Theories of Surplus Value, Part III, Chapter 20 - Part 42

In pre-capitalist modes of production, individual products that are sold as commodities, may each be individual specimens, and each be sold according to their individual value. For example, a pot crafted by a master potter may be sold at a price that reflects the actual labour used in its production, i.e. its individual value. However, as Marx points out, under capitalism it is not even possible to identify the individual value of each commodity unit. Not only is each identical unit part of a batch of such commodities, but all of this production entails the production of other large batches of commodities that form raw materials, and other components of the commodity. 

“It is no longer the labour expended on the individual particular commodity (in most cases, it can no longer be calculated, and may be greater in the case of one commodity than in that of another) but a proportional part of the total labour—i.e., the average of the total value [divided] by the number of products—which determines the value of the individual product and establishes it as a commodity.” (p 113) 

To go back to the earlier point, then, made in the “Observations”, if 120 hats are produced, and require 1200 hours of labour, comprising the labour used in the production of materials, the proportionate amount of wear and tear of machines, as well as the immediate labour, then the value of the output is determinable as being 1200 hours, but the individual value of each hat is now only determinable in relation to this total. In other words, the value of a hat is now equal to 10 hours, whether, in fact, any of these 120 hats comprised, individually, 9 hours of labour or 11 hours of labour. 

“Consequently, the total mass of commodities must also be sold, each commodity at its value, determined in this way, in order to replace the total capital together with a surplus-value. If only 800 out of the 1,200 yards were sold, then the capital would not be replaced, still less would there be a profit. But each yard would also have been sold below its value, for its value is determined not in isolation but as an aliquot part of the total product.” (p 113) 

But, technically, this last statement by Marx is wrong. The value of the 1200 yards is determined not by the labour embodied within it, but, precisely for the reasons he states, only by the socially necessary labour expended. A third of the labour expended was not socially necessary, and was not, therefore, value creating. If in our example above, only 80 hats out of the 120 produced could be sold, at their market value, then, again, a third of the labour expended was not socially necessary, and therefore, was not value creating. It is as though the entire 120 hats only had a value of 800 hours of labour, so that the value of each hat is only 6.66 hours, rather than 10 hours. 

The author of “Observations” writes, 

““If you call labour a commodity, it is not like a commodity which is first produced in order to exchange, and then brought to market where it must exchange with other commodities according to the respective quantities of each which there may be in the market at the time; labour is created at the moment it is brought to market; nay, it is brought to market, before it is created” (op. cit., pp. 75-76).” (p 113) 

But, what is brought to market, as a commodity, is not labour, but labour-power. The worker sells their ability to perform labour for a specific amount of time, e.g. a day. The value of that power to perform labour is not the same as the value of the product of that labour. The only reason for the capitalist buying the labour-power of the worker is precisely because of that fact, i.e. that what they have to pay for the value of labour-power is less than the value which that labour-power produces. 

The capitalist buys labour-power, for, say, 10 hours, and thereby obtains 10 hours of value, via the labour undertaken, but the value of 10 hours labour-power, and so what the capitalist pays as wages, may be equal to only 5 hours of labour. In other words, only 5 hours of labour are required to reproduce the consumed 10 hours of labour-power. Nor is this changed if the method of payment is via piecework. The capitalist then simply determines how many “pieces” should be produced, on average, during the day, and then calculates the payment per piece accordingly. 

For example, if the wage is £10, and rate of surplus value is 100%, the average number of pieces produced, per day, might be 1,000. Discounting constant capital, the value of these 1,000 pieces is £20, or £0.02 per piece. But, the worker will be paid only £0.01 per piece, providing the average worker with the wage of £10. As Marx describes, in Capital I, firms would get rid of the slowest workers, so that the average number of pieces per day slowly increased, and would attempt to adjust rates accordingly. But, this opens up grounds for disputes over these rates where improvements in technology, causes productivity to rise, rapidly increasing the quantity of pieces that workers can produce during the day, because without a reduction in the price paid per piece, this significantly raises wages, and reduces the rate of surplus value. 

Whether wages are paid as time wages, i.e. for a day, week or month, or as piece wages, the worker sells their labour-power before they are paid for it. At the time the worker is set on, their labour-power, for the agreed period, becomes the property of capital. Capital then utilises the use value they have bought, but not yet paid for. This is like a landlord who rents land, or property, the use value of which is then utilised by the tenant, who only pays for it later. In this context, the question of whether what the worker produces is bought as a commodity before or after the worker is paid their wages is irrelevant. As Marx describes in Capital II, the circuit of capital, and the period for its turnover, is determined not by when the commodities comprising the advanced capital are paid for, but when they are physically advanced to production. The period of turnover ends, at the point that their replacements are advanced to production, i.e. P … C` - M`. M – C … P. 

“But his commodity, his labour-power, has been consumed industrially, i.e., has been transferred into the hands of the buyer, the capitalist, before he, the worker, has been paid. And it is not a question of what the buyer of a commodity wants to do with it, whether he buys it in order to retain it as a use-value or in order to sell it again. It is a question of the direct transaction between the first buyer and seller.” (p 114) 

Back To Part 41

Forward To Part 43

The Purpose of The Backstop

Brexiters in recent days have thought that they had a clever argument to put, as they send May back haplessly to renegotiate with the EU over the Irish backstop.  In fact, it simply shows that they do not understand the basic issues involved, and have not been listening.

The argument goes like this.  The EU introduced the requirement of the backstop into the Withdrawal Agreement, because the EU seeks to maintain the commitment set out in the Good Friday Agreement to there being no hard border in Ireland.  If the EU does not remove the backstop, the Brexiters argue, then, as the vote in parliament on Tuesday showed, the Withdrawal Agreement will not pass, and so there will be a No Deal Brexit.  In the case of a No Deal Brexit, the Brexiters argue, then Britain, including Northern Ireland, will simply leave the EU, and so there will be no arrangements for trade, which will mean there will have to be a border in Ireland.  The Brextremists, including the DUP say that Britain would not erect such a border, so it would then be down to the EU to erect that border, meaning that they would have to do what they say they do not want to do, and is the reason for them insisting on the backstop.  On this basis, the Brexiters, and the Brextremists, in particular, think they have put the EU into a logical Catch 22 situation.  They haven't.

Firstly, it's not true that Britain would not be led to introduce a border on its side, because with EU citizens having a right of free movement into Ireland, and a right under the Common Travel Area, to move without checks from the republic to Northern Ireland, and from there to the mainland, should EU citizens still seek to come to the UK, they would have a very large, obvious back door through which to do so.  Given that the drive for Brexit came almost exclusively from a xenophobic hostility to immigration, its unlikely that British governments would leave that door open for long.

Secondly, even if Britain crashes out of the EU on March 29th. it will not crash out of the Good Friday Agreement, unless is specifically decides to do so, thereby breaching a legally enforceable international treaty, into which it had freely entered.  The Good Friday Agreement, commits Britain to not establishing a border in Ireland, and in order to do so, also commits Britain to maintaining the conditions required for their to be no border, i.e. that the regulatory requirements in Northern Ireland are kept in alignment with those in the Irish Republic, i.e. with those of the EU.  If Britain crashes out of the EU on March 29th. without having put in place an agreement to ensure that Northern Ireland remains in regulatory alignment with the EU, it will then be in breach of the Good Friday Agreement, whether it moves to erect a border or not.  That is precisely what the backstop provision in the Withdrawal Agreement was intended to deal with.

