking of Wages as an Advance by the Capitalist to the Labourer. Bourgeois Conception of Profit as Reward for Risk]


Marx examines here a number of explanations for the existence of profit arising from the relation of the capitalist to the worker, such as that the profit arises because the capitalist removes the need and risk for the worker to sell the portion of the product which belongs to them. The concept here is the same as that discussed above, which is that a portion of the product is owed to the worker – just as a portion is owed to the landlord for rent, a portion to the money-lender as interest, and to the state as taxes.

The worker advances their labour-power to the capitalist, by engaging in the production process for say a week, before they are paid. Its then argued that the capitalist advances wages to the worker, because although this has resulted in the creation of a product, it has yet to be sold. The capitalist gives money wages to the worker, at the end of the week, before they have sold the product and obtained its money value, which means the worker can consume as soon as they receive these money wages.

In fact, there are many activities where the worker produces a commodity that is sold within a matter of minutes, hours or days after its production, and so long before the capitalist has had to hand over money wages to the worker, e.g. the labour of a worker in a fast food restaurant.

But, even besides this, Marx set out, in Capital II, in discussing the turnover of capital, after the first turnover period, workers are paid their wages not out of the capital advanced by the capitalist, but from the proceeds of the sale of their own product.

“The money here has the form of means of payment. The capitalist has always appropriated to himself the commodity “labour” before he pays for it. The fact however that he only buys it in order to make a profit out of the resale of its product is no reason for his making this profit. It is a motive. And it would mean nothing but: he makes a profit by buying wage-labour because he wants to make a profit out of selling it again.” (p 314)

As for the argument that the profit is justified because the capitalist saves the worker the trouble of selling that portion of the product which belongs to them, if this were applied, it would upset the whole basis of the relation between wage labour and capital, and economic justification of surplus value. The actual relation between wage labour and capital is that the capitalist buys labour-power. What they pay for that labour-power, as a commodity, is its value. They set this labour-power to work with means of production, also bought by the capitalist, and so at the end of this process, a product exists, which also thereby belongs to the capitalist.

If the value of the product is greater than the total value advanced by the capitalist, and this is the purpose of their activity, then this surplus value also belongs to the capitalist. So, to begin saying that a portion of this product belongs to the workers who produced it would upset this whole arrangement.

“The profit that the capitalist makes, the surplus-value which he realises, springs precisely from the fact that the labourer has sold to him not labour realised in a commodity, but his labour-power itself as a commodity. If he had confronted the capitalist in the first form, as a possessor of commodities, the capitalist would not have been able to make any profit, to realise any surplus-value, since according to the law of value exchange is between equivalents, an equal quantity of labour for an equal quantity of labour. The capitalist’s surplus arises precisely from the fact that he buys from the labourer not a commodity but his labour-power itself, and this has less value than the product of this labour-power, or, what is the same thing, realises itself in more materialised labour than is realised in itself.” (p 315)

The argument that workers owned a portion of the product they produced, had some material foundation when workers were employed via the "Putting Out System", and when they were still basically independent handicraft producers working under one roof in a factory.  But, the reality already was that they wore wage-workers.  As Marx describes in relation to the Scottish pebble collectors, who sold pebbles to stone-cutters, they were nominally independent commodity-owners, but the reality was that there were so many pebble collectors relative to stone cutters that the latter were able to buy the pebbles from the former at prices that only reflected the value of their labour-power, not the value produced by their labour.  The latter, thereby appropriated the difference as surplus value.

The same phenomenon occurs today with all of the nominally independent commodity owners of the so called gig economy.  In reality most are in a worse position than the average wage worker.

The concept of workers being commodity owners who sold their part of the end product to the capitalist for wages was developed by James Mill, who as a disciple of Ricardo, sought to wrestle with all of the contradictions within the Ricardian system and theory of value, against the criticism of it from Malthus, Chalmers, Cazenove, Bailey and others.  The contradictions flowed partly from Ricardo's failure to identify the source of surplus value, in the way Adam Smith had done, and the failure of both Smith and Ricardo to distinguish between labour-power, as a commodity, and labour the value creating substance, and measure of value.  Marx deals Mill at more length in Theories of Surplus Value Part 3, Chapter XX, where he analyses this disintegration of the Ricardian School.

