Theories of Surplus Value, Part II, Chapter 17 - Part 2

Ricardo, like Adam Smith, believed that the value of a commodity resolves entirely into revenues (wages, profit, interest, rent, taxes). This led Ricardo into a false view, in relation to the accumulation of capital that such accumulation takes the form of an accumulation of variable-capital. Marx quotes Ricardo's statement, 

““All the productions of a country are consumed; but it makes the greatest difference imaginable whether they are consumed by those who reproduce, or by those who do not reproduce another value. When we say that revenue is saved, and added to capital, what we mean is, that the portion of revenue, so said to be added to capital, is consumed by productive instead of unproductive labourers.” (This is the same distinction as Adam Smith makes.) “There can be no greater error than in supposing that capital is increased by non-consumption. If the price of labour should rise so high, that notwithstanding the increase of capital, no more could be employed, I should say that such increase of capital would be still unproductively consumed” (l.c., p. 163, note).” (p 470) 

So, Ricardo makes the same distinction as Adam Smith, in relation to productive and unproductive consumption, i.e. consumption of means of consumption by workers, who themselves create value, as opposed to consumption by all those who do not. But, as seen in the discussion of Smith's theories of productive and unproductive labour, there is a difference between labour which may be unproductive of surplus value, and labour which is nevertheless productive of value. 

Ricardo essentially makes the definition of productive consumption by the labourer into only that which results in the production of surplus value. And, on that basis, he also arrives at a definition of overproduction of capital similar to that produced by Marx, whereby he says, 

“If the price of labour should rise so high, that notwithstanding the increase of capital, no more could be employed, I should say that such increase of capital would be still unproductively consumed”. (p 470) 

This is essentially the same definition of overproduction of capital that Marx uses in Capital III, Chapter 15, where he says, 

“As soon as capital would, therefore, have grown in such a ratio to the labouring population that neither the absolute working-time supplied by this population, nor the relative surplus working-time, could be expanded any further (this last would not be feasible at any rate in the case when the demand for labour were so strong that there were a tendency for wages to rise); at a point, therefore, when the increased capital produced just as much, or even less, surplus-value than it did before its increase, there would be absolute over-production of capital; i.e., the increased capital C + ΔC would produce no more, or even less, profit than capital C before its expansion by ΔC. In both cases there would be a steep and sudden fall in the general rate of profit, but this time due to a change in the composition of capital not caused by the development of the productive forces, but rather by a rise in the money-value of the variable capital (because of increased wages) and the corresponding reduction in the proportion of surplus-labour to necessary labour.” 

Yet, Ricardo himself, as we shall see, argues that overproduction of capital cannot occur. 

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Forward To Part 3

Danny Dyer Nails It

Danny Dyer nailed it over the unfolding disaster that is Brexit.  Cameron launched into the EU referendum simply to deal with problems inside the Tory Party.  Having caused all of this chaos, he has now buggered off.  That isn't as bad as some though.  One of the chief Brextremists is Nigel Lawson.  Lawson regularly appears on TV to spout a load of incoherent shit over Brexit, or denying climate change and so on, but at the same time, he can't help himself in pointing out that while he still sits in the House of Lords, making law on all this crap, he actually lives the life of Riley over in France!!!!  These are people who oppose the EU on the basis of lies about EU laws being made by unelected, and remote bureaucrats!

Meanwhile, according to Bloomberg some of those spouting opposition to the EU, and calling for Brexit, connected to the financial markets, were able to make a killing by betting against the Pound, on the basis of private polls, whilst leading the markets ahead of the referendum result to think that the Remain Camp had won.

But, this is no different to the way capitalism itself runs.  We are told that capitalists make big profits because they take big risks.  Crap.  Its workers that take all the risk.  Since the passing of the Limited Liability Act, in 1855, shareholders liability for the losses of any company is limited only to the what they have paid for their shares.  So, a big company like Carillion can go bust owing billions, but the shareholders, who have often got the money they paid for their shares back in dividends many times over, only lose what they paid for the shares.  All the other creditors of the company just fail to get paid, and as we've seen in lots of cases that includes all the workers, who not only might not get any outstanding wages, but who also may lose tens of thousands of pounds of their pension they have paid into for years.

In the meantime the capitalists big or small, when the firm goes bust, have usually made sure they have pocketed loads of dosh beforehand.  They make sure to keep their private wealth separate from that of the firm, so when they declare the firm bankrupt, it doesn't affect their private wealth.  They have enough money left to simply start another business, or retire.  But, the workers who had no opportunity to have any say in the stupid or reckless decisions the capitalists made that led to the firm going bust, lose their jobs, and their livelihoods.  They are the ones taking the real risk, and the ones left with all the shit that results from it.

The chaos and iniquity of Brexit, is really just a reflection of the chaos and iniquity of capitalism itself.

Northern Soul Classics - This Heart of Mine - The Artistics

Friday Night Disco - A 5th of Beethoven - Walter Murphy

Theories of Surplus Value, Part II, Chapter 17 - Part 1

Ricardo’s Theory of Accumulation and a Critique of it. (The Very Nature of Capital Leads to Crises)

[1. Adam Smith’s and Ricardo’s Error in Failing to Take into Consideration Constant Capital. Reproduction of the Different Parts of Constant Capital] 

Marx begins this chapter with what could almost have been written as a direct rebuttal of the ideas put forward, more than a hundred years later, by proponents of the Temporal Single System Interpretation, and of historic pricing. So, for example, Marx describes the way that, because capitalist production is a continuous process, based upon co-operative labour, the outputs of one part of the process are simultaneously the inputs of another. That is most clearly visible within the workshop, and more so with continuous assembly lines, but, as Marx described in Capital, the whole economy operates on the same basis, and now, with globalisation, and Just In Time production and stock control systems, the global economy itself operates on this basis. 

And Marx, as he did in Capital II and III, and earlier in Theories of Surplus Value, describes the way in which this process of social reproduction revolves around the physical reproduction of material balances, as he puts it “on a like for like basis.” It is the physical elements of constant capital, the raw and auxiliary materials, and worn out fixed capital, consumed at each stage of the production process, that must be physically replaced, for production to continue on the same scale. Similarly, it is the physical elements of variable-capital, i.e. the mass of use values that comprise workers' necessary consumption, that must be reproduced, in order that labour-power can be reproduced. 

Moreover, it is the fact of the requirement of this physical replacement of consumed use values that determines that the valuation of this consumed capital must be undertaken on the basis of its current reproduction cost, and not its historic cost, because it is this current reproduction cost which determines the proportion of current social labour-time, what proportion of current production, must be devoted to replacing that consumed capital, and so what proportion is left over as surplus production, and surplus value, or released capital, and, therefore, what the rate of profit, on the total advanced social capital is.