Thirdly, the Brexiters, thereby, also do not understand the real basis of the backstop.  The real basis of the backstop is not to prevent the erection of a border in Ireland per se, but is to prevent regulatory divergence between Northern Ireland and the Republic, which is the foundation for there being no border.  The reason that the EU requires such a provision is not just to prevent the erection of a border, so as to comply with the Good Friday Agreement, and the concerns over the possibility of hostility developing into violence against the existence of such a border; it is to prevent a 500 mile backdoor into the EU's single market being created along that border, a trojan horse into the single market that the Brexiters had been trying to sneak through from day 1.   In just the same way that Britain would eventually have to erect a border to stop EU citizens crossing from the republic to the North of Ireland on their way into Britain, so the EU would have to establish a border to stop non-EU goods that do not comply with EU regulations, streaming across the Irish border, and thereby into the EU.

So, when the brexiters say, the backstop, by preventing agreement on the Withdrawal Bill, will lead to a No Deal Brexit, which will lead to the erection of a border, which the Backstop is intended to prevent, they are wrong.  The fundamental reason for the backstop is not to prevent the erection of a border, bust is to protect the EU single market from being undermined by Britain using Norther ireland as a trojan horse into it!  There is absolutely no contradiction, therefore, in the EU continuing to insist on the backstop to prevent Britain pulling off that sleight of hand, of gaining back door entry into the single market.  That is one reason they will not agree to it, and May will get short shrift, in her latest hapless endeavours.

If the EU has to erect a border and police it, to effect that, given that Britain engages in a crash out from the EU, it will do so, and it will rightly blame Britain, for that situation, as Britain will have reneged on its legally binding obligations set out in the Good Friday Agreement.  But, as set out recently, the obvious solution to that situation, and the course of action that would be obvious to the EU, given the large support for staying in the EU expressed by the people of Northern Ireland, would be for the EU and Ireland to press for a border poll so as to bring about a United Ireland.  The EU would be able to offer generous inducements to the people of Northern Ireland to agree to such unification, but given the devastation that would be inflicted on Northern Ireland, in the event of a Brexit crash out, and the introduction of a border, such inducement would probably not be necessary.  Already polls show a majority in favour of a UNited ireland in the event of a No Deal Brexit.  Once again, the brexiters seem to be bluffing in a game of poker, where everyone can see their empty hand.

Theories of Surplus Value, Part III, Chapter 20 - Part 41

Prior to capitalism, the vast majority of production is not of commodities. It is merely production of products for direct consumption. Even those products that are produced as commodities, for exchange, are generally produced only in order to exchange them for other products required for direct consumption. As products, i.e. use values created by labour, those products have value, but this value is not stamped on their face as an exchange-value or price, as it is with a commodity. Even the products used in the production of other products are not generally commodities at this stage, but are themselves only products. 

“The transformation of products into commodities only occurs in individual cases, is limited only to the surplus of products, etc., or only to individual spheres of production (manufactured products), etc. A whole range of products neither enter into the process as articles to be sold, nor arise from it as such. Nevertheless, the prerequisite, the starting-point, of the formation of capital and of capitalist production is the development of the product into a commodity, commodity circulation and consequently money circulation within certain limits, and consequently trade developed to a certain degree. It is as such a prerequisite that we treat the commodity, since we proceed from it as the simplest element in capitalist production. On the other hand, the product, the result of capitalist production, is the commodity. What appears as its element is later revealed to be its own product. Only on the basis of capitalist production does the commodity become the general form of the product and the more this production develops, the more do the products in the form of commodities enter into the process as ingredients.” (p 112) 

Prior to capitalism, commodity production and exchange occurs and develops, but the commodity at this stage is not the same as the commodity that emerges from capitalist production. The commodity, in those pre-capitalist modes of production, is not produced for the purpose of producing and realising profit. It is produced for the purpose of obtaining either some other commodity, via a process of barter, or else to obtain exchange-value, i.e. money, so as to be able to buy other products. It is, in fact, on this basis that commodities, in this phase, exchange at their exchange-values, rather than at prices of production. 

But, under capitalism, the commodity becomes not just a means of obtaining exchange value, but of using it as capital, and thereby of gaining control over surplus value. The capitalist does not produce commodities in order to obtain their exchange-value, for the purpose of then simply acquiring other commodities, as symbolised by the circuit C – M – C, but rather produces them so as to produce a profit, so that the circuit here is P … C` - M`. M – C … P. In other words, as Marx sets out in Capital II, the circuit of industrial capital begins with a physical mass of commodities that constitutes their productive-capital, and their goal is to be able to start each new cycle with a physically larger mass of capital, because given any technical composition of capital, it is this physical mass that determines the amount of labour they employ, and it is this labour, which is the source of their surplus value. The capitalist always seeks to expand the physical mass of their capital, because it is that which enables them to produce on a larger, more efficient scale, so as to gain competitive advantage, and to gain market share relative to their competitors. Nothing could be more wrong then than to see the goal of the industrial capitalist as to merely expand the amount of exchange-value, money in their possession. That is rather the goal of the miser. For the capitalist, the aim is always to move this money form of capital on. The industrial capitalist seeks to continually turn money-capital into productive-capital, so as to produce on a larger scale – P...C` - M`. M – C … P; the merchant capitalist always seeks to convert money-capital into a greater quantity of commodity-capital, because it is from selling a greater quantity of commodities that they increase their own profits, and also reduce their own costs, so as to become more competitive – C` - M` - C2`; and as Marx sets out, even for the money-lending capitalist, their loanable money-capital can only act as capital if it continually passes out of their hands, and into the possession of borrowers – M – M` - M2. Money-capital can only ever be a momentary phase in the circuit of capital, an ephemeral form. As Marx puts it in Capital III, Chapter 24, 

"“In the reproduction process of capital, the money-form is but transient – a mere point of transit.” 

The circuit M – C … P ...  C` - M`, is only ever the circuit of the newly invested money-capital, which, as soon as it has occurred, becomes superseded, by the circuit of industrial capital P... C` - M`.M – C ... P. The only other occasion where M – C … P ...  C` - M` applies, is where the capital is being liquidated, as the firm closes down. 

And, because the capitalist produces commodities in order to realise profit, the equilibrium point around which the market prices of these commodities fluctuate is no longer their exchange-value, but their price of production, i.e. their cost of production plus average profit. 

“The commodity, as it emerges in capitalist production, is different from the commodity taken as the element, the starting-point of capitalist production. We are no longer faced with the individual commodity, the individual product. The individual commodity, the individual product, manifests itself not only as a real product but also as a commodity, as a part both really and conceptually of production as a whole. Each individual commodity represents a definite portion of capital and of the surplus-value created by it.” (p 112-3) 

Back To Part 40

Forward To Part 42

Deselect These Labour MP's

Its reported that the following Labour MP's abstained on Yvette Cooper's amendment to extend Article 50, which had been backed, though only at the last minute, by Corbyn and the Labour front bench.

• Tracy Brabin
  
• Judith Cummins
  
• Gloria De Piero
  
• Yvonne Fovargue
  
• Mike Kane
  
• Emma Lewell-Buck
  
• Jim McMahon
  
• Melanie Onn
  
• Ruth Smeeth
  
• John Spellar
  
• Stephen Twigg. 

The following Labour MP's are reported as having voted against the Cooper Amendment, and with the Tory government.

• Iain Austin.
  
• Sir Kevin Barron.
  
• Ronnie Campbell.
  
• Rosie Cooper.
  
• Jim Fitzpatrick.
  
• Caroline Flint.
  
• Roger Godsiff.
  
• Stephen Hepburn.
  
• Kate Hoey.
  
• John Mann.
  
• Denis Skinner.
  
• Laura Smith.
  
• Gareth Snell.
  
• Graham Stringer.

These Labour MP's are also reported to have voted for the Brady Amendment, backed by the government, which essentially throws the Good Friday Agreement under a bus, by telling May to scrap the backstop, and to reopen negotiations, based on some unknown fantasy alternative.

• Ian Austin
  
• Sir Kevin Barron
  
• Jim Fitzpatrick
  
• Roger Godsiff
  
• Kate Hoey
  
• John Mann
  
• Graham Stringer.

