Theories of Surplus Value, Part III, Chapter 24 - Part 40

In some types of production, the replacement of capital and fixed capital occurs in terms of its value, and use value, simultaneously. A farmer, for example, reproduces the value of the seed they consume in production, with the corn etc. they grow. But, a portion of this corn is then physically set aside, as seed, to replace that consumed in its production. A machine maker uses machines to produce machines, and sets aside some of their production of machines, to physically replace the machines they have used up in that production, and so on. 

“Jones’s remark that the additional capital must be “reproduced” (of course from the sale of the product or in kind), “in the time it wastes away” simply means that the commodity must replace the wear and tear embodied in it. In order to begin production anew, all the value elements contained in the commodity must be replaced by the time when its reproduction is to begin again. In agriculture, this reproduction time is given as a result of natural conditions, and the period of time in which the wear and tear must be replaced is given, in exactly the same way as the time in which all the other value elements of grain, for example, have to be replaced.” (p 438) 

The reproduction of use values is not simply a question of their consumption – either productive or unproductive – because each type of use value has a lifespan. It is more or less durable. 

“They decay, and finally they disintegrate. If their use-value is destroyed, then their exchange-value goes down the drain and that puts an end to their reproduction. The final limits of their circulation time are therefore determined by the natural times and periods of reproduction proper to them as use-values.” (p 438) 

As Marx described in Capital II, for production to be continuous, capital must be allocated in appropriate proportions. Suppose it takes 1,000 hours of labour to produce a car gearbox, and the car producer produces 10 cars in 1,000 hours. There is no point employing only 1,000 hours in producing gearboxes, because this would not meet the car maker's demand for them. 

Where very large amounts of fixed capital are used, the output must be such that the value transferred to output, over its lifetime, is sufficient to cover its replacement. This is why such firms depend on keeping the fixed capital fully employed. 

A large amount of capital is tied up, for example, in a ship, but, if, for whatever reason, the ship is not fully employed, moving cargo, it will not return sufficient funds to cover its own reproduction. But, this also applies where the lifespan of a piece of fixed capital is cut short. A ship may sink, having only been in operation for six months, and so on. This is why insurance is required in such businesses, to cover capital losses. But, the same thing applies to moral depreciation. A firm may have only bought a machine year ago, but then finds that a newly developed machine makes it obsolete, causing it to suffer a capital loss that cannot be recovered in the value of output. 

The other aspect of the question raised by Jones is the motivation of the capitalist for introducing a machine in place of labour, or what amounts to the same thing, a new machine in place of an existing machine. The motivation is profit. 

“Nowhere does Jones explain how he conceives the genesis of this profit. But since he merely derives it from labour, and the profit yielded by the auxiliary capital simply from the increased efficiency of the labour of the workmen, it must consist of absolute or relative surplus labour.” (p 439) 

But, the additional profit here is not the same thing as a higher rate of profit, though that might be the case in the short term. The firm that introduces a new machine, does so, because competition drives it to do so. It must ensure that it steals a march on its competitors so as to reduce the individual value of its output, and thereby gain increased market share, or at least avoid losing market share were its competitors to also introduce such a machine. For the individual firm, as it gains market share, by selling at a price marginally beneath the market value, it increases both its mass and rate of profit. When other firms introduce the machine, so that the market value falls, because now less labour is employed relatively, the rate of profit will fall, but, with the market value of the commodity having been reduced, this will result in the demand for it rising. The market will thereby expand, so that even though each firm may now obtain a lower rate of profit, they each obtain an increased mass of profit as a result of more capital in total being employed. 

For any individual firm, as as set out above, the actual basis of this profit is that it reduces the individual value of its output below the market value, whilst it continues to sell its output at the market value or marginally below it. In terms of prices of production, the firm sells its output at the price of production, but its cost of production (c + v) falls. Consequently, its profit rises above the average profit, in a similar way to how a farmer on more fertile soil obtains a surplus profit. The difference is that the farmer's surplus profit goes into the pocket of the landlord, as differential rent, whereas the surplus profit of the manufacturer goes into his own pocket. The surplus profit only disappears when other manufacturers introduce the machine so that the market value of the output is reduced. 

