The Tie-up And Release of Capital - Part 3 of 6

Circulating Constant Capital – raw material including intermediate production (1) 

Unlike fixed capital, the value of raw material, which for Marx includes the value of processed materials, or intermediate production (Department I (v + s) = Department II (c)), which is used productively, transfers the whole of its value in the labour process, because the whole of it is physically consumed in that process. The whole of its value is thereby reproduced in the labour process, and thereby is available for the physical replacement of the consumed material. However, for this same reason, it depends at what point the value/price of the material changes, as to whether a release or tie-up of capital occurs. It can be seen that because this circulating constant capital turns over several times, during the year, and the rate of turnover rises over time, due to technological developments in production and circulation (for example, containerisation, the introduction of flexible specialisation and Just In Time etc.) the effect of a release or tie-up of capital, as a result of changing prices is less significant than the effect of those changing prices on the rate of profit itself, because the proportion of raw materials held in stock, or as work in progress, is always only a small proportion of the total raw material processed during the year. 

Suppose, 100 kilos of cotton are processed into 100 kilos of yarn. The cotton has a current exchange-value/price of £100. £100 is paid in wages, with £100 of surplus value being produced. The value of output is then £300. If, at any point, prior to the yarn being sent to market, the value of cotton changes, this change in value will impact the value of the yarn. Suppose there is a bad cotton harvest, so that the value of cotton rises to £200 for 100 kilos. The value of yarn will then rise to £400. This has to be the case, because the yarn producers, having consumed the 100 kilos of cotton, must now physically replace it, “on a like for like basis” out of their current production, and its value. Unless, the value of yarn, currently on the market, rises to £400, the yarn producers will not recover sufficient value, from the sale of yarn, to cover their purchase of cotton, so as to continue production on the same scale. 

“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 same is true for the supply of raw materials, etc., in the hands of the producer.” 

(Capital III, Chapter 6) 

If the value of output rises, therefore, so that yarn that previously had a value of £300, now has a value of £400, there is no tie-up of capital as a result. However, assume that the yarn was sold prior to the rise in cotton prices, so that the yarn is sold for £300. But, this sale takes place prior to the £300, now in the form of money-capital, having being metamorphosed once more into productive-capital. In other words, £300 of yarn is sold, £300 is put in the bank, but it has not yet bought the cotton required to reproduce that consumed in the production of that yarn. Now, cotton prices rise to £200. In that case, the £100 that has been reproduced, in the sale of yarn, to reproduce the consumed 100 kilos of cotton, is not sufficient. In order to continue production on the same scale, and so to replace “on a like for like basis” the 100 kilos of cotton, the capitalist must now add another £100 of capital. The capitalist has sold yarn for £300. Previously, that represented £100 for cotton, £100 for wages, and £100 for profit. The profit constituted revenue for the capitalist, which they could consume without throwing it back into production. But, now, to continue producing on the same scale, they must take this £100 of revenue/profit and convert it into capital, so as to buy 100 kilos of cotton, whose value is now £200. £100 of revenue has now had to be converted to capital. That is a tie-up of capital, or to put it another way, £100 of revenue that could have been used to accumulate additional capital is now tied up simply to replace the consumed capital. 

Suppose, however, that the circulating capital turns over four times during the year. In that case, initially, £25 is advanced for cotton. The output value is £75 for the turnover period. If it is sold at this point, but then the value of cotton doubles, the spinner will suffer a £25 tie-up of capital, because this £75, will be £25 short of the capital required for production in the following period. However, a £25 tie-up of capital is significantly less than a £100 tie-up of capital. More significant is the effect on the rate of profit, which falls as a result of the fact that more capital must now be advanced, as a result of the rise in the value of raw material. If, the price of cotton rose, prior to the sale of the yarn, then the spinner would obtain a £25 capital gain (they bought cotton for £25 that now has a value of £50), but assuming that they intend to continue producing, and not liquidate all of their capital, this capital gain is only on paper. They obtain £100 for their output, rather than £75, but they must now use £75, of this to reproduce their consumed capital rather than £50, so that the capital gain disappears. More significant to them, again, is the fact that the price of cotton has risen, which means they must now lay out £75 more, in capital for the rest of the year, than would have been the case, and with a consequent effect on their rate of profit. 

Marx makes clear that he is assuming that the change in the price of the cotton is due to a change in its value, as a result of a change in social productivity. But, it could equally be simply a change in its market price, which would have the same effect. Suppose, a new spinning machine is introduced, so that the existing capital advanced for labour is able to spin a much greater quantity of cotton into yarn. In that case, the demand for cotton might rise, substantially. There may be no change in the value of cotton, but the sharp rise in demand for cotton would cause its market price to rise. For the buyers of cotton, this higher price appears in just the same way as if the value of cotton itself had risen, and has the same effect for them. 

There may be a difference, however. Where a rise in productivity in spinning arises, this means relatively less labour is used, and this has a consequent effect in reducing the value of yarn. A fall in the value of yarn, would lead to a rise in demand for yarn. If the rise in demand for cotton leads to higher cotton prices, these higher cotton prices may offset some of the fall in the value of yarn, so that demand for yarn may rise more modestly. However, if it is the value of cotton itself that rises, whilst there is no change in productivity in spinning, the higher price of cotton will pass through into a higher price of yarn, and from there into a higher price of cotton cloth, and clothing, which will cause the demand for cotton goods, cloth and yarn to fall. If demand falls sufficiently, it may not be possible for producers of yarn, cloth and cotton goods to pass on the higher price into their own prices, because it would cause demand to fall to a level where they could not continue to produce at the levels required to utilise their capital efficiently. In that case, they would have to absorb some of the rise in cotton prices out of their profits. 

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Theories of Surplus Value, Part III, Chapter 21 - Part 69

Marx describes the limits on the increase in the mass of profit in a similar way to that set out in Capital III. 

“It is physically impossible that the surplus labour-time of, say, two men who displace twenty, can, by any conceivable increase of the absolute or relative [surplus] labour-time, equal that of the twenty. If each of the twenty men only work 2 hours of surplus labour a day, the total will be 40 hours of surplus labour, whereas the total life span of the two men amounts only to 48 hours in one day.” (p 300) 

But, herein lies the logical fallacy referred to earlier. This assumes that the relevant working-day is that of the individual worker rather than the social working-day, and that the rise in social productivity is manifest not just in relatively less labour employed, but absolutely less labour, i.e. 2 workers rather than 20. 

If £10,000 of capital employs 10 workers working a 12 hour day of which 10 hours is necessary labour (£1,000), and 2 hours surplus labour (£200) the rate of surplus value is 20%, and rate of profit 2%. But, if we take this to relate to the whole economy what we have is a social working-day of 10 x 12 hours = 120 hours, necessary labour of 10 x 10 hours = 100 hours, and surplus labour of 10 x 2 hours = 20 hours. 