Unless any MP's that abstained had a good reason for doing so, such as being ill, they should be treated as scabs the same same as those that voted with the Tory government. By their actions they not only acted to keep this reactionary Tory government in office, they also lined up with the Tory paleo-right of Rees-Mogg and Co, to support what can only result in a No Deal Brexit. Any Brexit is a serious economic and political attack on the working-class, and those that back it should be branded with infamy accordingly. Those that line up with the hard right in promoting a No Deal Brexit, should have no place as Labour MP's.

90% of LP members oppose Brexit, as do around 75% of Labour voters. Labour MP's that lined up with the Tory government, and with the Tory hard right, are either pursuing their own reactionary nationalist ideological agenda similar to that being pursued by the Communist Party of Britain, of whom some are fellow travellers, or else they are simply pursuing their own reactionary attitude to immigration, or cowardly appeasing of the bigoted views of electors in their constituencies – many of whom will not vote Labour anyway – in the misguided belief that by doing so they might garner a few additional votes. In other words, in the worst tradition of bourgeois politics they put their interest in holding on to their seat and the cushy job that comes with it, above any pretence of holding to basic socialist principles.

The members in the CLP's of these MP's should begin immediately to deselect these MP's that lined up with the Tories in pursuance of reactionary goals. But, that should be only the start, we also need to begin replacing all of the Blair-right and soft left MP's too. They may have a more progressive position on Brexit than these reactionary nationalists, currently, but it is their past political activity that created the conditions under which Brexit became possible, and in which racist and other bigoted ideas were not fundamentally challenged.

We need to start to deselect MP's to make them directly accountable, on a day to day basis, to members, and thereby to put in place MP's, Councillors, and candidates that reflects the current LP membership, and its youthful, dynamic, outward looking, international socialist agenda.

Predictions Already Being Met

Predictions Already Being Met 

At the start of 2018, in my predictions for the year ahead, I said that the momentum towards another referendum would become unstoppable. As I wrote at the end of last year, that prediction had been fulfilled. A march of nearly a million people had been held demanding another referendum, in contrast to the handfuls of EDL/BNP/UKIP fanatics that Leave Means Leave could mobilise. The Labour Party, at its Annual Conference had unanimously passed a composite setting out the demand for a General Election, or if that could not happen, another referendum, with Remain on the ballot. The clear implication being that, Labour would argue for Remain, though the lengthy arm-twisting undertaken by the leadership to water down the initial presentation put forward by the CLP motions, was forewarning that Corbyn and parts of the leadership would attempt to avoid implementing that part of it, just as the year before they had bureaucratically kept discussion of Brexit off the conference agenda. Although, the Labour leadership, or parts of it, were trying to avoid opposition to Brexit, the party itself in the shape of 90% of its members, and its Conference decision, came into line with every other party, except the Tories and UKIP, in opposing Brexit, and supporting another referendum. 

As we enter 2019, therefore, that prediction has already been met. At the start of 2019, I predicted that, because the momentum for a People's Vote had become unstoppable, May would be led to call a General Election. The alternative to another referendum can only be that May is able to get some kind of deal through parliament, including a managed no deal, or that she calls a General Election, in the hope of gaining the majority, she currently lacks. May will not want to call another referendum, because it would split the Tory Party in parliament asunder; it would lead to all of the Blair-rights, lining up with the Liberals, Greens, SNP, Plaid, and Tory Remainers, which this time round would be likely to win the vote, meaning that May would have to resign anyway, leading to the General Election she has tried to avoid. 

So, I also predicted that in deciding to call a General Election, May would pivot towards the ERG, and throw the Tory Remainers under the bus. This week that last prediction has been fulfilled. Having massively lost the vote on her Withdrawal Bill, May responded, by wasting further time, to run down the clock, and then pivoted sharp right towards the ERG. She went so far yesterday in supporting the Brady Amendment, which flatly contradicts her narrative that the agreed deal with the EU, was the best and only deal available, and vacuously talks about going back to the EU to demand effectively that the backstop be dropped, as demanded by the ERG. She did that, despite having spoken to Junker at lunchtime, when he told her, before she spoke in the Commons, that there was absolutely no chance of the EU agreeing even to discuss reopening discussion on the backstop. 

May has clearly set out the ground she is going to stand on, in the upcoming battle. It is firmly with the ERG, and on the ground of a managed no deal Brexit. But, its also clear that there is no majority in parliament, currently, for such a no deal Brexit. In again voting for the Dromey-Spellman amendment, which ruled out No Deal, parliament has shown that the only way forward is now a General Election or another referendum. In two weeks time, after the EU have again told May that the Withdrawal Agreement is not going to be reopened, she will come back to parliament, and will either have to a) capitulate once again, reneging on her alliance with the ERG, which will destroy her, because the Tory rank and file will stomach the consequences, or else she will again have to propose a managed no deal, in line with her “No deal is better than a bad deal mantra”. But, as yesterday showed, there is no majority in parliament for such a No Deal solution. As may runs down the clock, and the effects of Brexit become clearer - last night when the amendments weee being serially defeated, the Pound took a massive nosedive, only recovering after the Dromey-Spellman amendment was passed. 

Polls show that 80% of Tory members and voters back No Deal. It is then rather a no brainer for May. What yesterday in parliament showed was that the Tories are able to coalesce around some form of Brexit policy. The Tory RINOS, who caved in the confidence vote against May, have shown that, absent any credible opposition to Brexit from Corbyn's Labour Party, they will suck it up. Those that can't will get removed by their local associations. The last two days, also showed that Corbyn's continued support for Brexit, whilst 90% of the party seeks to stop it, causes Labour, by contrast to be continually fractured and unstable. The fact that Labour, initially, was not going to oppose the racist new Immigration Bill introduced by the Tories, and only half-heartedly agreed to do so, after an incompetent and embarrassing U-turn, illustrates Labour's problem of the leadership being massively out of step with the membership, not just on Brexit, but also on free movement, and opposition to immigration laws. 

Corbyn's leadership is facing all sorts of different roads at the same time, in a form of triangulation way in excess of what even Blair attempted. The result is that the party's policies appear confused and confusing, unthought out, contradictory, and not entirely honest in their advocacy. That is why, as I said at the start of the year, May would be mad not to call a General Election, given the state of disarray within the ranks of Labour on this issue which is the decisive issue of the day, and which has drowned out discussion of all the other aspects of politics, upon which Labour would otherwise have a clear lead. 

As the clock is almost run-out, but with may still unable to get her deal, or a No Deal through parliament, and with her wanting to avoid another referendum, with Corbyn still, currently supporting her in that ambition, her obvious, indeed only choice left, will be to call a General Election. She will, have to ask for an extension of Article 50, because whatever happens now, Brexit cannot be carried through into law by March 29th anyway. She will ask for an extension in order to hold a General Election. The EU may grant it, in order to avoid a crash out on March 29th, but on the basis of understanding that if May wins the election, she will only come back to negotiate a managed “No Deal”, they may not, preferring to allow Britain to collapse in chaos. 

May will then fight a core vote strategy election, just like the core vote strategy saw Brexit over the line in 2016, and saw Trump over the line also. It will be fought around the concept of a managed no deal as proposed by the ERG. It should have been easy to defeat that strategy, but on the current basis, it will not. Bernie Sanders could probably have defeated Trump, but Clinton could not. A progressive Labour Party, having mobilised tens of thousands of young new members, virulently hostile to Brexit, and enthused by the radical economic and social policies of Corbyn, should have been able to defeat May, and a reactionary policy of Brexit. But, all other areas of politics have been drowned out by Brexit. Polls show that now, a majority of people associate more with Remain and Leave than with Labour and Tory, and the enthusiasm for those that support Remain is growing stronger compared to the enthusiasm of those that support Leave. At the moment, Corbyn is throwing away most of that advantage by continuing to argue his reactionary Brexit policy, which is barely distinguishable from that of May. If he changes position, which at this late stage is likely only to be a result of him being forced to do so, by the rank and file of the party, as with the grass roots rebellion over the Immigration Bill, his conversion will appear insincere, which is a problem with a lot of his political positions, now, which undermines one of his main selling points three years ago. 