Back To Part 39

Forward To Part 41

Northern Soul Classics - Can't Help Loving You - Paul Anka

Friday Night Disco - Funny Feeling - The Delfonics

Theories of Surplus Value, Part III, Chapter 24 - Part 39

If we return to the spinner, and the spinning machine, in six weeks, the machine has transferred ⅛ of its value to the 10,000 kilos of yarn produced. When the yarn is sold, the spinner gets back this £1,000 of value of wear and tear. But, the turnover period of the spinner's circulating capital is not confined to this production period. It may take a further 6 weeks for the yarn to be sent to market, sold, and for the replacement cotton to be ready to spin. The spinner's advanced circulating capital is then, not just what they must advance for the 6 weeks of production, but for this 12 week period, because they must produce continuously. 

But, suppose the circulation period is extended, so as to be not 6 weeks, but say 18 weeks. Now, the total turnover time is 24 weeks. Now imagine the fixed capital has a lifespan not of a year but of 12 weeks. In each production cycle of 6 weeks, the fixed capital gives up half its value in wear and tear. However, at the point it must be physically replaced, the spinner has not yet sold the yarn, and so has not received back the value of wear and tear required to reproduce the machine. The machine maker may have produced the machine so that it is available, but the spinner must now, themselves advance additional capital to buy it. 

The other part of this argument involves the question of how a machine/fixed capital can be introduced where none currently is employed (extensive accumulation), or how a new type of machine can be introduced to replace an existing type of machine (intensive accumulation). Associated with this is then the question of what leads to the capitalist undertaking such accumulation. 

On the first point, Marx notes, 

“The reproduction of the auxiliary capital takes place if the productivity is so great, in other words, if the increased amount of output produced during the working-day of the same length is such that a unit of a particular commodity is cheaper than a unit produced by the former method... “ (p 437) 

In other words, this comes down to the total labour-time expended. If 100 workers work 10 hours each producing 1,000 units of commodity A, each unit has a value of 1 hour of labour-time. If 20 workers work 10 hours each producing a machine, which is used by 30 workers, who are thereby enabled to produce the 1,000 units of commodity A, it now has a value of only 0.5 hours of labour-time, per unit (assuming the machine has to be replaced every 1,000 units of output.) 

Provided a surplus product existed that enabled the 20 workers to be employed by a machine builder, which is a requirement for all accumulation, then the producer of commodity A, once the machine is available, simply advances capital for the machine that otherwise they would have advanced as variable-capital. If 1 hour of labour-time is equal to £1, they would previously have advanced £1,000 as variable-capital (ignoring surplus value). Now, they advance £200 of capital, as fixed capital, and only £300 as variable-capital. The 1,000 units of commodity A have a value of £500, which now reproduces the value of the machine and the variable-capital. In the process, £500 of variable-capital has been released along with 50 workers, and this freed capital could be used to employ these workers in the production of some new commodity. As Marx points out, elsewhere, the fact that it could does not mean that it will be so, immediately. 

The other aspect here is in relation to the introduction of such a machine by one particular producer. The firm producing commodity A that introduces the machine reduced the individual value of its output to £0.50 per unit. However, it will continue to sell its output at the market value of £1 per unit, and will thereby make a surplus profit of £0.50 per unit, unless its own output is so large that it dominates production, and thereby determines the market value itself. 

