Paul Mason's Postcapitalism - A Detailed Critique - Chapter 5(3)

The Price of Information

Paul's point, in respect of information, is this. If A spends 100,000 hours of labour (£100,000) producing useful information, they can sell this information, for example, by producing a book, film etc. But, herein lies a problem. A landowner can fairly easily obtain a rent from a farmer, who seeks to cultivate the land. However, they cannot so easily obtain revenue from the poachers who capture game on their land, or who scavenge firewood etc. They have to employ gamekeepers, and impose heavy penalties for those who seek to engage in such freeloading activities. 

Similarly, the producer of information may be able to obtain payment for the first copy of the information they produce, but they cannot then ensure payment for any further copies. As soon as the information is released, it can be copied by whoever takes possession of it. Herein lies a problem that stems from the difference between intellectual property, and other forms of property, such as land or capital. The latter have no value, and yet they have market prices; the former has value – and contrary to Paul's suggestion may not be near zero – but it may be impossible to actually realise that value. 

There are, in fact, two different conditions here that overlap. Firstly, if we take the information that the engine maker obtains from the telemetry, it has no value. It is not the product of labour, but is effectively a bi-product of the technology required for the functioning of the engine itself. Similarly, the information that a supermarket obtains from its EPOS systems, and from our use of loyalty cards, credit cards and bank cards, effectively cost it nothing. This is information that has no value, but has use-value, and, as the Cambridge Analytica scandal showed, is a use value that some customers are prepared to pay a price for. As with the price of land or capital, this price ultimately comes down to a question of demand and supply, and this is what distinguishes these commodities from all others, whose market price revolves around their price of production. 

But, from this, it can be seen that there is nothing new for capitalism in creating a market, or determining a market price for commodities that have no value. 

The second condition, however, is for that information that is the product of labour, of scientific research and analysis, but for which the problem is not the identification of such value, but its realisation. Because this information, once placed in the public domain, can be easily copied, the labour required to produce such copies is negligible, and so the value of these copies is near zero. Herein also lies one of those beautiful ironies of capitalism. In general, in relation to this information that which has no value becomes valuable, and that which has the most value becomes worthless. The information that the engine producer obtains for free, becomes valuable. It enables them to gain further knowledge, so as to gain competitive advantage over their rivals. They will tend to hoard it. If a rival seeks to obtain it, they can either buy it from them – in which case they will be themselves unlikely to sell it on the cheap – or they will have to spend considerable amounts to engage in industrial espionage, which does occur to a considerable degree. Alternatively, every producer in an industry who produces their own large amounts of this valuable data for free, can agree to pool their resources, and share the information they gather, so as to collectively benefit from it. 

But, it is the information that has real value, as opposed to use value that tends to be made worthless. The labour that goes into the intellectual property of an iPhone is what gives it its value, but every other potential producer of a clone of an iPhone has an incentive to obtain that information for free, because the material cost of producing the phone is minimal by comparison. The same is true of Nike's trainers and so on. 

For some commodities, this is a manageable problem. If I am prepared to pay for a meal in a restaurant owned by a celebrity chef, in which the value of the food stems largely from their status, and reputedly the intellectual property they own, either the restaurant belongs to them or it doesn't. If I want to enjoy a live performance by a particular singer, etc., again either its them performing or it isn't. If I'm happy with a digitised copy, it could be a legitimate copy or a bootleg. 

As a general rule, anything that is intended to be mass produced, and takes some kind of material form, including digital form, can be copied, and the intellectual property content thereby destroyed. But, although this is a more significant problem, today, it is not a new problem. Forgers always forged things of value from money tokens to Old Masters. As soon as cheap reel-to-reel tape recorders became available, teenagers, and others, copied their favourite music for free from the radio. 

The real answer, in most of these cases, is not that its impossible to value the information, or to realise that value in production. It is that the producers of these commodities seek to restrain supply, so as to obtain monopoly prices. If a book is printed in sufficient quantity that the intellectual property component amounts to only a few pence per book, no one is going to be bothered to, say, photocopy its contents. Mass production reduces the unit values of commodities, and as a fixed cost, like with fixed capital, the greater the volume of output, the smaller that proportion of the unit value it becomes. But, it is not zero. The key here is to produce and sell on a sufficiently large scale that even at very low prices, the average profit is produced. 

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There Was Nothing Wrong With Pete Wilsman's NEC Comments

The hyperbole and hypocrisy from the Labour Right, and Jewish Tories over Pete Wilsman's comments at the NEC are symptomatic of the way those groups have weaponised anti-Semitism, as a means of attacking Corbyn and his supporters.  Having lost the political arguments, the Labour Right are resorting to their old, tried and tested methods of bureaucratic manoeuvre and expulsions.  That their is a confluence of interest between the Labour Right, and Jewish Tories to attack Corbyn, and his supports should tell ordinary Labour Party members all they need to know, and to understand why those groups have been making such a song and dance over the issue of the IHRA examples, supported by the Tory media.

The truth is that there was nothing wrong, and certainly nothing anti-Semitic about Wilsman's comments.  He basically only said what I also said a couple of days ago.  The fact is that organisations such as the British Board of Jewish Deputies, and the Jewish Leadership Council, are led by avowed Tories.  It is also true that some of those leaders did welcome the election of Donald Trump - Arkush Welcomes Election of Trump -  and they have also supported the overtly anti-Semitic Victor Orban in Hungary, as did the Bonapartist regime of Netanyahu, in Israel, because of Orban's opposition to George Soros.  When Bojo described Orban as "a friend", the Jewish Tories again refused to criticise him.  Contrast that to the repeated reference to Corbyn describing a series of speakers at a meeting as "friends".

It's also true that these Jewish Tories have had nothing to say about the fact that David Cameron took the Tories out of the European People's Party bloc in the European Parliament, and took them into the group of European Conservatives and Reformists, a group that is stuffed full of anti-Semites, homophobes, racists, and bigots of all sorts, including those that can be described in no other way other than being Neo-Nazis!

The hypocrisy of the Jewish Tories, and their allies within the labour Right, it appears has no bounds.  When Corbyn, glanced a small image on a smartphone of a mural that he mistakenly believed was about bankers exploiting society, and attempts to remove it, the Tories and the Tory media jumped all over him, when on closer inspection, and on a much larger screen, it becomes clear that those depicted in it, are Jewish stereotypes.  Not, of course, at the time that he had actually tweeted his support - when will politicians learn to avoid Twitter like the plague - but only months later, when the campaign of Labour's Right to try to find a peg on which to hang their smear campaign against him had trawled through the Interweb to find something.  Yet, when Tory MP, Michael Fabricant, tweeted a cartoon depicting London Mayor, Sadiq Khan as a pig, being mounted by another pig, an image that, even on a smartphone was clear and unambiguous, he is allowed to just get away with it, after having given a pathetic apology.  Where all the Tory media demands for his immediate resignation from Parliament?

The fact is that whilst there is undoubtedly some Left Anti-Semitism in the Labour Party, that flows over from hostility to Israel, as a racist and colonialist state, and whilst there is a  much smaller amount of traditional Anti-Semitism in the party - just as in the past there were significant numbers of members whose views were racist, misogynistic and homophobic - the reality is that it is the Tory Party, that has far more members that are guilty of that bigotry than is the Labour Party.

