Saturday, 31 August 2019

No Deal Brexit Is a Win-Win For The EU

The EU does not want a No Deal Brexit. It would involve disruption for EU member states. The EU, holds out the prospect that the UK will pull back from the brink, either because parliament will force that on Johnson, or because, Johnson, knowing that a No Deal will be catastrophic, will look for some means of avoiding it, especially when, the markets begin to factor in the likelihood of No Deal, and the Pound tumbles, and financial markets crash. Their preference is that Brexit should not happen at all, but that if it does, it will be based on the deal they already negotiated with May. They hope he might yet, take up the baton from Theresa May's deal, and be able to get Tory Brextremists to back it. But, the EU will not give Johnson further concessions. They certainly will not drop the backstop, let alone any of the other demands that the ERG are making. The EU, will not destroy itself on the altar of avoiding a No Deal Brexit. After all, in the end, if a No Deal does happen, it will be a win-win situation for the EU v UK. 

In a No Deal Brexit, the EU will face some inconvenience, but the UK will face chaos. Brexit itself means that trade between the UK and the EU will be hit, but a No Deal Brexit would mean that it would immediately suffer a dislocation. But, the EU is a $14 trillion economy, whereas the UK is a $2 trillion economy. Besides being able to continue trading inside the single market unimpeded, the EU has trade deals with over 40 countries, and economic blocs around the globe. The UK has negotiated just four, and they are with places like the Faroe Islands. The longer term effect on Ireland would be more significant given its degree of trade with Northern Ireland, and the rest of he UK, but in the event of a No Deal Brexit, its likely that things will never progress to these long-term effects. 

In the case of a crash out t, the chaotic effects will manifest themselves quickly. A crash in the Pound, collapse of UK financial markets, and the property market, will already have occurred, but will be accompanied by soaring inflation, and interest rates, as a result both of the crash in the Pound, and of the shortage of basic necessities such as food, medicines and possibly energy. The chaos will be manifest immediately in the fact that many UK planes will be grounded, even ferries may not have the right certification. That will apply to UK registered lorries and so on. 

Although Ireland, will suffer, in such conditions, because of the degree of its trade with the UK, and Northern Ireland, it will not be the one suffering from its planes and ferries being unable to move; nor will it be unable to continue getting medicines, and so on, precisely because it is in the EU, and will continue to have all the necessary certification etc. So, whilst Britain goes into large-scale chaos, and Northern Ireland, which depends overwhelmingly on an open border and trade with the Republic, will go into meltdown, the immediate effects on the Republic will be relatively mild during that period. Similarly, although the EU will also face some short term disruption during that period, it is nothing its much larger economy cannot handle, and it is quite able to also provide support for Ireland during this period too. Indeed, the EU appears much better prepared for a No Deal Brexit than does Britain, despite requiring less preparation for its effects. 

The EU does not want a No Deal Brexit, because it will mean disruption, whereas some kind of negotiated Brexit would create conditions under which Britain might slowly slide back into the EU over the next decade, as the current elderly British Tory voters, who pushed through Brexit, die out, and the younger Labour voters, who back EU membership by around 80%-20%, throw their weight in further elections behind pro-EU parties. But, the EU are not going to make concessions to Johnson and his government to avoid No Deal. It would mean undermining the EU Single Market, and thereby the EU itself. So, if Johnson is daft enough to push the No Deal button, they will let him. 

The EU knows what the consequence will be. It will be chaos and disaster for Britain, which will cause short term disruption only for the EU and particularly Ireland. The EU knows that the almost certain consequence of the kind of chaos that will unfold in Britain will be civil unrest, and clamour for the government to go. The play book for these kinds of situations has been drawn up over long periods to deal usually with left-wing nationalist governments, but it works at least as effectively against right-wing nationalist governments. The first thing will be a run on the Pound. Although that often causes the FTSE 100 to rise, because the heaviest weighting in the index is large companies that make most of their profits overseas, this is misleading, because a look at the FTSE 250, of smaller companies shows that their share prices usually fall as a result of such falls in the Pound. 

A falling Pound means that the vast amount of goods that Britain has to import, especially food, as we come into the Autumn and Winter, becomes much more expensive. But, immediate Brexit chaos at the ports will mean that a lot of the food never gets to supermarkets anyway, and shortages will lead to hoarding, and profiteering, pushing prices much, much higher. To protect the Pound, the Bank of England will have to raise interest rates. That will crash financial and property markets even more. Already, we have seen property prices falling significantly in London, and across the country a similar picture has been unfolding over the last year. All of those elderly Tory homeowners that voted for Brexit, will soon begin to scream when they see the price of their house collapsing. 

If Johnson's government could hold out for more than a fortnight in such conditions it would be surprising. He might go for the use of the Emergency Powers Act, to introduce Martial Law, to quell the civil unrest, but that would spell the death of the Tories forever. The inevitable consequence would be the fall of Johnson's government, as the labour movement would, even with its current lacklustre leadership, be in the realms of opposing it with a General Strike, and action on the streets. Labour would undoubtedly win any election with a landslide, and would have to call for an immediate re-admittance to the EU, on whatever terms could be obtained. 

For the last 200 years, France and Germany have taken it in turns to try to create a unified European state, under their respective leaderships. Britain's role, as first the primary global imperialist power, and then as second fiddle to US imperialism, has been to try to prevent that from happening, and Europe becoming the dominant global power. A Britain mortally weakened by Brexit would be see the end of its historic role in the world. If Britain drifts off into the Mid-Atlantic, it will have destined itself to irrelevance; if it has to apply for readmission to the EU, it will do so as a supplicant, and having lost all of its current status within the organisation. 

Suffering even significant disruption for a few weeks, whilst Britain goes through such death agonies, will be a small price to pay for the EU, and particularly France and Germany, to see their old enemy Britain so severely reduced in stature. A few weeks of inconvenience for the EU, will be well worth it, if it leads to Britain having to crawl back in, which will mean that the problems that would have affected Ireland in its longer-term relations to Britain, would then not happen, and as one consequence could be a United Ireland, it would forever change the balance of relations between Ireland and Britain. 

But, it has other short term benefits for the EU too. In the EU elections the rise in support for the far right populists that had been predicted by many pundits did not materialise, as in fact I had said it would not. Instead, it is more radical pro-EU forces that became more dominant. Pro-EU sentiment is stronger across the continent than it has ever been, including in Britain. As the EU's peoples see the disaster that Britain has imposed on itself as a result of Brexit, no wonder they have no desire to follow in that path. Brexit will have acted to damage the right-wing populists in Europe more than anything, and a chaotic and disastrous No Deal Brexit will damage them even more. 

The EU does not want a No Deal Brexit, but if Johnson and the Brexiteers think the EU will save them by offering them a deal, they are sadly mistaken.