Back To Chapter 16

Forward To Part 2

Paul Mason's Postcapitalism - A Detailed Critique - Chapter 2 (3)

LONG WAVES, SHORT MEMORIES

Uptrends, Downtrends and Accumulation

Paul rightly pays homage to the life, work and death of Kondratiev. His work has been misrepresented and misused. As I said earlier, there is also a tendency to confuse and conflate the concept of crisis of overproduction with recession and stagnation (depression). That is also apparent in the work of those right-wing, financial analysts who view things through the prism of stock market movements. For example, it has been common to view the stock market crash of 2000, especially followed by the 2008 crash, as indicative of the start of a downward phase of the long wave. In fact, Paul seems to reflect some of that in this chapter too. Therein lies the danger of trying to mechanically fit current events into some preconceived formula or framework. 

In fact, it's clear that if there is a more or less 50 year cycle – 25 years uptrend, 25 years downtrend – if the uptrend begins in 1949, the downtrend begins in 1974, with the next uptrend beginning in 1999. These cannot be seen as mechanically determining the actual start and end dates, but on no combination of dates, consistent with the long wave, is it possible to consider a downtrend commencing around 2000. But, here, Paul's dating of the Fourth Wave as being 1945 – 2008 also falls down. It would mean a 63 year wave with the downtrend (1973-2008) being 35 years! 

Paul introduces some interesting ideas in this chapter, locating the long wave within the wider theory of waves in nature. Further support for the existence of the long wave is cited from the works of Korotayev and Tsirel, in relation to global GDP, which identifies no global recessions (growth below 3%) between 1945-73, followed by six recessions after 1973. Paul also cites the work of Cesare Marchetti on energy consumption and infrastructure, who in 1986 concluded that these also showed pulses based on a 50 year cycle. 

Paul also rightly indicates the importance of Kondratiev in that his theory shows that the kind of catastrophism that has characterised the Left, for the last century, is a dead end. Moreover, as I have argued, it is a dead end that has also paralysed the Marxist Left in its own praxis. I have to say, I am not wholly convinced that Paul's concept of “Postcapitalism”, as elaborated, wholly breaks him from that constraint, but his proposals for praxis at least go some way to addressing it. 

Paul notes that, for Kondratiev, a new uptrend occurs because large amounts of cheap money-capital has accumulated. It facilitates large infrastructure projects, such as building of canals, or railways, or as Paul suggests, in relation to the work of Marchetti, the Internet.

In Theories of Surplus Value, Chapter 21, Marx examines the work of Hodgskin. Hodgskin, a working-class advocate, was keen to downplay the role of capital, and highlight the role of labour. Arguing against the notion that profits were the consequence of saving up, by capitalists, of those commodities required as means of production and means of consumption, he notes, in relation to the circulating capital, rather than it consisting of saved up commodities it consists of co-existing labour. In other words, he says, the bread the worker consumes, each day, had usually been baked by labour on the same day, and that was true of many such commodities. 

Marx pursues this analysis to demonstrate that the accumulation of circulating capital does not occur as a build up of such stocks, which, whilst rising absolutely, decline relatively, but as precisely this expansion of coexisting labour. The labourers producing outputs in one sphere are simultaneously producing inputs, used by coexistent labour, in other spheres. The accumulation of circulating capital, thereby, consists of an expansion of this coexistent labour, including the production of the increased mass of wage goods required by an expanding number of workers. 

The primitive accumulation of capital, Marx says, also does not arise as a consequence of some initial production and saving up of the commodities that comprise the constant and variable capital. All of these, he says, already existed. Unless they already existed, the peasant producers themselves could not have consumed to live, or had means of production so as to produce. The primitive accumulation consists of the concentration and centralisation of these commodities so that they can be used in a new way, in factories, on the basis of the division of labour, which, thereby, facilitates a sharp rise in productivity and the production of surplus value. Marx notes, in contradiction to the moral socialists, like Sismondi, that this could only have been done by capitalists, and could only take the form of capital, because it is only the capitalist that has the means and the motive to bring it about. That, he says, is the historical case for and necessity of capital. 

It can't be a build up of large amounts of cheap money-capital that explains the start of the new upswing, because, as Marx describes, the money-capital must have existing means of production to purchase/accumulate; it is a necessary but not sufficient condition. For the pace of this accumulation to increase, its necessary that there is some additional motivation for this money-capital to metamorphose into productive-capital, rather than for it to be used for unproductive consumption or in financial and property speculation. And, this is a crucial aspect for understanding this current long wave, 2008, and the period after. I will examine this and the conditions for a new long wave uptrend in Part 4.

Back To Part 2

Forward To Part 4

Theories of Surplus Value, Part II, Chapter 16 - Part 35

Ricardo describes one condition where the rate of profit may fall, when the price of food is low, and that he says is only a temporary condition. It is where production expands rapidly, driving up the demand for labour-power, whilst the population does not quickly expand to meet it. Then wages will rise, and profits fall Ricardo says.

Marx refers to a comment by Ricardo directed against Say, in relation to profits and interest. Ricardo says,

““M. Say allows, that the rate of interest depends on the rate of profits; but it does not therefore follow, that the rate of profits depends on the rate of interest. One is the cause, the other the effect, and it is impossible for any circumstances to make them change places” (l.c., p. 353, note).” (p 469)

But, as Marx says, causes which reduce profits can cause interest rates to rise, and vice versa. As Marx described in Capital III, interest rates hit their peak during a crisis, when profits collapse, and firms demand currency to pay bills and stay afloat. In the aftermath of a crisis profits may rise, but the demand for money-capital remains low. And, when the recovery begins, although the demand for money-capital rises, the increased mass of realised profits also thereby increases the supply of potential money-capital, thereby keeping interest rates low.

Ricardo challenges Say's determination of prices by supply and demand, as opposed to on the basis of their cost (price) of production.

““M. Say acknowledges that the cost of production is the foundation of price, and yet in various parts of his book he maintains that price is regulated by the proportion which demand bears to supply” (l. c., p. 411).” (p 469)

But, Marx says, Ricardo should then have seen that the price of production is not the same as the value of the commodity, i.e. the labour required for its production.

Ricardo quotes Smith in support of his argument.