Thursday, 13 July 2017

Theories of Surplus Value, Part I, Chapter 6 - Part 4

If we take the example above of a producer who simply produces for their own maintenance.

“The constant flowing back of the money to its starting-point expresses here not only the formal conversion of money into commodity and commodity into money—as in the simple process of circulation or the mere exchange of goods—but at the same time the continuous reproduction of the commodity by the same producer. Exchange-value (money) is converted into commodities which enter into consumption, and are consumed as use-values; they pass however into reproductive or industrial consumption, therefore reproduce the original value and consequently reappear in the same amount of money (in the above example, in which the producer labours only for his own maintenance), M—C—M here shows that M is not only formally converted into C, but C is actually consumed as a use-value, falling out of circulation into consumption, but into industrial consumption, so that its value is maintained and reproduced in consumption, and M therefore reappears at the end of the process, being maintained in the movement M—C—M.” (p 310-11)

But, in the second transaction, no reproduction occurs where the money flows back to the farmer from the landlord.

“ It is as if the farmer had given the landlord tokens or tickets for products to the value of 1,000 millions. When the landlord cashes these tokens, they flow back to the farmer and he redeems them. If the landlord had had half the rent paid directly in kind, no circulation of money would have taken place. The whole circulation would have been limited to a simple change of hands, the transfer of the product from the farmer’s hand to the landlord’s.” (p 311)

This kind of reflux of money outside the reproduction process must always arise in the case of productive-capitalists' payments to creditors, and the other exploiters who share in the surplus value, in the form of rent, interest and taxes, always appear as creditors of the productive-capital.

“For example: all taxes are paid by the producers in money. In this transaction the money is for them means of payment to the State. With this money the State buys commodities from the producers. In the hands of the State it is a means of purchase, and thus returns to the producers in the same measure as they part with their commodities.” (p 311)

This is always the case, Marx says, where what is involved is an exchange of revenue for capital. In reality, the creditor here is the owner of a portion of the output even though it remains in the possession of the producer. The producer buys their own product, by giving to the creditor an equivalent sum of money.

“The person who pays the revenue is supposed to have received from his creditor a part of his own product—for example, in the case of the farmer, the two-fifths of the product which according to Quesnay constitute the rent. He is only its nominal or de facto owner.” (p 312)

If the farmer only has their commodities and no money, the farmer cannot first buy the portion of the rent, which belongs to the landlord, but which is in the possession of the farmer. The farmer must first sell their output, including that portion which does not belong to them, so as to obtain the money, and thereby pay the rent.

“... it has therefore already passed through its first metamorphosis before he can pay it out as money to the landlord. Even taking this into account, there are more changes of place on the part of the money than on the part of the commodity. First C—M [is carried through]; two-fifths of the commodity is sold and transformed into money. Here there is the simultaneous exchange of commodity and money. Then however this same money, without being exchanged for a commodity, passes from the hands of the farmer into those of the landlord.” (p 313) 

This is similar, Marx says, to the situation where someone acts as an agent for the owner of a commodity, in its sale. In such a case, the agent has possession of the commodity, and on its sale, has possession of the money, but they are the owner of neither. The agent must pass on the money to the actual commodity owner.

“In this instance the movement of the money from one hand to the other does not express any kind of metamorphosis of the commodity, but is a mere transfer of the money from the hand of its immediate possessor into the hand of its owner.” (p 313)

Where money acts as means of payment rather than circulation, it is taken that it is payment for a commodity that has already passed into the possession of the buyer. But, with the rent the farmer already had possession of that part of the product which constituted the rent, and which is owned by the landlord.