Wilsman is absolutely correct.  The Labour Right, having lost the political arguments, having lost the votes for Leader, for the NEC and so on, have looked for any basis they can find to attack Corbyn and his supporters.  They have found common cause with Jewish Tories, and with apologists for Israel, who see Corbyn's support for Palestinian democratic rights as a threat.  It is not conspiracy theory to look at an organisation like BICOM, and to see that a number of its leading officers are also former officials within the Israeli state, not to notice the overlap between BICOm, and that group of Right-wing Labour MP's, and Labour members that are part of the campaign against Corbyn.

The criticism of Wilsman, like the criticism of Livingstone previously, and with the charges being levied against dozens of Labour Party activists, comes down to the fact, not that what they have said is Anti-Semitic, or untrue, but that the truthful and factual statements they have made cause offence to a very small group of Jewish Labour MP's, their supporters, and to Jewish Tories.  They give offence, not because they are Anti-Semitic, or untrue, but precisely because they are not Anti-Semitic or untrue.  They give offence, because they bring to light facts about the state of Israel, and its Zionist supporters that they would really not want bringing to light, or have discussed.  They give offence to that minority, precisely because they are not Anti-Semitic, or untrue, but because they are Anti-Zionist, and thereby illustrate the difference between Anti-Semitism and Anti-Zionism, a difference that the Zionists have tried might and mane to eradicate, which is why they have made such a fuss over Labour's clarification of the examples attached to the IHRA definition of Anti-Semitism.

Unfortunately, because Labour's leadership has continually vacillated, and made concessions to the Labour Right, and bent to Tory media pressure, they have simply encouraged the Tories and the Labour Right, now working openly in concert, to press ahead further with their attacks, and demands for capitulation, and expulsions.  But, its not just the Labour Leadership that has done that.  The same has been true of Momentum, which has become the personal fiefdom of John Lansman.  Its an example of another organisation the left sects effectively destroyed.  They did their normal thing of infiltrating  and then trying to take over an organisation that had much greater support than they had themselves.  To coin the phrase that Trotsky used about the way unrepresentative elements took over the soviets after the February Revolution, they used their "sharp elbows".  Having used such, essentially bureaucratic means to gain position way in excess of their actual support within Momentum, let alone the wider Labour Party, they gave Lansman a reason, and an excuse to act bureaucratically himself.

Whenever these issues of taking on the Labour Right, or Jewish Tories has arisen, Lansman has taken the wrong side.  Its time for Corbyn and the Labour Leadership to stand up to the Labour Right, and their allies amongst the Jewish Tories, and the Tory Media.  If those right-wing Labour MP's feel that "Labour is not the party I first joined", then they are free to go, now, and don't let the door hit you in the arse on the way out.  Under Blair, Brown and Miliband, the Labour Party was not the party I joined in 1974 either.  It is much closer today, under Corbyn, to that party, and to the principles on which it was originally founded, than it has been for 30 years.  The long slide to the Right has been halted, we cannot let them regain traction, and lead Labour into the abyss, now.  Its time to clear out the Right, at every level.

Theories of Surplus Value, Part II, Chapter 17 - Part 33

What capital requires, in order to grow rapidly, is to be able to utilise existing value to create new value, and to do that most effectively, it requires that existing value to be small compared to the new value it creates. Put another way, it requires that as small a proportion of current labour-time be needed to physically reproduce the consumed productive-capital, as possible, leaving as large a portion of current labour-time as possible left over as surplus labour-time.  Consider a capitalist with £1 million of money-capital to invest. What would they prefer - to have to have, a factory built, new machines produced, and materials supplied to them, or to be able to buy all of those things, at a fraction of the price, from a liquidation sale of some bankrupted business? The answer is obvious. They prefer the latter, because what they need, to produce profit, is the use value of the factory, machines and material. The less they have to pay to obtain that use value, the higher the rate of profit they can make. But, the same is true for the economy as a whole. What the economy needs, in order to grow rapidly is the use value of all these elements of the constant capital, because it is the productive use of all these elements, by workers, that enables the new value to be produced, and the surplus value created. The lower the value of the constant capital, the higher the proportion of the surplus value to it, and therefore, the higher the rate of profit. What capital requires is not a destruction of those use values, which only imposes an additional cost for its replacement, but a destruction of the value of those use values. 

And, it is this distinction that Marx makes here. The physical destruction “means that the process of reproduction is checked and that the existing means of production are not really used as means of production, are not put into operation. Thus their use-value and their exchange-value go to the devil.” (p 495-6) 

But, whilst this physical destruction of use values is deleterious to accumulation, and growth, it is precisely the destruction of exchange-value that is beneficial. 

“A large part of the nominal capital of the society, i.e., of the exchange-value of the existing capital, is once for all destroyed, although this very destruction, since it does not affect the use-value, may very much expedite the new reproduction.” (p 496) 

This is why the moral depreciation of the fixed capital stock, as a result of rapid technological development, and increasing social productivity acts to raise the rate of profit. In other words, all of these factories, machines, material, and commodity-capital that gets devalued, as firms go into liquidation, becomes available at knock-down prices that other capitalists are able to buy and utilise. It is precisely because they buy this capital at these knock-down prices that, in their hands, it becomes profitable. In fact, as soon as economic activity picks up again, the buyer may find that, not only are they able to operate profitably, but the value of the factory, the machines etc., they bought at the knock-down price, rises to its previous level, or more, so that they also make a capital gain. 

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Paul Mason's Postcapitalism - A Detailed Critique - Chapter 5(2)

The Value of Information

As an aside here, I want to note that this increased attention given to information is no coincidence. We are just beginning to come to grips with the idea that reality itself is nothing more than information. The more science has investigated matter, the more it has found it to be intangible, and reducible to information. That is the basis, for example, of quantum entanglement, which allowed Chinese scientists, last year, to create a teleportation machine that instantaneously transported information several miles into space. 

Some of the latest theories of reality, and of the multiverse, posit it as being nothing more than a computer simulation, or nothing more than a complex mathematical formula. If we examine the nature of cells, and of DNA, it again comes down to information. If that information was accurately reproduced, over and over again, we would not age, or suffer from illnesses caused by faulty transmission of information, such as cancer. But, it appears that, just as property owners put means of preventing the copying of information into their digital products, so our cells have similar inhibitors, in the form of telomeres that shorten over time, and keep track of the number of replications. 

The real reason that accounting and orthodox theory has a problem in valuing information is actually because information, of itself, has no value. The labour undertaken to obtain information is value creating, in so far as the information it produces is usable information that is then embodied in some product/commodity. If an author spends 100,000 hours of simple labour researching, analysing and codifying data, the resultant information only has value in so far as someone wants to utilise this information, i.e. it is, for them, a use value. If we say 1 hour of simple labour is equal to £1, the labour required to produce the paper and so on required for a book to be published may amount to say £5, the labour to typeset it, and print it a further £5. But, if only one book is produced it would have a value of £100,010, at which price its unlikely to sell any copies. If however, 100,000 copies of the book can be sold, it would have a value of £11 per book, and have the potential to be sold. 

