Tuesday, 20 February 2018

Theories of Surplus Value, Part II, Chapter 13 - Part 15

Something similar can be seen in relation to Marx's comments concerning what Ricardo says about the rent of mines. Ricardo says in Chapter III “On the Rent of Mines” [David Ricardo, On the Principles of Political Economy, and Taxation, third edition, London, 1821, p. 76]. 

““… this rent” (of mines) “as well as the rent of land, is the effect, and never the cause of the high value of their produce” (l.c., p. 76).” (p 328) 

Marx points out that absolute rent is neither the cause nor the effect of “high value”. It is the effect of the excess of the value over the price of production. That excess is the result, not of the high value of the produce, but of landed property, whose monopoly is thereby enabled to restrict the supply of land until the price of agricultural commodities rises to a level whereby rent is payable. Something similar can be seen in relation to the monopoly of the money-lending capitalists. As Marx says in Capital III, if interest rates fall below a certain level, the owners of loanable money-capital can choose not to lend it, just as landowners can allow land to lie fallow, or use it for other purposes. By restricting supply, they can wait until prices rise to a point whereby rent is payable, or in the case of loanable money-capital, until interest rates at a minimum level are payable.

In Capital III, Marx points out that, if the supply of loanable money-capital were to rise to a level where interest rates fell below some minimum level, the owners of this money-capital could convert back into productive-capitalists.

“He has the choice of making use of his capital by lending it out as interest-bearing capital, or of expanding its value on his own by using it as productive capital, regardless of whether it exists as money-capital from the very first, or whether it still has to be converted into money-capital. But to apply it to the total capital of society, as some vulgar economists do, and to go so far as to define it as the cause of profit, is, of course, preposterous. The idea of converting all the capital into money-capital, without there being people who buy and put to use means of production, which make up the total capital outside of a relatively small portion of it existing in money, is, of course, sheer nonsense. It would be still more absurd to presume that capital would yield interest on the basis of capitalist production without performing any productive function, i.e., without creating surplus-value, of which interest is just a part; that the capitalist mode of production would run its course without capitalist production. If an untowardly large section of capitalists were to convert their capital into money-capital, the result would be a frightful depreciation of money-capital and a frightful fall in the rate of interest; many would at once face the impossibility of living on their interest, and would hence be compelled to reconvert into industrial capitalists.”

(Capital III, Chapter 23)

But, as I've set out elsewhere, the owners of money-capital could also use it simply as revenue, for unproductive consumption. They might also use it to purchase land and property, to obtain rental yield, thereby raising land and property prices, and reducing those rental yields. But, they may also use it for the purpose of speculation, buying existing shares, bonds and property, not for the purpose of obtaining revenue from rent and interest, but solely in the expectation of obtaining large nominal capital gains, as a result of financial, property, and other asset price bubbles.

The peculiar legal advantages of shareholders, as money-lending capitalists, adds to that, because, unlike any other money-lender, the shareholder also exercises a control, via their representatives on company boards, over the use of the firm's productive-capital. That is quite at odds with say the position of an owner of commercial bonds, a bank that makes a commercial loan, or a landlord who leases land or property to a productive-capitalist. The shareholders, therefore, collectively, can exercise control over investment and dividends policies that are not based upon economic laws, at least in the short and even medium term. Boards of Directors can respond to falling dividend yields by raising the share of corporate profits going to dividends, and reducing the proportion going to productive investment. So, according to Andy Haldane, at the Bank of England, in the 1970's, only 10% of profits went to dividends, whereas today that proportion has risen to around 70%. The Boards can make direct capital transfers back to shareholders and so on.

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