“... ‘the prices of commodities, or the value of gold and silver as compared with commodities, depends upon the proportion between the quantity of labour which is necessary in order to bring a certain quantity of gold and silver to market, and that which is necessary to bring thither a certain quantity of any other sort of goods?’” (p 469)

That quantity, Ricardo continues, will not be affected whether wages or profits are high or low, but that is wrong, in the sense that Marx demonstrated in Capital III, in examining the role of a general rise in wages on the average rate of profit and its consequences for the prices of production of commodities. He showed there that a general rise in wages causes a fall in the average rate of profit. The consequence is that those commodities with a high organic composition of capital see their price of production fall, and vice versa, whilst commodities with an average composition see no change in their price of production.

Moreover, in the passage from Smith that Ricardo quotes in his support, what Smith means by prices is only the money equivalent of values. And values, be it of gold, silver or any other commodity are determined by the labour required for their production. Ricardo conflates value with cost (price) of production. But, it is not at all a contradiction to say that because value and price of production are two different things the value of commodities is determined by the labour required for their production, whilst the exchange value of commodities, the proportion they exchange for one another, or against a money commodity, is determined by their price of production.

Back To Part 34

Forward To Chapter 17

Back To Theories of Surplus Value II Index

Labour Should Be The Champion of Business

Over the last week, amid the unfolding catastrophe that is Brexit, the Tories have been fighting like rats in a sack. Now, as well as attacking each other, they have begun to lash out willy-nilly, including at those sections of society that established wisdom has always seen as the monopolistic preserve of the Tory Party. As “business” speaks out against the disaster of Brexit, Bojo responds “Fuck, business”, whilst his associates tell Airbus and others to keep quiet, and do as they are told. The truth is that the Tories have never been the party of business. It is Labour that should be the champion of business. 

The Tories have always been the party of the landed and financial oligarchy, and those are interests hostile to business. The landed oligarchy lives off rents, which are a deduction from the profits created by business. Their cousins in the financial oligarchy, live not from renting out land, but renting out money-capital. They live off interest, which is, again, like rent, a deduction from the profits created by business. In more recent times, the landed and financial oligarchy have lived off huge capital gains, arising from the hyperinflation of asset prices, which has created the bubbles in stock, bond and property markets, which not only leads to huge levels of instability, as witnessed by the repeated financial and property crises (1987,1990, 2000, 2008, to name just the main ones in recent times) but also acts to divert resources away from actual business, and the production of goods and services, into this gambling for the sole benefit of a tiny minority. 

The reason that Brexit and the whole issue of the EU, for the last 40 years, causes such friction within the Tory Party is that that element of the Tory party's support is largely in favour of EU membership. The very rich shareholders and bondholders, have seen that membership of the EU, facilitated a growth in capital and profits, which meant that the interest and dividends they could scoop up was able to grow with it, as were the rents it could appropriate. Indeed, for the landed oligarchs, the subsidies they were able to get from the EU, just for owning land, ran into hundreds of millions of pounds. 

But, the Tories, also became the party of the small capitalists, once the Liberals were consigned to the dustbin of history at the start of the 20th century, with the creation of the Labour Party. Although, it is the landed and financial oligarchy that have the financial muscle, it is the millions of small capitalists that make up the core support for the Tory Party that call the shots in determining the Party's policy. When it comes to that element of the Tory's support, of the white van man, wheeler-dealer, market trader type small capitalist, there is generally a visceral hatred of the EU, and all it stands for, with the requirement for decent minimum standards for wages, working conditions, consumer rights, environmental protection, health and safety and so on. Their agenda is presented every day in the pages of The Daily Express and Daily Mail. 

So, on the one hand, the reactionary wing of the Tory Party, reflecting these elements within society, who also, like Hayek, see the large corporation, and its power, as just as much their enemy as the trades unions, are forced to push for Brexit, as a precursor to a bonfire of regulations and workers' rights, whilst the conservative, social-democratic wing of the party, which represents the interests of the landed and financial oligarchy, and recognises that, ultimately, the fortunes of the economy depend upon the large corporations, and membership of the EU, are pulled in the opposite direction. 

In either case, the Tories are not the party of business. One wing of the party is the party of the landed and financial oligarchy that leeches off business by the extraction of rents and interest, the other is the party only of small business “owners”. For too long the apologists for capitalism have been able to identify these minorities as representing business itself, but they do not. 

What is business? It is the way the labour process itself is organised. In every society other than the most primitive, labour is organised in some kind of business. Even in largely peasant economies, the peasant households, whilst producing a lot of what they consume themselves, also produce commodities. The peasant household here is a business. There are always things that the individual peasant household either cannot produce for themselves, or else it is simply not worthwhile them producing for themselves. In even very primitive societies, people such as blacksmiths exist, for example, who shod horses, and produce tools and weapons. They exchange them for commodities produced by peasant households.  These are businesses, just not capitalist businesses, driven by profit.

And, if capitalism was replaced tomorrow, businesses would continue to exist, just as businesses continued to exist in Russia after 1917, because it continues to be a basic requirement that we organise the labour process to produce goods and services to meet the needs of society, by one means or another. Socialists, are then not at all hostile to business, because we could not possibly be hostile to the basic requirement of society to meet its needs, and to organise the labour process so as to do so. On the contrary, we are the most ardent, and consistent proponents of business, because we want to ensure that business, the organisation of the labour process to meet society's needs, is able to grow as rapidly and effectively as possible, and thereby to meet the needs of society, which is comprised now, in its huge majority, of workers, of the very people whose labour is organised by business, and who actually thereby comprise business. Labour should be the champion of business, because business is actually comprised of workers – including all of those managers, technicians, administrators who contribute to production by their labour, and who are paid wages in return – and Labour is the party of the working-class. 

What Labour should not be the champion of, is those elements in society that leech off business. We can leave it to the Tories to represent the 0.01% whose wealth consists of shares, bonds and property, and who have acted against the interests of business by their continual draining of resources from business, as they have sucked up huge amounts of rents, dividends, interest and so on, to finance their gambling on stock, bond and property markets, as well as their disgustingly ostentatious lifestyles, rather than investing it in productive activity. All of these elements act to hold back the development of business, and Labour as a champion of business, and of the working-class, should act to remove the ability of those parasitic elements to hold back business in future. 

In the 19th century, radical elements of the bourgeoisie, basing themselves on the criticism of these parasitic elements, set out by Adam Smith, David Ricardo and others, for example, argued for the nationalisation of land, so that all rent would be used to cover the costs of running the state, and thereby reduce the amount of tax deducted from profits, which would then be available to be invested in expanding businesses. Labour should commit itself to that radical bourgeois demand today. It would also be a means of providing the land required for a major house building programme. 