But, then compare that with the information that Paul discusses in this section. The information that the engine maker gets back, in the telemetry from the plane etc. is not the product of any labour to produce it. It consequently has no value. It is like land, which is not the product of labour, and so has no value. Yet, land is bought and sold as a commodity. It has a market price, even though it has no value. It is a vital instrument of production . You can't get minerals or agricultural products out of the ground without using land; in the case of the latter, it is an integral part of the production process itself, because you can't get crops without the nutrients that the land itself contributes to them. Nor can you produce manufactured goods nor services without land on which buildings stand, not to mention on which stand workers engaged in that production. 

Land, therefore, has a market price, even though it has no value, because, under capitalism, it becomes a commodity that is bought and sold, and its price is then a consequence of this interaction of demand and supply. And, the same is true of capital itself. Capital – self-expanding value – is a social relation, and not the product of labour, and so has no value. But, like land, it is also a use value. It has the use value of producing the average rate of profit. This use value is also thereby turned into a commodity that is bought and sold, and whose price – the rate of interest – is determined by the interaction of demand and supply. 

The fact that these things, land and capital, have no value, and yet have a price comes down to the fact that they constitute property. If A owns 10 hectares of land, and B wants to use that land, they either have to rent the land from A, or else they have to buy that land from A, at a price that equalises the capitalised value of the rent. If A owns £100 of money-capital, and B wants to use it, they have to agree to pay A interest on the money-capital. 

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Theories of Surplus Value, Part II, Chapter 17 - Part 32

“It must never be forgotten, that in capitalist production what matters is not the immediate use-value but the exchange-value and, in particular, the expansion of surplus-value. This is the driving motive of capitalist production, and it is a pretty conception that—in order to reason away the contradictions of capitalist production—abstracts from its very basis and depicts it as a production aiming at the direct satisfaction of the consumption of the producers.” (p 495) 

The fact that under commodity production and exchange the act of production is separated from consumption creates the potential for crisis. Capitalist production, as necessarily speculative production, on a mass scale, turns this potential for crisis into a near inevitability, because “great upheavals and changes take place in the market in the course of this period, since great changes take place in the productivity of labour and therefore also in the real value of commodities, it is quite clear, that between the starting-point, the prerequisite capital, and the time of its return at the end of one of these periods, great catastrophes must occur and elements of crisis must have gathered and develop, and these cannot in any way be dismissed by the pitiful proposition that products exchange for products.” (p 495) 

As set out above, the basis of these catastrophes may be that the demand for the output – especially where that output has been significantly increased, due to accumulation – at existing prices, falls. Again, the reason for such falls in demand can be many fold. Or, it may be that the value of inputs rises, or their market prices rise sharply, as their supply fails to meet sharply increased demand, and this increased cost cannot be passed on into the final commodity price. If that means that the producers of the end product make losses, they may suspend production, and all of their existing fixed capital then becomes redundant, along with any stocks of raw material, etc. Its value collapses, as it is thrown on to the market, as the company's assets are liquidated. 

Marx makes an important point here. He sets out the process whereby real capital is physically destroyed. A machine that is not used productively is not capital, and not being used, it depreciates. Material left unused deteriorates and depreciates, and the same with labour-power. This is the difference between depreciation, which is a function of time and non-use, and represents a capital loss, as against wear and tear, which is a function of usage, and the value of which is reproduced and recovered in the value of output. All depreciation represents a physical destruction of the use value of these elements of capital. 

For Keynesians, this kind of physical destruction is seen as a basis for economic recovery, as the destroyed physical commodities provide an opportunity for creating a spur to aggregate demand, as workers are set to work replacing them. Keynesians always see things such as bad storms, that create widespread damage, as having the silver lining of acting to stimulate economic activity in the following repair work. Some Marxists have also adopted this Keynesian outlook, using it as a means of explaining the post-war economic boom, by claiming that it was due to the reconstruction and replacement of capital physically destroyed during war. In another variant, it is the basis of the so called Permanent Arms Economy thesis. 

It is, of course, nonsense. There was no such boom following all of the destruction of capital that occurred with the First World War, for instance. On the contrary, after a brief two-year recovery, Europe slipped, in the 1920's, into a Depression that lasted more or less until the outbreak of WWII. In fact, the basis of the recovery was already in place by the mid 1930's, in Europe, though not in the US, which had not gone into the Depression in the 1920's (rather experiencing the boom of the Roaring 20's) and was consequently about ten years behind Europe. The basis of the recovery, that was established in the mid 1930's, was not any destruction of physical capital that had to be replaced, but was a destruction of capital value, and a rise in the rate of profit, which facilitated more rapid capital accumulation, on the basis of an expansion of the market, in the form of a range of new industries, such as domestic electronic appliances, motor vehicles, petrochemicals etc. Moreover, if a lack of physical capital were the necessary requirement for more rapid capital accumulation, then the poorest countries in the world should be the ones that experience the most growth! 

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Paul Mason's Postcapitalism - A Detailed Critique - Chapter 5(1)

The Prophets of Postcapitalism 

The Information Revolution

In this chapter, Paul begins to set out his case that what is different about this current long wave is that it is driven by information. He starts by examining the role of information technology in transforming existing technologies, such as jet engines. Its an idea I have also discussed previously. Computers and rapidly developing processing power, combined with the ability to embed microprocessors within almost every device – including human beings – is transformative, in almost every sphere of science and of life. 

Paul sets out this role of information technology, in the design of new products and materials, as well as in the production process, but we see it also in the products themselves, such as with SatNav systems, which combined with robotics makes possible driverless vehicles of all kinds. Again echoing a point I have been making for a long time, Paul notes that where the value of the basic component of many products is falling, as a result of the rise in productivity, this technological revolution has brought about a situation where a growing part of the value of these commodities derives from the complex labour used in their production. 

The majority of the actual production and assembly of an iPhone takes place in China, undertaken by large numbers of workers. However, 90% of the value of an iPhone is produced in the US. That is because the actual materials consumed in production, as well as the labour of assembly is largely de minimis in relation to each unit, compared with the labour of the software and hardware designers. Even in terms of the materials used, an increasing proportion of their value is itself attributable to complex labour, because the materials themselves are increasingly the products of material science. That is the case, for example, with the single crystal carbon, used in the production of jet engine blades. But materials science is almost annually coming up with new materials with esoteric qualities, useful for a range of new products. 

I have written about this previously. It means that, for example, in the pharmaceutical industry, the scientific labour, used in the development of new drugs, acts more like fixed capital. The new value it produces is determined, as with any other labour, by the amount of abstract labour it represents. Let us say that, for some drug this represents 1 million hours. But, that is a fixed value, like the value of machines. Exactly how much of this value is embodied in each unit of production depends on the volume of production. The more units of any particular drug produced, the more this value is spread across the volume of production, so that it is thereby reduced. And, like fixed capital, in addition to transferring this value piecemeal to the value of output, it also suffers depreciation. The longer a given drug has been on the market, the more likely generic alternatives are available, at lower cost, and the more likely some later drug, that is more effective, will come along to replace it, bringing about a sort of moral depreciation. 

If we look at the decoding of the human genome, its cost has fallen from around $3 billion, for the first one, to $1,000, and is likely to fall to around $100 in the next year or so. 