Currently, Corbyn insists that Labour would go into an election still arguing for Brexit. His positions on the Customs Union and Single Market are exploded every time they come into contact with reality, as May showed yesterday in parliament. He clearly does not understand the technical details of a Customs Union or Single Market, and his position of negotiating a Customs Union makes no sense. It bears no resemblance to reality, which means, as yesterday, the Tories will be able to make him look stupid, or dissembling every time it is discussed. The reality of Corbyn's position on the Customs Union and Single Market is that it is as unachievable, indeed more so, than the Tories idea that they can have a “Customs Arrangement” that enables them to have all the benefits of free trade, as currently enjoyed in the EU, but with none of the responsibilities. So, the Tories, as well as the Liberals, Greens, Plaid, SNP trying to take votes from Labour, will simply be able to point to that inconsistency to show that a labour government would be placed in exactly the same position as the Tories of being unable to achieve their aims, and so faced with the choice of either capitulating on those aims, or else themselves being forced into a No Deal Brexit. Given Corbyn's behaviour over the last three years, and his long standing opposition to the EU, it would have to be suspected that this last outcome is what he would be happy with anyway. 

In 2017, Labour was loaned the votes of tens of thousands of Liberals, Greens, and even some Remainer Tories, where it looked possible that Labour might have a chance of preventing a hard Tory Brexit government coming to power. Labour's behaviour in the last three years, and Corbyn's insistence on arguing for Brexit means those votes, and more besides are likely to disappear in any snap Brexit election. After all, why vote Labour if its is going to pursue an almost identical Brexit agenda as the Tories, which must also end in some form of No Deal Brexit? 

Yesterday, as I had predicted, May threw the Tory Remainers under the ERG bus, as she moves towards a General Election based on a managed no deal. She was assisted in that by around 14 right-wing Labourites, who jumped on board the ERG bus alongside driver Rees-Mogg so as to ensure that they were crushed. It is part of a dangerous reactionary alliance of nationalists that is going along with Britain itself sliding inexorably towards increasing reaction, and disaster. 

Theories of Surplus Value, Part III, Chapter 20 - Part 40

The basis of the future criticism of the Smithian/Ricardian/Marxian theories of objective value, by the neoclassical school, is first set out by Samuel Bailey. The door to this criticism by Bailey is provided by Ricardo himself, who talks of value only in terms of relative value, i.e. exchange value. The author of the “Observations” writes, 

““[An increased supply of labour is an increased supply of that which is to purchase labour.] If we say, then, with Mr. Ricardo, that labour is at every moment tending to what he calls its natural price, we must only recollect, that the increase made in its supply, in order to tend to that, is itself one cause of the counteracting power, which prevents the tendency from being effectual” (op. cit., pp. 72-73).” (p 111) 

The intention here is to show that wages do not rise to the value of labour-power as capital accumulation raises the demand for labour-power, because the rise in wages also calls forth a rise in population, and supply of labour. This is really more a criticism of Smith than Ricardo. Smith equates the value of labour (power) with the value of the product of labour. The difference between the two, under capitalism, he equates to the excess supply of labour to capital, an excess he feels must disappear as capital accumulation proceeds. 

If we instead start from the concept of labour-power, and a value of labour-power, as a commodity, then the assumption of that value of labour-power, as the point of departure, i.e. as the equilibrium price, follows for wages, as the market price of labour-power, just as with the market price of any other commodity. Its only on that basis that any sense can be made of fluctuations in market prices around this equilibrium price. However, this is the point of departure for proponents of theories of subjective value like Bailey, or the neoclassical school. For these theorists there is no objectively determinable value of commodities, or equilibrium price around which market prices fluctuate. For these theorists, value is purely subjective, and is identical to whatever the current market price is. 

The author of the “Observations” writes, 

““… it is not meant to be asserted by him” (Ricardo), “that two particular lots of two different articles, as a hat and a pair of shoes, exchange with one another when those two particular lots were produced by equal quantities of labour. By ‘commodity’, we must here understand ‘description of commodity’, not a particular individual hat, pair of shoes, etc. The whole labour which produces all the hats in England is to be considered, to this purpose, as divided among all the hats. This seems to me not to have been expressed at first, and in the general statements of his doctrine” (op. cit., pp. 53-54). 

… for example, Ricardo says that “a portion of the labour of the engineer” who makes the machines (Ricardo, On the Principles of Political Economy, and Taxation, third ed., London, 1821, quoted from the Observations) is contained, for instance, in a pair of stockings. “Yet the ‘total labour’ that produced each single pair of stockings, if it is of a single pair we are speaking, includes the whole labour of the engineer; not a ‘portion’; for one machine makes many pairs, and none of those pairs could have been done without any part of the machine…” (Observations etc., London, 1821, p. 54).” (p 111-112) 

The statement that what is being considered in the concept of the exchange-value of the commodity is not some individual commodity unit, such as a particular hat, but that whole class of commodity, i.e. hats in general (at least hats of the same type) is correct, and set out by Marx in Capital I. As far as the last part of the statement is concerned, as Marx says, it is based on a misunderstanding. The machine as a whole takes part in the labour process of making stockings, but only a part of its value is transferred to the commodity, in the form of wear and tear. 

Back To Part 39

Forward To Part 41

Theories of Surplus Value, Part III, Chapter 20 - Part 39

3. Polemical Writings 

“The period between 1820 and 1830 is metaphysically speaking the most important period in the history of English political economy—theoretical tilting for and against the Ricardian theory, a whole series of anonymous polemical works, the most important of which are quoted here, especially in relation to those matters which concern our subject. At the same time, however, it is a characteristic of these polemical writings that all of them, in actual fact, merely revolve around the definition of the concept of value and its relation to capital.” (p 109) 

The first crisis of overproduction occurred in 1825. But, the period from around 1815 to 1830 can be considered as the Autumn or Crisis phase of the long wave cycle, when the conditions for such crises become most acute. Similarly, the period from around 1865 to 1880 demonstrates such characteristics. It also saw the start of the introduction of neoclassical ideas. The same is true of the period from 1914 to 1927, and the development of the Keynesian paradigm. Once more, the crisis period that runs from around 1974-87 saw that Keynesian paradigm that had dominated after WWII, challenged by the Chicago School of Monetarism, and it is that paradigm that has dominated since the 1990's. The next crisis phase of the long wave cycle is due around 2025, unless intervening factors have prolonged, whilst suppressing the strength of, the current boom phases. The basis for the critique of the Monetarist paradigm can already be seen in terms of its effect on producing astronomical asset price inflation, an expansion of the parasitic elements of capital, at the expense of the productive elements, by holding back real capital accumulation so as to repress interest rates, and thereby try to prevent the astronomical asset price bubbles from bursting.

a) [“Observations on certain Verbal Disputes”. Scepticism in Political Economy]

The contents of this work point to actual weaknesses in the theory of value as presented by Smith, Malthus and Ricardo, but it makes no attempt to resolve those weaknesses. 