Marx notes, 

“An increase in the product could take place without fulfilling this condition. If, for example, the numbers of pounds of twist were to increase tenfold (instead of a hundredfold, etc.) and if the value of the wear and tear of the machinery which has to be added to the price were to drop from one-sixth to one-tenth, then the twist spun by machinery would be dearer than that produced by spindle. If an additional £100 of capital in the form of guano were used in agriculture and if this guano had to be replaced in a year, and if the value of a quarter (produced by the old method) were £2, then 50 additional quarters would have to be produced merely to replace the depreciation. And without this the guano could not be used (profit is here disregarded).” (p 437-8) 

Back To Part 38

Forward To Part 40

Theories of Surplus Value, Part III, Chapter 24 - Part 38

The reproduction of the fixed capital comprises two different things. First the reproduction of the value of the fixed capital (value of wear and tear), and secondly, the physical replacement of the use value of this fixed capital. The difference between fixed capital and circulating capital is that the total use value of the latter is consumed in the production process, and thereby reproduced in the value of the output resulting from that process. That is not the case with the fixed capital. The part of its value not transferred to output in the production process by wear and tear remains “fixed” in it. 

For example, suppose the output of a working period of 6 weeks is 10,000 kilos of yarn. In this period, 10,000 kilos of cotton is consumed as raw material. The cotton is circulating capital. The whole 10,000 kilos are consumed in production, and when the yarn is sold, the value of this cotton is then reproduced. The spinner obtains the value of the cotton, say, £1,000, which they can then use to physically replace the consumed cotton. Herein lies the other element of the reproduction process, because it assumes that the cotton grower has themselves produced the 10,000 kilos of cotton, so that the spinner can buy it from them. 

In producing the 10,000 kilos of yarn, the spinner will also have used spinning machines. But, the machine is not fully consumed in this production process. For the sake of argument assume a 48 week year, and that the machine lasts for a year. In the production process of the 10,000 kilos, therefore, the machine does not give up all of its value. It gives up only 1/8 of its value. If the machine has a value of £8,000, it transfers £1,000 of value to the yarn, which the spinner gets back when they sell the yarn. But, unlike with the circulating capital, all of which must be thrown back into circulation, to replace the 10,000 kilos of cotton, the spinner can put the £1,000 into a reserve fund, which they only need to throw back into circulation at the end of the year, when they replace the machine. 

For most fixed capital, therefore, the physical replacement only needs to have been accomplished over this longer time period, extending over several production cycles, even though the reproduction of the value of the fixed capital is is taking place constantly, alongside the reproduction of the value of the circulating capital, via the transfer of the value of wear and tear to the end product. 

So, the producer of spinning machines only needs to produce a replacement machine by the end of the year. But, this is not always the case, as Marx demonstrated in Capital II. Instead of physically replacing the spinning machine, the spinner might piecemeal replace or repair parts of it, during the year. Marx gives the example, in Capital II, of locomotives that continually have their component parts replaced. In Only Fools and Horses, council road sweeper, Trigger, says he has had the same brush for twenty years, though he has got through several new brush heads, and handles. In Capital II, Marx also gives the example of things like canals. A canal does not usually get physically replaced by another canal. The wear and tear instead assumes the form of repairs to locks, canal walls, bridges, tunnels etc. Today, the same would apply to motorways, telecommunications networks and so on. 

If we take the spinning machine, and assume it is physically replaced, in its entirety, then, because a number of such machines are bought by different spinners, at different times, we might expect that, on average, 1/8 of the total number of such machines wear out during each 6 week production cycle, so that the machine maker must have physically produced that quantity of machines, so that they can be physically replaced. In practice, as I've set out elsewhere, because producers tend to have to acquire new types of machine not long after they become available, to remain competitive, these replacement cycles can tend to become synchronised. That is marked, for example, in relation to companies buying new computers, when new, more powerful processors become available and now more advanced software becomes available to utilise their power. A countervailing factor to that, as Marx showed in the previous chapter, is where large firms, with large amounts of fixed capital, have already written down much of the value, as a result of the transfer of wear and tear over many years. 

On an average, however, we could say, taking the total fixed capital of an economy, the amount of value transferred to final output in wear and tear, is equal to the amount of value that must be taken out of current production, for the year, to physically reproduce that fixed capital that has actually worn out during that period. 