Paul points out that the jet engine, via the same information technology, constantly passes information back to the engine producer, in real time. This is the same technology that sends back telemetry from a Formula I car to the pit crews. It is also what allows a family car to monitor its own performance from fuel consumption, tyre pressures to fault diagnosis. All of this provides useful information to the companies that can collect this data. The same thing applies to the supermarkets that collect the data on our shopping habits, as well as the tech companies that collect data on our internet browsing habits, the media companies that collect data from our smart TV's and so on. 

The value of this big data has started to be realised, and was brought to light with the activities of Cambridge Analytica. Yet, as Paul says, little of this value is reflected in company balance sheets, and existing accounting practices have difficulty in being able to measure it. 

However, for reasons I'll set out later, I'm not convinced that any of this means that, in terms of production and distribution, capitalism has become qualitatively different, as Paul claims. Different yes, but only in the same way that industrial capitalism was different to capitalism at a time when agriculture was dominant, and in the same way that service industry has become dominant. It does have implications for the Marxian law of a falling rate of profit, but for the reasons already set out, this too does not represent a qualitative change. 

Paul believes that this qualitative change arises also because not only is accounting unable to value this information, but orthodox economic theory also cannot cope with a technology that drives marginal costs to or near zero. Again, I don't think this is true, but I will deal with that in the coming chapters, when Paul sets out his argument in relation to that, and his understanding of the Labour Theory of Value. Suffice it to say, here, near zero marginal costs are not zero, and this is something that is not essentially new for capitalism, but is simply the logical conclusion of existing laws when applied to ever larger volumes of output. Moreover, as I will set out, in part, Paul's error, in this regard, stems from a basic error in his understanding of the Labour Theory of Value.

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Forward To Part 2

Theories of Surplus Value, Part II, Chapter 17 - Part 31

In other words, the situation described here was that the market price of yarn fell, so that it was not possible to buy flax or labour-power to replace that consumed in production. The situation Marx now describes is now essentially the same, but viewed from the opposite direction. Now, the price of yarn remains the same, but the price of flax rises sharply, or is unavailable. As Marx describes, in Capital III, Chapter 6, there are a number of scenarios that might exist, here. If the price of flax rises sharply, after the spinner has sold their yarn, the money they receive for the yarn will no longer be sufficient to replace that previously consumed in the production of the yarn. For all new money-capital entering yarn production, including that reinvested from profits, this is the condition they will face, i.e. a given amount of money-capital will now metamorphose into a smaller quantity of productive-capital.

M is the money equivalent of C, the commodities (means of production and labour-power),

 consumed in production.  They must be physically reproduced, as shown in the top line.  If yarn has been sold prior to flax being bought at its new price, M will not be sufficient to physically reproduce all of the consumed C.  If yarn is sold after the rise in flax prices, the value of yarn itself would rise accordingly.  If all of the yarn could still be sold, at this new value, then M would reflect this higher value, and would reproduce the consumed flax.  As Marx sets out in Capital III, Chapter 6, however, a rise in the price of flax would inevitably cause a fall in demand for yarn due to its rise in price, so that not all yarn could be sold at the new higher price.

All new money-capital, for example where a new firm is established would be in the position where its money-capital bought less flax.  That is also the case in relation to m, the profit realised from the sale of the flax.  That is why, the rate of profit has to be calculated on the current reproduction cost of the consumed capital, not on the historic price.  It illustrates the way a change in the value of the constant capital leads to a rise or fall in the rate of profit, because the profit will enable either a greater or small expansion of the productive-capital, as a given amount of profit will buy a greater or smaller quantity of the commodities that comprise the capital.

If the price of flax rises sharply, before the spinner has sold their yarn, then the value of yarn will be increased correspondingly. However, a rise in yarn prices necessarily has an impact on the demand for yarn. The demand for yarn would then fall. In order to keep demand for yarn at its previous level, which may be necessary to ensure that production continues at a sufficient level to maintain the efficient use of fixed capital, etc., the yarn producer may have to absorb some or all of the rise in the price of flax out of their profit. In practice, the spinners would always have a portion of their output that had been sold at the old price, and not yet turned into flax, a portion that was in the process of being sent to market, and a further portion that was still in the process of being spun. 

But, the situation described here, of a crisis due to a breakdown of the supply of elements of constant capital, is also what Marx described in Capital III, Chapter 6, in relation to the US Civil War, which led to the supplies of cotton being stopped to the Lancashire cotton mills. The problem of an insufficient accumulation of the physical components of constant capital, i.e. of raw materials, is common in relation to agricultural production, because supply can only be increased in the following year. Moreover, opening up new farms, or new territories, as with opening up new mines, etc. is something which requires many years to achieve. Increasing supply from existing cultivated land or mines is often restricted and costly, so that in the early stage of a new long wave boom, these sharp rises in primary product prices are a regular feature. Although, Marx does not refer to it as a long wave analysis, that is essentially what he was analysing in the earlier chapters when he examined the movement of agricultural prices over fifty year periods, and examined this effect of the time taken to open up new farms and territories, and the time taken for fixed capital investment to become incorporated in the natural fertility of such lands. As an indication of the above phenomenon, the rise in the price of copper is a good indicator. 

“There occurs a stoppage in reproduction, and thus in the flow of circulation. Purchase and sale get bogged down and unemployed capital appears in the form of idle money. The same phenomenon (and this usually precedes crises) can appear when additional capital is produced at a very rapid rate and its reconversion into productive capital increases the demand for all the elements of the latter to such an extent that actual production cannot keep pace with it; this brings about a rise in the prices of all commodities, which enter into the formation of capital. In this case the rate of interest falls sharply, however much the profit may rise and this fall in the rate of interest then leads to the most risky speculative ventures. The interruption of the reproduction process leads to the decrease in variable capital, to a fall in wages and in the quantity of labour employed. This in turn reacts anew on prices and leads to their further fall.” (p 494-5) 

This description of a rise in profits, along with a rise in reserves of idle money, and fall in interest rates, which provokes speculation is a perfect description of the situation globally, in the late 1990's, and early 2000's, which led to the property, bond and stock market bubbles of the period, which, in turn, led to the stock market crises of 2000 and 2008. 

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Theories of Surplus Value, Part II, Chapter 17 - Part 30

Moreover, its clear how this partial crisis could then be transformed into a general crisis. We have made no assumption about any change in the value of either the flax or labour-power. So, 10 kilos of flax still has an exchange value of £1 as before, which is why the yarn producer can now only buy 750 kilos of it. Similarly, the labour-power of a worker still has an exchange-value of £1, so that not only does the capitalist now only need 75 workers, to process the 750 kilos of flax, but, with the £75 of capital they have left, they can only afford to employ 75 workers. 

If the situation facing this yarn producer also faces all other spinners, then they all will find that they cannot reproduce their capital. All will be faced with reducing their purchases of flax by 20%, and with laying off workers. (In fact, as Marx describes in Capital III, Chapter 15, what would actually tend to happen here is that, for a time, each firm would continue to produce at at least the same level, and may even increase output, in an attempt to reduce its costs, so as to grab market share; eventually the less efficient firms would go bust, so that yarn production, and the capital employed in it, would decrease not via a reduction in output by each capital, but by a reduction in the number of capitals, and a consequent concentration of the remaining capital, which also implies a rise in average efficiency in the industry, and reduction in the market value of yarn.) So, if the flax growers continue to produce at the previous level (let alone on a larger scale, as part of their own capital accumulation, and attempt to gain market advantage) which can be expected given that their production would have been set in the previous year, when they planted their seed, then the flax growers will find that they have overproduced by 20%. They too will then find that its market price falls, possibly below the cost of production, so that the capital, in wear and tear of machinery, fertiliser and labour-power cannot be reproduced. 

