Saturday, 10 August 2019

Theories of Surplus Value, Part III, Chapter 21 - Part 79

The supposed problem of capitalising the surplus value, and potential for such accumulation to lead to a catastrophic fall in the mass of profit was seized upon by Malthus and others of his ilk, such as Thomas Chalmers, to argue the case for the landed aristocracy and their lackeys in the clergy etc. 

“Hence the fantasy of the Rev. Thomas Chalmers to the effect that the smaller the amount of the annual product laid out by the capitalists as capital, the larger the profit they pocket. The Established Church then comes to their assistance and sees to it that a large part of the surplus product is consumed instead of being capitalised. The miserable priest confuses cause with effect.” (p 311) 

As seen previously, Malthus' catastrophist argument was that, as the capitalists' accumulated more and more capital out of profits, and so produced more and more commodities, the problem would be of being able to realise the produced profit. His answer was that there needed to be a class in society who consumed without producing, who could then carry out this useful social function of soaking up the surplus product, and thereby enable the capitalists to realise the produced surplus value. Step forward the landed aristocracy, and their associated lackeys. This is essentially the same solution that Keynes came forward with a century later. But, of course, what Malthus failed to ask was where these elements would obtain the revenue from which to be able to buy this surplus product. 

The answer was that they obtained it from rents, tithes and taxes. But, all of these are themselves deductions from surplus value, and so profit. The answer amounted only to the capitalists themselves handing over a portion of their profits to these parasitic layers, solely in order that they could then pay this money back to them in exchange for commodities. Keynes' solution is essentially the same, but more sophisticated and nuanced. His solution is to borrow money, and, today, the same thing could be achieved by printing money, QE, which is then used by the state to purchase commodities, employ labour-power, so that excess production is soaked up and profits realised. This is essentially what is proposed by proponents of Modern Monetary Theory (MMT).  The multiplier than results in the additional employment increasing demand for commodities, so that more of the surplus production is soaked up. As revenues (wages, profits, rent, interest) rise, so taxes also rise, and so the state recoups the increased spending, which enables it to repay the borrowing. 

Although the solution is more sophisticated, it suffers from the same underlying problem as that put forward by Malthus. In order to borrow money, the state absorbs money-capital that otherwise would have been available for investment. It thereby causes interest rates to rise, and that also reduces the rate of profit of enterprise, which reduces the potential for capital accumulation. In the short-term, in a period of long wave uptrend, where firms see any recession as temporary, this may not matter. They are likely to see any recovery in employment and aggregate demand as justifying confidence in making additional investments. In the postwar long wave uptrend, between 1949-74, there were five such recessions identified by Mandel, and, on each occasion, Keynesian intervention succeeded in cutting it short. 

However, in a period of long wave crisis and then stagnation, firms begin to see any recovery as only temporary and short-term. In the crisis phase, it is indeed high levels of employment that have pushed up wages, and squeezed profits. Capital does not want higher levels of employment that would prevent wages falling, so as to raise the rate of surplus value, and reduce the squeeze on profits. During such periods, the demand for money-capital, simply as currency to pay bills, reaches a peak, so that interest rates also reach their highest point. Again firms do not want to face even higher rates of interest in such periods, as a result of being crowded out of capital markets by the state. The whole point of such a crisis phase, is for capital to engage in intensive rather than extensive capital accumulation, so as to introduce labour-saving technologies, to create unemployment so as to reduce wages. 

Where the government increases money-supply, in these conditions, this simply puts additional liquidity into the economy, and thereby acts to cause inflation. Rather than increasing their investments, so as to create employment, and aggregate demand, they see it as merely a means of raising their prices. The recoveries become shorter and shallower, the state must intervene more often, and more aggressively, the state itself becomes a major source of demand for money-capital, leading to the crowding out seen in the 1970's. The consequence is a descent into the kind of stagflation witnessed in the 1970's, and early 1980's. 

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