As Marx points out, the law of the tendency for the rate of profit to fall is predicated on rising social productivity, a rising rate of surplus value, and a rising mass of capital employed, rising mass of labour employed, and rising mass of profit. So, if now the working day remains constant, at 12 hours, but an increased social capital of £20,000 employs 18 workers, the actual social working day rises from 10 x 12 hours – 120 hours, to 18 x 12 hours = 216 hours. But, viewed in terms of the social capital, and social working day, its quite clear that the same rise in social productivity that leads to relatively less labour being employed, also leads to less necessary labour. Suppose previously, of the workforce of 10, 8.33 workers worked solely producing wage goods = 8.33 x 12 = 100 hours. But, as a result of the rise in productivity, the wage goods required for the 18 workers can be produced in 156 hours. In other words it requires 13 workers, each working a 12 hour day. So, now the 18 workers have produced a new value of 216 hours, and the necessary labour is 156 hours, leaving 60 hours of surplus labour. 

In money terms, £20,000 of capital now employs 18 workers, 13 of whom are engaged wholly in necessary labour, producing the wage goods for all 18. That amounts to £1,560 for wages, and £600 profit. The rate of surplus value rises from 20% to 38.46%, and the rate of profit rises from 2% to 3%. There is no theoretical reason why, as capital accumulates, the absolute mass of labour should not continue to rise, and along with it, the mass of new value produced. Indeed, Marx insists this must be the case. That is just another way of saying that the social working-day continues to increase, and its upper bound is only set by the normal working-day, and the mass of employed, and employable labour.  And, that is exactly what Marx says, and it forms a central aspect of his theory of overproduction of capital.

"Given the necessary means of production, i.e. , a sufficient accumulation of capital, the creation of surplus-value is only limited by the labouring population if the rate of surplus-value, i.e. , the intensity of exploitation, is given; and no other limit but the intensity of exploitation if the labouring population is given. And the capitalist process of production consists essentially of the production of surplus-value, represented in the surplus-product or that aliquot portion of the produced commodities materialising unpaid labour."

(Capital III, Chapter 15)

Moreover, whilst there is no upper limit to the social working-day, theoretically, the only lower limit to the necessary working-day is zero. Rising social productivity means that fewer workers are required to produce the mass of wage goods, so that both the rate of surplus value and mass of profit can continue to rise. 

Suppose, for example we assume that £100,000 of capital now employs 50 workers. At the original technical composition it would have employed 100. The social working-day is then 50 x 12 = 600 hours = £6,000 of new value. If the wage goods for these 50 workers can now be produced by 20 workers, working a 12 hour day = 240 hours necessary labour = £2,400, then the surplus social working day is 360 hours = £3,600, and the rate of profit rises to 3.6%. 

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The Tie-up And Release of Capital - Part 2 of 6

The question of tie-up and release of capital has to be considered from the perspective of fixed capital, circulating constant capital and variable-capital. It also has to be viewed in terms of what point in the circuit of capital changes in values or market prices occur.

Fixed Capital 

Fixed capital always only transfers a portion of its value, via wear and tear, to the value of production, during the labour process. What proportion of its value is transferred depends upon the durability of the fixed capital, and the duration of the labour process. A screwdriver constitutes fixed capital, for example. Its normal lifespan might be say 5 years. Used in the production of kitchen cabinets, which are produced and sent to market every week, the screwdriver transfers (assuming a 50 week year) 1/250 (0.4%)of its value in the labour process. Used in the production of a ship, which is built and sent to market in three years, the screwdriver transfers 60% of its value in the labour process. If the screwdriver had greater durability, say a lifespan of ten years, it would transfer only 1/500 (0.2%), and 30% of its value, respectively. 

Because, fixed capital only transfers a portion of its value, via wear and tear, to the value of output, this equivalent value being returned, via the sale of the output, in each turnover of capital, it is more susceptible to changes in its value, over its lifetime. This will have different consequences for different capitals depending upon what stage in the lifespan of a piece of fixed capital a change in its value occurs, as Marx discusses in Theories of Surplus Value, Chapter 23. 

Suppose firm A bought a machine ten years ago, for £1,000. It has a lifespan of ten years, thereby losing £100 a year in wear and tear. The firm has recovered the £1,000 value of the machine in the value of its output over that period, and has stored up this value, so as now to be able to replace the machine “on a like for like” basis. Firm B, bought the same type of machine a year ago, for £1,000, and has, so far, recovered, £100 of the wear and tear, it has lost. Now, due to a rise in social productivity, the machine requires only half as much labour-time for its reproduction, so that its value falls in half. If the value of money remains constant, the exchange value/price of the machine will, thereby fall to £500. 

Firm A, which has recovered £1,000 in wear and tear, over the ten years, now has a £500 release of capital. It only needs, half of the £1,000 it stored up, to be able to replace the machine “on a like for like basis”. In effect, it has made a £500 capital gain on the money-capital it stored up for this purpose, i.e. its money capital has risen in value relative to the value of the machine. It can use the other £500 of stored up capital as revenue. Either the capitalist might consume this revenue, which will appear as additional profit to them, though that is an illusion, because no additional surplus value has been produced, by increasing their unproductive consumption, or they might again convert this revenue, back into capital, by accumulating additional capital, perhaps by buying a second machine. 

For the second firm, however, they have only recovered, £100 of value of wear and tear. For them, they now have a machine that has a value of only £500. Taking away the value of the £100 of wear and tear, the machine that would have had a residual value of £900, now represents to them a capital loss of £400. If they liquidated their assets, the machine that yesterday had a value of £900, today, only has a value of £500. Moreover, when they come to recover the value of wear and tear from the value of the output, they will now only be able to recover £50 per year, rather than £100. Assuming no further changes in the value of the machine, over the ten years of its life, they will recover £550 in wear and tear. That will still mean they have received a £50 release of capital, but that is much less than that obtained by firm A. If we were to consider a third firm C, that has only just bought such a machine, and so far recovered none of its value from wear and tear, they would suffer a £500 capital loss, as a result of the moral depreciation of the machine. 

Suppose that, in addition to the machine, both firm A and B, advanced £100 for materials, and £100 for wages, with a 100% rate of surplus value, so that £100 of profit is produced. In the current year, prior to the fall in the value of the machine, the value of output is £100 for wear and tear, £100 for materials, £100 for wages, and £100 for profit = £400. The rate of profit is 33.3%. Next year, with the value of the machine falling to £500, only £50 is transferred as wear and tear, so the value of output falls to £350. But, the amount of surplus value remains the same, at £100. So, now, the rate of profit rises to 40%. The rate of profit rises, even though the mass of surplus value remains constant, because the fall in the value of the machine means that less capital has to be advanced to reproduce the consumed capital, “on a like for like basis”. 

The same is true in relation to the annual rate of profit. Previously, £1,000 was advanced for fixed capital, £100 for materials, and £100 for wages = £1200. Profit was £100, giving an annual rate of profit of 8.33%. Now advanced capital falls to £700, and the annual rate of profit rises to 14.29%. This shows what a significant effect on the average annual rate of profit, the moral depreciation of the fixed capital stock, as a result of technological development, can have. 