It's not because its physically unavailable to be reproduced. It may, indeed, be available in abundance. The reason it cannot be reproduced is because the flax grower no longer has the capital in the form of exchange-value, money, to be able to buy it, just as the spinner did not have the capital, in the form of exchange-value to be able to buy the flax and labour-power, in the former quantities. 

“Accumulation, however, stagnates even more. Surplus-value amassed in the form of money (gold or notes) could only be transformed into capital at a loss.” (p 494) 

In other words, suppose the spinner had previously hoarded surplus value from earlier years. If they had the £50 thereby available to make up the difference, so that they bought once more 1,000 kilos of flax, and kept the 100 workers employed, they would then also make an additional loss on this further investment and production. In fact, by increasing the supply of yarn on to the market even further, they would exacerbate the crisis of overproduction, and push market prices even lower, thereby intensifying the losses and the crisis. So, they would tend to throw any such money hoards and reserves into the money market, so as at least to earn interest. But, with other capitalists doing the same thing, and capitalists cutting back their investment in productive-capital, the result is an increase in the supply of loanable money-capital along with a reduction in demand for loanable money-capital, so that interest rates fall. 

“It therefore lies idle as a hoard in the banks or in the form of credit money, which in essence makes no difference at all. The same hold up could occur for the opposite reasons, if the real prerequisites of reproduction were missing (for instance if grain became more expensive or because not enough constant capital had been accumulated in kind).” (p 494) 

Back To Part 29

Forward To Part 31

Northern Soul Classics - Dr. Love - Bobby Sheen

Friday Night Disco - I'm Ready For Love - Martha and the Vandellas

Another great Summer classic from Martha.

Paul Mason's Postcapitalism - A Detailed Critique - Chapter 4(5)

The Resumption of the Fifth Wave

As I have argued since 2010, the actual slowness of the recovery from that point stems from the deliberate imposition os measures of austerity to reduce aggregate demand, and put downward pressure on wages and interest rates, so as to reflate asset prices. It stems from the policy of QE to underpin those reflating assets, and thereby divert money-capital, and indeed, revenues, away from the real economy, and real capital accumulation, again in order to inflate those asset prices. Policy did not fail to bring about a faster recovery, because policy never was designed to bring faster recovery. It was designed to restrain recovery, and inflate asset prices, the main form of wealth of the bourgeoisie, and now the chosen metric of progress, as speculative capital gain replaced, profit, rent or interest, which again underpinned the change in cultural mindset. 

The bourgeoisie sucked up speculative capital gains, as share, bond and property prices hyper-inflated, financed by central banks. The working-class and underclass hoped for speculative gains from the Lottery, scratch cards and slot machines. On pages 97-99, Paul provides charts for the growth of money-supply, income inequality, and the growth of financial profits that also support the argument I have presented above. On page 100, he provides a chart showing the growth in foreign direct investment, which again shows a clear spike from 1999 until 2008, with a sharp dip between 2000-2003. A further graph on, page 101, shows the same clear pattern. It shows that GDP per head of population rises sharply, across the globe, starting in 1999-2000. For the world, it rises from around $5500 to $10,000 in 2012. For former Stalinist states the rise is even more stark. It rises from around $1500 to around $9,000, whilst for developing economies. It rises from around $1500 to $4200. 

But, Paul, to support his thesis of the prolongation of the fourth wave, focuses on the data for the period after 1989, rather than 1999. For the former Stalinist states, GDP per head understandably falls between 1989-2000. But, even for developing economies, GDP does rise more notably between 1989-2000. For the world, GDP does rise more notably between 1989-2000, but, even here, whilst it rises by about third, from $4000 to $5500, that is much less than its near doubling, from $5500 to $10,000 between 1999-2012. 

Even so, contrary to the pronouncements about secular stagnation and so on, as Paul says, 

“It is this that prompted the British economist Douglas McWilliams, in his Gresham lectures, to nominate the last 25 years as the 'greatest economic event in human history'. World GDP rose by 33% in the hundred years after the discovery of the Americas, and GDP by 5%. In the fifty years after 1820, with industrial revolution underway in Europe, and the Americas only, world GDP grew by 60%, and GDP per person by 30%. But, between 1989 and 2012 world GDP rose from $20 trillion to $71 trillion – 272% - and as we have seen, GDP per person increased by 162%. On both measures, the period after 1989 outpaces the long postwar boom.” (p 101) 

And, the fact is that, in the last two years, the strength of the long wave boom has started to reassert itself, once more. More than 90% of the world's economies are currently growing above their trend rates of growth, many economies are growing at paces equal to those of the early 2000's. 

Paul also provides a further interesting chart that illustrates the point made earlier about stagnant wages for many workers in developed economies. His chart, on page 102, shows a massive rise in income for those at the lowest levels of income, across the globe, reflecting the process of industrialisation of developing economies. It shows a similar rise for the world's top earners. But, it shows a large drop for those in between, which represents all of those workers and middle classes within the developing economies. It represents a significant element in the inevitable collapse of neo-Liberalism. 

In support of this, Paul cites the work of Richard Freeman that I have also referenced, in the past, showing that the global working-class doubled between 1980-2000. A large part of that comes from the industrialisation of Asia, particularly China. In fact, as I have also described, the global working-class rose by a third in the first decade of this century, and interestingly the growth in the service sector at least matches that in industry. 

Paul also notes the same point that I have made, which is that a lot of this development in the developing economies, has proceeded on the basis of extensive rather than intensive accumulation. However, he points out, as these cheap labour supplies start to get used up, and wages rise, the scope for additional profits from offshoring begin to dry up. 

Paul sees these conditions interrupting the wave, as productivity gains decline. However, I still see the potential for expanding the mass of simultaneously employed labour further. Unemployment and underemployment is still high in places. As the boom resumes, many zombie companies will collapse, releasing their capital and labour, much of the fake self-employment will also disappear. And, there are still large supplies of labour in Asia and South America, not to mention the world's latest, and most rapidly developing economies in Africa. 

Paul concludes the first part of the book with a number of questions. 

“What emerges from this shattered dream? The new technical and economic system will have to be built from the materials to hand. We know it will involve networks, knowledge work, the application of science and a large amount of green technology investment. 

The question is: can it be called capitalism?” (p 106) 

I will now follow him in examining those questions.