Theories of Surplus Value, Part III, Chapter 22 - Part 12

Ramsay correctly notes that, because the capitalist replaces less and less of their stock, in kind, and, instead, replaces it more and more by exchange with other producers, their focus is increasingly on exchange-value, rather than use-value. An example of that might be the farmer who formerly saved seeds, so as to replace them in kind, but who now sells all of their output of grain, buying the seeds they require from a seed merchant. Where the farmer saves seeds they are concerned with the quantity of of output, and the quantity, therefore, that they can take out, so as to replace, in kind, the consumed seeds. But, where the farmer buys seeds from a a seed merchant it is not necessarily the quantity of grain they produce that concerns them, but its exchange-value, the price they can obtain for it. It is that which will determine how many seeds they can buy, how much fertiliser, how much labour-power, and so on. 

““… the more the value of the product exceeds the value of the capital advanced, the greater will be his profit. Thus, then, will he estimate it, by comparing value with value, not quantity with quantity. This is the first difference to be remarked in the mode of reckoning profits between nations and individuals” (loc. cit., p. 146).” (p 337) 

But, as Marx notes, the nation too can make this comparison of value with value, not just the individual capital. The reality is that, in every mode of production, social reproduction requires the replacement, on a like for like basis, of all these products that constitute means of production and those that constitute means of subsistence for the producers. It is a process based upon the reproduction of material balances. The difference, in each mode of production, is the form in which this reproduction of those material balances is effected. 

Under capitalism, the means of production takes the form of constant capital. Its value, the labour-time required for its reproduction, is transferred to, and reproduced out of the value of the final output. The means of subsistence, for the producers, takes the form of variable-capital, and its value is also determined by the labour-time required for its reproduction. It does not transfer this value to the value of final output, but this value, like the value of the constant capital, is reproduced out of the value of the final output. That is because, it is reproduced out of the new value created by labour in the labour process. 

For the nation too, therefore, the value of the constant capital and the variable-capital can be calculated. And, the new value created by living labour can also be calculated. By subtracting the value of the variable-capital from the new value created by labour, the amount of surplus value can be calculated, and by comparing this to the total value of constant capital and variable-capital, a rate of profit for the total social capital can be established. 

“It can calculate the total labour-time which it has to expend to replace the used-up part of its constant capital and the part of the product consumed individually, and the time of labour spent in producing a surplus designed to enlarge the scale of reproduction.” (p 337-8) 

Northern Soul Classics - Something's Wrong - Chris Clark

Currently, my favourite track to dance to. 100 mph blue eyed soul from Chris Clark.

Theories of Surplus Value, Part III, Chapter 22 - Part 11

Ramsay distinguishes between manufacturing and agriculture. In manufacture, 

“though […] it may throw out of employment a considerable body of persons, “this” will yet probably be followed, after a longer or shorter period, by the re-engagement of the same, or even a much greater number of labourers” (loc. cit., pp. 92-93).” (p 336) 

In agriculture, however, Ramsay says, not only does the demand for raw material not rise so rapidly, but the conversion of arable to pasture leads to large numbers of agricultural workers being displaced. The funds that previously went to wages then go to support sheep, cattle, and other livestock. 

Previously, Marx has distinguished between the real cost of production, for society, of commodities, as opposed to the cost of production for the capitalist. As Ramsay has described, it, the real cost of production of a commodity is the labour embodied in the constant capital, consumed in production, plus the quantity of living labour expended in production. For the capitalist, the cost of production is only the cost of the constant capital plus what they pay for wages. The difference between the two is the surplus value appropriated by capital. Marx says that Ramsay is correct, then, when he says, 

““Wages … as well as profits, are to be considered each of them as really a portion of the finished product, totally distinct in the national point of view from the cost of raising it” (op. cit., p. 142). 

“Independent of its results, it” (fixed capital) “is a pure loss… But, besides this, labour … not what is paid for it, ought to be reckoned as another element of cost of production, Labour is […] a sacrifice […] The more of it is expended in one employment, the less … for another, and therefore if applied to unprofitable undertakings … the nation suffers from the waste of the principal source of wealth… the reward of labour ought not to be considered as an element of cost” … (loc. cit., pp. 142-43).” (p 336-7) 

This formulation may seem odd, because we have come to think of cost of production as meaning in the sense used by business, as the cost of materials, equipment, wages etc., and of profit as something in addition to these costs. The definition as set out by Ramsay is, however, significant in analysing the process of reproduction. 

“Ramsay describes the real reproduction process correctly: 

“In what manner is a comparison to be instituted between the product and the stock expended upon it?… With regard to a whole nation… It is evident that all the various elements of the stock expended must be reproduced in some employment or another, otherwise the industry of the country could not go on as formerly. The raw material of manufactures, the implements used in them, as also in agriculture, the extensive machinery engaged in the former, the buildings necessary for fabricating or storing the produce, must all be parts of the total return of a country, as well as of the advances of all its master-capitalists. Therefore, the quantity of the former may be compared with that of the latter, each article being supposed placed as it were beside that of a similar kind” (loc. cit., pp. 137-39).” (p 337) 

Marx notes that the distinction between the nation and the individual capitalist is a false abstraction. The nation exists only as the capitalist class, in this sense, “and the whole class operates in exactly the same way as the individual capitalist.” (p 337) 

Thursday, 29 August 2019

Stop The Coup – For An Indefinite General Strike – Build Workers Councils


Make no mistake, what Johnson has done is a coup. It has all the trappings of a coup, its backers have typically attempted to present it as purely within the bounds of normal parliamentary procedure, whereas, as even the Speaker of the Commons has pointed out, it is perfectly obvious that it isn't. When Hitler took power, he did so on the basis of first being elected. The Nazis did not win a majority, but were the largest party, and Hitler was appointed Chancellor on the back of the support of other conservative parties. Looking around the world today, at other Bonapartist regimes, Erdogan in Turkey was elected, Netanyahu in Israel was elected, Putin in Russia was elected, Orban in Hungary was elected, and although they are not yet Bonapartist regimes, Trump in the US is a Bonapartist who is gradually undermining the constitutional constraints on his power, and the same process has been occurring in Britain now for several years. Bonapartism always shrouds itself in the cloak of constitutionalism and the facade of democracy, the most obvious manifestation of which is the use of plebiscites, and the mobilisation of the atomised sections of mass society

Back in 2012, I warned that Britain was heading towards Bonapartism, and that Boris Johnson would be its face. The process began under Cameron and Clegg. As Marx describes in The Eighteenth Brumaire, the coup of Louis Bonaparte did not simply happen out of thin air, but was the culmination of a prolonged process of a steady ratchet to the right. Under Cameron, we saw the Tories leaving the EPP, and signing up with the various neo-nazi groups in the European Parliament, and a ratcheting up of anti-EU rhetoric, as a means of diverting attention from the economic crisis that the Liberal-Tory government was inflicting via its austerity measures. We saw it move decisively towards using the old relationship of Church and State, and its earlier messages of hug a hoody were replaced by gaol a rioter, when its austerity measures led to inner city riots once more, as had happened in the 1980's under Thatcher. The appointment of a hang 'em and flog 'em Tory as Home Secretary, in the shape of Priti Patel is only a continuation of what began under Cameron and Clegg. But, this steady ratchet to the right, as happened in France in 1848, only ever leads to ever more constrictions on democracy in the name of “strong and stable” government and the restoration of law and order. Those that initiate this process are never those that complete it via the coup. Counter revolutions also devour their children. As I wrote, 

“It is seen in the move from “hug a hoody” to gaol a rioter, in the proposals to restrict even further the right to strike and so on. It is seen in the attempts to free the State from even the most basic requirements of the Rule of Law in relation to the right of trial by Jury, and attempt to free it from the requirements of meeting basic Human Rights as determined by the European Convention and Court. And all the time Cameron looks over his shoulder to the blond haired, dishevelled Crapulinsky in his London fortress.” 