“But in law he becomes its owner only by handing over to the landlord the money received for it. His legal title to the commodity changes; the commodity itself is in his hands both before and after. But first it was in his hands as something in his possession but the owner of which was the landlord. It is now in his hands as his own property. The change in the legal form while the commodity remains in the same hands has naturally not caused the commodity itself to change hands.” (p 314)

The same is true in relation to interest, as Marx describes this being outside the process of reproduction. The money-lending capitalist lends money-capital to the productive-capitalist M-M. But, this money-capital is not additional or different money-capital, which then enters the reproduction process, by metamorphosing into productive-capital. It is simply the same money-capital functioning twice. At the end of the reproduction process this occurs again as M' – M+i. In other words, the commodity-capital, including the surplus value, is realised as M', and out of it the original loaned money-capital, M, is paid back to the lender plus interest.

In reality, a portion of the product, equal to M+i, belonged to the money lender, but was in the possession of the productive-capitalist, who sells it, converts it into money, which they hand to the money lender.

Wednesday, 12 July 2017

Theories of Surplus Value, Part I, Chapter 6 - Part 3

Looking at the ₣2 Billion back in the hands of the farmer, it has gone through four different processes of circulation. Firstly, it acted solely as means of payment of rent.

“In this function it does not circulate any part of the annual product, but is merely a circulating draft on the part of the gross product which is equal to the rent.” (p 309)

In other words, for money to act as means of circulation, then as Marx sets out in A Contribution to the Critique of Political Economy, and in Capital I, it must act as the intermediary between the exchange of commodities. So, if A sells £1,000 of commodities to B, and vice versa, money has acted as the means of circulating these commodities, which otherwise could only have taken place by barter. But, the ₣2 Billion of rent paid to the landlords has circulated no commodities. The landlords have received the money without giving the farmers any commodities in exchange. The money has acted only as a means of payment. In reality, the landlords had a right to the ₣2 Billion of commodities, which formed the farmer's surplus value, but instead received it in money form.

The landlords use half of this sum to buy commodities from the farmers, and in this second transaction the money acts as means of purchase of commodities. Marx, at this point engages in a twenty page excursus, before getting back to the third and fourth acts of circulation, so let me now set out briefly what they are, before continuing with the more detailed discussion.

The third act is the purchase of ₣1 Billion of manufactured goods, by the landlords. This is simple circulation, as money passes in one direction, and commodities flow in the other. This is indicated by the line a-c.

Fourthly, the manufacturers buy ₣1 Billion of food from the farmers, which again represents means of circulation, c-d. But, as the detailed discussion shows, these different transactions also hide a number of important differences. For example, the purchase of food by landowners results in its consumption, and so disappears from circulation. The purchase of food by manufacturers similarly results in its consumption, but this consumption is in the form of means of subsistence for workers, who form a part of the productive-capital. Rather than simply disappearing, therefore, this use value changes form and becomes a part of labour-power. The value is thereby thrown back into circulation as this labour-power is employed in the productive process.

If we consider these now in more detail, the second transaction appears to be like the third and fourth transactions, in that in both these cases, money flows in one direction and commodities flow in the other. But, further consideration shows this is not the case. In the second transaction, money flows to the farmer from the landlord, and food flows in the opposite direction. But, the money paid out by the landlord is only the same money that the landlord had received from the farmer as rent, without any commodities moving in the other direction.

In other words, the transaction here does not represent a part of the process of reproduction. For reproduction to take place, a certain amount of value, or in the Physiocratic system use value, must be acquired and set in motion. For example, 100 kg of grain may be used as seed, and a further 900 kg used as wages for workers. Production takes place and say 1,000 kg of grain is produced. This enables the seed to be replaced and the means of subsistence, for the workers to be replaced, so reproduction can continue.

In value terms, if the seed has a value of £100, and the wages of workers is £900, and the value of output is £1,000 the grain can be sold, and with the proceeds the seed (constant capital) and the wages (variable capital) can be reproduced. But, it is clear that if the farmer gave £1,000 away first, so that consumers could buy this output that would not be the case. They would get back only the money they had given away. This would enable them to once more buy seed and labour-power, but at the end of this cycle, they would still need to sell this output. Its only if the potential buyers themselves have a means of being able to generate the money required to buy this output that reproduction could continue. If they continually require the farmer with the money to do so, this is not sustainable.