Previously, £100 of profit, accumulated over ten years, was £1,000, which would have bought one additional machine. Now, this same £100 of profit, accumulated over ten years, will buy two machines, because the value of the machine has halved to £500. The rate of profit, which is a measure of how much the capital has self-expanded, has risen, because the value of the capital that itself has to be reproduced has fallen, in relative terms, therefore, the self-expansion is greater, even though the profit in absolute terms is constant. 

There are two different things happening here, then, that have to be distinguished. The fall in the value of the machine brings about a release of capital. How much capital is released depends upon the extent to which any particular firm has recovered the original value of the machine via wear and tear, or indeed is a new firm with available money-capital, which it has not yet used to buy such a machine. Firm A experiences a £500 release of capital, because it had already recovered the original £1,000 value of the machine in wear and tear. It is in the same position as a new firm, D, entering this production, that had £1,000 of money-capital ready to buy such a machine, but, now finds that it only requires £500 of that capital leaving it with £500 of released capital. Firm B, experienced a £50 release of capital, because it had only recovered a tenth of the original value of the machine in wear and tear, whereas firm C, obtained no release of capital, because it had only just bought the machine for £1,000, and not yet recovered any of its value in wear and tear. 

But, for all of these firms, something else occurs. Firm A, has to replace the machine, “on a like for like basis”, and the value of the machine is now £500. If we measure its profit, against the value of the machine it must replace, then initially the profit represented, over ten years, 100%. But, now, it represents 200%. But, this is true for each of these firms. Firm B, when it comes to replace its machine will have to advance £500, so will firm C, and firm D, which has just entered production, has, from the start, only advanced £500 for its machine. So, the rate of profit measured against the value of the machine, is 200%, in each case, irrespective of whether each of these firms experienced a release of capital or not, and irrespective of whether, they made a capital loss, as a result of a reduction in the value of their existing machine, or made a capital gain, as a result of the money-capital in their possession having risen in value relative to the machine they needed to replace. 

In fact, as Marx describes in Theories of Surplus Value, Chapter 23, this effect of a fall in the value of fixed capital causing a rise in the rate of profit, occurs even where this fall in the value of the fixed capital is not due to moral depreciation, but is due simply to the normal fall in its value due to wear and tear. This also illustrates that Marx's calculation of the rate of profit is based on the current value/reproduction cost of capital, and not on its historic cost. Marx gives the example of a coal producer with capital of £100, comprising £50 fixed capital, which loses £5 a year in wear and tear, and variable-capital of £50, which produces £50 of surplus value. In Year 1, the rate of profit is 50%, but in Year 2, the value of the fixed capital is only £45, because it has lost £5 in wear and tear, so that the rate of profit rises to 50/95 = 52.63%. 

“In the second year, the fixed capital of the coal producer would amount to 45, variable capital to 50 and surplus-value to 50, that is, the capital advanced would be 95 and the profit would be 50. The rate of profit would have risen, because the value of the fixed capital would have declined by one tenth as a result of wear and tear during the first year. Thus there can be no doubt that in the case of all capitals employing a great deal of fixed capital—provided the scale of production remains unchanged—the rate of profit must rise in proportion as the value of the machinery, the fixed capital, declines annually, because wear and tear has already been taken into account. If the coal producer sells his coal at the same price throughout the ten years, then his rate of profit must be higher in the second year than it was in the first and so forth.” 

Were social productivity to fall, so that the value of fixed capital were to rise, then instead of this release of capital, there would be a tie-up of capital. Revenue would have to be converted to capital, so that the consumed fixed capital could be replaced “on a like for like basis”, so that reproduction could continue on the same scale. Similarly, instead of the rate of profit rising, the rate of profit would fall. 

This fact, that the rate of profit rises, solely because of the reduction in value of fixed capital due to wear and tear, is one means, Marx says, by which firms that employ large amounts of fixed capital protect themselves from becoming uncompetitive relative to new entrants using newer, cheaper equipment. It is also why they seek to use such fixed capital as intensively and extensively as possible, so as to recover its value from wear and tear as quickly as possible, and thereby avoid suffering a capital loss from its depreciation. The more the value of existing stocks of fixed capital is reduced, due to wear and tear, the higher the rate of profit, if those firms continue to sell their output at the previous price. But, if they reduce these prices in accordance with the fall in the value of their fixed capital, they can remain competitive with new entrants, and still make the average profit. 

“This extra profit may be equalised also as a result of the fact that—apart from wear and tear—the value of fixed capital falls in the course of time, because it has to compete with new, more recently invented, better machinery. On the other hand this rising rate of profit, which results naturally from wear and tear, makes it possible for the declining value of the fixed capital to compete with newer, better machinery, the full value of which has still to be taken into account. Finally, the coal producer sold his coal more cheaply [at the end of the second year], on the basis of the following calculation: 50 on 100 means 50 per cent profit, 50 per cent on 95 comes to 47½; if therefore he sold the same quantity of coal [not for 105 but] for 102½—then he would have sold it more cheaply than the man whose machinery, for example, began to operate only in the current year. Large installations of fixed capital presuppose possession of large amounts of capital. And since these big owners of capital dominate the market, it appears that only for this reason their enterprises yield surplus profit (rent).” 

(Theories of Surplus Value, Chapter 23) 

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Theories of Surplus Value, Part III, Chapter 21 - Part 68

There are two ways the rate of surplus value can rise – either by an increase in absolute surplus value, or an increase in relative surplus-value. As Marx set out previously, all surplus value is ultimately determined by relative surplus value, because it depends on the level of social productivity achieving a minimum level, whereby labour can produce more, in a working-day, than is required for consumption, so as to reproduce the labour-power of the labourer. 

Absolute surplus value is increased by lengthening the working-day. If the working day is 12 hours, and 10 hours are necessary labour, then surplus labour is 2 hours, giving a rate pf surplus value of 20%. If the working-day is extended to 15 hours, then 5 hours are now surplus labour, and the rate of surplus value is 50%. Alternatively, if the intensity of labour is increased, the same effect can be achieved. So, if workers continue to work 12 hours, but produce as much in this 12 hours as would normally be produced in 15 hours, it is as though this labour is complex labour. It produces 15 hours of new value, but still requires only 10 of these hours as necessary labour, leaving 5 as surplus, and so a 50% rate of surplus value. If all labour operates at this new level of intensity, it becomes the norm, and so reverts to the previous position whereby it only produces 12 hours of new value, and the rate of surplus value falls back to 20%. 

Relative surplus value is increased by reducing the amount of necessary labour in the working-day. That is why Marx says all surplus value is ultimately relative surplus value. The amount of necessary labour depends on the level of social productivity, which depends on the degree of technological development. As new technologies are introduced, as part of capital accumulation, productivity rises, the amount of labour required to produce all commodities, including wage goods, falls, and, as the value of wage goods falls, so the value of labour-power falls, and the amount of necessary labour falls. If the working day remains 12 hours, but the amount of necessary labour falls from 10 hours to 8 hours, the surplus labour rises to 4 hours, and the rate of surplus value rises from 20% to 50%. 