(Part 5

Johnson's coup is designed to prevent parliament stopping his No Deal Brexit agenda. Johnson has boxed himself into a corner. When the whole Brexit debate first began, he believed that a large Brexit vote would enable the Tories to negotiate further concessions from the EU, whilst remaining inside, as Thatcher had done previously. Johnson and other Brextremists clearly did not think that Leave would actually win the vote, which is illustrated by their shock when it did, and their failure to be able to have any kind of worked out programme of how to implement it. He still believes that he may be able to get the EU to make concessions to him over the Irish backstop that will allow him to bring essentially May's deal back to parliament, and to get it approved as the basis of Brexit, which would then give him two years to negotiate something close to his original intentions. That indeed, is the belief of the Faragists too, which is why they do not trust Johnson. 

Johnson knows that a No Deal Brexit on October 31st will be catastrophic for Britain, and even more so for Northern Ireland, which is important for the Tories given their reliance on the support of the bigots of the DUP. He has lashed his fortune to the mast of negotiating a deal with the EU, based on the removal of the backstop. But, the EU will not do so. When Macron and Merkel told him last week that he had 30 days to come up with proposals to deal with the backstop, the Tory media presented it, as a concession, a weakening on the part of the EU, but Johnson knew exactly what it was. It was the EU calling his bluff, and saying we know you have no actual solution to the Irish border issue, and so now, we are giving you a 30 day deadline to put up or shut up. 

Johnson has no solution, but his current measures amount to a further doubling down on the bluff, demanding that the EU provide him with the solution he so desperately needs. It cannot, and will not, because to do so would be to undermine the EU Single Market, which essentially means the EU liquidating itself. Johnson is left with two options. Either he follows the example of May, and again capitulates to the reality of what a No Deal Brexit actually means, or else he allows history to take its course, for the chaos of a No Deal Brexit to happen, but that he rides it out on the back of the imposition of strong state measures to suppress the inevitable social unrest that will ensue. He is trying to leave his options open. He clings desperately to the hope that the EU might believe his bluff, whilst preparing for the likelihood they won't. That is what his zigging and zagging one day to another about the chances of a No Deal Brexit being a million to one are all about. 

But, as I pointed out seven years ago, the roots of this Bonapartist coup lie deeper than just the issue of Brexit, and the immediate problems of Boris Johnson. The roots lie in the collapse of the conservative social-democratic model that persisted for more than thirty years from the time of Thatcher and Major, through Blair and Brown, and into the government of Cameron. That model was based upon the idea that, instead of real capital accumulation, which creates real economic growth, and a growth of revenueswages, profits, interest and rent – it is possible to create wealth via financial and property speculation. That speculation, which was backed by central banks that abandoned regulation, and was always ready to step in to lower interest rates and print money, inflates asset prices, and this wealth can then substitute for real economic growth, by allowing these inflated assets to be partly sold off – in the terminology of the financial advisors “taking profits”. In place of profits, we got paper capital gains, and as the capital gains were based upon inflating asset prices, to compensate for falling yields on those assets, we got an ever increasing share of profits going to dividends and other interest payments to boost the yields, which meant that even less was available for real capital investment. Alongside it, workers whose wages were stagnant, were also encouraged to use rising house prices as collateral to borrow more to sustain their consumption, and where they could to speculate themselves in property, to become buy to let landlords, to borrow money against their own property to give to their kids and grandchildren to help them buy unaffordable houses, and thereby artificially inflate demand for houses, and thereby property prices even further. 

Periodically, as the real economy and its laws imposed itself, causing market rates of interest to rise, as in 1994, 2000, and 2007/8, this series of financial bubbles burst, but on each occasion central banks were on hand to print even more money to reflate them, and conservative governments were on hand to ensure that the printed money went into further financial and property speculation rather than into the real economy and investment, which would only have caused a rapid inflation, rise in interest rates, and further more spectacular bursting of bubbles – a process which the laws of the economy brings about eventually anyway. 

It is the collapse of that model that has created the current political conditions, which is summed up in the collapse of the political centre, which is more correctly characterised as a polarisation of the political landscape, into two great opposing class camps. The potential solutions to the current situation facing capital are to push through a political counter-revolution against the social-democratic state and polity that has dominated for the last century; that is what the Libertarians such as Rees-Mogg seek to achieve, or to push forward with social-democracy, abandoning its conservative variant based upon the short term interests of fictitious capital, of inflating asset values, and instead to focus once more on the need to accumulate real capital, so as to promote real economic growth, and to produce profits. 

But, this latter variant itself leaves open two apparent alternatives. One alternative is that being put forward by Johnson, and the other is that being put forward by progressive international social-democrats and socialists. It is no surprise that Johnson has talked about increasing public spending, thereby ending the policy of austerity that has dominated for the last 9 years. That is quite consistent with the agenda of that political strand of economic nationalism. It is the same agenda that was pushed forward by Mussolini in Italy, and Hitler in Germany. It is, of course, wholly at variance with the small state, libertarian agenda of Rees-Mogg, and the interests of all the small capitalists, and backward petit-bourgeois that that wing of the Tory Party, and the Faragists represent. But, that is only the same situation that Rees-Mogg's idol Von Mises found himself in, in Austria in the 1930's, when he too, despite his Libertarian ideology found himself acting as the hand maiden of the Austrian clerical-fascists. 

That agenda of economic nationalism, using the tools of Keynesian fiscal intervention is the same agenda that Oswald Mosely also promoted in Britain, and was supported by Nye Bevan and others on the Labour Left. It necessarily goes along with a strong state, and the suppression of independent working-class action. It is why, as Trotsky pointed out the appearance of this kind of “national-socialism” was indistinguishable as promoted by both the regime of Hitler, and that of Stalin. It is no wonder that today, we see a red-brown coalition of forces running from the Stalinists of the Morning Star, through to some of the Faragists of the Brexit Party pursuing such an agenda. Its roots go back to the statism of Ferdinand Lassalle, who sought to build an alliance with Bismarck. As Hal Draper writes, of Marx's response to it,

“He told Lassalle to his face that he was a “Bonapartist,” and wrote presciently that “His attitude is that of the future workers’ dictator.” Lassalle’s tendency he called “Royal Prussian Government socialism,” denouncing his “alliance with absolutist and feudal opponents against the bourgeoisie.”” 