“This kind of scepticism always heralds the dissolution of a theory, it is the harbinger of a frivolous and unprincipled eclecticism designed for domestic use.” (p 110) 

The author of the work writes, 

““There is an obvious difficulty in supposing that labour is what we mentally allude to, when we talk of value or of real price, as opposed to nominal price; for we often want to speak of the value or price of labour itself. Where by labour, as the real price of a thing, we mean the labour which produced the thing, there is another difficulty besides; for we often want to speak of the value or price of land; but land is not produced by labour. This definition, then, will only apply to commodities” (op. cit., p. 8).” (p 110) 

So, as far as labour is concerned, this is correct, because no distinction is made, by Ricardo, between labour and labour-power. The latter is a use value, or product, because it is also produced by labour (in the shape of the necessaries required to reproduce it, the labour involved in educating and training the worker etc.) and, as wage labour, also a commodity, with an exchange-value. The former – labour – is not a commodity, and does not have a value, but is itself the essence and measure of value. Labour is not a use value, product or commodity, but is an activity, a process, the activity of creating new value.  But, the author does not draw out these distinctions, and thereby resolve the deficiency, but merely emphasises the existence of the problem itself. 

In similar vein, it is correct that land has no value, because it is not a product of labour. All that the objection does is to emphasise the problem of equating price with value. But, as Marx points out, this objection is irrelevant given Ricardo's theory of rent, because, through it, Ricardo explains the price of land as nothing more than the capitalised rent. Given that Ricardo explains the existence of rent on the basis of his theory of value, no problem, in terms of the theory of value exists. It is only possible to arrive at a price for land on the basis of first deriving the value of commodities, of labour-power, and thereby of profit, and the rate of profit. But, even then, a series of other intermediate steps are required to derive rent, and then a price for land, which depends not only on the rate of rent, but also the rate of interest. 

The same thing can be said of productive-capital, and the generation of profits. It is not possible to move directly from this stage to derive a price for shares and bonds (fictitious capital), issued to the providers of loanable money-capital that financed the purchase of the productive-capital. The profit produced by the productive-capital may rise, so that the amount paid out as interest to bond and shareholders may rise, causing bond and share prices to rise. On the other hand, interest rates may rise, so that the capitalised value of the shares and bonds falls, despite the higher profit. 

It is this uncertainty that fuels gambling on the stock exchange, on the future prices of this fictitious capital, whose only real value is as a claim to a portion of future company profits, or a claim to future tax revenues, in the case of government bonds. 

Back To Part 38

Forward To Part 40

How To Lose The Backstop

The Brextremists are insistent that to support May's Brexit deal, it is necessary to lose the backstop, which ensures that Britain's international treaty commitment to an open border in Ireland, set in the legally binding Good Friday Agreement is kept.  The Brextremists say that if Britain crashes out of the EU with a No Deal Brexit, it would automatically mean that the backstop did not exist, and, it would also mean that a border would have to be erected, as Northern Ireland would no longer be in the Single Market.  That is true, but it would also mean, therefore, that Britain had breached its commitment to a legally binding international treaty.  That does not seem to bother the Brextremists who also want to breach Britain's other legally binding commitments to pay the €39 billion, which cover Britain's already accrued bills from its 47 year membership of the EEC/EU.  Britain could decide to renege on its bills and legally enforceable treaties, but to do so would put it in a similar league as other pariah states, which flout such international laws and obligations.  It would hardly be a propitious start for a British state seeking to attract new international partners to do business with it!

There are a number of ways that the Backstop could be removed legally, and thereby prevent Britain from becoming a pariah state after having reneged on its international commitments.   The Withdrawal Agreement sets some of those out.  It would require that Britain and the EU, come to an agreement, which means that Britain and Ireland are able to engage in frictionless trade in the same way they do now as members of the EU.  The Brextremists are right to baulk at this provision, because whatever fantasies May on the one hand and Corbyn on the other may try to purvey, such a solution does not exist.  Or, more precisely, it could only exist if Britain were to agree to remain indefinitely inside the EU Single Market and Customs Union, and were to sign that into international law, via a legally binding treaty.  That is precisely what the Brextremists object in regards the backstop.  Moreover, realistically, any such arrangement could only be a temporary stage prior to Britain rejoining the EU, because no government in its right mind would agree to be permanently bound to abide by the rules and regulations of a Single Market and Customs Union, of which it had no right to a say in determining those rules and regulations.  The EU is not going to give that right to non-EU members, because to do so, would mean destroying the entire basis of the EU itself.

Moreover, the experience of the last two years of the chaos and incompetence of British negotiators, who have shown they have absolutely no idea what they want, let alone how to get it, demonstrates that any possibility of reaching a deal on Britain's future relationship with the EU, will not be arrived at any time soon.  Even if it were possible to arrive at a deal that made the backstop unnecessary, which it isn't, it could not be negotiated for at least another ten years, and the Brextremists have no intention of waiting that long to ditch the backstop.  Their latest ploy appears to be to follow the lead of Michael Gove, of accepting any Brexit deal, so long as it gets Britain outside the EU.  Then Gove's plan is to simply push British regulations ever further away from EU regulations, so that any deal simply quickly falls apart, allowing a Brextremist Tory government to push forward with its hard Brexit agenda, complete with its bonfire of workers and consumers rights, and environmental protections.  The Irish and EU politicians are undoubtedly aware of that plan, which is why they are insistent on the need for the backstop arrangement whatever Britain might seek to do after Brexit.  It is why any hope the Tories have of getting the EU to drop the backstop will be in vain.

May now, therefore, apparently seeks to modify the backstop so as to put some end date to it, and in order to assuage the Brextremists that date would have to be only a few years hence.  This is part of May's plan to pivot towards the Brextremist wing of the Tory Party, as she prepares to call a snap Brexit Election.  In that election, the Tory Remainers will be thrown under the ERG bus.  May will call the election on the basis of getting a mandate to push through a so called "Managed No Deal Brexit", which is what the ERG are pushing for.  That will require her getting agreement from the EU for a short extension of Article 50, to enable an election to be held, and for arrangements to be put in place for this illusory managed no deal Brexit.  Given that 80% of Tory members and voters back No Deal, it will unify the Tories around that idea, whilst it will leave Labour floundering to come up with some kind of unified alternative.

May could, of course, decide to resolve the backstop issue by agreeing with her Remainer wing, and agreeing to push for membership of the single market and customs union.  That would work, although as stated above why any sane government would agree to it, whilst having no voice in determining the rules and regulations is a complete mystery.  But, as I wrote recently, there is no chance that May will do that, because any hint of it would see her out on her ear, along with the other Remainer Tories, as the Tory rank and file ose up in rebellion.  They have already been told that would happen.

But, as I wrote the other day, any hope of resolving the border question in Ireland without the North being in a single market with the EU is forlorn.  It cannot work.  The ideas about some Canada plus style free trade agreement, as with talk about membership of a Customs Union, completely miss the point.  A free trade agreement or a Customs Union, is only an agreement to levy no internal tariffs or quotas on goods and services traded within it.  That does not at all mean that trade itself is frictionless within such an area, because for trade to be frictionless it requires a single market, where all of the goods and services within it, have to comply with certain rules and regulations in their production, and distribution.  The EU, for example has trade deals with the US, which allow certain goods to be traded between them, at either zero tariffs, or tariffs on which they agree that are different from what would apply under WTO terms.  But, that does not mean that trade between the US, and EU can be frictionless.  For on thing, the EU can block certain US products from coming into the EU altogether, such as GM crops, or chlorinated chicken.

To ensure that nothing coming from the US is in any of these banned categories, or that none of the products themselves contain, some of those banned products, it is necessary for the EU to have a border that can check such products, and stop them, where they do not comply.  An example of that can even be seen inside the EU itself.  The EU largely does not have a single market in services.  And, because it does not have such a single market, service providers, even in the EU, are not allowed to freely trade in them within the EU.  Travel around Europe, for example, and you will find that every so often your mobile phone pings, as it tells you that your coverage is now being provided by Orange or Bouygues and so on.  It's only recently that the EU has made some progress in providing the elements of such a single market in phone services by banning the exorbitant roaming charges that once applied, and which British travellers can now looking forward to facing again after Brexit.