Hodgskin's argument is. 

““… no labour, no productive power, no ingenuity, and no art can answer the overwhelming demands of compound interest. But all saving is made from the revenue of the capitalist” (that is from simple profit) “so that actually these demands are constantly made, and as constantly the productive power of labour refuses to satisfy them. A sort of balance is, therefore, constantly struck” (op. cit., p. 23).” (p 302) 

Marx points out that, in its general sense, this amounts to the same explanation he has given for the tendency for the rate of profit to fall. That is that the rate of surplus value not only may, but must rise, as a result of rising social productivity, and this not only may but must result in a growing mass of profit, and yet the rate of profit will tend to fall, because this rise in the mass of profit will be proportionately smaller than the increase in the mass of capital just as the increase in the mass of labour employed is proportionately smaller than the increase in the mass of capital. 

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The Tie-up and Release of Capital - Part 1 of 6

The value of national output, like the value of the commodity resolves into c + v + s – constant capital, variable-capital, and surplus value. It comprises two components – capital and revenue.  In this context, capital means the value (current reproduction cost) of the means of production consumed in production, which must be replaced, on a like for like basis, out of current production, and revenue is comprised of the new value created by labour in production, which is then resolved into wages, profits, rent, interest and taxes.

“Thus, the value of the annual commodity-product, just like the value of the commodity-product produced by some particular investment of capital, and like the value of any individual commodity, resolves itself into two component parts: A, which replaces the value of the advanced constant capital, and B, which is represented in the form of revenue — wages, profit and rent. The latter component part of value, B, is counterposed to the former A, in so far as A, under otherwise equal circumstances: 1) never assumes the form of revenue and 2) always flows back in the form of capital, and indeed constant capital. The other component, B, however, carries within itself, in turn, an antithesis. Profit and rent have this in common with wages: all three are forms of revenue. Nevertheless they differ essentially in that profit and rent represent surplus-value, i.e., unpaid labour, whereas wages represent paid labour. The portion of the value of the product which represents wages expended thus replaces wages, and, under the conditions assumed by us, where reproduction takes place on the same scale and under the same conditions, is again reconverted into wages, flows back first as variable capital, as a component of the capital that must be advanced anew for reproduction.” 

(Capital III, Chapter 49) 

The capital component comprises the value of constant capital consumed in current production, including the value of the wear and tear of fixed capital. The revenue component comprises v + s, which is equal to the new value created by labour in production. A portion of this new value, v, has to be handed back to workers to cover the value of their labour-power, i.e. to enable them to consume all of the wage goods required for their reproduction. The remaining portion of this newly created value, s, is initially appropriated as profits by the industrial capitalist, before being divided into rent, interest, taxes and profit of enterprise. The total of this v + s, for the economy, is equal to National Income, or society's consumption fund, which, as Marx sets out in Capital II, Capital III, and Theories of Surplus Value, is quite clearly different from National Output, contrary to what Adam Smith had argued, and which orthodox economics has continued to believe ever since. 

The value of the national output is equal to the labour-time required for its reproduction. In other words, the value of the consumed constant capital, and wear and tear of fixed capital, is equal to the labour-time required for its reproduction, its current reproduction cost. The new value created in the labour process, which transforms this constant capital into final output, is equal to the actual labour-time expended in current production. The value of the labour-power, or alternatively of the variable-capital, which must be reproduced out of this new value, is itself equal to the labour-time required for its reproduction. In other words, if wage goods become cheaper, due to a rise in social productivity, this does not change the amount of new value created by labour (v + s), but it does reduce the value of v, so that s, must then rise. 

The constant capital comprises a certain quantity of means of production. For example, in linen production, a certain quantity of flax is spun into yarn, and the yarn then woven into cloth. For production to continue on the same scale, this quantity of flax must again be bought, and processed into yarn, and then into linen. If the level of technology is given, to process the flax into yarn, and then into cloth, requires a given quantity of labour. The relation between the physical quantity of flax, and the physical quantity of labour required to process it is called the technical composition of capital. It is important, as Marx sets out in Capital I, because it is this technical composition of capital that is the basis of the organic composition of capital. It is important, because the technical composition of capital determines how much labour is employed, and, assuming the rate of surplus value remains constant, the amount of labour employed determines how much surplus value is produced. It is the basis for determining the extent of the self-expansion of capital, but also because it determines the mass of labour employed, also thereby determines how much the capital relation itself can be expanded, via the process of accumulation, and the employment of additional labour. 

As Marx sets out in Capital III, Chapter 49, if social productivity remains constant, then social reproduction requires that the physical mass of means of production are reproduced "on a like for like basis", and given this mass of means of production, with a given technical composition of capital, that requires the reproduction of the given mass of labour to process it, which requires also that the wage goods required to reproduce that labour-power are reproduced. The reproduction of the physical commodities that comprise the constant capital and the variable-capital is done out of the physical mass of current production, with the remainder comprising the surplus product. If social productivity remains constant, then the labour-time required for the production of these components also remains constant, so that their value also remains constant, and the proportional relations between those values. 

“... if we leave aside that portion of constant capital which did not pass over into the product, and which therefore continues to exist, although with reduced value, as before the annual production of commodities; in other words, temporarily leaving out of consideration the employed, but not consumed, fixed capital, then the constant portion of advanced capital is seen to have been wholly transferred to the new product in the form of raw and auxiliary materials, whereas a part of the means of labour has been wholly consumed and another part only partially, and thus only a part of its value has been consumed in production. 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.” 

And later in the chapter, 

“In so far as reproduction obtains on the same scale, every consumed element of constant capital must be replaced in kind by a new specimen of the same kind, if not in quantity and form, then at least in effectiveness. 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. The excess may then be employed to form new additional capital or a larger portion of the product may be given the form of articles of consumption, or the surplus-labour may be reduced. On the other hand, should the productiveness of labour decrease, then a larger portion of the product must be used for the replacement of the former capital, and the surplus-product decreases.” 

This is the basis for either the tie-up of capital, where social productivity falls, and more current labour-time/production must be consumed to physically replace the consumed capital (revenue has to be used to reproduce capital), or conversely a release of capital, where social productivity rises, and a portion of current production/labour-time that previously would have been required for the physical reproduction of capital, is now released and can be used as revenue. 

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Theories of Surplus Value, Part III, Chapter 21 - Part 67

[e)] Compound Interest: Fall in the Rate of Profit Based on This

An underlying concept, in Hodgskin's analysis, is that, as the amount of capital per worker rises, the amount of surplus value/profit that the worker produces must also rise if the rate of profit does not fall. Hodgskin refers to the return on capital as interest. As Marx points out in Capital III, interest, as well as rent and taxes are only separate divisions of the surplus value, after it has been realised as profit by the capitalist. Marx quotes Hodgskin. 