But, the major form of parasitism today is that of the financial oligarchy, which drains billions of pounds from business each year in the form of dividends and other capital transfers. According to Bank of England Chief Economist, Andy Haldane, where in the 1970's only about 10% of profits went to pay dividends, today that figure is around 70%! Shareholders, like bondholders should be entitled to a market rate of interest on the money-capital they lend to business, but nothing more. It is a travesty even of bourgeois property laws, that shareholders, having lent their money-capital to business, and been paid for it, in the form of dividends, then demand the right to exert control over the money-capital they have loaned to the business. A bank that makes a loan to a business does not have that right, nor does a bondholder, nor an equipment leasing company that loans machinery to the company, or a landlord that leases buildings to the company. It's like a bank giving you a mortgage to buy a house, and then demanding the right to tell you what colour you can paint it, what flowers to have in your garden, and who you can have round for dinner! 

Labour should put a stop to that iniquity. Labour should commit to changing Company Law in relation to corporate governance so as to remove the right of shareholders to vote, or appoint Boards of Directors. Companies should elect Boards of Directors on the basis of the same kind of democracy that exists in the rest of society. In other words, the company can be nothing other than those who work within it, at any particular moment in time. They should elect the Boards of Directors, who would take strategic decisions in between General Meetings where the whole company would have the right to vote and participate in setting the general policy direction. 

If we take a current situation, the one which has caused such angst for Bojo and the Brextremists, the view expressed by Airbus in North Wales, if the company's policy was determined on the basis of industrial democracy, by vote of its workers and managers, then its very unlikely they would vote to close down their production, and shift it elsewhere. 

The apologists for all of the parasitic elements that leech off business would no doubt scream about all of the shareholders who are pensioners, and all of the workers whose pensions depend on the dividends paid out. But, it is all hot air and hypocrisy. Firstly, shareholders would continue to get dividends based on a market rate of interest. Indeed, as the company grew more strongly, with bigger profits, it would be able to pay higher dividends. Secondly, although its true that a large amount of the money-capital invested in company shares, comes from pension funds, the reality is that the workers whose pension funds they are, get no say whatsoever in appointing the pension fund managers, or determining how their funds are invested. The real truth is that the control over those pension funds is exercised by a small number of banks and financial institutions, who act not in workers interests, but in the interests of the top 0.01%. In doing so, they have been responsible for blowing up the huge asset price bubbles that have meant that workers pension contributions are able to buy fewer and fewer shares and bonds, and has seen yields fall more and more as a consequence. In effect, workers pension contributions have been used as just a cheap source of finance put at the disposal of the top 0.01%, even leaving out the huge amounts siphoned off from those contributions in commissions and other kickbacks, even before the money gets to be invested. According to Panorama a few years ago, around 65% of workers pension contributions goes to cover such commission and charges. 

It would be far better for workers and managers to have direct control over their businesses, on the basis of industrial democracy, and to have control over the money they set aside as pension contributions, which could then be pooled to ensure actual investment in additional productive capacity. 

And, as I suggested a while ago, on a similar basis, Labour should not favour higher Corporation Tax. Corporation Tax is another deduction from the profits made by the company, which could otherwise be used to expand the business. With workers able to exert such control on the basis of industrial democracy, they could use the profits for expansion, thereby also creating additional employment. What Labour should favour instead, is a higher rate of tax on unearned income, i.e. a higher rate of tax on dividends, interest on bonds, rents and so on. In fact, a Wealth Tax on assets over £10 million would provide the resources required to finance the Health Service and other public services. 

Of course, the parasitic elements, the top 0.01% who own the majority of shares, bonds and property would not sit back and agree to that willingly. They would threaten to sell their property, shares and so on and move to other countries. That is why, even such a progressive social-democratic programme requires that it be fought for across the whole of the EU, which is why also socialists should be fierce opponents of Brexit, which acts to divide workers across the Continent. 

Theories of Surplus Value, Part II, Chapter 16 - Part 34

Not only does Ricardo overlook the point made earlier that the market for commodities is made up not just of capitalists and workers, but also of other classes, he also fails to take into account, despite his earlier comment, in respect of crises and fixed capital, that once production becomes based upon this large-scale machine industry, other regulations come into play that govern minimum efficient levels of output etc. 

“... he overlooks that in reality, where not only the capitalist confronts the workman, but capitalist, workman, landlord, moneyed interest, [people receiving] fixed incomes from the state etc., confront one another, the fall in the prices of commodities which hits both the industrial capitalist and the workman, benefits the other classes. 

Secondly he overlooks that the output level is by no means arbitrarily chosen, but the more capitalist production develops, the more it is forced to produce on a scale which has nothing to do with the immediate demand but depends on a constant expansion of the world market. He has recourse to Say’s trite assumption, that the capitalist produces not for the sake of profit, surplus-value, but produces use-value directly for consumption— for his own consumption. He overlooks the fact that the commodity has to be converted into money. The demand of the workers does not suffice, since profit arises precisely from the fact that the demand of the workers is smaller than the value of their product, and that it [profit] is all the greater the smaller, relatively, is this demand. The demand of the capitalists among themselves is equally insufficient. Over-production does not call forth a constant fall in profit, but periodic over-production recurs constantly. It is followed by periods of under-production etc. Over-production arises precisely from the fact that the mass of the people can never consume more than the average quantity of necessaries, that their consumption therefore does not grow correspondingly with the productivity of labour.” (p 468) 

And this, as Marx and Engels repeat in numerous places, is the key to understanding the crisis of overproduction, and why, despite 400 years of developing capitalist production, from the 15th century on, it is only in 1825, when large-scale machine industry has taken hold, that the first crisis of overproduction arises. In all petty commodity production and capitalist handicraft industry, the four potential causes of crisis, identified by Marx exist. That is that the commodity itself is both use value and exchange value; production and consumption are separated; money acts as both means of circulation and means of payment; and the potential for a disproportion in supply of different commodities arises. Yet, crises of overproduction do not arise in these earlier forms of capitalism, and commodity production. 

The reason is that, even in terms of capitalist manufacture, i.e. production based essentially on handicraft production, rather than machine production, output expands only more or less in line with the expansion of the population, and so of the market. Machine production changed all that. The machines themselves are continually revolutionised, output rises by multiples overnight, and the production itself can only be justified by being undertaken on a huge scale, which must be continuous, and must be ahead of consumption. The potential of crisis, resulting from the separation of production and consumption, becomes the inevitability of crisis once the production expands so much faster than the market that the output, having been produced, cannot find buyers at prices that cover the cost of production. As production expands, more workers are employed, the demand for labour-power begins to exceed the supply, so wages rise, and profits are squeezed. The workers, with their higher wages, consume more of the mass produced products, but that only means that their demand for these commodities becomes more quickly sated. They could buy more, but have no desire to do so. 