There is another way that an end date could be written into the backstop, and that is to write in that the backstop will end, when Northern Ireland becomes rejoined with the rest of Ireland.  That would mean that Northern Ireland would then be a part of the EU, and its single market and customs union.  That eliminates the problem entirely.  The Tories cannot openly suggest it, because they are dependent on the DUP to stay in office, and their own Unionist hardliners would not stand for it.  But, if the Brextremists want an end point that is it.  In fact, voters in Northern Ireland voted 2:1 to Remain in the EU.  recent polls suggest that, faced with a No Deal Brexit, a majority in Northern Ireland would vote to unify with the Republic.   Simply on the basis of demographics, the largely Republican/Nationalist Catholic population is growing faster than the largely Loyalist Protestant population, so that eventually, there will be a clear majority for a United Ireland anyway.  And, indeed the affinity of non-Catholics in Northern Ireland with Unionism, is declining, as today's younger, better educated population,as everywhere, becomes less attached to religion, and the bigotries, and tribal loyalties that go with it.  So, trying to hold on to Northern Ireland, is itself time limited anyway, which makes any attempt to make it determinant for wider Tory policy, such as Brexit, extremely short-termist.

Theories of Surplus Value, Part III, Chapter 20 - Part 38

Prévost then tries a different approach. He writes, 

““Soils of inferior quality … are only put into cultivation if they yield profits as high as—or even higher than—the profit yielded by industrial capitals. Under these conditions, the price of corn or of other agricultural products often remains very high despite the newly cultivated land. These high prices press on the working population, since rises in wages do not correspond exactly to rises in the prices of the goods used by workers. They are more or less a burden to the whole population, since nearly all commodities are affected by the rise in wages and in the prices of essential goods. This general pressure, linked with the increasing mortality brought about by too large a population, results in a decline in the number of wage-workers and, consequently, in a rise in wages and a decline in agricultural profits. Further development now proceeds in the opposite direction to that taken previously. Capitals are withdrawn from the inferior soils and reinvested in industry. But the population principle soon begins to operate once again. As soon as poverty has been ended, the number of workers increases, their wages decline, and profits rise as a consequence. Such fluctuations follow one another repeatedly without bringing about a change in the average rate of profit. Profit may decline or rise for other reasons or as a result of these causes; it may alternately go up and down, and yet it may not be possible to attribute the average rise or fall to the necessity for cultivating new soils. The population is the regulator which establishes the natural order and keeps profit within certain limits” (op. cit., pp. 194-96).” (p 108-9) 

Marx says that this is confused, but consistent with the population principle. However, according to Ricardo, additional investment in agriculture, only takes place on the basis of rising agricultural prices, which creates rising agricultural profits. What Prévost describes, however, is a condition where constantly rising agricultural prices leads to rising wages and falling industrial profit. The consequence of the latter is a reduced level of capital accumulation, which leads to a surplus working population, a fall in wages, and thereby to a decline in population. 

“According to the Ricardian-Malthusian view, the population would grow more slowly. But Prévost’s basis is: that the process would depress wages below their average level, this fall in wages and the poverty of the workers causes the price of corn to fall and hence profits to rise again.” (p 109) 

Prévost’s exposition is important, Marx says, because it shows that the Ricardian-Malthusian view can explain fluctuations in the rate of profit, but cannot explain the long-term tendency for the rate of profit to fall. For example, “upon reaching a certain level the rise in corn prices and the drop in profit would force wages below their level, bringing about a violent decrease in the population, and therefore a fall in the prices of corn and other necessaries, and this would lead again to a rise in profits.” (p 109) 

Similarly, Smith's argument that capital accumulates faster than the growth of the working population explains periods of overproduction of capital, which results in rising wages squeezing profits, but capital always responds to such situations by switching from a regime of extensive accumulation to one of intensive accumulation, whereby labour saving technologies are introduced, which raise productivity, reduce the value of labour-power, and constant capital, creates a relative surplus population, which reduces wages, and thereby increases the rate of surplus value, whilst reducing the rate of profit/profit margin, at the same time as raising the annual rate of profit, and creating the conditions for the next expansion. 

Back To Part 37

Forward To Part 39

Brexiters Dodgy Democracy

The arguments put forward by the Brexiters, whether the Tory Brexiteers and Brextremists, or the Labourite Brexiters who argue that the reactionary Brexit vote has to be "respected", have always been dodgy, but they seem to get more so as time goes on, and the demands for some kind of further democratic testing of the decision, either by another referendum, or a General Election, become unstoppable.

The idea that a referendum could ever be a democratic means of deciding Britain's relation to the EU, on the basis of a simple dichotomous vote, was always dubious, even given the history of plebiscites as a favourite tool of demagogues and dictators.  That is should be so, when the referendum campaign was fought out almost entirely on the grounds of a personality contest made up almost solely of primadonna Tory politicians, was even more unlikely.  That anyone should put any store by a democratic mandate from such a contest is wholly debatable to begin with, and of course, those most insistent upon doing so, whilst being most resistant to any requirement to further test the resilience of that decision are those that secured an ephemeral and tiny majority for their particular opinion on the day. 

The idea that it is required to "respect" any democratic is, of course, alien even to the tenets of bourgeois democracy, let alone anything more substantive.  The basic requirement of democracy is that those that lose a vote, have every right to continue to argue against it, and thereby to disrespect it, to try to overturn it at the earliest opportunity.  If I am a shop steward, and I ask my members to support a vote for continued strike action, and they reject my appeal, I may respond in a number of ways.  I might "respect" that decision, and implement it, hoping to fight another day, or if I strongly feel that the decision is wrong, and damaging, I might have to accept that this is the will of the majority, but a will I cannot in good conscience implement.  I would then stand down, and ask the members to elect a new steward, whilst I would then continue to argue that the decision had been wrong, and should be reversed.  Democracy might require that I accept that those that voted a particular way have a mandate to act upon that decision, it in no way commits me to helping them to do so, or prevents me from trying win a majority for a different course of action.

And, of course, some democratic decisions are themselves so undemocratic that no amount of sophistry about the need to "respect" the will of the majority can force a minority to accept them.  No matter how large a majority of the population vote to send jews to the gas chamber, for example, could be democratic, because it directly removes the democratic rights of a section of the population, in the most brutal way, i.e. by murdering them.  No matter how large the majority for such a course of action would deny the right of others to actively attempt to overturn and to frustrate such a decision.

The Brexiters argue that many of those that argue the need for a further democratic testing of the Brexit vote, point to the fact that lies were told by the Brexiters during the referendum campaign.  Angela Rayner on TV, this morning raised this argument, in saying why she thought another referendum would be a bad thing.   Politicians lie in every election, she said, so the Brexit referendum was nothing different.  Quite true, but the logic of that argument, which she did not follow through, is that precisely because politicians lie in election campaigns, and because people change their minds as they see the implications of what they have voted for, we then have regular elections, so that the lies told in the election and the lessons learned, can enable voters to change their minds, and kick the bums out.

In fact, the day after every election, the losing politicians always continue to argue that they were right, and attempt to bring about another election so as to overturn the decision of the previous one.  So, what is different about the EU referendum that makes the Brexiters so insistent that it should be a one off vote that holds for all time, or at least for another generation?  That is especially so, since the percentage of victory was so narrow, and given that the death of old Leave Voters, and eligibility of new young voters, means that simply on the basis of demographic change, that small majority has almost certainly now been reversed.

In fact, we should apply the same logic as applies to any other democratic vote, and we should like the Chartists, be seeking to enhance all of the democratic procedures we already have.  The Chartists demanded Annual Parliaments.  That would not only facilitate holding lying politicians to account, but contrary to the whining of the Brendas from Bristol, for whom any slight inconvenience to take part in the democratic process is too much to bear, it would facilitate engaging the population in the democratic process to the degree that any meaningful democracy requires, for informed decision making and accountability.  A shop steward is recallable by their members, officials of all kinds of organisations have to put themselves up for election every year.  Even MP's talked about introducing a right of recall of MP's by their constituents, though it seems to have dropped from sight.  So, why should not even some basic democratic norms means that in relation to such a vital issue as Brexit, it is open to regular and sustained challenge?