Although the Physiocrats did not see it this way, because they believed it was only agricultural labour that created value, the difference between the second transaction and the fourth transaction is that the manufacturers reproduce the capital used in their production, and so are able to continue to exchange with the farmers.

The farmers produce ₣1 Billion of food sold to manufacturers, whilst manufacturers produce ₣1 Billion of manufactured goods sold to farmers. They could simply exchange these goods repeatedly without the need for money, which here just acts as means of circulation.

Tuesday, 11 July 2017

The Tories, The DUP and Russia

Last night, Channel 4 News revealed details of a secret financial donation, of £425,000 that was made to the DUP, that went to a pro-Brexit campaign, during the EU referendum.  The Tories, who are now dependent on the votes of the DUP to remain in government, have refused to backdate legislation requiring all such donations to be fully revealed.  Its only in Northern Ireland where such donations have been allowed in secret, as a throwback to the days of sectarian violence.  There is no reason for such restrictions to still be in place, and its only the DUP that opposes the backdating of such legislation.

As Channel 4 revealed, the middleman who organised the donation is a Scottish Tory.  It has to be suspected that as the real motivation behind the donation was to support the Tory "Leave" campaign, that the donation was made to the DUP in order to hide the actual source of the money, which in turn raises questions about the nature of that donor.  After all, the Tories have many friends who are very rich individuals, who regularly give them donations transparently.  The Tory "Leave" campaign also had many such donations that were openly recorded, so what was different about this particular donation?

Well as I reported a couple of months ago, its not just in the US where Russia has been intervening in elections, and the democratic process.  Even the Daily Express discussed links between Farage and Putin's Russia.  Jon Ashworth MP has also raised questions about donations from Russians to the Tories.  And, as I've set out in that post, the Times and a number of journals from other countries have raised questions about the links of sections of the Tories with Putin's Russia.

Last night in Washington, it was revealed that Trump's son was called to a meeting with Russians who said they had dirt on Hillary Clinton ahead of the election.  As time goes on, more and more evidence of interference in the election from Russia is being revealed, whilst Trump himself has cosy chats with Putin, and offers to invite him into the inner workings of US cyber security systems.

Putin and Trump both attempted to intervene in the French elections to support Le Pen, and both have an agenda designed to break apart the EU, as witnessed by Trump's advocacy for Farage.  Russian intervention in the US elections came not just from hacking the Democrats computer systems, so as to provide information to the Trump campaign, but also from large scale use of bots and trolls on social media to promote fake news stories.  And, of course there was no shortage of such activity and fake news during the UK EU referendum.  It would be highly surprising if Russia had not intervened in other ways during the referendum, therefore, to provide support for ultra-right, nationalist forces in Britain during the referendum campaign, and what better fits that description than the DUP, and Tory right.

There is clearly an international right-wing nationalist campaign being waged whose tentacles reach out from Russia, and into Washington, as well as a number of other countries such as Turkey, and the Philippines.   It just about succeeded in winning a majority in the EU referendum, by excluding 16-18 year old voters, and on the back of series of ridiculous fake news stories such as the idea that several million Turks were about to invade the country, or that after Brexit £350 million would be given by the government to the NHS.  That provoked a backlash, which prevented those ultra right-nationalists getting the increased majority sought by Theresa May, but a timid Labour Party is still allowing that right-wing reaction to dictate policy on Brexit, rather than standing up, and calling it out for the anti-working class, reactionary policy that it is, and loudly calling for it to be opposed.

That international right-wing ultranationalist (national Bolshevism) campaign also failed in the Netherlands and in France, despite again being clearly seen to have been intervening in those elections.  It looks set to fail in its ambitions in Germany and in Italy, as the tide of right-wing nationalism is on the wane, as I suggested last year, it would be.  The global economy is strengthening, despite the massive draining of funds from real investment into financial and property speculation that the policy of QE has caused.  Employment levels have been rising everywhere, and unemployment rates are now at levels considered to represent full employment.  Britain's gamble with Brexit shows all the signs of leading to economic disaster for the UK, which has acted to strengthen support for closer EU integration amongst the remaining members.