““A mere glance must satisfy every mind that simple profit does not decrease but increase in the progress of society—that is, the same quantity of labour which at any former period produced 100 quarters of wheat, and 100 steam-engines, will now produce somewhat more [… ] In fact, also, we find that a much greater number of persons now live in opulence on profit in this country than formerly. It is clear, however, that no labour, no productive power, no ingenuity, and no art can answer the overwhelming demands of compound interest. But all saving is made from the revenue” (that is from simple profit) “of the capitalist, so that actually these demands are constantly made, and as constantly the productive power of labour refuses to satisfy them. A sort of balance is, therefore, constantly struck” (loc. cit., p. 23).” (p 298) 

Because Hodgskin remains confined within the Ricardian framework, his conception, here, is based on the idea that, in order to increase, or even maintain the rate of profit, the mass of profit must increase, which requires a rise in the rate of surplus value. But, Hodgskin concludes, there are limits to how much this rise in the rate of surplus value can continue, without wages themselves actually declining below what is required for the reproduction of labour-power. So, on this basis, he concludes that there is this “balance struck” between capital and labour. As I've shown before, there is a logical flaw in this idea about there being a limit to how far the rate of surplus value can be raised. I will come back to it later. 

Marx describes the way actual capital accumulation is the equivalent of compounding. That is, if a given capital is £100, and produces £10 of profit, all of which is accumulated, the capital is then £110, and if it now produces the same 10% profit, the profit in the second year will be £11, which if all accumulated means the capital is now £121, and so on. So, measured over a period of years, the actual amount of profit would result in a much higher annual rate of profit than 10% on the initial £100 capital. 

“Thus the capital will have multiplied itself sevenfold over a period of 20 years. According to this yardstick, if only simple interest were paid, it would have to be 30 per cent per annum instead of 10 per cent, that is, three times as much profit, and the more we increase the number of years that elapse, the more the rate of interest or the rate of profit calculated at simple interest per annum will increase, and this increase is the more rapid, the larger the capital becomes.” (p 298) 

I've also referred to this in another context, in relation to current conditions. The price of shares and bonds has risen inexorably over the last thirty years. In order that the yield on these assets should even remain constant, therefore, the amount of dividends and bond interest paid must rise by a proportionate amount. These assets are treated as capital which, somehow, produces these returns in the same way that a pear tree produces pears. But, in reality, the dividends paid on shares, and the interest paid on bonds, depends not on any intrinsic quality of those assets, but on the ability of the actual productive-capital to produce profits. If we take a company with £1,000 of productive-capital that has been financed by an equivalent amount of borrowing, represented by the issue of 1,000 £1 shares, it may produce £100 of profit, or 10%. The shareholders may be paid the market rate of interest, say 5%, on their loaned money-capital, as dividends. That leaves £50 that may be accumulated by the company as additional capital. 

However, shares are traded on stock markets. If the price of these shares rises, say to £2 per share, then, if its expected that they continue to produce a yield of 5%, it would mean that £100 in dividends would have to be paid out. That is the equivalent of the whole profit of the company, which means that no profit is then available for capital accumulation. If the company does not expand its capital, then, unless its rate of profit rises, for some reason, its mass of profit cannot expand beyond this £100. So, if the price of the shares rises further, say to £2.50, the yield must inevitably fall, here, to 4%. 

Hence, we have seen the phenomenon described by Andy Haldane, at the Bank of England, that, in the 1970's, only about 10% of profits went to dividends, whereas today it is more like 70%, and yet dividend yields have been falling. In fact, yields were falling because asset prices were rising for reasons wholly separate from any increase in profits. As yields fell, the Directors whose role is to protect the interests of the owners of fictitious capital (shareholders, bondholders) compensated by increasing the proportion of profit going to dividends. But, as they did so, that kept the prices of fictitious assets inflated whilst denuding the resources for real capital accumulation and profit growth, which thereby further undermines the real basis of providing future dividends. 

In a similar way, if the employed labour produces £100 of profit, where £1,000 of capital is employed = 10%, then, if the consequence of capital accumulation is that £5,000 of capital is employed, the employed labour must produce £500 of profit, for the same 10% rate of profit to be maintained. That would require two things. Firstly, there is no change in productivity, and so no change in the technical composition of capital, secondly, that the population rises proportionate to the accumulation of capital so that there are adequate supplies of labour. Otherwise, demand for labour would exceed supply, wages would rise, profits would fall, and along with it the rate of profit. 

“We have seen that over 20 years, capital increased sevenfold, whereas, even according to the “most extreme” assumption of Malthus, the population can only double itself every twenty-five years. But let us assume that it doubles itself in twenty years, and therefore the working population as well. Taking one year with another, the interest would have to be 30 per cent—three times greater than it is. If one assumes, however, that the rate of exploitation remained unchanged, in 20 years the doubled population would only be able to produce twice as much labour as it did previously (and [the new generation] would be unfit for work during a considerable part of these 20 years, scarcely during half this period would it be able to work, in spite of the employment of children); it would therefore produce only twice as much surplus labour, but not three times as much.” (p 299) 

It might be expected then, as indeed Adam Smith did expect, that the accumulation of capital exceeds the growth of the labour supply. Wages would then rise, and profits fall, until they eventually disappeared. But, of course, as Marx has shown, whenever any such situation arises (a crisis of overproduction of capital), capital responds by engaging in a search for labour-saving technologies, and a subsequent period of intensive, rather than extensive, accumulation. The process of capital accumulation goes along with a process of raising the level of social productivity – more acutely during these periods of intensive accumulation – so that the technical composition of capital rises. Capital does not then require that, in this case, the labour supply trebles, rather than doubles, over the 20 years, because each unit of this labour now produces 50% more than it did previously. 

However, and this is a point made, though in a different manner, by Hodgskin, Marx's explanation for the tendency for the rate of profit to fall, is that, if less labour is employed, relatively, then the amount of profit it produces must also fall, relative to this larger mass of capital, and so the rate of profit falls. If £1,000 of capital employs 10 workers, who produce £100 of profit, the rate of profit is 10%, but, if £2,000 of capital employs 18 workers, who produce £180 of profit, the rate of profit is 9%. The mass of labour employed, and the mass of profit have both risen by 80%, but the amount of labour has fallen, relatively, and along with it the profit has also fallen relatively. 

That assumes that the rate of surplus value itself remains unchanged, which, as Marx says, is not tenable, because the rise in social productivity assumed here, as the basis of this tendency, also means that the value of labour-power falls, as wage goods become cheaper. In fact, that same principle means that raw materials and fixed capital also fall in value, which also results, therefore, in a rise in the rate of profit. 