Brexiters Dissembling On The Border

During the referendum, Brexiters tried to avoid talking about the irish Border; when they had to they assured us that it was no problem at all.  That was just like they said that the negotiations with the EU would be the easiest in history.  Now, that both have been exposed as lies, they still try to claim Britain somehow has the upper hand in negotiations, and that the EU are simply negotiating, and will collapse at the last minute.  That is simply delusional attempts to avoid recognising that their entire world view was shown to be wrong.  On the Irish Border they continue to claim that there is no problem, and that trade across it can continue with the use of some unknown magical electronic systems.  

In pursuit of this later claim, the Brexiters refer to the fact that different EU countries, including Britain and Ireland have different duties, and VAT on various products, and yet this poses no problem to frictionless trade between them.  That is true, though it does not prevent fraudulent VAT and Customs and Excise returns where there is left to self-policing.  Nor does it prevent smuggling of goods across borders, in order to take advantage of variations in those VAT and Excise rates.  However, all this is completely besides the point.  The issues relating to different countries being in different customs regimes, or having different VAT and Excise rates are fairly minimal, and can indeed be dealt with by electronic systems, as well as policing to reduce smuggling etc.  The real issue does not relate to the fact that Britain and Northern Ireland will be in a different Customs Union to ireland and the rest of the EU, it relates to the fact that they will belong to different single markets, and that therefore, they will have completely different sets of rules and regulations dealing with standards of goods and services, both in terms of their own final production, and in terms of the production of the components used in their production.  No amount of so far non-existent electronic systems, is going to deal with that.  The only way to deal with that is to determine what goods and services can cross borders, and which can't, and then to ensure that is actually carried out at the border.

Take something like a chicken pie produced in the North of Ireland, to be shipped to the Republic.  The EU has single market rules and regulations relating to workers rights, to consumer rights and to protection of the environment, which ensure that its objectives are attained, and also that different firms operating within the single market do so, on a level playing field.  Suppose, as an extreme example, a firm in Northern Ireland, after Brexit, and the fulfilment of the Brextremists wish for a bonfire of workers' rights, is able to employ child labour to produce such pies.  That would give it an unfair advantage against EU, firms, including those in the Republic, where the employment of child labour is prohibited.  The single market is intended to prevent such divergences in basic conditions, which enable firms operating with poorer conditions to gain a competitive advantage over those that abide by some minimum standards.

It does not have to be so extreme, as the employment of child labour.  The EU introduced the Working-Time Directive for a similar purpose, so that firms had to abide by some minimum standard in terms of how much they overwork their employees.  Britain, of course, under Thatcher, objected to having to abide by such minimum standards, and obtained an exemption for Britain from the Directive.  That gives an indication of the direction the Tories would quickly whish to go in, after Brexit, just as the Brextremists have been keen to demand the right to be able to define regulatory alignment as really meaning regulatory divergence.  It is the strategy of those like Gove, in supporting May's Deal, who just want to get out of the EU, so that they can then begin this process of regulatory divergence, which will then require that the UK break entirely with the EU, thereby achieving their goal of a hard Brexit.

If firms in Britain/Northern Ireland, for example, introduce working-regulations that mean that employers do not need to provide basic things like a minimum number of paid holidays, maternity and paternity pay and so on, that would give them a clear advantage over EU firms that do have to provide such minimum standards.  Because Brexit will inevitably weaken the British economy, it will also inevitably lead to Britain attempting to introduce more and more of these penny-pinching measures, as a means of British capital attempting to maintain its profits and competitiveness.  That will particularly be the case under the Tories, but under Corbyn, the economic weakness of the economy, brought about by Brexit, will lead to the same thing.  This is why Brexit represents an economic and political attack on the whole working-class.  If British capital is led to introduce these limitations on British workers wages, conditions and rights, so as to compensate for its diminished profitability, then immediately, firms in Britain's immediate neighbours, with whom it trades will also attempt to introduce such attacks on their workers too, so as to retain their competitive advantage.  As this race to the bottom on pay, conditions and rights proceeds, so that attack on workers spreads out across the globe, so that US firms attempt to do the same to match their EU counterparts, and the Chinese Stalinists do the same to maintain the profits of Chinese firms and so on.

Trying to keep track of which chicken pie was made where, and what conditions the workers in that particular factory enjoyed, and whether they complied with EU standards, is impossible to keep track of without a border, and no amount of electronic systems is going to police such trade.  But, that is just in relation to the actual regulations relating to workers' rights in the Northern ireland factory, producing the chicken pie.  We could multiply that up to look also at the environmental regulations that such pies have to comply with in the EU, and whether their production outside the EU complied with those standards.  Then there is whether the firm complies with the EU's minimum standards for consumer rights.

But, even that has only touched the surface of the problem.  The chicken pie itself does not get made from nothing.  It requires pastry, chicken meat, gravy, possibly mushrooms, and various other ingredients.  Nearly all these separate ingredients will come from different suppliers, and many may come from suppliers based in different countries.  Within the EU, this is not a particular problem, because only products that comply with EU regulations can be imported.  But, Britain will not be in the EU, and so not bound by such regulations.  A firm in Britain and Northern Ireland could buy in pastry (or flour and so on to make the pastry) from anywhere in the world, and whether that flour or pastry then complied with EU standards would be anyone's guess, and pretty impossible to keep track of.  For example, Britain might buy in chicken meat from Mexico, which itself had been processed from chlorinated chickens, imported into Mexico from the US.  The EU bans chlorinated chicken, and so this would breach EU regulations.  But, with Britain and Northern Ireland outside the EU, and free to buy in chicken meat from Mexico, who would know that its chicken pies contained this chicken that was banned by the EU.

But, again, that only touches the surface.  Who would know whether the Mexican workers that processed the chicken had the required rights and so on that the EU requires, in relation to the products it allows into the single market?  Who would know whether those Mexican firms comply with the required consumer and environmental protections?  The EU itself, can ensure compliance with that, in terms of products it allows in directly from such third parties, because it is dealing with trade agreements relating to its huge economy, but it too then has border controls in relation to the import of these approved products to ensure compliance.  There is no way the EU could sub-contract that function to the EU, by allowing the UK to import goods and services willy-nilly from across the globe, which it then either sells on directly, or else which form components of its final production, which is sold on into the EU, without any kind of border checking.

And, that is only to deal with one component of the chicken pie.  The same considerations apply to GM crops used in the production of wheat that then goes into the production of the flour that goes into the pastry used in the pie.  And, this is for something fairly simple like a chicken pie.  Imagine the complexity involved in a more complex product, comprising thousand of components, all produced in different locations, and which moves rapidly across borders, back and forth, as these different components are added to say, a car engine, or a gearbox, which in turn is just one component of a car!

It is all of these different transactions, and the requirement for their production to comply with the rules and regulations of the single market that is the issue at stake in relation to the Irish border, not the issue of the Customs Union.  That is why Labour is mistaken in thinking that the question of the irish Border is dealt with by Britain being part of the Customs Union.  It isn't.  It can only be dealt with by being a member of the Single Market, or by agreeing to permanently accept the rules and regulations of the single market.  It is also why the Brexiters continually talk about the Customs Union, and fail to talk about the  real issue which is compliance with single market requirements.  