And, Trump's travels down the roads of economic nationalism are causing the US to become isolated and a pariah state, whilst its international role is being increasingly filled by a more confident and assertive EU led by a strengthening Germany.  In Asia, the US's role is being taken over by China, which is set to be the dominant power of this century, alongside a renewed EU, as it moves ever closer to becoming a United States of Europe.  The forces of right-wing ultra nationalism are powerful, they have access in Russia, the US, Turkey etc. to powerful institutions and media outlets, in Russia and Turkey, they even have access to state resources, whilst in the US, the state is a roadblock in the path of Trump and his agenda.  If it can, the US state will dislodge him, which would be a significant blow against those international right-wing forces.

But, more importantly, those forces are swimming against the tide of history.  The nation state is well past its sell by date, and the movement towards larger economic blocs, and the regulation and planning of economic activity is an unstoppable process, which is also why Brexit will ultimately fail.  Either Brexit will never happen, or it will be gutted in content, or it will soon be reversed, with Britain having to rejoin on the same terms as every other member, and without its current concessions.  The journey to that end result, however, is causing considerable collateral damage.

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

[2. Circulation between Farmers and Landowners. The Return Circuit of Money to the Farmers, Which Does Not Express Reproduction]


Quesnay and the Physiocrats begin their analysis of social reproduction not with this year's production, but with last year's harvest. On this basis, the farmers begin the cycle with a quantity of commodity-capital, a portion of which is destined, as seed, manure etc., to form the constant capital for this year's production, and acts to replace, in kind, the constant capital consumed in last year's production. Another portion is destined to form the consumption fund, or variable capital, required to feed the workers during this year's production. A final part constitutes the surplus product, which is appropriated by the landlords as rent.

This process of social reproduction is also adopted by Marx in his schemas. Although the circuit of capital is often described as being M-C...P...C'-M', Marx makes clear, in Capital II, that this is only the case in respect of newly invested money-capital. For all existing productive-capital, the circuit is, as described here, P...C'-M'.M-C...P, or else C'-M'.M-C...P...C'.

That is, all existing industrial capital starts its circuit with a quantity of productive-capital, in the shape of buildings, materials, labour-power and work in progress. Simple reproduction requires that, at the end of its circuit all of the use values that comprise this productive-capital have been reproduced, “in kind, at least in terms of effectiveness”. That is if 100 kg of grain has been consumed as seen, then out of this year's production, this 100 kg of seed must be withdrawn to replace it, and so on.

Marx points out later that this is clearly indicated in the case of labour-power. The worker advances labour-power to the capitalist in the production process. The capitalist only pays wages to the worker at the end of this process, thereby enabling the worker to obtain a portion of the product they have just themselves produced.

In the case of the Tableau, the farmers could pay their rent in kind with the surplus product. However, its assumed that this is a money economy, and so the farmers pay ₣2 Billion to landlords as rent, this being the amount of their surplus value. With this money, the landlords buy ₣1 Billion of food from the farmers, which covers the requirements of themselves and their retainers. This is indicated by the line a-b. The landlords also buy ₣1 Billion of manufactured goods from the industrial capitalists, which is represented by the line a-c. The landlords have now spent all of their rent, and obtained ₣1 Billion of food, and ₣1 Billion of manufactured goods, to meet the needs of them and their retainers.


₣1 Billion of the rent paid by farmers to landlords has now returned to them, whilst ₣1 Billion has passed into the hands of the industrial capitalists.

The industrial capitalists now buy ₣1 Billion of food from the farmers, to cover the needs of them and their workers. All of the ₣2 Billion the farmers paid as rent has now returned to them, c-d.

The farmers now buy ₣1 Billion of manufactured goods from the industrial capitalists, a'-b', but this flows back to the farmers as the industrial capitalists buy ₣1 Billion of agricultural products from them as raw materials, for their production process, a''-b''.

At the end of the process, everyone is back to the same position they were in at the beginning.