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The Tie-Up and Release of Capital - Summary

The Tie-Up and Release of Capital

Summary

• The accumulation of capital involves the conversion of revenue into capital. In other words, a part of society's fund of commodities/money/labour-time, available for consumption, is instead used to accumulate additional productive capacity. A Tie-Up of Capital occurs where a fall in social productivity means that the current labour-time/value of those commodities that comprise constant and/or  variable-capital rises, so that a portion of revenue is then required, not to accumulate additional capital, but simply to ensure the reproduction of the existing capital.
• A Release of Capital occurs in the opposite conditions where a rise in social productivity causes the value of constant and/or  variable-capital to fall. Then a portion of current labour-time that previously would have been required to reproduce the consumed constant and/or variable-capital is released, and becomes available as additional revenue.
• Where the value of constant capital falls, and a release of capital arises, this release of capital creates the illusion of an increased mass of profit. No such actual increase in profit has occurred, because there is no change in the rate of surplus value, or the mass of labour employed, and so no change in the amount of surplus value produced. The illusion of additional profit arises, simply because a part of social production that was previously required to reproduce capital is now available as revenue. The opposite applies in relation to a tie-up of capital.
• For those in possession of constant capital, the release of capital as a result of a rise in social productivity, and a fall in its value represents a capital loss. For example, the owner of a machine whose value is morally depreciated, suffers a capital loss, equal to the amount of depreciation. But, for every other capitalist who owns money-capital, and seeks to buy such a machine, they obtain a capital gain on their money-capital, because that money-capital is worth more relative to the machine. That applies to the owner of the machine themselves, whose money-profits now also have appreciated relative to the value of any of these machines they seek to buy, either to replace those they have that have worn out, or else to add to their stock of machines. The opposite applies where capital is tied up due to a fall in social productivity, and a rise in the value of constant capital.
• Although a release of constant capital creates only the illusion of an increased mass of profit, it creates a real rise in the rate of profit. A change in the value of constant capital does not change the amount of surplus value produced, because that is a function of the rate of surplus value, and quantity of simultaneously employed labour. If the mass of surplus value then remains the same, but the value of constant capital falls, the rate of profit must rise. The rate of profit is s/(c + v). S and v have remained the same whilst c has fallen, so that (c + v) has fallen, meaning that s/(c + v) rises. The opposite is true where there is a tie-up of constant capital.
• Where capital is released (either constant or variable-capital) the released capital can be used for additional accumulation, in just the same way that any other increase in profit can be used for additional accumulation. Where the released capital is used for additional accumulation, so that more labour is employed, then, even assuming the rate of surplus value remains the same, this increase in the mass of simultaneously employed labour means that the mass of surplus value itself is increased. The opposite is true where there is a tie-up of capital, so that less capital and labour is employed, so that the mass of surplus value would then fall.
• A release of variable-capital arising from a rise in social productivity that reduces the value of wage goods, results in the same illusion of additional profit, but it also causes a rise in the rate of surplus value, and thereby in the mass of surplus value. This rise in the mass of surplus value, of itself, means that the rate of profit rises, i.e. even if (c + v) were constant, s/(c + v) rises due to the rise in s. However, here, not only does s rise, but v falls, so that (c + v) falls, meaning that the rate of profit rises for this additional reason. The opposite applies where there is a tie-up of variable-capital.
• A release of variable-capital can arise where wages themselves fall, which could be because they are pushed below the value of labour-power, or because they had previously been above the value of labour-power. The rate and mass of surplus value would again rise,  here, because a greater part of the day now constitutes surplus labour, and with the same mass of simultaneously employed labour, this means that the mass of surplus value rises. It again thereby means that the rate of profit rises, because of the increased mass of surplus value, and lower value of advanced capital.
• A release of variable-capital can arise where unit wage costs remain constant, but where less labour is simultaneously employed, because a rise in social productivity results in a rise in the technical composition of capital, i.e. less labour is required to process a given mass of material. The release of variable-capital creates the same illusion of additional profit. If the rate of surplus value remains constant, the reduced mass of simultaneously employed labour means that less surplus value is produced. But, c remains the same as before, and consequently the rate of profit falls. This is the basis of Marx's Law of The Tendency For The Rate of Profit To Fall.

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Theories of Surplus Value, Part III, Chapter 21 - Part 66

Marx inserts a short digression on the etymology of value. The proponents of theories of subjective value, such as Bailey, and later the neoclassical economists, equate value with utility or use-value. In terms of the etymology of the term, that is quite correct, as Marx sets out. Tracing the root of the words, “value”, “valeur”, “wert”, via Sanskrit, and other ancient languages, Marx demonstrates that they originally mean the use value of things to people. But, its precisely for that reason that this concept of value, as use value, has nothing to do with the actual value, or, therefore, the exchange-value that is the subject of economic study. 

“Exchange-value, as the result of the social development which created it, was later superimposed on the word value, which was synonymous with use-value. It [exchange-value] is the social existence of things.” (p 296) 

Marx examines Hodgskin's analysis of fixed capital, and commends him for his correct understanding of its relation to labour. Hodgskin also makes the correct distinction between wear and tear of fixed capital, the value of which is transferred to the commodity, as against depreciation, which isn't. Wear and tear is a function of use. It requires that the fixed capital participate in the labour process alongside immediate labour. That labour thereby preserves the value of constant capital, by firstly preserving its use value. It does that, in the case of fixed capital, via the transfer of the value of wear and tear. 

All capital that is not participating in the labour process, however, deteriorates. Its use value is not, thereby preserved by the action of immediate labour upon it. It depreciates, because it loses use value, and, consequently, it has less use value to transfer, as wear and tear, to output. Unlike the value of wear and tear, which is reproduced in the value of output, this depreciation is then simply a capital loss that is not reproduced. 

But, this demonstrates, as Hodgskin says, that it is not this fixed capital that somehow adds value to the value created by labour, but that the value even of the fixed capital is itself not even preserved or reproduced without the action of immediate labour upon it. 

““… all instruments and machines are the produce of labour. […] As long as they are merely the result of previous labour, and are not applied to their respective uses by labourers, they do not repay the expense of making them. […] most of them diminish in value from being kept. […] Fixed capital does not derive its utility from previous, but present labour; and does not bring its owner a profit because it has been stored up, but because it is a means of obtaining command over labour” ([Thomas Hodgskin,] Labour Defended etc., pp. 14-15).” (p 297) 

““After any instruments have been made, what do they effect? Nothing. On the contrary, they begin to rust or decay unless used or applied by labour.” “Whether an instrument shall be regarded as productive capital or not, depends entirely on its being used, or not, by some productive labourer” (loc. cit., pp. 15-16). 

“One easily comprehends why […] the road-maker should receive some of the benefits, accruing only to the road-user; but I do not comprehend why all these benefits should go to the road itself, and be appropriated by a set of persons who neither make nor use it, under the name of profit for their capital” (loc. cit., p. 16).” (p 297) 

Marx gives a number of further quotes from Hodgskin to a similar effect that it is the accumulation of skilled labour that is significant, and so the claim to profit, by capitalists, simply on the basis of the role of fixed capital is baseless. 

““… it is not […] the quantity but the quality of the fixed capital on which the productive industry of a country depends. […] fixed capital as a means of nourishing and supporting men, depends for its efficiency, altogether on the skill of the labourers, and consequently the productive industry of a country, as far as fixed capital is concerned, is in proportion to the knowledge and skill of the people” (loc. cit., pp. 19-20).” (p 298) 

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Theories of Surplus Value, Part III, Chapter 21 - Part 65

What Hodgskin focuses on, therefore, is coexistent labour, and on this basis, he emphasises accumulation not as an accumulation of dead labour, but of living labour, of the accumulation and development of skilled labour. 