Back To Part 37

Forward To Part 39

Labour Manifesto – Transport

Labour's transport policy focuses on public transport, primarily rail and buses. If this were a programme for the 20th century, even the late 20th century into the 1990's, this would be a rational, forward looking agenda. Unfortunately, this is supposed to be a programme for the 21st century, and, as such, it is timid, backward looking and fails to deal with the real issues. 

There is a reason that railways declined in the 20th century. It is that railways are great in shifting large and heavy volumes, both of freight and passengers, over long distances from A to B. They are inflexible and costly ways of moving things over short distances, or to destinations not on a rail line. Across Britain, in the 19th century, local rail lines were able to be effective in moving large amounts of heavy freight and bulk material. For example, local lines transported coal from collieries to ports, power stations, steel plants, and coal merchants. They similarly moved iron ore to steel plants, as well as moving finished steel in the other direction. They moved clay to potteries and brick manufacturers, and so on. 

But, even where these heavy finished products were transported by train, their final journey to markets usually had to be made by road. Coal merchants delivered coal to houses by road. When I was a kid, our local merchant still delivered via a horse and cart, but by the 1960's, coal was being delivered by lorry. And, as manufacturing industry expanded into a range of new products, these end products, even if they were transported over long distances by train, still had to make the final bit of the journey into shops by road. By the 1960's, local rail lines were no longer profitable, and were phased out under Beeching. 

The same is true with buses. In a place like North Staffordshire, which is a long thin conurbation, strung out along the A50, it was conducive to travel by bus. If you lived in one of the villages or hamlets that straddle the A50, it was always possible, with varying degrees of difficulty, to catch a bus to somewhere on the main line route, and to continue your journey from there. But, again, by the 1960's, the death knell of the bus was already ringing. When large numbers of workers all worked at one large workplace, like a colliery, steel mill, hospital, or potbank it was possible to run works buses. But, in the 1960's, there was a large increase in the number of women workers. Many went to work in shops and offices in town centres. 

At the same time, schools were being merged, as were hospitals, obtaining economies of scale. A family with two kids going to two different schools, could not simply catch a bus, dropping off one child at A, the next at B, before continuing to workplace C, because often A, B and C were not on the same bus route. I remember as a child suffering with pneumonia, and having to go to the local hospital for X-Rays, which involved a half hour bus journey for the first stage, followed by a half hour wait for a connecting bus, for another twenty minute bus journey to the hospital, and the same in reverse. That was for what was a ten minute journey, going direct by car. 

In addition, in the 1960's, people began to have money to spend on leisure activities, and that was particularly notable for young people. Transport up to this point was driven almost exclusively by the needs of capital. It was about moving bulk products across the country, and moving large numbers of workers from their dormitories to the workplace. It was totally unsuited to the new freedoms that developed in the 1960's. It wasn't just TV that closed down by midnight, as bosses were anxious that workers did not stay up too late for fear of affecting their performance at work the next day. Bus services also closed down. So, even in the early 1970's, I would go dancing for five or six hours, and then have to run the five miles home, because there were no buses. Its no wonder that so many young people, in particular, were keen to get their own private transport, because it meant a freedom of movement that was a necessary corollary of the wider freedoms they now enjoyed. 

And, this then created a dynamic that meant that private transport was bound to expand at the expense of public transport. Trains will continue to have a function where it comes to transporting large numbers of passengers, or large quantities of freight over long distances, where it is a matter of moving from A to B, but they do not meet the requirements of a modern networked society, where the majority of movement does not fit into this rigid pattern. The same is true of buses. The number of buses on the road today is a fraction of what it was in the 1960's and 70's, yet, even back then buses were not capable of dealing with these more complex journeys. Trying to put a sufficient number of buses on the roads, to cover even 90% of actual journeys, would be prohibitively expensive. Indeed, this is one reason that Uber has taken off along with other ride sharing systems. 

