Sunday, 18 November 2018

Interpreting US Profits (6) - Historic Pricing and Simultaneism

Historic Pricing and Simultaneism

Michael says, 

"AK measures the US rate of profit based on corporate sector profits only and using the historic cost of net fixed assets as the denominator." 

Except, of course, that, in many places, Marx sets out why such historic prices are useless for calculating the rate of profit, precisely because the current rate of profit depends upon the current replacement cost of the commodities that comprise the capital, i.e. how much of current production, and current social labour-time is required to physically replace the consumed capital! 

Michael continues, 

“Marx approaches value theory temporally; thus the price of denominator in the rate of profit formula is at t1 and should not be changed to the price at t2. To do the latter is simultaneism, leading to a distortion of Marx’s value theory.”

Yet, in Capital III, Chapter 6, and elsewhere, that is precisely what Marx says he does, in calculating the rate of profit! 

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

Hence, if the price of raw materials rises, and there is a considerable quantity of available finished commodities in the market, no matter what the stage of their manufacture, the value of these commodities rises, thereby enhancing the value of the existing capital... 

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

There could hardly be a clearer statement by Marx, that his calculation of the rate of profit is based upon the current reproduction cost of the capital, not its historic price. Marx here, most definitely states that the cotton bought at t1 at price x, is retrospectively valued at price x` at t2, as a result of a change in its value, and that is necessarily so, for his theory of social reproduction, and rate of profit, because that reproduction, and the potential for accumulation, is based upon what proportion of current output, of current social-labour-time is required to replace in kind, those elements of capital that have been consumed in the production process. 

As Marx says, in  Capital III, Chapter 49

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

Later in the chapter, Marx says, 

“If the productiveness of labour remains the same, then this replacement in kind implies replacing the same value which the constant capital had in its old form. But should the productiveness of labour increase, so that the same material elements may be reproduced with less labour, then a smaller portion of the value of the product can completely replace the constant part in kind.” 

That is precisely the point made in Chapter 6. If the value of cotton, etc. falls, then, irrespective of what was actually paid for that cotton, in the past, i.e. its historic cost, its current value is reduced, less of current production, less current social labour-time is required to replace it in kind, and the consequence of that is to cause the rate of profit to rise. And that is inextricably linked to simultaneism in that outputs are simultaneously inputs. It is obviously the case that any individual widget is not itself physically in two places at the same time, other than in the sense that the whole of reality is based upon constant movement, i.e. the Earth is whizzing through space at 65,000 miles an hour, and the solar system is itself whizzing around the galactic centre, and so on. But, that fact that it is not the self same widget that is simultaneously an output and an input, is trivial and irrelevant, when capitalism as a system of continuous production is considered, because as Marx stated in Capital I,  each one of these commodity units is merely a specimen of its kind. 

Marx does not have a theory of embodied labour, whereby the value of each widget is determined independently. The value of widgets, like the value of the cotton discussed by Marx in Chapter 6, is continually being adjusted in real-time, as a consequence of changes in social productivity, which results in the social labour-time required for the production of widgets rising or falling. In this sense, the value of the widget should be considered to be like the process of quantum entanglement described by quantum mechanics, whereby the charge of an entangled particle, is instantaneously changed as a result of changes to its partner, no matter how far apart they are. In the same way, a change in the social value/market value of widgets, resulting from changes in social productivity, instantaneously changes the value of all existing widgets, wherever they might be, in the production process. Individual widget X, of course, as it rolls off the production line of A, is not simultaneously, entering the production process of B, but precisely because capitalist production consists of a continuous labour process, an identical clone of widget X, call it X`, is entering the labour process of B, and precisely because X and X`, are identical, and have the same value, then it is absolutely true to say, as Marx does, that outputs are simultaneously inputs. 

Marx himself repeatedly, and overtly states that his approach to social reproduction is based precisely upon such simultaneism. Far from it leading to a distortion of Marx's value theory, it is absolutely central to it! He writes, 

“Various fractional parts of capital pass successively through the various stages and functional forms. Thanks to this every functional form passes simultaneously with the others through its own circuit, although always a different part of capital finds its expression in it. One part of capital, continually changing, continually reproduced, exists as a commodity-capital which is converted into money; another as money-capital which is converted into productive capital; and a third as productive capital which is transformed into commodity-capital. The continuous existence of all three forms is brought about by the circuit the aggregate capital describes in passing through precisely these three phases.” 