“Accumulation in this context means assimilation, continual preservation and at the same time transformation of what has already been handed over and realised.” (p 294) 

Marx notes an analogy here with Darwin's theory of evolution, in that each new species arises not on the basis, each time, of starting from the beginning, but of building on what already existed. For Hodgskin, past labour, stored up in the circulating capital, plays no significant role in the accumulation of the skilled labour, because the circulating capital itself is nothing other than coexistent labour. It expands as the quantity of coexistent labour expands, and as its increasing skill results in a wider range of more complex products being produced by it. 

This view, as Marx says, is one-sided, but its obvious why Hodgskin adopts such a stance as against the bourgeois economists. It is one-sided because it is not just the progressive development of skilled labour that is determinant here. Even a less skilled worker can produce a more precisely engineered product than a highly skilled worker, if the former has more advanced tools or machines to work with. The accumulation of fixed capital makes immediate labour more productive, and a consequence of that greater productivity is a larger social surplus, the ability to develop science and technology, and so on. 

Hodgskin, however, as with other subjectivists, gets things the wrong way round. He recognises the relation between capital and wage labour as a social relation, and that it is this relation that is the basis of profit. But, he then concludes that the presentation of things by the bourgeois economists, as representatives of the bourgeoisie, as being a relationship between current labour and past labour, must be a deliberate deception. 

“The capitalist, as capitalist, is simply the personification of capital, that creation of labour endowed with its own will and personality which stands in opposition to labour. Hodgskin regards this as a pure subjective illusion which conceals the deceit and the interests of the exploiting classes. He does not see that the way of looking at things arises out of the actual relationship itself; the latter is not an expression of the former, but vice versa. In the same way, English socialists say “We need capital, but not the capitalists”. But if one eliminates the capitalists, the means of production cease to be capital.” (p 296) 

Marx does not mean just the elimination of private capitalists, here. As he sets out, in Capital III, the private capitalists are progressively eliminated from production by the very process of capital accumulation. The monopoly of private capital is replaced by socialised capital, in the form of joint stock companies, cooperatives, corporations and state capital. The social function of the private capitalist is taken over by the functioning capitalist, the professional day to day managers, administrators, technicians, and so on. Even within the context of the worker owned cooperative, which acts in the post-capitalist environment, as a transitional form of property, and where these professional managers are employed by the workers, their function remains to be the personification of that socialised capital. Their task is to use the techniques of scientific management so as to maximise surplus value production, so as to facilitate capital accumulation, and thereby create the conditions whereby commodity production itself gives way to the production of use values, based upon social need. 

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Northern Soul Classics - Ton of Dynamite - Frankie Crocker

Friday Night Disco - Don't Take Away The Music - Tavares

Now The Brextremists Just Sound Pathetic

The Brextremists now just sound pathetic. Some of them are preparing their betrayal narrative already, just one day into the Johnson regime. Steve Baker, offered his old job back, turned it down saying he did not want to repeat the exercise in powerlessness he had suffered under Theresa May. The Brextremist case amounts to, “Look, Theresa May, when it came to it, did not have the bottle to pull the trigger. Now, just consider Johnson's hard right Brexit Cabinet. Its obvious, isn't it, that we really do mean it, Mr. Barnier. So, if you do not give us what we want, then, this time, we really will pull the trigger and blow our brains out!” 

What a pathetic bunch of no-hopers. Its obvious that they do not have clue 1 when it comes to negotiating. Who would be surprised. To the extent any of them do have experience in negotiating in business it is from the employers side of the table, against workers. In other words, it is from the perspective of someone who, from the start, has the whip hand, and who really can just walk away from any talks, waiting to starve workers back to work. That is not the position they are in here. On the contrary, they are in the position more usually reserved for workers, of being in a weak position. It is the EU, with its $14 trillion economy, here, that has the whip hand, as against the UK's $2 trillion, and declining, economy. 

But, even in terms of two businesses negotiating between themselves, the Tories line that No Deal is better than a bad deal makes no sense. If you are, say, a pottery manufacturer, and you have made several tens of thousands of pieces of pottery, on which you have spent several millions of pounds of capital, you need to get your money back, hopefully with a profit. Suppose, you have spent £10 million. You go to retailers, and say we want to negotiate with you for the sale of this pottery, our price is £11 million. The retailers come back and say, “Sorry, we are only prepared to pay you £9 million.” 

According to the Brextremists, the response should be, “That's preposterous, because we have spent £10 million, and you are not even covering our costs. Rather than sell to you for £9 million, we will have no deal, and simply smash up all of the crockery.” 

But, such a response is clearly idiotic. Getting £9 million, when you have spent £10 million is clearly a very bad deal, and you could not continue in business on that basis, but, nevertheless, this bad deal is clearly better than no deal, because, at least you get £9 million to cover some of your costs, which means you could stay in business, for now, whereas throwing a tantrum, and walking away, means you get nothing, and have to head for the dole. 

The truth is that, however much the UK may bluff and bluster, the EU knows that the UK is not going to decide to blow its brains out via a No Deal Brexit, any more under Boris Johnson than it would under Theresa May. One suspects that Steve Baker, and the Spartans also know that, which is why he has turned down the job, why the other Spartans are demanding not just that the Withdrawal Agreement be scrapped, but that the payment of the €39 billion (€6 billion of which has already been paid, anyway, since March, so its only €33 billion) and that the EU, straight away, give Britain a Canada Style Free Trade Agreement. In other words, they know Johnson will fail, and they are preparing their own betrayal narrative. 

The EU knows that Johnson will not push through a No Deal Brexit by October 31st, because to do so is tantamount to blowing Britain's brains out. True, the EU would prefer Britain didn't do that, but to continue the analogy, that is because, no one wants to be standing close by when someone does blow their brains out. Its unpleasant to watch, and you might get some of the grey matter splattered on to you in the process. But, the EU would soon recover from the trauma of watching a near neighbour commit suicide, and it would soon clean off its clothes, and get on with its life. For Britain, not so much. So, in terms of a negotiation, here, the fact that the EU would prefer not to watch the UK commit hari kiri, is not going to make it concede to UK blackmail to avoid it. 

Moreover, the EU knows that were Johnson to actually be proceeding to a No Deal, and even assuming that parliament was unable to prevent him doing so, long before it could happen, the Pound would collapse, UK financial markets would go into turmoil, UK Bond yields would soar, pushing up interest rates, causing UK property prices to crash, which would immediately hit the paper wealth of all those elderly, Tory homeowners that make up the large majority of the Brexit vote. Even if Johnson soldiered on through all that, like a latter day General Haig, or like Churchill at Gallipoli, sending thousands of troops senselessly to their deaths, the EU knows that the reality of the chaos following such a No Deal Brexit would be such as to cause the government to fall, for the Tories to be destroyed as a party, and for Britain to have to quickly petition for re-admittance to the EU on whatever terms it could secure. 