As Marx puts it, 

“Say’s earth-shaking discovery that “commodities can only be bought with commodities” simply means that money is itself the converted form of the commodity. It does not prove by any means that because I can buy only with commodities, I can buy with my commodity, or that my purchasing power is related to the quantity of commodities I produce. The same value can be embodied in very different quantities [of commodities]. But the use-value—consumption—depends not on value, but on the quantity. It is quite unintelligible why I should buy six knives because I can get them for the same price that I previously paid for one.” 

(TOSV 3 Chapter 20, p 119)

As a result, unless there are a wide range of new commodities available for workers to buy, at prices they are willing to pay, they simply take their money wages, from the sale of their labour-power, and hold on to it. As Marx puts it in his response to Say's Law, 

“At a given moment, the supply of all commodities can be greater than the demand for all commodities, since the demand for the general commodity, money, exchange-value, is greater than the demand for all particular commodities, in other words the motive to turn the commodity into money, to realise its exchange-value, prevails over the motive to transform the commodity again into use-value.” (TOSV2, Chapter 17, p 505) 

And, it is not just workers in this position. As the market prices of these commodities are driven down, the cheaper they become for the landlord or money lender, relative to their rent and interest payments, and so the more quickly is their own demand sated, whilst this also represents a transfer of surplus value from capital to the landlord and money lender. 

I have set out these arguments in much more detail in my book – Marx and Engels' Theories of Crisis. 

Back To Part 33

Forward To Part 35

Paul Mason's Postcapitalism - A Detailed Critique - Chapter 2 (2)

LONG WAVES, SHORT MEMORIES

Overproduction, Profit and Innovation

What is right in Paul's explanation of the long wave is that the reason that periods of innovation are concentrated, and not just random occurrence, or uniformly spread, is that profit itself moves through cycles, and these cycles are the result of regular crises of overproduction. Part of the problem of economic analysis, both for Marxist analysis and orthodox analysis, is a confusion of terms. A crisis of overproduction is often confused with a recession or even depression, especially when looking at long wave patterns, but these are very different things. 

Innovation is concentrated at certain points because, at certain periods, capital becomes overaccumulated. But what does overaccumulation mean? It is not an absolute overaccumulation. Capital is overaccumulated, as Marx describes in Capital III, Chapter 15, when any further accumulation results in no addition to the mass of surplus value produced. In Theories of Surplus Value, Chapter 21, Marx also describes what that means. 

If we take a single worker who is backed by £1,000 of capital, the worker works a 10 hour day, and is paid £100 wages, producing £100 of surplus value. So, they work 5 hours of surplus labour. The rate of profit is 10%. If we assume their wages remain constant, at £100, the capital, as a result of progressive accumulation, might rise to say £1500. In order to produce 10% profit, the worker must now produce £150 of surplus value. To do so, the working day must rise from 10 hours to 12.5 hours, so that 7.5 hours of surplus labour is undertaken. If the capital accumulates to £2,000, the worker must produce £200 of surplus value, which requires a working-day of 15 hours. But, it may then be impossible for the worker to work any more hours in the day. 

If the capital accumulates to £3,000 the worker would need to produce £300 of surplus value, which would require 15 hours of surplus value, in addition to the 5 hours of necessary labour. But, if the physical maximum working day is 15 hours, this is impossible. It is impossible to produce more than 10 hours of surplus value so that any accumulation of capital over £2,000 represents overproduction of capital. At £3000, only £200 of surplus value can be produced,, which means that the rate of profit falls to 6.66%. 

Moreover, if capital continued to accumulate in this way, in relation to each worker, the demand for labour-power would itself rise, so that wages themselves rose above the value of labour-power, wages might rise to say the equivalent of 7.5 hours, rather than 5 hours of labour. In that case, even with a 15 hour working day, the surplus value would fall to 7.5 hours, producing only £150 of profit, so that the rate of profit would fall to 5%, as it is squeezed by the rising wages. This is what Marx means in Capital III, Chapter 15 when he says, 

“There would be absolute over-production of capital as soon as additional capital for purposes of capitalist production = 0. The purpose of capitalist production, however, is self-expansion of capital, i.e., appropriation of surplus-labour, production of surplus-value, of profit. As soon as capital would, therefore, have grown in such a ratio to the labouring population that neither the absolute working-time supplied by this population, nor the relative surplus working-time, could be expanded any further (this last would not be feasible at any rate in the case when the demand for labour were so strong that there were a tendency for wages to rise); at a point, therefore, when the increased capital produced just as much, or even less, surplus-value than it did before its increase, there would be absolute over-production of capital; i.e., the increased capital C + ΔC would produce no more, or even less, profit than capital C before its expansion by ΔC. In both cases there would be a steep and sudden fall in the general rate of profit, but this time due to a change in the composition of capital not caused by the development of the productive forces, but rather by a rise in the money-value of the variable capital (because of increased wages) and the corresponding reduction in the proportion of surplus-labour to necessary labour.” 

In Theories of Surplus Value, Chapter 21, Marx points out that, of course, if capital accumulates on the basis of the existing technology – so the same technical composition of capital – provided additional labour is employed, there is no reason for the rate of profit to fall. If £1,000 of capital employs 1 worker who produces £100 of profit, then £3,000 of capital, employing 3 workers, who produce £300 of profit, results in a 10% rate of profit in both cases. The point here is that, on the basis of a given state of technology, producing a given technical composition of capital, the rate of profit can only maintained or raised by exploiting more labour simultaneously. Either the individual working-day must be extended/intensified or else the social working day must be extended by an expansion of the workforce. When that reaches the limits, i.e. the working-day cannot be extended, and no more workers are available, it becomes impossible to increase the mass of surplus value. There is a profits squeeze. As Marx also puts it in Capital III, Chapter 15, 

“Given the necessary means of production, i.e. , a sufficient accumulation of capital, the creation of surplus-value is only limited by the labouring population if the rate of surplus-value, i.e. , the intensity of exploitation, is given; and no other limit but the intensity of exploitation if the labouring population is given.” 

But, there is then an obvious response for capital, in such conditions. It is to create a relative surplus population by technological, labour-saving innovations. That is exactly what Marx describes in Value, Price and Profit, where he notes the way, between 1849 and 1859, agricultural wages rose, squeezing profits, which led to farmers seeking out technological innovations to replace labour. I will come back to this in examining the next chapter. 