(Capital II, Chapter 4) 

and continues, 

“Capital as a whole, then, exists simultaneously, spatially side by side, in its different phases. But every part passes constantly and successively from one phase, from one functional form, into the next and thus functions in all of them in turn. Its forms are hence fluid and their simultaneousness is brought about by their succession. Every form follows another and precedes it, so that the return of one capital part to a certain form is necessitated by the return of the other part to some other form. Every part describes continuously its own cycle, but it is always another part of capital which exists in this form, and these special cycles form only simultaneous and successive elements of the aggregate process.” 

Marx makes the same point about this simultaneity in Theories of Surplus Value, Chapter 17

“A large part of what appears as constant capital—instruments and materials of labour—in one sphere of production, is simultaneously the product of another, parallel sphere of production. For example, yarn which forms part of the constant capital of the weaver, is the product of the spinner, and may still have been in the process of becoming yarn on the previous day. When we use the term simultaneous here, we mean produced during the same year. The same commodities in different phases pass through various spheres of production in the course of the same year.” 

And further, 

“The same commodities which are thus consumed as constant capital in the course of the year are also, in the same way continuously being produced during the same year.” 


“A machine is wearing out in sphere A. It is simultaneously being produced in sphere B. The constant capital that is consumed during a year in those spheres of production which produce the means of subsistence, is simultaneously being produced in other spheres of production, so that during the course of the year or by the end of the year it is renewed in kind. Both of them, the means of subsistence as well as this part of the constant capital, are the products of new labour employed during the year.” 

Marx's philosophical framework derives from dialectics. The dialectic is founded upon the concept of change and process, whose dynamic is driven by the struggle of contradictory poles united within a single whole. The concept of movement, of process is inseparable from contradiction within a dialectical approach. Hegel's dialectic was based upon a process of change within The Idea itself. Marx turned Hegel right way up, to show that this evolution of The Idea was only a reflection of the evolution of the material reality. Reality, whose condition is itself inseparable from constant change, and movement, is necessarily contradictory, and so the reflection of that contradictory reality, whilst anathema to the formal logic of the Aristotelian syllogism, must itself encompass that same contradiction. 

This does not apply to Michael, whose political heritage is in the line of the orthodox Trotskyism of the Militant Tendency, but many of the proponents of the Temporal Single System Interpretation, and of historical pricing, are also part of the so called Third Camp, whose ideological fathers were James Burnham and Max Shachtman. Burnham and Schachtman rejected Marxism, and the dialectic, in favour of the syllogism, on the road to them becoming right-wing conservative opponents of socialism. Trotsky, in A Petty-Bourgeois Opposition in the Socialist Workers Party, took apart this advocacy of formal logic by Burnham and Schactman, and demonstrated the principle of the Marxian dialectic, and the fundamental nature of continuity, and simultaneity to Marxian method. 

Trotsky writes, 

“The Aristotelian logic of the simple syllogism starts from the proposition that “A” is equal to “A.” This postulate is accepted as an axiom for a multitude of practical human actions and elementary generalizations. But in reality “A” is not equal to “A.” This is easy to prove if we observe these two letters under a lens – they are quite different from each other. But, one can object, the question is not of the size or the form of the letters, since they are only symbols for equal quantities, for instance, a pound of sugar. The objection is beside the point; in reality a pound of sugar is never equal to a pound of sugar – a more delicate scale always discloses a difference. Again one can object: but a pound of sugar is equal to itself. Neither is this true – all bodies change uninterruptedly in size, weight, colour, etc. They are never equal to themselves. A sophist will respond that a pound of sugar is equal to itself “at any given moment.” Aside from the extremely dubious practical value of this “axiom,” it does not withstand theoretical criticism either. How should we really conceive the word “moment”? If it is an infinitesimal interval of time, then a pound of sugar is subjected during the course of that “moment” to inevitable changes. Or is the “moment” a purely mathematical abstraction, that is, a zero of time? But everything exists in time; and existence itself is an uninterrupted process of transformation; time is consequently a fundamental element of existence. Thus the axiom “A” is equal to “A” signifies that a thing is equal to itself if it does not change, that is, if it does not exist.” 

The contradiction implied by simultaneism is anathema to the syllogistic logic, where A is A, and cannot simultaneously be not A, but is fundamental to Marx's dialectical logic. In reality, it is absolutely the case, that A is simultaneously not A, because without that being true there is no change, and the nature of matter, and of energy is inseparable from constant change. In reality, it is absolutely true, for example, that at the point of tangency on the circumference of a circle, the line is both a straight line and a curve; in reality, movement implies that a thing is simultaneously in two places at the same time, because that is inseparable from movement, which is continuous, and not a process of discrete movements; in reality, light is both a particle and a wave simultaneously; in reality, as quantum mechanics demonstrates, an electron is in multiple locations simultaneously

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