There is a simple fact, which is that if Britain does not remain in the Customs Union, and more importantly the single market, then there cannot be frictionless trade between Britain and the EU, including Northern Ireland and the Republic.  The EU is quite right to say that it does not want a border in Ireland.  That is a requirement of the Good Friday Agreement.  If Britain does not agree to a deal with the EU that keeps it in the single market and Customs Union, or keeps it tied to those regulations permanently, then it must either accept the backstop, or accept that it would de facto have ensured that a border must be erected in Ireland.   It would by its actions have broken a legally enforceable, international treaty, i.e. the Good Friday Agreement.

There are only two courses of action the EU can then follow.  It can demand that Britain hold a border poll in Northern Ireland, so that the people of Northern Ireland, who voted by a 2:1 majority to remain in the EU, can give effect to that vote, by voting to become part of a UNited Ireland, rather than see he economy of the province devastated, or else the EU could do what it says it does not want to do, but what Britain's actions would force it to do, which is to erect a hard border in Ireland, and to police it using EU Border Agency personnel, and if necessary by EU military personnel.  In other words, Britain would then have the army of its large and powerful neighbour sitting dominantly on its border.

Theories of Surplus Value, Part III, Chapter 20 - Part 37

Ricardo argued that as the price of food rose, money wages would rise, which squeezes money profits. This is the case even though Ricardo argues real wages may fall, because money wages do not rise as much as food prices. Prévost seeks, on this basis, to show that a continual fall in profits is not inevitable. His argument is essentially that the accumulation of capital itself is an indication of the potential for a growing mass of profit. He says, 

““To begin with, the state of prosperity increases profits”” (p 106) 

He means, here, specifically agricultural profits, because, as the population grows, the demand for food rises, more land is cultivated, more capital is invested in agriculture, and, as food prices rise, agricultural profits rise. 

“... “and this happens long before new land is taken into cultivation. The increased area under cultivation does indeed affect rent and decreases profits. But although profit is thus directly decreased, it still remains as high as before the advance… Why is the cultivation of land of inferior quality undertaken at certain times? It is undertaken in the expectation of a profit which is at least equal to the customary profit. And what circumstance can lead to the realisation of such a profit on this kind of land? Increase of population. It presses on … the existing means of subsistence, thereby raising the prices of food (especially of corn) so that agricultural capitals obtain high profits. The other capitals pour into agriculture, but since the soil is limited in area, this competition has its limits and the point is reached when even higher profits can be made than in trade or manufacture through the cultivation of inferior soils. If there is a sufficient area of inferior land available, then agricultural profit must be adjusted to the last capitals applied to the land. If one proceeds from the rate of profit prevailing at the beginning of the increasing prosperity” (division of profit into profit and rent), “then it will be found that profit has no tendency to decline. It rises with the increase in the population until agricultural profit rises to such a degree that it can suffer a considerable reduction as a result of the cultivation [of new land] without ever sinking below its original rate, or, to be more precise, below the average rate determined by various circumstances” (op. cit., pp. 190-92).” (p 107) 

Marx notes that “Prévost obviously misunderstands the Ricardian view” (p 107) 

If the population rises, causing the demand for food to rise, then food prices rise, and agricultural capitals make bigger profits. Its true that on existing farms, where rents have already been set, this does not result in higher rents, and the higher profits go into the farmer's pocket. But, if additional capital is invested, in the cultivation of new land, even of the same quality, this additional demand for land will allow landlords to charge higher rents on this land. Moreover, as existing leases run out, landlords will inevitably set higher rents on that land, reflecting the higher agricultural profits. The higher food prices cause wages to rise, and those higher wages cause profits in industry to fall. That means that even the lower profits on less fertile land may surpass industrial profits, which creates an incentive for capital to move from industry to agriculture. A demand for these less fertile lands is then created, which enables landlords to charge a rent. Only when these new lands begin to supply products to the market, so that the demand is satisfied, and agricultural prices fall, does it become not possible to levy a rent on the least fertile land. 

“The additional amount yielded by the product of the better [soils] is converted into rent. This is the Ricardian conception, whose basic premises are accepted by Prévost and from which he reasons. Corn is now dearer than it was before the rise in agricultural profit. But the additional profit which it brought the farmer is transformed into rent. In this way, therefore, profit also declines on the better land to the lower rate of industrial profit brought about by the rise in the price of agricultural produce. There is no reason for assuming that as a consequence profits do not have to fall below their “original rate” if no other modifying circumstances intervene. Other circumstances may, of course, intervene.” (p 107-8) 

Other circumstances may intervene. If productivity rises, the prices of manufactured wage goods may fall to such an extent that money wages may not rise, so that money profits in industry are not squeezed. Or, as was the case, in the 20th century, when central banks acted to control the note issue, to prevent deflation of the general price level, money wages may rise, but not by as much as total money prices. In this way, the rise in productivity results in a rise in the real wage (living standards), but by a smaller amount than the rise in the nominal money wage, and of total output. The consequence is a rise in the surplus product and surplus value. 

A similar rise in productivity may reduce the value of manufactured constant capital, and of non-food agricultural products, as well as mineral. This does not increase the mass of profit, but, by reducing the value of constant capital, it does lead to a release of capital, and rise in the rate of profit. The rate of profit in agriculture is higher than in industry, because of the lower organic composition of capital. The rise in demand for agricultural products causes prices, and agricultural profits to rise. When capital migrates from industry to agriculture, in response, this only has the effect of reducing the agricultural profits to their previous level, prior to the increase in demand. 

Back To Part 36

Forward To Part 38

Theories of Surplus Value, Part III, Chapter 20 - Part 36

Marx comments on Ricardo's theory of comparative advantage, and Say's notes on it in Constancio's translation of Ricardo's “Principles”. Say notes that sugar imported to France, from the Caribbean, was cheaper than sugar produced in France. Under colonialism, that can be the result of simple cheating, but, as Marx points out, Say fails to mention Ricardo's other point that, as well as absolute comparative advantage there is also relative comparative advantage. 

“Here the law of value undergoes essential modification. The relationship between labour days of different countries may be similar to that existing between skilled, complex labour and unskilled, simple labour within a country. In this case, the richer country exploits the poorer one, even where the latter gains by the exchange, as John Stuart Mill explains in his Some Unsettled Questions.” (p 106-6) 

Mill in the above says, 

“... 'Laws of interchange between Nations; and the Distribution of the Gains of Commerce among the Countries of the Commercial World' and remarks that ' We may often, by trading with foreigners, obtain their commodities at a smaller expense of labour and capital than they cost to the foreigners themselves. The bargain is still advantageous to the foreigner, because the commodity which he receives in exchange, though it has cost us less, would have cost him more' (pp. 1, 2-3)”, (Note 39, p 106) 

Marx then turns to Prévost's treatment of the relation between agricultural and industrial profits. 

““We admit that, in general, the rate of agricultural profit determines that of industrial profit. But at the same time we must point out that the latter also reacts of necessity on the former. If the price of corn rises to a certain point, industrial capitals turn to agriculture, and necessarily depress agricultural profits” (loc. cit., p. 179).” (p 106) 

This question was discussed earlier. There is a distinction between the Smithian and Ricardian theories of the falling rate of profit. For Smith, capital accumulates faster than the growth of the working population. Competition for labour drives up wages and squeezes profits. Ricardo rejected this concept, as does Marx, from a long term perspective. Ricardo believes that the working population increases at least in line with the accumulation of capital, but this growth requires increases in food production, and continually increasing pressure on agriculture. Production is forced on to less fertile land, causing food prices to rise, which raises agricultural prices, causing rents to rise, again squeezing profits. 

“But Ricardo himself admits that profits can also fall when capitals increase faster than population, when the competition of capitals causes wages to rise. This [corresponds to] Adam Smith’s theory. Prévost says: 

“When the growing demand of the capitals increases the price of the labourer, that is, wages, does it not then appear that there are no grounds for asserting that the growing supply of these selfsame capitals never causes the price of capitals, in other words, profit, to fall?” (op. cit., p. 188.)” (p 106) 

Back To Part 35

Forward To Part 37