(The Two Souls of Socialism) 

But, at least Bismark, as with Louis Bonaparte, were pursuing agendas designed to transform their societies via an industrial revolution, from feudalism to capitalism. Marx and Engels could not in any way give support to the regimes of those dictators, but they could recognise that the results from them, at least would be historically progressive. The same cannot be said today of the economic nationalists. Their agenda is wholly reactionary. We have already passed through the process of industrial revolution, and that process long since broke through the barriers imposed by the nation state. 

The progressive solution today starts from that foundation of capitalism as an international system. It starts from the nature of the dominant section of that international capitalism being large scale, multinational socialised capital, in the form of huge companies and corporations. Progress depends upon a further development of those forces, and the conditions required for that development. It starts from the requirement to remove any remaining barriers and frictions between states within the EU, for an extension of the social-democratic measures based upon planning and regulation, so as to create the conditions for large scale, and long-term capital investment, and it requires that industrial democracy be introduced into these large corporations so that the workers and managers within them guide their policy, based upon the need for such capital accumulation, rather than the shareholders who are interested primarily only on their receipt of dividends and capital gains. 

These two alternative solutions are the material foundation upon which the division into two great class camps arises. On the one hand, we have the representatives of the millions of small capitalists, who seek a counter-revolution, to break up the social-democratic state that has been dominant for the last century. Their focus is concentrated within purely national bounds, the need for the state to exist only to provide them with protectionist measures both against foreign competitors and against the organised working-class. On the other is the organised working-class itself, whose interests reside in extending industrial democracy, in extending the role of planning and regulation at the level of the state, and for that state itself to be one that extends across the EU, in order to operate on a level playing field with other global super states like the US, and China. And, in fact, that is the long-term interest of the owner of fictitious capital too. The repeated financial crises show that their reliance on capital gains as an alternative to revenues from their assets is not sustainable. They too need that large-scale industrial capital which provides them with revenues to grow, and produce more profits too. They are in a bind, because to achieve that will mean that all of the money printing, the diversion of money into assets, and so on will have to end, and that will mean a huge financial crash that knocks 75% off the value of their assets. 

For now Trump and Johnson are a consequence of this stalemate rising up in typically Bonapartist fashion above society. 

The dynamic of the long wave cycle upswing remains in place. The actions of central banks to pump money into speculative assets, and of conservative governments to implement austerity has acted to try to restrain the economic growth that will again cause interest rates to rise, and asset prices to crash. Trump's global trade war is an extension of that. Whilst on the one hand it is a measure of typical economic nationalism, shown by the fact that his tariffs are aimed not just at China, but at the EU as well, it acts to also constrain the increase in global trade that was resuming, and the economic growth that was preceding on the back of it, again causing interest rates to rise, which in 2018, also again saw US stock markets fall by 20%. It is no accident that Trump calls Federal Reserve Chair, Powell, a bigger enemy of the US, than President Xi. 

As the dichotomy between these two solutions intensifies, so the division between the two great class camps intensifies. The emergence of Bonapartist tendencies arises for familiar reasons. On the one hand, as I wrote some years ago, the progressive sections of the bourgeoisie have become decadent. In part that is because those dominant sections themselves became reliant on the liquidation of capital gains rather than on the need for real capital accumulation providing real profits. The progressive sections of the bourgeoisie failed to push through their own bourgeois revolution consistently, failed to take on decisively the reactionary and bigoted ideas of sections of their own class, inherited from the past, because to do so would have involved a large scale political struggle against those reactionary elements, which could only be carried through with the support of the working-class. 

The ruling class itself has become decadent, most clearly illustrated by its ideological representatives in the media. That the right-wing Tory press should spread lies, and fawn over the Faragists is to be expected. These are the same sections of the press, which in the 1920's backed Mussolini, and then Hitler, as well as Mosely in Britain. Their protests against anti-Semitism in the Labour Party ring somewhat hollow in that context. But, it is not just the gutter press that has acted in a thoroughly reactionary manner. The BBC, for years gave extensive free air-time to Farage and his entourage. In search of ratings and readership, as news became purely entertainment, drama, and a stage for celebrity, the mainstream media fell over itself to provide a platform for the populists. 

But, similar weaknesses exist within the working-class too. The most obvious example has been the persistence of the virus of Stalinism and other forms of statism, and economic nationalism in the Labour movement, illustrated by the role of those that acted as Corbyn's advisors, and the backers of the ridiculous notion of Lexit, who have a great deal of responsibility for the situation that now exists. It illustrates the need for a thorough rejuvenation and rebuilding of the labour movement on sounder principles. The fight against the Bonapartist coup is not an alternative to that rejuvenation and rebuilding, but an opportunity to combine the two. 

In the 1930's, faced with a similar threat to bourgeois democracy in France, Trotsky wrote the Action Programme. Trotsky started from some simple principles. As Marxists, we have no desire to limit ourselves to bourgeois democracy, which we consider to be a sham. The actions of Bonapartists like Johnson, today, illustrate the extent to which it is a sham. We want to go beyond the limitations of bourgeois democracy, and instead to bring about a true democracy based upon the permanent mobilisation and involvement in political activity of the vast mass of society, of the working-class that constitutes that majority. But, when even the limited bourgeois democracy is under threat from tyrants and Bonapartists, a starting point is to defend that limited democracy, without which our attempts to move forward are themselves made much more difficult. To move forward its necessary to first not go backwards. 

However, as Trotsky sets out in the programme, in defending that limited democracy, we do not limit ourselves to its methods. We do not allow ourselves to be parliamentary cretins, seeing everything only from the perspective of what happens in parliaments, and via parliamentary and constitutional manoeuvres, which has been a feature of the opposition to Brexit and its proponents over the last three years. Rather we use our own methods, and our own forms of democracy and organisation. Using the method of Trotsky's Action Programme, today that would mean: 
  • Organise an indefinite General Strike to stop the coup
  • Rejuvenate local Trades Councils, and link them with District Labour Parties to become local Workers Councils of Action
  • Build Tenants and Residents Committees in every community, as local action committees, and democratic organs to confront fascists, and to bring forward plans for community renewal
  • Brexit has encouraged the racists and fascists, and as the coup unfolds, and resistance to it develops, the fascists will be emboldened to attack the organised working-class, and ethnic communities. We need to build Workers Defence Squads that will protect striking workers resisting the coup, and to protect workers communities, including protection of ethnic minorities from racist attacks.
  • The state as the state of the dominant section of the ruling class opposes Brexit. On that we can agree with Rees-Mogg. But, its opposition to the Brextremists has been weak. We cannot know what the response of the state's bodies of armed men will be, faced with the masses rising up against the coup. Their instinctive response may be to close ranks. The army is after all loyal to the Queen, who has already given her assent to the dissolution of democracy, via the proroguing of parliament, which comes as a no doubt welcome distraction from renewed scandal over the roles of the Royal Family, in relation to Jeffrey Epstein. Either way, we cannot afford to disregard the possibility that the armed forces along with the police will be used to enforce the coup once underway. Alongside the democratic organs of struggle in each community, therefore, we need to build an armed Workers Militia to defend ourselves against a heavily armed state.
  • A General Strike, as was seen in France in 1968, poses other questions. We need to ensure the continued supply of vital materials and services, for example to the NHS. It raises the question of occupying factories and other workplaces, so as to continue production under workers control and management. In every workplace, therefore, we need to build workplace committees, comprising all worker be they in trades unions or not, to bring each workplace under democratic control. The half million Labour Party members, can play a vital role in bringing that about, and we need to vastly increase that membership, and internal Labour Party democracy in the process.
  • That process of renewing internal labour movement democracy must be extended to the trades unions, and to the cooperative movement. All cooperatives should be converted into worker owned and controlled cooperatives, and their workers should take over the running of them, bringing them together in one single cooperative federation. All trades union officials should be subject to regular election and recall, and paid only the average wage of their members. The right-wing Labour MP's that have said they would vote with the Tories to push through Brexit should be expelled forthwith, and the Blair-right MP's should be deselected by their members, as well as introducing mandatory reselection of all MP's.