Back To Part 4

Forward To Chapter 5

Jewish Tories Embarrass Themselves and Undermine The Fight Against Anti-Semitism

The co-ordinated attack by Tory elements of the Jewish media, and by the Jewish Tories leading organisations such as the Board of Deputies and the Jewish Leadership Council, on Jeremy Corbyn, has become so hysterical, and removed from reality, that they are now simply embarrassing themselves. If that were all they were doing, it would not be so bad, but by engaging in such an hysterical and so obviously unfounded, and overtly political attack on Corbyn, under the cover of supposedly fighting anti-Semitism, and threats to Jews, they are fundamentally damaging the real fight against anti-Semitism. It's not just socialist Jews like those in the Jewish Voice for Labour, or radical Jews such as those of Jewdas that have pointed out the sheer hypocrisy of these Jewish Tories and the Blair-rights who have been supporting them. The actions of the Jewish Tories must appal the majority of Jews in Britain. 

The Jewish Chronicle, Jewish Telegraph and Jewish News co-ordinated their front page headlines to attack Corbyn, and to promote the ridiculous idea that a Corbyn government would pose an existential threat to Jews living in Britain! Let us even assume the ridiculous claims made by Jewish Tories that Corbyn is a racist and anti-Semite were true. What are they saying, when they claim that a Corbyn government would represent an “existential threat” to Jews living in Britain? What does an “existential threat” mean? It means what it says, it means that a Corbyn government would pose a threat to the very existence, i.e to the lives of Jews living in Britain. It is essentially equating a Corbyn government to Nazi Germany, and by implication Corbyn to Hitler. In other words, it is doing the very thing that they accuse others of doing when they compare the actions of the Israeli state to that of Nazi Germany! 

The Israeli state, of course, was founded on the basis of a war against the resident Palestinian people, of displacing them and turning them into refugees, and it has ever since sought to expand its territory on a similar basis, which flows from the nationalistic and colonialist ideology of Zionism itself. It did and does represent an existential threat to Palestinians. The actions of successive Israeli governments of different political persuasions, in denying rights to Palestinians, in occupying additional Palestinian lands, like Gaza and the West Bank, as well as Syria's Golan Heights, and their repeated military actions against Lebanon etc., are not accidental or coincidental, but flow from the very nature of Zionism, as the basis upon which the state of Israel was created. Even so, that does not mean that the comparisons of Israel with Nazi Germany are valid. Nor does it justify calls for the destruction of Israel, any more than socialists called for a destruction of Germany, as opposed to the overthrow of the Nazis. It should, however, mean that discussion of Zionism, and the nature of the Israeli state are not off limits, including the links between leading Zionists, at the time, with Nazi Germany and Mussolini's Italy, to try to form an alliance to fight against British imperialism, and its mandate in Palestine. Indeed such discussion might throw light upon why it is that the Tory leaders of Jewish organisations in Britain can attack Corbyn, whilst welcoming the election of Trump, and people like Orban in Hungary, etc! 

Does anyone, however, seriously believe that a Corbyn government would begin to, make Jews second class citizens and so on, in the way that Israel does with Palestinians, let alone round up Jews, to send them to concentration camps and so on, as the Nazis did? Of course not, and by claiming that Corbyn does represent such an existential threat to British Jews the Jewish Tories simply make themselves look ridiculous, and provide succour to the real right-wing anti-Semites. The truth is that the Jewish Tories are more concerned to undermine the possibility of a left-wing Corbyn government, than they are in the fight against anti-Semitism, and they are prepared to sacrifice the latter, by using it as a convenient vehicle to attack Corbyn. In fact, it demonstrates, precisely why Corbyn has been right to resist the further attempts to get Labour to capitulate over the IHRA examples. 

But, let us assume that the Jewish Tory ridiculous assertions against Corbyn were true, let us then suppose that a Corbyn Labour government began to pass some anti-Jewish laws. Have the Jewish Tories not understood that, in Britain, we have a thing called the “Rule of Law”. Unlike the Bonapartist regime in Israel, where Netanyahu could push through the racist laws making Palestinians second class citizens, no British government could bring about such a change without ripping up the existing state itself.  Any such laws, besides provoking a severe public backlash would undoubtedly be struck down by the courts. So, are the Jewish Tories suggesting that a Corbyn government would also scrap the Rule of Law? Are they suggesting that the police, for example, would not act against anyone carrying out attacks on Jews, and so on? And, of course, to do any of those things to scrap the Rule of Law, would indeed require a Labour government to be indistinguishable from that of Mussolini or the Nazis. But, where are the Corbyn Blackshirts or Brownshirts dismantling the Rule of Law, and replacing the police with paramilitary forces and so on? 

Anyone with even a toe planted firmly in reality, knows that any suggestion that a Corbyn Labour Party is setting about dismantling the police, the courts and other aspects of the Rule of Law is totally ridiculous. If anything, the people who have been doing that over the last few years have been the Tories themselves, as they tried to prevent democratic scrutiny of their Brexit chaos.  It could only be put forward by people who have lost all contact with reality, who have abandoned all sense of shame in being prepared to hysterically make any allegation, not matter how ridiculous, so as to undermine the possibility of a Corbyn Labour Government. That they repeatedly rush out with such accusations every time that Labour look set to do well in elections, or begin to take a lead over the Tories in the opinion polls shows the real political motivation of these Jewish Tories, and it has absolutely nothing to do with really fighting anti-Semitism. 

On the news the other day, they interviewed a young girl in Manchester who has faced the kind of routine anti-Semitic abuse from right-wing idiots that many Jews living in Britain face every day. She was asked about the abuse in relation to the attacks on Corbyn by Jewish Tories, and she said words to the effect, “I don't know how much of the abuse I have been getting is down to the things that Jeremy Corbyn has been saying.” But, the obvious question that the reporter should then have asked, and didn't was “Exactly what statements by Jeremy Corbyn do you think might have led to you receiving this anti-Semitic abuse?” 

In fact, whenever Labour canvassers have asked ordinary members of the Jewish community that question, when they have been canvassing, no one could actually give any comment from Corbyn that they were aware of that was anti-Semitic, or promoted anti-Semitism. All of them said that they were basing their opinions solely on what the Tory Jewish media organisations like the Jewish Chronicle, or the Tory leaders of Jewish bodies like the Board of Deputies were saying. In other words, the Tory leaders of these Jewish organisations are whipping up a moral panic, and an anti-Corbyn hysteria, that Jews, in particular, should be familiar with, because it is the kind of hysteria and hatred that has repeatedly been whipped up against them, in the past. 

The Jewish Tories are undermining the real struggle against anti-Semitism, by using the issue for their own short term political objective of undermining Corbyn, as I wrote some time ago. The Jewish community at large needs to be aware of that, and begin to call them to account over it. The vast majority of cases of anti-Semitism brought before the courts involve members of right-wing organisations, not members of the Labour Party, or real supporters of Jeremy Corbyn. The Blair-right, and Jewish Labour MP's who spoke in parliament a few weeks ago, themselves had to admit that where those guilty of abuse against them had come to court, they were all members of right-wing organisations. So, why are the Jewish Tories focussing their attacks on Corbyn, rather than the real culprits when it comes to anti-Semitism? 

As I wrote a while ago, the suggestion that Corbyn is an anti-Semite is thoroughly ridiculous. As the comrades of Jewish Voice for Labour put it recently , 

“The concocted hysteria generated by a small but loud, privileged, rabidly Zionist, section of the Jewish community about the prospect of a Labour Government led by Jeremy Corbyn has descended into complete farce with this “unprecedented step” of three Jewish newspapers with declining readerships all about to publish the same page, declaring that a Corbyn-led government will be an “existential threat” to the Jewish community. The politician who is the most consistent and committed anti-racist, human rights supporter, champion of the homeless and oppressed, fighter against poverty in the House of Commons is painted in this way. it is phenomenal nonsense. Alice in Wonderland stuff.” 