If Labour wanted to have a truly forward looking agenda, it would forget about building an integrated transport system around trains and buses, and begin to develop a 21st century, flexible transport system around the development of autonomous self-driving vehicles. As a start, it should facilitate Uber drivers, and others to create their own worker owned cooperative, providing a cheap, safe and reliable ride sharing system. It should provide incentives for the use by the cooperative of electric vehicles. The world is becoming a services economy, rather than an ownership economy. People no longer buy videos or DVD's, but stream them from Netflix or Amazon. Software like Microsoft Office is no longer bought to own, but is leased and so on. Many people in larger cities have got rid of their cars, but, still unable to rely on public transport, use Uber, or else one of the schemes where they can pick up someone else's car to use. In the next couple of years, autonomous, driverless vehicles will begin to be rolled out, indeed, as I noted some time ago, an autonomous, electric flying taxi service has been established in New Zealand. A number of firms are introducing flying cars in Britain. 

I'm not suggesting that Labour should promote flying taxis, though its worth looking at for the next Manifesto, but I am suggesting that, Labour's focus should now be on promoting the idea of a service based transport system that meets the needs of the 21st Century, rather than simply trying to prop up the kinds of transport systems that were relevant for the 19th and first half of the twentieth century. Autonomous, electric vehicles that can be summoned by smart phone in the same way that an Uber can be hailed, enable existing road networks to be utilised efficiently without any additional costs, and they enable the same kind of flexibility in travel that exists with privately owned vehicles, but without that private ownership. If the proper safeguards are built into these vehicles, it could also dramatically reduce the number of accidents occurring on roads. 

The plans for introducing additional cycle paths and so on are all well and good, but as someone who used to cycle 7 miles to work, and 7 miles back every day, at a time when I was at peak fitness having just obtained my black sash in Lau Gar Kung Fu, I can guarantee that for many people, it would be a route to a certain heart attack, if they managed to even complete the first such journey. That is before all of the risks of death due to the state of the roads, being cut up by drivers and so on. Building physically separated cycle lanes might be one solution to the latter, but its unlikely to be done given the cost of doing it to fit into existing infrastructure. 

Labour says that it will invest in Crossrail for the North. Good, but on its own woefully inadequate. Britain's, transport infrastructure is geared almost exclusively on a North-South axis. That is no accident. As with HS2, the whole purpose is to funnel people and resources into London. London is like a huge black hole that sucks life from the rest of the country. The nonsense is being promoted in relation to HS2 that it will bring economic prosperity to the North. Total nonsense. The whole history of such projects is that they enable the larger centre to be able to draw in labour supplies from further afield, thereby both obtaining cheaper labour, whilst denuding those outer areas of the labour they require. The flow is not going to be from London to Birmingham or Manchester, other than of workers who spend the day in London, and return home at night, but almost entirely in the opposite direction. 

If Labour wants to promote the economy in the North, it should scrap HS2, and use those resources elsewhere. We need a whole series of East-West, rail and road links so that each region can develop the economy around regional hubs. HS2 does nothing to speed up rail freight, which illustrates its real purpose of simply providing London with additional cheap labour from the provinces. Moreover, rather than promoting additional business travel, Labour should be promoting 21st century alternatives to it, such as providing a 21st century broadband network with 2 Gb speeds like that being introduced in Singapore. As I wrote recently, Labour's broadband proposal is a step forward but way too timid. By 2030, it will be way out of date, and indeed most internet activity by that time is likely to be conducted via 5G, or even by then 6G, wireless networks. Labour's broadband proposal only makes sense if it is to be rolled out in the next 2-3 years. 

Labour says, 

“We will bring together transport and land-use planning to create towns and cities in which walking and cycling are the best choice: safe, accessible, healthy, efficient, economical and pollution-free. We will help children’s health and well-being by ensuring street designs provide freedom for physically active outdoor play and by introducing measures to ensure the zones around our schools are safer, with cleaner air.” 