Johnson, himself, when he was given the information by the Civil Service of the estimation of civil unrest that will follow a No Deal crash out, is reported to have visibly blanched. Its no wonder that he is proposing to quickly put an extra 20,000 cops on the streets, because the civil unrest and strife that will follow Brexit, will require them, and all the other trappings of a strong state to suppress it. 

Johnson is clearly preparing for a General Election. That is the other main reason for him appointing such a hard right Cabinet bunch of sycophants. His strategists have been hard at work on the interweb sussing out different lines of messaging, which has all the hallmarks of the old Cambridge Analytica network swinging into operation. Its yet to be seen how much the Putin-Trump axis will be contributing to the effort, in one way or another, but its another reason why that axis' direct line into Britain via the Brexit company, will be kept at arms length by the Tories, so as to be able to have plausible deniability, when the facts come out. 

Johnson will need to call the General Election before October 31st. He could not go into an election having not implemented Brexit. But, he clearly can go into a General Election arguing that he is calling it so as to implement Brexit on time, and so as to overcome parliamentary opposition to his plans. That is what I expected Theresa May to do in February, whilst Labour was still thoroughly at sea with its policy of support for Brexit, and haemorrhaging votes to the Liberals and nationalists. Johnson must rationally calculate that Labour's position is still obscure and confused, and has lost a large chunk of its support to the Liberals and Greens. Its yet to be seen whether Labour's glacial move towards calling for another referendum is much too little, much too late for it to have any credibility so as to win those votes back. 

But, the truth is that the position of both Labour and the Liberals in relation to another referendum is itself confused and idiotic. Questioned by Clive Lewis the other day, Liberal Leader Jo Swinson said that the Liberals would fight an election on the basis of holding another referendum. That is basically the position that Labour also now holds. But, asked what the Liberals would do if the referendum again came out for Leave, she confirmed that they would still oppose Brexit. And, of course, that is the right thing to do, because Brexit is a reactionary policy. However, if you believe its a reactionary policy, why would any party then argue for a referendum. Its idiotic to campaign for a vote on something, that you confirm in advance you are going to ignore! 

And, the fact is that with a Johnson government in office, it is even more idiotic. The reason that Bonapartist regimes love plebiscites is that it gives them every opportunity to get the result they desire. They have all of the propaganda channels at their disposal. Moreover, in a plebiscite, those who seek to mobilise the mass do so on the basis that they can appeal to all of those who are really peripheral to society, who generally avoid involvement in the political process. The fanatics who are obsessed with immigration, with a return of the death penalty, and other such issues, know that in a General Election, those issues will be peripheral, as the majority of voters vote for parties based on more central issues of jobs and so on. In a referendum, the question is about these single issues on which the fanatics have a bee in their bonnet, which means that they can be mobilised. 

Johnson will campaign over the Summer, in preparation for an election in September. In the intervening period, Tory associations will begin removing some of the Remainer Tory MP's ahead of that election. Johnson will wait until late August or early September, before making a sham attempt at negotiations with Brussels, so that he can come back to say that Brussels is immovable, and in order to prevent parliamentary obstruction, he is seeking a clear majority in an election. On that timescale, if he gets a majority, he will then go to Brussels, and ask for a delay – which he dare not do before an election – but, he will do so on the basis of arguing for a Managed No Deal, of an extension of some of the temporary side deals already put in place to lessen the chaos of a crash out, and in the context of negotiating a Canada Style Free Trade Agreement. If he fails to get a majority, he can then blame whoever takes over for failing to implement Brexit, and so the betrayal narrative remains in place. 

The idea of a Canada Style Free Trade Agreement, which some of the Spartans are already touting as an alternative to the Withdrawal Agreement shows they really do not understand, or understand but are prepared to massage the truth. They continually state that Donald Tusk offered Britain such a deal in 2018. What they fail to mention is that he did so within the context still of reaching a Withdrawal Agreement. The Withdrawal Agreement still needs to address the question of Britain's €39 billion debt to the EU, of the question of EU Citizen's Rights, and of the Northern Ireland Border. The EU has made clear that without any resolution of these issues, no free trade deal can even begin to be negotiated. 

The fact that the Brexiters think that such a free trade deal resolves the issue of the Irish border shows they do not understand the nature of that problem. Its not about different customs regimes, but about the Single Market, and common standards, rules and regulations. The Canada FTA does not resolve those issues, because Canada is not in the single market, which is precisely why Canadian goods do not pass unchecked into the EU, i.e. there remains a border between the EU and Canada. A free trade agreement between the UK and the EU will not remove the requirement for a border, or for goods to be checked as they cross that border, including the border in Ireland. 

The EU, has obviously refused, so far, to say that they would erect a border in Ireland, because they want to ensure that Britain takes responsibility for any such border resulting from Brexit. They have firmly put the ball in the UK's court to come up with some alternative to such a border, as required by the Good Friday Agreement. But, it is obvious that if the UK were to press ahead with Brexit, then the EU will have to erect a border between Northern Ireland and the Republic, so as to protect the EU Single Market. That will undoubtedly be damaging to the Irish Republic, but it will be crucifying to the small Northern Ireland statelet. The economic disaster, and chaos will cause immense pressure for the problem to be resolved, which could only be done by drawing Northern Ireland into a United Ireland. According to recent polling, 63% of Tories are prepared to see that happen in order to push through Brexit, but Johnson could only push ahead with that, if he gets a large enough Tory majority that he no longer depends on the DUP. 

Johnson has no way out. He cannot get a revised deal from the EU. He cannot push ahead with No Deal by 31st October, without it leading to disaster. He can only call an election having attempted to win back the Brexiter votes from Farage's Brexit company, in the hope that with a divided opposition, he can win a majority based on a core vote strategy, in the same way they won the 2016 referendum. So, it is really down to Labour. If Labour comes out decisively on the basis of stopping Brexit and revoking Article 50, it can win back the votes it lost to the Liberals, Greens and nationalists. It can win a majority on that basis. But, it must also quickly ditch the reactionary 26 nationalist Labour MP's that signed the letter, and have suggested they will line up with the Tories to push through Brexit. 

But, in order to win, Labour cannot proceed on a Liberal/Blair-right agenda either. Corbyn should have moved against the Blair-rights three years ago. Labour members need to deselect the Blair-rights and soft lefts, select progressive socialist internationalist candidates, committed to revoking Article 50, pursuing a radical social democratic agenda in Britain, and across Europe, for free movement, for an end to austerity, the introduction of industrial democracy, the levelling up, and equalisation of benefits, for a shorter working week and life, for a massive programme of infrastructure investment, particularly in the economically depressed towns and regions. In that way, Labour can show workers in the deprived areas that the solution to their problems is not Brexit or economic nationalism, but is international socialism, and workers solidarity. Our aim, as Lenin put it, is not national self-government, but workers' self-government.