Theories of Surplus Value, Part III, Chapter 22 - Part 10

Marx quotes Ramsay's statements 

““… that demand must depend” (directly, immediately) “upon the amount of the latter species of capital alone” (op. cit., p. 87). (This is tautology on Ramsay’s part, since he equates circulating capital with capital laid out in wages.) “At every change of this kind, the fixed capital of the country is increased at the expense of the circulating” (loc. cit., p. 89). “… the demand for labour will generally increase as capital augments, still it by no means follows that it will do so in the same proportion” (loc. cit., p. 88). “It is not, until, in the progress of industry, favoured by the new inventions, circulating capital shall have become increased beyond what it formerly was,”” (p 335) 

And, Marx notes the same fallacy in Ramsay's argument, here, as seen previously, that a rise in the production of necessaries is automatically a rise in those necessaries intended for consumption by workers. As seen in previous chapters, that increased output of necessaries can go as increased unproductive consumption by capitalists and rentiers, including to provide for the consumption by retainers, domestic servants, mistresses, etc., employed by them. Alternatively, such necessaries can be exported, in exchange for imported luxury goods, or capital goods. 

Marx continues Ramsay's quote, and then also sets out the same argument I have elaborated elsewhere, in relation to the effect of the introduction of machines, which raise the rate of surplus value, raise the mass of produced surplus value, reduce the value of constant capital and variable capital, and, thereby, facilitate greater capital accumulation, including the employment of additional labour. 

““that a greater demand for labour will spring up. Demand will then rise, but not in proportion to the accumulation of the general capital. In countries where industry has much advanced, fixed capital comes gradually to bear a greater and greater proportion to circulating. Every augmentation, therefore, in the national stock destined for reproduction, comes, in the progress of society, to have a less and less influence upon the condition of the labourer” (loc. cit., pp. 90-91). “Every addition to fixed capital, is made […] at the expense of the circulating”, i.e., at the expense of the demand for labour (loc. cit., p. 91).” (p 336) 

In other words, the demand for labour will fall relatively, i.e. it will rise in absolute terms, but by a proportionally smaller amount than the rise in the quantity of materials processed. This rise in the proportion of materials processed, relative to labour, is the direct effect of the rise in productivity. Ramsay notes that this is a consequence of waves of new technology arising that act to displace labour, by raising productivity. So, as a new wave of such technology is introduced, labour is displaced, unemployment rises, wages fall. But, these evils are temporary, because, by raising the rate of surplus value, and cheapening the elements of capital, accumulation is once more spurred on; employment rises, wages rise, until capital is again led to introduce yet another wave of technology that again displaces labour, and the cycle repeats itself. 

As Marx puts it, 

“The capitalists who use the new machinery obtain extraordinary profits; consequently their capacity to save and to increase their capital grows. A portion of this is also used as circulating capital. Secondly, the price of the manufactured commodities falls in proportion to the diminished cost of production; thus the consumers save, and this facilitates the accumulation of capital, a portion of which may find its way to the manufacturing industry in question. Thirdly: the fall in the price of these products increases the demand for them.” (p 336) 

In other words, the phases of the long wave cycle. In the crisis phase, extensive accumulation causes labour supplies to be stretched, absolute and relative surplus value cannot be increased, as the social working-day is fully extended, and the demand for labour causes wages to rise, causing a profits squeeze. A crisis of overproduction of capital, i.e. capital cannot self-expand, due to this profits squeeze, arises. The overproduction means that small changes in conditions of supply results in tight profit margins turning into losses, and thereby a sudden fall in the rate of profit. Businesses, hold off additional investment, they begin to resist pay claims, causing strikes and so on to be far more protracted and bitter (as for example, with the 1984-5 Miners Strike). Firms, where they do invest, do so via intensive accumulation, introducing new technologies that are labour-saving. As with the introduction of new technologies in the print industry, in the early 1980's. A given amount of growth can now be achieved with relatively less labour, throwing workers on to the back foot, as their position in production is weakened. 

In the next phase of the cycle, the stagnation phase, this intensive accumulation becomes dominant. Old technologies are replaced with newer, technologies. One new machine or technology replaces several older machines or technologies. That means that whilst the stock of fixed capital grows, it grows much more slowly than the growth in output. Moreover, the new technologies bring about a moral depreciation of the existing fixed capital stock, both because the new machines make the older machines redundant, and because the rise in productivity the new technology brings about also reduces, hugely, the value  of all types of machine and technology.

Along with it goes the introduction of new materials, more efficient ways of using existing materials, and a significant reduction in the value of materials as a result. The most obvious example of this, in the stagnation phase that ran from 1987-1999, is the massive replacement of old technologies, based around transistors, and printed circuit boards, by the microchip technologies. It saw huge mainframe computers, taking up whole rooms, replaced by personal computers, and then hand-held devices with the same, or even greater, processing power and functionality.

The very fact that the same amount of output can be generated with a smaller quantity of fixed capital, and often even a smaller quantity of circulating constant capital, as well as with less labour, is why growth in this stagnation phase is lower than the long-term average. Yet, the growth in the quantity of output, i.e. of use values, can rise far more than the rise in the value of this output, during this period, precisely because of the rise in productivity. The fall in both the relative (if not absolute) mass of fixed capital employed, the huge moral depreciation of the existing fixed capital stock, and fall in value of all fixed capital due to higher productivity, the reduction in the unit value of elements of the circulating capital, and the rise in the rate of surplus value, as the value of labour-power is reduced, and wages that had risen previously, are now reduced, as the effect of the creation of a relative surplus population, causes a sharp rise in the rate of profit. The increase in the rate of turnover of capital, also causes the annual rate of profit, and thereby the average annual rate of profit to rise sharply. 