This is good, and Labour can make a start on it, by building this into its programmes for new Council House building. Residential property accounts for only 1% of land use in Britain. Golf courses account for 2%, by comparison. The Green Belt is an absurdity. It is crying out for some rational planning for developing new residential developments. More than a decade ago, as a County Councillor, I drew up some suggestions for development in my local area that suggested developing new villages, based upon a maximum development size of 250 houses, built up to modern standards of efficiency, and space. Britain has the smallest houses, by far, of anywhere in Europe. Housing developments lack adequate gardens, adequate parking space, adequate width of roads, and adequate amenities. Instead of the large amounts of wasted, sterilised land tied up in the Green Belt, we should instead build in mini-Green Belts around each of these small scale developments, with a minimum of a quarter to a half a mile of Green Space around each development. We should also begin, greening the major towns and cities, so that instead of the current policy of developing every square inch of brownfield sites, they instead be turned into green open space. 

A 21st century broadband network will mean that children can grow up in these greener more pleasant environments, whilst having access to everything that would be associated with a city, at their fingertips. Labour should ensure that all libraries be available on line, so that every child or adult can obtain any book, free online, and the same with other public archives. Ultrafast broadband is already used in Singapore to provide high quality education to children in their homes. We have also had the development Mass Online Courses. New technology is making all of these services from education, to entertainment, to healthcare available online, to everyone wherever they live. Labour should champion and facilitate that development. 

This ability to live locally, but connect globally would also thereby contribute hugely to Labour's plans to reduce environmental damage, and pollution. 

Labour has failed to be radical enough, and forward thinking enough in these proposals.

Theories of Surplus Value, Part III, Chapter 24 - Part 37

Marx now looks at the way Jones explores the role of technology in raising productivity. Jones essentially makes the distinction between extensive and intensive accumulation. The latter involves an increase in knowledge, Jones concludes. 

Jones begins by looking at the way capitalist production makes possible a division of labour on a larger scale. 

“… if he” (the capitalist) “employ more than one man, he can divide the task between them; he can keep each individual steadily at work at the portion of the common task which he performs the best… if the capitalist be rich, and keep a sufficient number of workmen, then the task may be subdivided as far as it is capable of subdivision. The continuity of labour is then complete… Capital, by assuming the function of advancing the wages of labour, has now, by successive steps, perfected its continuity. It, at the same time, increases the knowledge and skill by which such labour is applied to produce any given effect.” (p 436) 

This also means, Jones says, that the capitalists themselves cease being workers, and concentrate solely on this task of increasing their knowledge as to how production can be increasingly undertaken by more efficient means. Jones, of course, was writing before the capitalists themselves were removed from that social function, and it became the preserve of professional managers and technicians whose work was itself systematised by the theorists of scientific management, such as Taylor. 

Jones, here, then, also recognises the role of fixed capital in this process of raising productivity. He defines this fixed capital, which constitutes all constant capital, apart from raw material, as auxiliary capital. 

““The national mass of auxiliary capital may, certain conditions being fulfilled, increase indefinitely: the number of labourers remaining the same. At every step of such increase, there is an increase in the third element of the efficiency of human labour, namely, its mechanical power… auxiliary capital thus increases its mass relatively to the population…”” (p 436) 

He then sets out three conditions required for the accumulation of this auxiliary capital. The first, which applies to all capital accumulation, is that it must be possible to “save” the additional capital. In other words, there must be a surplus product that can be set aside from current production for this purpose. Secondly, there must be a will to actually save this surplus production rather than consume it unproductively. Thirdly, Jones says, 

“Some invention by which it may be made possible, through the use of such capital, that the productive powers of labour may be increased; and increased to an extent which will make it, in addition to the wealth it before produced, reproduce the additional auxiliary capital used, as fast as destroyed, and also some profit on it…” (p 436) 

This is confused, and Marx disentangles its contents, after citing the rest of Jones' comments on it. In these comments, Jones then sets out the difference between extensive accumulation where simply more of the same technology is employed, and intensive accumulation, where new technologies are introduced, which replace the old. The latter requires a development of knowledge itself, what would be termed today a new innovation cycle. 