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Theories of Surplus Value, Part II, Chapter 16 - Part 33

Ricardo says, 

““From the account which has been given of the profits of stock, it will appear, that no accumulation of capital will permanently lower profits, unless there be some permanent cause for the rise of wages… If the necessaries of the workman could be constantly increased with the same facility, there could be no permanent alteration in the rate of profit or wages,” (this should read: in the rate of surplus-value and the value of labour) “to whatever amount capital might be accumulated. Adam Smith, however, uniformly ascribes the fall of profits to the accumulation of capital, and to the competition which will result from it, without ever adverting to the increasing difficulty of providing food for the additional number of labourers which the additional capital will employ” (l. c., pp. 338–39).” (p 467) 

Marx comments, 

“By profits Ricardo means here that part of surplus-value which the capitalist appropriates, but by no means the [entire] surplus-value; and wrong as it is to say that accumulation can cause the surplus-value to fall, so it is right that accumulation can cause a fall in profit.” (Note *, p 467) 

Ricardo's argument here suffers from the fact that, from the beginning, he confuses and conflates surplus value with profit. For Ricardo, the rate of profit falls if wages rise, or if rent rises – we might add if interest or taxes rise. But, again, this confuses surplus value with profit, and the rate of surplus value with the rate of profit. If wages rise, and assuming a fixed working-day, then surplus value, and the rate of surplus value will fall. If rent, interest or taxes rise, that does not reduce surplus value, or the rate of surplus value. But, it is a deduction from profit. These do not reduce profit, or the rate of profit, but do reduce the amount of profit of enterprise, and rate of profit of enterprise. 

“Thus Adam Smith says that the rate of profit falls with the accumulation of capital, because of the growing competition between the capitalists; Ricardo says that it does so because of the growing deterioration of agriculture (increased price of necessaries). We have refuted his view, which would only be correct if rate of surplus-value and rate of profit were identical, and therefore the rate of profit could not fall unless the rate of wages rose, provided the working-day remained unchanged. Adam Smith’s view rests on his compounding value out of wages, profits and rents (in accordance with his false view, which he himself refuted). According to him, the accumulation of capitals forces the reduction in arbitrary profits—for which there is no inherent measure—through the reduction in the prices of commodities; profits, according to this conception, being merely a nominal addition to the prices of commodities.” (p 467-8) 

Ricardo is right, as against Smith, in arguing that, in the longer-term, the accumulation of capital cannot reduce the rate of surplus value, as a result of competition driving up wages and competing away the profit. Because capital introduces labour saving technologies, whenever the demand for labour-power rises so much as to cause wages to rise, and profits to be squeezed. But, he is wrong in arguing that the accumulation of capital does not result in a tendency for the rate of profit to fall. The accumulation of capital, particularly where driven by these periodic labour shortages, into more intensive accumulation, goes along with a rise in the productivity of labour. Even if it is just that the division of labour results in a given amount of labour processing larger and larger amounts of material, the consequence of this is to increase the proportion of dead labour as against living labour in the value of commodities. 

In other words, the organic composition of capital rises, and the rate of profit falls. As new technologies are introduced, the productivity of labour rises even faster, and this process is intensified. 

“... but Ricardo is quite wrong when he seeks to refute Adam Smith by asserting that over-production in one country is impossible. Ricardo denies the plethora of capital, which later became an established axiom in English political economy.” (p 468) 

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Theories of Surplus Value, Part II, Chapter 16 - Part 32

Ricardo also noted a feature detailed by Marx, which also acted as a deterrent for raising agricultural production. That was the way landlords were able to appropriate to themselves all improvements on their land, at the end of a lease. Landlords not only benefited from any investment undertaken by capitalist farmers, to clear the land, introduce drainage, or to erect buildings, but, in towns and cities, landlords also took over the ownership of housing built by capitalist builders, and owned leasehold, rather than freehold, at the end of the leasehold period. In this way, many members of the landed aristocracy became large-scale property owners and developers. 

The ability to acquire for free such capital investment meant that landlords had an incentive to push for shorter and shorter leases, as not only did they obtain this capital gain, but they were also able to levy higher rents on the improved land. Ricardo says, 

““In all countries, and all times, profits depend on the quantity of labour requisite to provide necessaries for the labourers, on that land or with that capital which yields no rent” (l.c., p. 128).” (p 466) 

Ricardo's argument here is wrong. It implies that the general rate of profit is determined by the rate of profit of the capital employed on the worst land, which thereby also pays no rent. Ricardo's argument is this. The product of this capital is sold, at its value, and because it pays no rent, this value is divided into the value required to reproduce labour and the average profit. But, as seen previously, this assumes, as Ricardo does, that value and price of production are the same. In fact, value and price of production are not, and cannot be the same. 

“I have shown that, where there is capitalist production and where landed property exists, the land or mine of the worst type cannot pay a rent, because the corn is sold below its [individual] value if it is sold at the market-value, which is not regulated by it. For the market-value only covers its cost-price. But what regulates this cost-price? The rate of profit of the non-agricultural capital, into whose determination the price of corn naturally enters as well, however far removed the latter may be from being its sole determinant.” (p 466-7) 

What is correct in Ricardo's statement, Marx says, is that in the profit of the capital employed on the worst land, the average rate of profit becomes apparent. In other words, we can see what the average rate of profit is. If the rate of profit on this land were higher, it would pay rent; if it were lower capital would not be invested on it. But, this is not the same thing as saying that the capital employed on this land determines, or in any way regulates the average profit, which is to see things upside down. 

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Paul Mason's Postcapitalism - A Detailed Critique - Chapter 2 (1)

Long Waves, Short Memories

Crises, Profits and Cycles

Chapters 2,3, and 4 have to be considered together, because they are interrelated. In this chapter, Paul considers Kondratiev's long wave theory, but he notes the deficiencies in it, and, as I have also done, proposes considering within it the Marxist theory of crisis and of profit. Anyone reading these chapters who has also read my blog over the last ten years will see a lot of shared ground. Indeed, Paul's comment in Chapter 3, 

“In summary, Marx argued that crisis is the pressure valve for the system as a whole. It is a normal feature of capitalism, and a product of its technological dynamism.” (p 53) 

is more or less a paraphrase of the statement in the introduction to my book, “Marx and Engels Theories of Crisis”. 

“We tend to think that crises are an indication that something has gone wrong, because they disrupt the normal course of events, but, in fact, crises themselves are normal events. There is nothing abnormal about an earthquake, for example. It is simply a means by which the stresses of tectonic plates, and other geological formations are relieved. This kind of process occurs throughout the material world. There are long periods of gradual change, ruptured, every so often, by revolutionary breaks. It is a reality recognised by chaos theory, which demonstrates that what appears on the surface as a steady state, is, in reality, a seething mass of continual change at a quantum level. 