In the next phase, the Spring or Prosperity phase, the intensive accumulation of the previous phase starts to give way to a more extensive accumulation. What were the new technologies now become the standard technologies. As growth accelerates, more of these technologies are simply rolled out, and alongside them more workers are employed. This was seen in the period between 1999-2008. Finally, in the Summer or Boom Phase, this process of growth, fuelled by high levels of profits, and increasing masses of labour being employed, starts to cause the wage share to begin to rise again. Rising wage share as increasing masses of labour are employed, and wages themselves start to rise, creates a surge in demand for wage goods that firms seek to satisfy via additional investment, additional employment of labour. Eventually, this brings everything full circle, so that full employment, rising wages, and so on, begins to squeeze profits, and a new crisis phase begins. 

Wednesday, 28 August 2019

Call A General Strike To Stop Johnson's Coup Attempt

I warned several years ago that Britain was heading towards Bonapartism, and that Boris Johnson would be its figurehead.  With his decision to close down parliament we have arrived at the point of the attempted Bonapartist coup.  Labour and the TUC should unite to call an indefinite General Strike to stop the coup.

It shows that what I wrote yesterday didn't take long to be vindicated.  All of the parliamentary cretinism, of manoeuvres to take control of the Order Paper, and so on, which were only a means of the Liberals trying to avoid backing Corbyn, were doomed to fail at this late stage.  The only sure way of stopping a No Deal Brexit, now, is to bring down Johnson's Bonapartist regime.  The legal parliamentary means of doing that is via a vote of No Confidence in the government, which not only the Liberals, but all of those Tory MP's who claim to support parliamentary democracy, would have to support.  But, Johnson, and his advisor Dominic Cummings have already intimated in typical Bonapartist fashion that they would not necessarily take any heed of such a no confidence vote.  It will need to be backed up by mass extra-parliamentary action, including a General Strike to defend bourgeois democracy against tyranny.

A no confidence vote, backed by mass extra-parliamentary action by the working-class, must force Johnson're regime out of office, and install Corbyn as caretaker Prime Minister.  Corbyn's fist act must then be to Revoke Article 50.  The next act should be to call a General Election.  Labour should fight that election on a clear programme of keeping Britain in the EU, and of joining forces with the working-class, socialists and progressive social-democrats across the EU for a radical programme of reform of the EU, and of ending austerity, and implementing a programme or progressive social democracy, starting with a political struggle to extend democracy into the workplace, removing shareholders from Boards of Directors, and replacing them with elected workers directors; it should ensure that there is democratic working-class control over the trillions of Euros contained in workers pension funds across the EU, so that those funds can be used to make investments in real capital, rather than being used only to finance speculation, as they are currently; we should scrap the measures of austerity, and get the EU Council of Ministers, backed by the Parliament to introduce a programme of massive infrastructure spending across the EU, and to finance it by the issuing of EU bonds.

Labour must also make it clear that even if Johnson does push through his No Deal Brexit by this coup, it will not be the end of the matter.  A No Deal Brexit will bring economic and social chaos that is bound to flow over into the streets, as the police and security services have already warned.  The Labour Party and TUC should be making preparations to create create workers defence squads and a democratically controlled workers militia to protect workers from attacks either by the forces of a tyrannical state attempting to quell dissent, or from the forces of fascism that Brexit is unleashing. 

Labour should also be holding talks with the EU to ensure that when Johnson's Bonapartist regime falls, a new government will be able to reverse Brexit.  In the past, the EU has literally stopped the clock.  Labour should ask the EU to again stop the clock on the October 31st deadline.  Then a Labour government when it comes into office can simply pass retrospective legislation to revoke Article 50.  Parliament does not like passing retrospective legislation, but these are not normal times.  If Johnson wants to flout democracy with his coup to push through a No Deal Brexit, then Labour must be prepared to fight fire with fire, and itself be prepared to adopt unorthodox measures to reverse it.

Stop Johnson's Bonapartist Coup - A General Strike to Defend Democracy - Corbyn Into Downing Street Now - Revoke Article 50

Theories of Surplus Value, Part III, Chapter 22 - Part 9

Illustrating that Ramsay had arrived at the correct conclusion about the average rate of profit, as set out above, in relation to the total capital advanced, and not just that laid-out, and consumed in production, Marx quotes Ramsay's comment, 

““… value must be in proportion not merely to the capital truly consumed, but to that also which continues unaltered, in a word, to the total capital employed” (op. cit., p. 74).” (p 334) 

As Marx notes, what Ramsay should refer to, here, is price of production, rather than value, so that the profit added to the cost of production is proportional to the total advanced capital, not to the cost of production, or laid out capital. This latter relation, p/k, is the profit margin, or rate of profit that Marx refers to in his Law of The Tendency For The Rate of Profit To Fall. 

Marx summarises Ramsay's conclusions from his analysis of what he calls fixed and circulating capital, i.e. constant and variable capital. They are similar to those drawn by Marx, in his own analysis. As society develops, the proportion of constant capital rises relative to variable-capital. That is because rising social productivity by definition means that a given mass of labour processes an increasing mass of raw material. So, the demand for labour declines relatively, even as it rises absolutely

“In manufacture, the “evils” which the development of the productive forces generate for the workers are temporary, but reappear constantly. In agriculture, they are continuous, especially in connection with the conversion of arable land into pasture. The general result is: with the advance of society, i.e., with the development of capital, here with that of national wealth, the condition of the workers is affected less and less by this development, in other words, it worsens relatively in the same ratio as the general wealth increases, i.e., as capital is accumulated, or, what amounts to the same thing, as the scale of reproduction increases.” (p 335) 

As Marx says, the contrast with Adam Smith, here, is apparent. Smith believed that, as capital accumulated, the demand for labour would rise faster than its supply. The natural price of labour would then rise, and the natural price of capital fall. This is the basis of Smith's law of the tendency for the rate of profit to fall. 

“In his time, the demand for labour did in fact grow at least in the same proportion in which capital was accumulated, because manufacture still predominated at that time and large-scale industry was only in its infancy.” (p 335) 

Tuesday, 27 August 2019

The Liberals Are Driving Britain Into a No Deal Brexit

Jo Swinson and the Liberals, are driving Britain into a No Deal Brexit.  Were it the case, as it was even a month ago, that Corbyn's Labour was not offering to stop Brexit, then it would have been quite legitimate for MP's to find whatever means were possible to achieve that end.  But, it is no longer the case, since Corbyn committed to using all means necessary to stop a No Deal Brexit.  Labour is by far the largest opposition party, and Corbyn is its Leader.  If a government is to step in to replace the Tories, to stop Brexit, and call an election, it can only be a Labour government led by Corbyn, and given the backing of other Remain supporting MP's.  Swinson's refusal to accept that, is an attempt by 13 Liberal MP's to hold the Labour Party, its 246 MP's, and half million members to ransom.  It is an attempt, by Swinson to implement a coup inside the LP itself, and to dictate to Labour's half million members who their Leader should be.  It is clearly not acceptable, and Swinson's pursuance of that line is tantamount to saying that she puts it before her supposed opposition to a No Deal Brexit.