““When the full amount of auxiliary capital, that in the actual state of knowledge can be used profitably, has already been supplied … an increased range of knowledge can alone point out the means of employing more. Further, such employment is […] only practicable if the means discovered increase the power of labour sufficiently to reproduce the additional capital in the time it wastes away. If this be not the case, the capitalist must lose his wealth. But the increased efficiency of the labourers must, besides this, produce some profit, or he would have no motive for employing his capital in production at all…, all the while, that by employing fresh masses of auxiliary capital these two objects can be effected, there is no definite and final limit to the progressive employment of such fresh masses of capital. They may go on increasing co-extensively with the increase of knowledge. But knowledge is never stationary; and, as it extends itself from hour to hour in all directions, from hour to hour some new implement, some new machine, some new motive force may present itself, which will enable the community profitably to add something to the mass of auxiliary capital by which it assists its industry, and so increase the difference between the productiveness of its labour and that of poorer and less skilful nations” (loc. cit., pp. 38-41).” (p 436-7) 

This, again, whilst representing a significant insight into the process of capital accumulation, is also confused in its formulation. 

Marx notes, 

“First, with regard to the statement that the inventions, or appliances or contrivances must be of such a kind, “that the productive powers of labour may be increased; and increased to an extent which will make it, in addition to the wealth it before produced, reproduce the additional auxiliary capital used, as fast as it is destroyed…”, or “reproduce the additional capital in the lime it wastes away”. This means nothing more than that the wear and tear is replaced as it takes place, or, that on the average the additional capital is replaced in the same period during which it is consumed. A portion of the value of the product, or, what amounts to the same thing, a portion of the product, must replace the consumed auxiliary capital, and, at such a rate that if, in a given period of time, it is wholly consumed, it is reproduced wholly, or that a new capital of the same kind takes the place of the capital used up. But what is the condition for this? The productivity of labour must rise to such an extent through the application of the additional auxiliary capital that a part of the product can be deducted to replace this component part either in kind or by exchange.” (p 437) 

Back To Part 36

Forward To Part 38

Labour Manifesto – Economy and Energy

Labour says, 

“Labour led the UK Parliament in declaring a climate and environmental emergency. The next Labour government will lead the world in fighting it, with a plan to drive up living standards by transforming our economy into one low in carbon, rich in good jobs, radically fairer and more democratic.” 

All very good and admirable, but the UK economy accounts for only about 3% of global GDP, whereas the EU economy accounts for around 28%. The EU and US together account for around 50% of global GDP. The small UK economy, on its own, is in no position to effectively lead anything. Outside the EU, the UK will lose most of the leverage it was able to apply in determining these large global responses. It will be the big players such as the EU, the US, and China that will set the pace and determine the rules of the game. Moreover, precisely because any new advanced technologies required to really resolve the climate emergency will require vast amounts of investment in research and development, and will require large markets into which these new technologies can be sold, to make production on a large enough scale worthwhile, it will only be these large economies that will have the resources to take it forward. 

One of the first things that the EEC did, for example, after its inception, was to be able to develop the European Atomic Energy Industry, on a continent wide basis, so as to obtain the benefits of both state support for the industry, as well as the pooling of resources and know-how, along with a large European market. As, in the past, if Britain does succeed in developing new green technologies, having ploughed large proportions of its own tax revenues into such development, it will be European, US and Chinese companies that will simply adopt these technologies, and develop them at scale, reaping the profits and jobs that results from it. A Britain outside the EU, will certainly face problems in selling at scale, so that any new businesses that arise, in this sphere, will quickly relocate their operations to other EU countries, to avoid tariffs and non-tariff barriers, having first taken advantage of any government grants, tax concessions and so on that the UK government has given them during any development programme. 