The same is true about economic and financial crises, they are a means of resolving the contradictions that build up within the economic process. In respect of capitalism, this notion, that it is a system that is driven forward by the continual resolution of these contradictions, is central to the analysis provided by Marx.” 

The issue I have tried to address, in my own work, is what is the dynamic that drives the periodicity of the long wave? As Paul notes, Kondratiev, following Marx's work on the business cycle, and the life cycle of fixed capital, put forward the idea that it is related to the life cycle of more durable forms of fixed capital, and infrastructure. Trotsky had proposed that it is exogenous factors, such as wars and revolutions, whilst Schumpeter pointed to the role of technology and the Innovation Cycle. None of these are satisfactory explanations; they all require some other driver. 

Paul puts forward the idea that what has to be introduced is the Marxist theory of crisis, and the role of profits. I agree, but, unfortunately, I think that there are deficiencies both in Paul's presentation of the long-wave, and of the theory of crisis, and so in the interrelation of the two. In the words of Roy Walker, “Its good, but its not right.” 

The problem with Trotsky's approach is, if the long wave cycle is conditioned by exogenous events like wars and revolutions, why would it have any periodicity at all? The problem would then become, why do wars and revolutions and so on occur in 50 year cycles? The problem with Kondratiev's notion about the replacement of more durable fixed capital, such as canals, railways and so on, is that, as Marx describes, the major element of their reproduction takes the form of a continual programme of repairs. Unlike a machine that lasts for ten years, and is then physically replaced, the canals built 250 years ago, are still in use, and the railways built 200 years ago are still in use. The question of this infrastructural fixed capital is significant, however, for reasons I will come to later, and which Marx himself addressed in Theories of Surplus Value, Chapter 9. 

Moreover, Kondratiev faces the same question, effectively, as Schumpeter, whose answer was the role of technological innovation, which is – why now? In other words, why is it that there exists an Innovation Cycle at all, with there being, as Marx describes, long periods where technological change is slow and incremental, interspersed with periods where rapid new technological advancements are made? Paul correctly locates the answer to this question in the Marxist theory of crisis, and the fall in the rate of profit, which he sets out in Chapter 3, which then enables him to examine the last and current cycles within that framework in Chapter 4. Unfortunately, Paul's analysis of the fall in the rate of profit, and the theory of crisis is wrong, which I will deal with in those respective chapters.

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Theories of Surplus Value, Part II, Chapter 16 - Part 31

Ricardo says, 

“In an improving state of society, the net produce of land is always diminishing in proportion to its gross produce” (l. c., p. 198).” (p 465) 

By an improving society, Ricardo means one where social productivity is rising, technological developments are being introduced, the consequence of which is that variable capital falls relative to constant capital. The rate of profit falls, and along with it rent decreases. Ricardo, however, like Smith, has no concept of constant capital, and views it only in terms of fixed capital. He also equates circulating capital only with labour, with the variable-capital laid out in wages. He says, 

““In rich and powerful countries, where large capitals are invested in machinery, more distress will be experienced from a revulsion in trade, than in poorer countries where there is proportionally a much smaller amount of fixed, and a much larger amount of circulating capital, and where consequently more work is done by the labour of men. It is not so difficult to withdraw a circulating as a fixed capital, from any employment in which it may be engaged. It is often impossible to divert the machinery which may have been erected for one manufacture, to the purposes of another; but the clothing, the food, and the lodging of the labourer in one employment may be devoted to the support of the labourer in another; or the same labourer may receive the same food, clothing and lodging, whilst his employment is changed. This, however, is an evil to which a rich nation must submit; and it would not be more reasonable to complain of it, than it would be in a rich merchant to lament that his ship was exposed to the dangers of the sea, whilst his poor neighbour’s cottage was safe from all such hazard” (l. c., p. 311).” (p 465) 

There is indeed here, in Ricardo's comment, a realisation of the way in which capitalism proper, industrial capitalism, and machine industry, turns what were previously, under petty commodity production, and handicraft manufacture, potential causes of crisis into the inevitability of crisis. Yet, as will be seen in the next chapter, Ricardo, himself resting upon Say's Law, continued to deny the possibility of general crises of overproduction. But, as Marx says, that is not altogether surprising, because Ricardo never saw the recurring crises of overproduction that occurred after 1825. The crises that Ricardo witnessed were all financial crises, arising within the banking system, and financial markets. 

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Theories of Surplus Value, Part II, Chapter 16 - Part 30

Ricardo knew that a rise in wages does not result in a rise in prices. It results, instead, in a fall in profits. However, he says, even if a rise in wages did result in a corresponding rise in prices, it would not change the validity of his thesis that the rise in wages causes a fall in profits. He says, 

“But if it were otherwise, if the prices of commodities were permanently raised by high wages, the proposition would not be less true, which asserts that high wages invariably affect the employers of labour, by depriving them of a portion of their real profits.” (p 464) 

If wages paid in the production of hats, hosiery and shoes rose by £10, and the price of those commodities correspondingly rose, by £10, Ricardo says, the position would be no better than had each not raised their prices. 

“If the hosier sold his stockings for £110 instead of £100, his profits would be precisely the same money amount as before; but as he would obtain in exchange for this equal sum, one-tenth less of hats, shoes and every other commodity, and as he could with his former amount of savings” (that is with the same capital) “employ fewer labourers at the increased wages, and purchase fewer raw materials at the increased prices, he would be in no better situation than if his money profits had been really diminished in amount, and every thing had remained at its former price” (l.c., p. 129).” (p 464) 

Here, Ricardo admits what previously he has not said, which is that not only is it necessary to employ more workers on less fertile land, to produce the same amount of output, but that, with higher wages, a given capital employs less labour, and, therefore, produces less output, value, and surplus value, which means also a lower rate of profit. But, Ricardo is also wrong in his argument about the effect of higher wages, and commodity prices. It's quite true that, if commodity producers all increase their prices, by the same amount, this cancels itself out in their exchanges with each other. But, as Marx points out in Capital III, the market does not just consist of capitalists and workers. The landlords and other rentiers, on fixed incomes, would have to pay these higher prices for commodities, and so this would represent a transfer of revenue from these other parasitic classes, to the productive-capitals. 