The Labour Party, not just its 246 MP's, but also its half million members, can never allow Swinson as the Leader of a Liberal Party with just 13 MP's, or even Swinson in conjunction with a single Green MP, four Plaid MP's, and an unknown number, but probably only in double figures, of rebel Tory MP's, to dictate to it, who its Leader should be, and we won't.  Even if some Blair-right Labour MP's are attracted to the idea of having one of their number put up, as some kind of clever ruse, to undermine Corbyn, they would quickly and rightly be slapped down by their own party members.  Moreover, if I was a Labour MP, there is no way that I would vote for anyone other than Corbyn as the Prime Minister in any such caretaker government. 

Swinson says that she would not support a Corbyn led caretaker government, because she will not support any solution that has no chance of being accepted.  Well there is no chance that her suggestion will be accepted, because Labour members, and Labour MP's could never accept it.  Swinson says that it could never be accepted, because rebel Tory MP's would not vote for a Corbyn led caretaker government, but they have only been emboldened to make that statement because of the factional antics of Swinson and the Liberals.  Had the Liberals, like the SNP, come out from the beginning to say they would back such a caretaker government, the Tory rebels would have immediately have been on the spot to follow suit.  The real force now driving towards a collapse into a No Deal Brexit is Swinson and the Liberals, who are putting their own silly, factional interests above stopping Brexit.

The reality is that all of the parliamentary manoeuvres now offer no guaranteed way of stopping Brexit, and the more time is wasted on such parliamentary games, the more it means that there would be no time to pass a No Confidence vote, and install a caretaker government before October 31st comes and goes.  Anyone serious about stopping Brexit, now, only has the option of supporting a No Confidence vote, and of then backing Corbyn as Prime Minister, to form a caretaker government to stop Brexit, and call a General Election.

And, all of the other proposals about calling a second referendum either before or after a General Election are also a dangerous diversion.  The idea put forward by the SNP that MP's could grab control of the Order Paper, and pass legislation to extend Article 50, and call another referendum is fraught with dangers.  Firstly, there is no guarantee of being able to pass such legislation, and the time taken in trying do so will simply bring us closer to October 31st, with no time left to pursue the obvious option of a confidence vote.  Secondly, there is no guarantee that the EU 27 would grant such an extension.  Thirdly, even if it did, you would have to be gullible in the extreme to believe that a Bonapartist regime under Boris Johnson, with Dominic Cummings now entrenched in Downing Street, with the backing of Trump in the US, and with the support of all of the right-wing Tory media, would not pull out every stop, use every lie, deceit, and dirty trick in the book to make sure that any such referendum produced the result they require in even more stark manner.  

And, what then, would all those that have been clamouring for such a referendum then simply roll over and play dead and support such a reactionary decision?  At least Swinson was honest in her duplicity, when she proclaimed that she would not, then, accept such a decision, which makes you wonder exactly why she would want such a vote in the first place, then! 

In a parliamentary democracy the basis for taking decisions is via General Elections, and the election of MP's, as members of parties who stand on manifestos setting out the policies they will implement.  That is how this issue too should have been resolved.  Instead of calling the referendum, Cameron should have invited the Tory Right to simply join with their UKIP outriders and stand in a General Election on a programme of Brexit.  He didn't, because he was more concerned with Tory Party management, and the fact that he knew that in such an event, the Tories would lose a load of seats as their vote was split with the Faragists, which would have meant that Labour would have won the election.

But, the principled position here remains the same.  The first referendum created this situation by establishing plebiscitary democracy as an alternative and necessarily contradictory mandate to parliamentary democracy.   The solution to that cannot be a further referendum, which simply repeats that mistake in the hope of achieving a different result.  If Johnson really wants to push through a No Deal Brexit, let the Tories stand in a General Election on a Manifesto clearly setting out that that is what he intends to do, and then Labour can stand on a clear Manifesto arguing that we will scrap Brexit, and remain in and reform the EU.  Whoever then wins that election, and obtains a mandate can be enabled to implement it, and to take responsibility for their actions.

Labour can never accept Swinson's blackmail and coup attempt.  If she and other MP's refuse to back Corbyn as interim Prime Minister they will have to take responsibility for a No Deal Brexit, and the consequence of that is that those parties will be electorally destroyed.  The only thing stopping a No Deal Brexit would then be if either Johnson, having had his bluff called, capitulated as with May before him, or if, as the chaos approached or unfolded, and UK stock and bond markets collapsed, along with the Pound, and interest rates soared to emergency levels as in 1992, up to 15% and beyond, causing property prices to crash through the floor, a wave of popular revolt forced the government from office, a General Election, and a Labour government that would be able to negotiate an emergency reentry into the EU.

Labour should say to the Liberals, rebel Tories and others, if you want to be held responsible for the chaos of a No Deal Brexit, go ahead, we will do all in our power to stop it.  If the chaos unfolds, you will take the blame for it, and we will reap the reward of steadfastly opposing it.  It is we the Labour Party, with our half million members, our links to millions of organised workers through the trades unions that will be in a position to build an extra parliamentary social movement of civil unrest and disobedience against the chaos of Brexit, so as to force a General Election, and reverse it.  October 31st is not at all the end of this matter.

Theories of Surplus Value, Part III, Chapter 22 - Part 8

In Capital I, it was seen that Nassau Senior, in opposing the reduction in the working-day, wrongly argued that the constant capital value, consumed in production, had to be reproduced out of the new value created by labour during the day (Senior's Last Hour). Ramsay repeats this false argument here. 

““… the rise of wages […] is limited by the productiveness of industry. In other words, … a man can never receive more for the labour of a day or year than with the aid of all the other sources of wealth, he can produce in the same time. … his pay must be less than this, for a portion of the gross produce always goes to replace fixed capital” (i.e., constant capital, raw materials and machinery, according to Ramsay) “with its profit” (op. cit., p. 119).” (p 334) 

This argument itself flows from Smith's “absurd dogma” that the value of commodities resolves entirely into revenues, and thereby is the result of the new value created by labour. Ramsay should not have fallen into this error because, as was seen earlier, he correctly identified the value of commodities as being determined by the living labour required for their production, in addition to the value of the constant capital consumed in their production. Marx notes, 

“Here Ramsay confuses two things. The amount of “fixed capital” embodied in the daily product is not the product of the day’s labour of the worker; in other words, this portion of the value of the product represented by a portion of the product in kind is not the product of this day’s labour. On the other hand, profit is indeed a deduction from the daily product of the worker or from the value of this daily product.” (p 334) 

Monday, 26 August 2019

Theories of Surplus Value, Part III, Chapter 22 - Part 7

Indirectly, the question of fixed capital, relative to circulating capital, may, however, be significant, for the reasons Marx sets out elsewhere. In determining the average rate of profit, what is being measured and compared is the annual rate of profit, in each sphere. The annual rate of profit is calculated on the total capital advanced (fixed and circulating), for one turnover period. If the rate of turnover is the same in each sphere then those spheres that have a high proportion of fixed to circulating capital, will have a lower annual rate of profit. For example:-
Sphere 1
Fixed Capital
Materials
Wages
Surplus Value
Annual Rate of Profit %
10,000
1,000
1,000
1,000
8.33

Sphere 2
Fixed Capital
Materials
Wages
Surplus Value
Annual Rate of Profit %
1,000
1,000
1,000
1,000
33.3
However, because the rate of turnover is a function partly of productivity, and productivity is a function of fixed capital, the rate of turnover in Sphere 1 is likely to be higher. Suppose the capital in Sphere 1 turns over 10 times during the year, rather than once. Then:-
Fixed Capital
Materials
Wages
Surplus Value
Annual Rate of Profit %
10,000
1,000
1,000
10,000
83.3
Surplus value is £10,000, here, because the variable-capital of £1,000, advanced for a turnover period produces, £1,000 of surplus value, as before, but now there are ten such turnover periods in the year, thereby producing £10,000 of surplus value in the year.