Monday, 10 July 2017

Theories of Surplus Value, Part I, Chapter 6 - Part 1

Quesnay’s Tableau Économique (Digression)


[1. Quesnay’s Attempt to Show the Process of Reproduction and Circulation of the Total Capital]


Marx notes his discussion here a “digression”, which runs from page 422-37 of his manuscript. In none of it, until page 437 of the manuscript are there any quotations from the various authors he discusses. This has led to the belief that it was written in April 1862, when Marx was staying in Manchester, and may not have had any of the works of these authors with him.

Marx uses a version of the Tableau found in Schmaltz's “Economie Politique. Ouvrage traduit de l'allemand par Henri Jouffrey”, tome 1, Paris, 1826, p 329. However, Marx identifies the flow of money and commodities by the use of lines marked a-b, a-c, c-d and so on. Even so, its still not easy to follow. I have tried to make it clearer in the diagram, without losing the original character of either the Tableau, or Marx's amendment to it, by introducing colour, so that each colour shows the movement of money from each respective source.

Each of the lines represents a starting point, with the money shown at the start point being the money in the possession of that group, whilst the money shown at the end point is the money they have spent with the group there. So, for example, at starting point a, the landlords have ₣2 Billion. They pay ₣1 Billion, a-b, to farmers to buy food. Conversely, b-a, represents ₣1 Billion of commodities sold to landlords.

The landlords also pay ₣1 Billion to industrial capitalists (the sterile class) for manufactured goods, a-c, whilst ₣1 Billion of commodities flow in the opposite direction.

Similarly, at a', the farmers have ₣2 Billion in money and pay ₣1 Billion to industrial capitalists for manufactured goods, a'-b', whereas at a'', the industrial capitalists have ₣1 Billion in money and buy ₣1 Billion of agricultural products from farmers, a''-b''.

There are three classes involved in the social reproduction process, here. Firstly the farmers, which includes not just the capitalist farmers, but also their workers; secondly, the landlords, which would also include their retainers; thirdly, the sterile class, which comprises the industrial capitalists and their workers.

“The first point to note in this Tableau, and the point which impressed his contemporaries, is the way in which circulation is shown as determined purely by the circulation and reproduction of commodities, in fact by the process of capital.” (p 308)

Sunday, 9 July 2017

Theories of Surplus Value, Part I, Chapter 5

Necker [Attempt to Present the Antagonism of Classes in Capitalism as the Antithesis Between Poverty and Wealth]


Jacques Necker, Marx says, demonstrated that increases in social productivity result in the worker requiring less time to reproduce their labour-power, thereby leaving more of the working day as surplus production, appropriated by the employer.

“What he is mainly concerned with, however, is not the transformation of labour itself into capital and the accumulation of capital through this process, but rather the general development of the antithesis between poverty and wealth, between poverty and luxury, because, to the extent that a smaller quantity of labour suffices to produce the necessary means of subsistence, part of the labour becomes more and more superfluous and can therefore be used in the production of luxury articles, in a different sphere of production. Some of these luxury articles are durable; and so they accumulate from century to century in the possession of those who have surplus-labour at their disposal, making the contrast ever deeper.” (p 305)

Necker recognises that the wealth of the exploiting classes comes from the appropriation of surplus labour, in the form of profit and rent. The surplus value here is relative surplus value, obtained via higher productivity, rather than absolute surplus value, resulting from a lengthening or intensification of the working day.

The rise in productivity that creates this additional surplus value is the productivity of labour, and yet because this productivity rises with the introduction of new machines etc., it appears to be a rise in productivity brought about by capital.

“The productive power of labour becomes the productive power of the owner of the conditions of labour. And productive power itself is equivalent to the shortening of the labour-time that is necessary to produce a certain result.” (p 305-6)

Necker understands the value of labour-power in terms of the minimum required for its reproduction. That this should be understood in pretty absolute terms is not surprising, for the time. But, as Marx sets out later, the idea of some Iron Law of Wages, which leads to an immiseration of workers is false. It is false, in part, for the very reason Necker describes here, rising social productivity. As the part of the day required to reproduce labour-power continually falls, so it becomes possible to raise real wages, i.e. living standards, whilst still increasing profits. Moreover, for the same reason, and as the number of workers grows, so capital must be able to sell an ever wider range of commodities to workers in greater quantities, in order to realise the produced surplus value.