Clearly, it is time for Jewish socialists to begin to expose the activities of the Tories in the organisations of the Jewish communities, and to begin to bring about the same kind of progressive transformation of those organisations that Corbyn supporters have brought about within the Labour Party.

Theories of Surplus Value, Part II, Chapter 17 - Part 29

Marx then describes how, even setting aside the question of the accumulation of capital, a crisis can occur simply in relation to the reproduction of the existing capital. The fundamental requirement of such reproduction, as Marx has set out, following the reproduction model of the Physiocrats, is that the use values that constitute the constant and variable-capital, must be physically reproduced and replaced. Unless this is done, reproduction cannot occur, because the amount of labour employed is dependent on the technical composition of capital. If 100 workers are required to process 1,000 kilos of flax into linen, unless the 1,000 kilos of flax can be physically replaced, there is no basis for being able to employ the 100 workers. Moreover, if the 100 workers require 1,000 units of food to ensure their own reproduction, then, unless this 1,000 units of food can be replaced, it is not possible to reproduce the workforce, or thereby to process the 1,000 kilos of flax. 

But, Marx says, it is, as far as capitalist production and exchange is concerned, not only a matter of ensuring this physical replacement of the use values that comprise the constant and variable capital. In order that a capitalist may, for example, be able to reproduce the 1,000 kilos of flax, they turn into 1,000 kilos of yarn, they must be able to sell the 1,000 kilos of yarn at a price that enables them, once more, to buy the 1,000 kilos of flax. In other words, they must be able not only to reproduce the consumed use value of the flax, but also its exchange value. Suppose the capitalist buys 1,000 kilos of flax for £100. They employ 100 workers, at a cost of £100, who, by their labour, add £150 of new value to the flax, as they spin it into yarn. The yarn now has a value of £250. If it is sold at this value, the capitalist is thereby enabled to use £100 to again buy 1,000 kilos of flax, and a further £100 to engage 100 workers to process it. In the process, they obtain £50 of profit. If the average rate of profit is 25%, they will then have also secured this average profit. 

But, suppose, for whatever reason, the market price of yarn falls to £200. The capitalist could still replace the 1,000 kilos of flax, and again employ the 100 workers, these are use values are physically available for them to do so, but they would now make no profit. If they thought this situation would persist they would look to employ their capital elsewhere, so as to be able to make the average profit. If they continued in this sphere, it would mean selling their output for £50, or 20% less than its exchange-value. However, if the market price of yarn fell to £150, then not only would the capitalist make no profit, but they would also not be able to reproduce their capital. Although the required quantity of flax and labour-power is available to be reproduced, the yarn producing capitalist now no longer has the capital to be able to employ it. They can only buy 750 kilos of flax, and employ 75 workers to process it. 

Back To Part 28

Forward To Part 30

Paul Mason's Postcapitalism - A Detailed Critique - Chapter 4(4)

A Disrupted and Distorted Wave

The Long Wave expansion from 1843 to 1870 is clearly visible.
The effect of the 1847 financial crash, and later too the 1857
financial crisis is also visible.  The 1847 financial crisis caused
GDP to fall by around 37%.  But, once the credit crunch is
 resolved, the long wave expansion continued apace.

There is a similarity of 2000 and 2008 with the stock market crash of 1847, which arose just 4 years into a new upswing, as excess money-capital flooded into railway shares. But, in 1847, when the stock market crashed, it stayed crashed, and after the Bank Act was suspended, and the credit crunch relieved, money-capital flowed back, at pace, into real capital accumulation, and the economic boom continued. That is because liquidity was released to relieve the credit crunch, and no more.

What characterised every crash in asset prices between 1987 and today has been that central banks have kept printing money, and backstopping asset prices without end, in order to reflate them, undermining the real economy and real capital accumulation where necessary, in order to do so. That is actually what creates the distortion of the current long wave. It is also what creates the mindset that the basis of wealth is fictitious capital, and speculative capital gain, rather than revenue. Harold Wilson even disliked Premium Bonds, because he saw them as gambling and creating such a mindset. John Major brought in the National Lottery, Blair oversaw its extension and liberalising of gambling laws. Numerous surveys have shown that people have seen the way to get on being by such means, becoming a celebrity, and so on, as well as being able to make some kind of compensation claim. 

Paul explains the distortion by the collapse of workers resistance to the adaptation of capital in the 1980's, compared to resistance to the adaptation in every previous cycle of the long wave. I don't think that argument is sustainable, for the reasons I've set out previously. In every wave, we see capital respond to labour shortages, in the crisis phase, by seeking out labour saving technologies. These technologies, bit by bit, replace labour, undermine its position, create a relative surplus population, reduce wages, and boost profits. That is what happened in the 1980's, just as it happened in the 1920's, and in the 1870's, and the 1820's. 

And, the facts are clear that a new upswing is discernible from 1999, which is why Paul has to date the fifth wave from the late 90's, even as he argues that the fourth wave ran until 2008! The fact is that, much like 1847, the growth of productivity and profit has been so strong that, even allowing for all of the profits that flowed into unproductive financial and property speculation, there was still sufficient money-capital to finance an enormous accumulation of real capital, particularly after 1999. This is the undeniable fact that those who claim there was no rise in the rate of profit, after 1987, cannot explain. In other words, if the rate of profit did not rise, where did all the additional capital come from? 

Paul provides a chart of global GDP growth (p 94). As he says, it shows the phases of the last two long waves clearly. The usual method of examining such charts is to look for a trend whereby a series of higher highs, and higher lows, transition to lower highs, and lower lows. On that basis, there is a clear upward trend between the mid 1940's to the mid 1970's, followed by a downward trend to 1999, followed by a new uptrend. 

Paul also provides a chart of interest rates over the period, though, for the reasons I have discussed previously, such charts should be treated with a large degree of caution and scepticism, because, as measures of official interest rates, or government bond yields, they are not, as Marx pointed out, even 150 years ago, representative of actual market rates of interest. That is illustrated today by the fact that we have near zero official interest rates, government bond yields that, for shorter dated maturities, are negative, whilst simultaneously, we have small and medium sized businesses unable to get loans, having to resort to credit cards or peer to peer lending, whilst millions of consumers are reliant on expensive overdrafts, payday lenders or worse. The lunacy is illustrated by Italian bond yields below those of the UK, which surge overnight on political risk, and the possibility that ECB support for these bonds might disappear. 

Paul also gives a chart for the price of nickel. He uses this to support the argument of the extension of the fourth wave after 1989. But, in actual fact, the 1987 spike, in nickel prices subsides after 1990, more or less to its previous level. The real sustained rise comes after 1999, as the chart shows. And, Paul's narrative emphasises the point. Citing the US Geological Survey, he says that China's nickel usage doubled from 30 kt. In 1991, to 60 kt. In 2001, but between 2001 and 2012, it rises 13 fold, from 60 kt. to 780 kt.! A look at all other primary products, including agricultural products, shows this same sharp rise in demand and prices after 1999. In 2014, prices fell back sharply, not because of a fall in demand, but because the usual long wave response of increased investment in supply, brings large volumes of these products flooding on to the market. 