Sunday, 25 August 2019

Theories of Surplus Value, Part III, Chapter 22 - Part 6

As seen earlier, Ricardo had raised the issue of spheres employing much fixed capital as providing an exception to the determination of prices by labour-time. In attempting to reconcile the contradictions in the Ricardian system, his followers, like J.S. Mill and McCulloch, had turned this exception into a rule, and the contortions this led to resulted in the dissolution of the Ricardian School. 

Ramsay also refers to Ricardo's exceptions. For the reasons already discussed, those exceptions are a diversion. Marx briefly shows why, by summarising his analysis in relation to the formation of prices of production, and the effect of a general rise in wages. The points can be summarised as follows:- 
  1. Assuming the working day and rate of surplus value in each sphere is the same, the rate of surplus value can only change if wages rise or fall.
  2. Spheres where the organic composition of capital is higher than the average, or where the rate of turnover is lower than the average will have higher prices of production than exchange values, because to obtain the average annual rate of profit, they have to appropriate more surplus value than they produce, and vice versa.
  3. A general rise in wages causes the rate of surplus value and the average annual rate of profit to fall.
  4. Those capitals that have a higher price of production than exchange value then see their price of production fall, because the fall in the average profit is greater than the rise in their wage cost; those capitals that have a lower price of production than exchange value see their price of production rise, because the fall in the average profit is less than the rise in their wage cost; those capitals whose price of production is equal to their exchange value see no change in their price of production. 
To effect these changes, capital must leave the spheres where price of production rises, and enter those spheres where price of production falls. On this basis an average annual rate of profit is restored. It also means that it brings about a further concentration and centralisation of capital, because the spheres into which capital flows are those more capital intensive areas of production. 

But, as Marx points out, this has nothing to do, directly, with the division of capital between fixed and circulating capital as defined by Ricardo. 

“Bankers and merchants employ almost exclusively circulating capital and hardly any variable capital; that is, they lay out relatively small amounts of capital on living labour. Contrariwise, a mine-owner employs incomparably more fixed capital than a capitalist engaged in tailoring. But it is very questionable whether he employs relatively as much living labour. It is merely because Ricardo advanced this special, relatively insignificant case as the only instance of a divergence between production price and value (or, as he incorrectly put it, [as] an exception to the determination of value by labour-time) and presented it in the form of a difference between fixed and circulating capital, that this blunder—and in an incorrect form at that—has survived as an important dogma in all subsequent political economy. (The mine-owner should be counterposed not to the tailor but to the banker and the merchant.)” (p 333-4)

Saturday, 24 August 2019

Theories of Surplus Value, Part III, Chapter 22 - Part 5

As Marx points out, if labour only resulted in reproducing the constant capital and variable capital, i.e. the consumed materials, worn out machinery etc., and the wage goods required for the reproduction of the workers, then no surplus value would have been created, which means no profit and no capital

“But that nature has nothing whatever to do with it and that the race of labourers perpetuates itself despite this surplus and that the surplus assumes the form of profit and on this basis, the race of capitalists perpetuates itself has been admitted by Ramsay himself since he declares that “circulating capital”, by which he means wages, wage-labour, is not an essential condition of production, but is due merely to the “deplorable poverty of the mass of the people”. He does not draw the conclusion that it is capitalist production which “perpetuates” this “deplorable poverty”, although he admits it when he says that it “perpetuates the race of labourers” and leaves them only as much as is necessary for that perpetuation.” (p 331-2) 

As Marx has already noted, all surplus value ultimately depends on relative surplus value, i.e. social productivity must be high enough that, in Man's relation with Nature, he is able to produce more use values in a day than is required for his own reproduction. The more social productivity rises, the greater the potential for such relative surplus value. Ramsay, unlike Ricardo, however, also recognises the possibility of absolute surplus value, resulting from a lengthening of the working-day. 

Marx sets out briefly Ramsay's understanding of the average rate of profit, and the formation of prices of production

“The rise in prices in some branches of industry resulting from increases in wages “… by no means exempted the master-capitalists from suffering in their profits, nor even at all diminished their total loss, but only served to distribute it more equally among the different orders composing that body” (op. cit., p. 163). 

And if the capitalist whose wine is the product of 100 men (Ramsay’s example) sells it for the same price as a capitalist whose commodity is the product of 150 men, in order that “… the employment [of capital] in question should not be less lucrative than others” [p. 43], then it is clear that thereby the surplus-value embodied in the wine and in the other commodity is not increased, but only distributed equally between different orders of capitalists.” (p 332) 

In fact, as Marx sets out in his further elaboration of the transformation of exchange-values into prices of production, things are not entirely that simple, because the output of one sphere of production is simultaneously the input of some other sphere, so that in transforming the exchange-value of the former into a price of production, that simultaneously affects the cost of production of the latter. As Marx then shows, if say the organic composition of capital in those spheres which produce wage goods is higher than average, or the rate of turnover of capital in these spheres is lower than average, the price of production of wage goods will be higher than their exchange-value, so wages will rise, and surplus value will fall, as described earlier. 

“We have seen how a deviation in prices of production from values arises from: 1) adding the average profit instead of the surplus-value contained in a commodity to its cost-price; 2) the price of production, which so deviates from the value of a commodity, entering into the cost-price of other commodities as one of its elements, so that the cost-price of a commodity may already contain a deviation from value in those means of production consumed by it, quite aside from a deviation of its own which may arise through a difference between the average profit and the surplus-value. 

It is therefore possible that even the cost-price of commodities produced by capitals of average composition may differ from the sum of the values of the elements which make up this component of their price of production. Suppose, the average composition is 80 c + 20 v. Now, it is possible that in the actual capitals of this composition 80 c may be greater or smaller than the value of c, i.e., the constant capital, because this c may be made up of commodities whose price of production differs from their value. In the same way, 20 v might diverge from its value if the consumption of the wage includes commodities whose price of production diverges from their value; in which case the labourer would work a longer, or shorter, time to buy them back (to replace them) and would thus perform more, or less, necessary labour than would be required if the price of production of such necessities of life coincided with their value.” 

(Capital III, Chapter 12)