Necker writes,

““I see one of the classes of society whose wealth must always be pretty nearly the same; I see another of these classes whose wealth necessarily increases: thus luxury, which arises from a relation and a comparison, has had to follow the growth of this disproportion and become more evident as time went on” (l.c., pp. 285-86). (The contrast between the two classes as classes has already been clearly noticed.) “The class of society whose lot is as it were fixed by the effect of social laws is composed of all those who, living by the labour of their hands, are subject to the imperative law of the owners” (owners of the conditions of production) “and are compelled to content themselves with a wage proportionate to the simple necessities of life; competition between them and the urgency of their needs bring about their state of dependence; these conditions cannot change” (l.c., p. 286).” (p 306)

The consequence of technological development, therefore, had been to raise agricultural productivity, and another had revolutionised industrial production, so that workers,

“... “have been able, in an equal length of time, and for the same reward, to produce a greater quantity of products of all kinds” (p. 287).” (p 306)

If these developments had released 20,000 out of 100,000 workers, he says, then these 20,000 could now be employed producing luxury goods, to be consumed by the rich. For all workers who require no special talent their wages,

“... are always proportionate to the necessary price of subsistence for each labourer; thus the speed of production, when the knowledge required has become common, does not accrue to the advantage of the labouring men, and the result is only an augmentation of the means for the satisfaction of the tastes and vanities of those who have at their disposal the products of the land” (l.c., p. 288).” (p 306)

And echoing Marx's previous argument against the Monetary School, Necker points to the fact that, over time this process leads to an accumulation of value, (as Marx says, here, he does not mean an accumulation of fixed capital, but of the consumption fund. In other words, production is able to expand and sustain a larger number of workers) and this does not arise because of any increase in the quantity of money.

“Hence “the quickening pace of industrial production, which has multiplied the things of pomp and luxury on earth, the length of time in which accumulation has grown from this, and the laws of property, which have brought these good things into the hands of one class of society alone…these great sources of luxury would in any case have existed, whatever had been the quantity of coined money” (p. 291).” (p 306-7) 

Necker sets out the relation between the worker and the owner of capital, which as Marx has previously described establishes the conditions under which the worker must provide unpaid labour.

““When the artisan or the husbandman have no reserves left, they can no longer argue; they must work today on pain of dying tomorrow, and in this conflict of interest between the Owner and Labourer, the one stakes his life and that of his family, and the other a mere delay in the growth of his luxury” (l.c., p. 63).” (p 307)

Marx paraphrases an idea he uses in the Grundrisse, where he defines Labour as “not capital”, and Capital as “not Labour”.

“This contrast between wealth that does not labour and poverty that labours in order to live also gives rise to a contrast of knowledge. Knowledge and labour become separated. The former confronts the latter as capital, or as a luxury article for the rich.” (p 307)

If “properties” were equal, Necker says, then everyone would labour moderately, and have available free time. This is similar to Marx's point in the Critique of the Gotha Programme, where he writes that distribution is a consequence of production and productive relations, i.e. the ownership of property. If everyone had this free time, Necker says, then everyone could obtain education and knowledge.

“... but with the inequality of fortunes, resulting from the social order, education is prohibited for all who are born without property; because all sustenance being in the hands of that part of the nation which possesses money or land, and no one giving anything for nothing , the man born without any other resource but his strength is obliged to devote it to the service of the Owners from the first moment when his strength develops, and to continue thus all his life, from the moment when the sun rises to the moment when this strength has been worn down and needs to be renewed by sleep” (p. 112).” (p 307)

Necker points out that the confusion of the Physiocrats, and the same thing could be said of many modern economists, who confuse the owner of means of production for the means of production themselves.

““They begin by confusing the importance of the owner (a function so easy to perform) with the importance of the land” (l.c., p. 126).” (p 307)

In other words, its not the landlord who creates value, which they extract as rent. It is the fact that land is a use value required in production, and the monopoly ownership of land enables a rent to be obtained from it.

Similarly, it is not the owner of a machine that enables production to occur, but the machine itself.

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