“It makes no difference to the capitalist, if the price of hats etc. rises by 10 per cent, but the landlord would have to give up more of his rent. His rent may have risen for example, from £10 to £20. But he gets proportionately fewer hats etc. for his £20 than for the £10.” (p 465) 

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Northern Soul Classics - Not Me Baby - The Silhouettes

Friday Night Disco - Whispers (Getting Louder) - The Isley Brothers

Theories of Surplus Value, Part II, Chapter 16 - Part 29

The fact that Ricardo defines the rate of profit by what is actually only the rate of surplus value is shown by the quote. 

““Although a greater value is produced, a greater proportion of what remains of that value, after paying rent, is consumed by the producers, and it is this, and this alone, which regulates profits” (l.c., p. 127).” (p 463) 

In other words, Ricardo, like Smith, resolves the value of the product into revenues. So, here the value of the product resolves in rent, then the portion of the value of the product consumed by the producers (workers), i.e. wages, and then only what is left constitutes profit. Nowhere here does Ricardo include in the value of the product the value of the means of production, used in its production. The surplus value here is the surplus of the workers product over what they consume, and which is retained by the capitalist, after deducting rent. 

“But, with a given working-day, the rate of surplus-value can only fall if the rate of wages is rising permanently. This is only possible if the value of necessaries is rising permanently. And this only if agriculture is constantly deteriorating, in other words, if Ricardo’s theory of rent is accepted. Since Ricardo identifies rate of surplus-value with rate of profit, and since the rate of surplus-value can only be reckoned in relation to variable capital, capital laid out in wages, Ricardo, like Adam Smith, assumes that the value of the whole product—after deduction of rent—is divided between workmen and capitalists, into wages and profit. This means that he makes the false presupposition that the whole of the capital advanced consists only of variable capital.” (p 463-4) 

In a note on page 463, Marx notes that Ricardo recognises that it is only productive-capital that produces profit. He also makes clear that he recognises that shares and other forms of loaned money-capital do not constitute capital. To use Marx's term, these financial assets constitute only fictitious capital. Ricardo says, 

““In the form of money … capital is productive of no profit; in the form of materials, machinery, and food, for which it might be exchanged, it would be productive of revenue… “ (l.c., p. 267). “The capital of the stockholder can never be made productive—it is, in fact, no capital. If he were to sell his stock, and employ the capital he obtained for it, productively, he could only do so by detaching the capital of the buyer of his stock from a productive employment” (l.c., p. 289, note).” (Note *, p 463) 

Ricardo recognises that production of agricultural products increases absolutely, but, he says, to obtain this absolute increase in output, proportionally more labour must be employed to produce it. So, even though each of these workers might receive an increasingly smaller quantity of this agricultural output, because the total number of workers receiving these wages will have risen, by a larger proportion than this fall in their real wages, the proportion of the total output left over, after these wages are paid, will get smaller and smaller. What struck fear into Ricardo, as Marx says later, is that he extrapolated this continual fall in the rate of profit to a point where it represents an actual fall in the mass of profit itself, until it disappears. 

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Paul Mason's Postcapitalism - A Detailed Critique - Chapter 1 (7)

CHAPTER 1 – NEOLIBERALISM IS BROKEN

The Zombie System 

Paul concludes this chapter by setting out a scenario for an escape for capitalism. Central banks withdraw from QE, and promise to raise interest rates, in the face of any future bubbles. I'm not sure what he means by the private market for government bonds having been suppressed, because one of the effects of QE was to also stimulate private sector demand for these bonds, given that QE made them a one-way bet. He goes on to describe the consequence being that the speculative bubbles burst, and finance flows towards productive investment, which is the scenario I have described many times. 

I don't accept the need for pegged exchange rates, as Paul sets out on page 26, but its his scenario not mine. I don't see the removal of global imbalances that Paul then says would follow, as being a bad thing. Moreover, its wrong to think that China is dependent upon low wages. As I've written before, the road to development for Singapore and others ran though moving up the value chain, and encouragement of higher wages. The Chinese leaders seem to be pursuing a similar course. Higher wages promote innovation and higher productivity, as well as creating the basis for a domestic market. A higher currency reduces import prices to help constrain domestic inflation. 

Paul says it makes a reversal of financialisation, and a move away from the banks and the politicians who support them. More importantly, it involves a move away from shareholders and the politicians who support them. 

The problem is, Paul says, it would involve a huge write down of debt, and important vested interests would suffer significant losses. That's true, and its why central banks are being stretched on the rack. But, the reality is that either way interest rates will rise, as economic growth picks up, and it will. Governments cannot hold back growth further by yet more austerity. And, as rates rise, financial and property markets will crash with an explosion like Krakatoa. The question is to what extent the central banks can get ahead of the pyroclastic flow, by now getting as much of a head start as possible. 

Nor do I agree with Paul that the implication of this is a breakdown of globalisation. This is not the 1930's. Trump, Orban, Farage et al, are a death spasm of Neoliberalism. In the 1930's, their fascist and nationalist equivalents were playing in to conditions of economic collapse. The opposite conditions exist today. The US already has labour shortages, Trump's import tariffs have already caused the price of US washing machines and other domestic appliances to rise by 19%! The US faces not stagflation, but Trumpflation, as the economy overheats in conditions of labour shortages, huge excess liquidity, and Voodoo Economics, creating Twin Deficits Crisis 2.0.

The UK has hidden unemployment, and underemployment, but it is suffering from decades of lack of investment in education and skills, as it focussed on building a low wage/low skill/high private debt economy. Brexit has already led to the appearance of huge staff shortages in the NHS, in the construction industry and so on.

The immediate impact of over 1 million refugees entering Germany has been to cause German GDP to rise sharply, as they all added to aggregate demand in Germany for goods and services. The EU economy is set to grow rapidly. If social-democrats across the EU and Britain get their act together, and stop pandering to bigots, these conditions can quickly undermine the proto fascists, and economic nationalists. It opens up the door for workers across the EU to refashion it as a federal state, returning also to some of those progressive social-democratic principles upon which it was founded. It would also, of course, be better if UK workers were also part of that struggle alongside them. 

Paul repeats some of the forecasts of stagnation for the global economy up to 2060. But, as I said earlier, even now, those projections are out of date, and global growth is accelerating, employment is at high levels, wages are starting to rise, and new regions of the globe, such as Africa, are joining in. We have as I predicted, seen a cyclical slow down from the end of 2017, but that will end in the third quarter of 2018, leading to a much stronger period of global growth. Along with it will also disappear the conservative message and solutions being touted by all those stuck in the ideology of the last thirty years. The real flexibility and productivity miracle will come from the growth of industrial democracy, of workers taking back control of the means of production, and developing them on the basis of their endless ingenuity.

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