I've set out the other data previously that shows clearly that 1999 marks a conjuncture. Up to 2008, that was pretty indisputable, but 2008 changed the climate in which this underlying economic reality was viewed. The severity of the financial crisis flowed over into the real economy, though as I've illustrated elsewhere, the measures undertaken in 2008/9 were quickly reversing those effects. The shock initially scared the bourgeoisie, undermined their confidence in the system, and led to them reaching instinctively for the traditional social-democratic levers. For the Left, of almost every hue, it appeared once more to confirm the idea that the system was in some kind of inevitable decline, restoring all those old catastrophist notions about permanent or semi-permanent crises and inevitable collapse. 

With even progressive bourgeois economists, like Larry Summers, talking about secular stagnation, a general media labelling of the events as The Great Recession, and left-wing economists talking about The Long Depression, it was hard to swim against the stream, and to insist, as I and a few others did, during this period, that we were actually in a period of long wave upswing. But, that is the reality. Unfortunately, writing in 2015, Paul finds himself in a similar situation to that he describes in relation to Bukharin, in 1929, but reversed.

Back To Part 3

Forward To Part 5

Theories of Surplus Value, Part II, Chapter 17 - Part 28

Marx proceeds on the basis of a number of simplifying assumptions, such as that commodities are sold at their exchange-values; he does not, for now, consider the effect of competition between capitals; and nor does he consider the effect of credit. Yet, he recognises that all these things, along with the fact that not only are producers and consumers not coterminous categories, but consumers do not simply break down into the two categories of workers and capitalists either. 

“The first category, that of the consumers (whose revenues are in part not primary, but secondary, derived from profit and wages), is much broader than the second category [producers], and therefore the way in which they spend their revenue, and the very size of the revenue give rise to very considerable modifications in the economy and particularly in the circulation and reproduction process of capital.” (p 493) 

Marx first turns to Say's Law, which was actually developed by James Mill, but was adopted by Ricardo from Say. The basic argument of Say's Law is that there cannot be overproduction, because supply creates its own demand. The underlying assumption is that producers only produce things for one of two reasons. Either they want to consume what they have produced themselves, or secondly they want to exchange what they have produced for some other commodity they desire to consume. On this basis, the driving force of all production, including capitalist production, is consumption; producers only produce in order to consume. 

This is set out in a quote from Ricardo that is repeated in whole or in part, by Marx, several times in his refutation of this concept. Ricardo says, 

““M. Say,” writes Ricardo in Chapter XXI (“Effects of Accumulation on Profits and Interest”), “has…most satisfactorily shewn, that there is no amount of capital which may not be employed in a country, because demand is only limited by production. No man produces, but with a view to consume or sell, and he never sells, but with an intention to purchase some other commodity, which may be immediately useful to him, or which may contribute to future production. By producing, then, he necessarily becomes either the consumer of his own goods, or the purchaser and consumer of the goods of some other person. It is not to be supposed that he should, for any length of time, be ill-informed of the commodities which he can most advantageously produce, to attain the object which he has in view, namely, the possession of other goods; and, therefore, it is not probable that he will continually” (the point in question here is not eternal life) “produce a commodity for which there is no demand.” ([David Ricardo, On the Principles of Political Economy, and Taxation, London, 1821,] pp. 339-40.)” (p 493-4) 

The problem with this argument is that it implies an economy not just prior to capitalism, but one even before generalised commodity production, and the existence of money! It implies an economy based largely on direct production of products for consumption and barter. It is, of course, true that in such an economy people would only produce what they wanted to consume or what they thought they could exchange for other commodities they wanted to consume, but that has absolutely nothing to do with the situation under capitalist production. The capitalist certainly does not produce commodities for their own direct consumption, but nor does the capitalist produce in order to exchange those goods for others they wish to consume either. The capitalist produces for one reason, and one reason only, and that is to produce profit. Even Adam Smith understood this. He writes that the butcher, the baker and the candlestick maker do not supply goods out of some altruistic desire to fulfil the consumption needs of their customers, but only out of their own self-interest, to be able to make profits from such activity. 

It is, of course, the case, that capitalists produce goods and services that they think they will be able to sell, and hopefully sell at the highest prices, but, that is only to affirm the nature of the commodity itself as being a fusion of both use value and exchange-value. No product can have value if it is not itself a use value, and consequently no commodity can have exchange-value unless it too has use value. The capitalist only produces use values that meet consumers' needs, because that is the condition for them also realising the exchange-value, and so the surplus value of the commodity. But, it is the desire to obtain that exchange-value, and thereby the surplus value, that drives the capitalist not the desire to produce use values, so as to fulfil consumption needs. If that were not the case, crises would not be possible. Capitalist firms would continue to churn out commodities to meet the unfulfilled needs of millions of citizens, without regard to whether doing so produced a profit or not. 

But, Ricardo's argument fails for a further reason, which is that, in a money economy, the producer of commodities does not produce them simply in order to exchange them for commodities for their own personal consumption. The capitalist produces commodities to be sold so that the money received from their sale can again be turned into money-capital, and then metamorphosed once more into productive-capital. 

The capitalist, rather than producing to sell to consume, produces so as to sell, so as to be able to produce once more, on a larger scale. But, even prior to capitalist production, the fact that, in a money economy, the two actions of production and consumption are separated means that someone who produces and sells thereby obtains money from the sale, but is under absolutely no compulsion, as is the case with barter, to then use this money in order to buy, to consume! 

A miser, for example, may produce and sell, and then simply hoard the money they obtain in exchange. But, even if the hoarding of this money is only a temporary situation, it means that the necessary flow of value, along with the metamorphosis of the commodity breaks down. A produces and sells to B, and obtains an amount of money, but then does not circulate that money back to B, so that B's production cannot be sold. It has been overproduced. Ricardo does not see this, because for him the process of production and exchange is viewed essentially still in these terms of barter, with money only intervening as a means of facilitating the process of circulation. He fails to understand the nature of money. Missing from Ricardo's analysis is the role of money also as means of payment and store of value. So, Ricardo does not recognise that when A sells to B, the money they receive may not be used to buy commodities from B, but may be used to make a payment to cover some previous debt, to pay taxes and so on. But, A may simply hoard the money, as a store of value. They may do that as a miser, or, alternatively, the fact that money acts as a store of value also thereby means that it can be hoarded, and then turned into money-capital. 

And, in fact, Marx points out that the normally consistent Ricardo finds himself being tricked by the generally inconsistent Say, because having followed Say into the idea that overproduction is impossible, and that, therefore, there were no limits to the accumulation of capital, Ricardo notes, 

““Is the following quite consistent with M. Say’s principle? “The more disposable capitals are abundant in proportion to the extent of employment for them, the more will the rate of interest on loans of capital fall.’ (Say, Vol. II, p. 108.) If capital to any extent can be employed by a country, how can it be said to be abundant, compared with the extent of employment for it?” ([Ricardo], l.c., p. 340, note.)” (p 494) 

How indeed? 

Back To Part 27

Forward To Part 29