In the US, despite Trump's pledge to bring back coal mining jobs, and despite his tariffs on imports of coal and pretty much everything else, coal mining jobs continue to drop. One reason is that, to compete, coal miners have had to introduce more and better machines, each one of which replaces miners jobs. The other main reason is that coal is being undercut by cheap gas production in the US, coming from the development of shale oil and gas production. Coal and oil could also be undercut in Britain by gas from fracking, but Labour has committed itself to opposing it, which is really a populist response to the opposition to it that various environmentalist groups have waged. Given that many coal mining communities, across the country, continue to suffer, not just from the legacy of poisoned land, but also from widespread subsidence, affecting housing, the minor, by comparison, effects of fracking seem to pose little cause for objection in being able to, in the short term, reduce carbon emissions. 

Moreover, if we look at Scotland, one effect of Brexit, particularly if Scotland were to become independent, is that its economy will be heavily dependent on continued North Sea Oil production. As I pointed out to Paul Mason, in relation to Postcapitalism, oil will be far more valuable in the future, because of its use for producing petrochemicals, fertilisers, plastics and so on, which will become more significant as materials technology develops, along with 3-D printing and so on. But, for now, North Sea oil and gas remains important as an energy source. Any attempt to withdraw from it will leave a large hole in the country's coffers, at a time when Brexit will already be undermining the economy, and the tax revenues obtained from it. 

Labour says, 

“We will ask the Office for Budget Responsibility to incorporate climate and environmental impacts into its forecasts so that the cost of not acting will be factored into every fiscal decision. 

The cost of not acting is far greater than the cost of acting. We will launch a National Transformation Fund of £400 billion and rewrite the Treasury’s investment rules to guarantee that every penny spent is compatible with our climate and environmental targets – and that the costs of not acting are fully accounted for too. Of this, £250 billion will directly fund the transition through a Green Transformation Fund dedicated to renewable and low-carbon energy and transport, biodiversity and environmental restoration.” 

But, in a post-Brexit environment, where British businesses are already thereby disadvantaged in competing with EU businesses, lumping these additional costs on to them will only make them even less competitive, less profitable, and thereby less able to invest, either to develop new technologies or to grow the economy. In turn that will hit tax revenues for the government, making Labour's plans for funding these investment schemes even less achievable. Yes, it may be true that the long-term costs of not acting on climate change will be greater than the cost of doing nothing, but that does not change the short term costs of such changes. Meanwhile, whatever changes Britain imposes on its business will not change the reality of global climate change, and if our nearest neighbours in Europe do not adopt the same measures, it will not prevent that from affecting Britain too. Outside the EU, Britain will have no say in those matters. At the same time, Britain outside the EU weakens the EU, itself, in trying to impose more stringent measures on the US and China. 

The proposal to create a National Investment Bank, and Regional Investment Banks with a £250 billion fund to invest over ten years is the kind of social-democratic measure that has long been in operation elsewhere in the EU. The problem for Labour is that it wants it both ways. On the one hand it wants to proclaim its measures as somehow being radical socialism. Corbyn commented that he welcomed the hatred of the rich for these measures being introduced. On the other, Labour wants to say “Nothing to see here, all normal measures, applied by moderate governments across Europe.” The reality is that there is nothing tremendously radical in Labour's proposals, but its left populist verbiage, of trying to make it all sound more radical and threatening than it actually is, combined with its vacuous verbal attacks on “the rich”, and “billionaires”, together with the duplicitous nature of the Corbyn leadership, over the last four years, means they get the worst of both worlds. They do not get the credit for introducing the kinds of measures that large-scale socialised capital has benefited from across the EU, and which are standard fare for any modern industrialised economy, and instead they potentially scare off investment by their populist rhetoric. 

The world's largest bond fund PIMCO, has already said that, given the scale of additional borrowing, proposed by Labour, they would steer clear of buying UK Gilts. Well, we'll see. As I set out recently, there is $15 Trillion of negatively yielding bonds across the globe, such is the demand for bonds as safe assets. No one thinks the UK government is going to default, and UK Pension Funds, alone, need to buy a significant proportion of UK issued debt. But, there is one reason that all of the money printing, as part of QE, has not caused general price inflation. It is that all of the additional money tokens that have been printed have been deliberately diverted into buying financial and property assets. There has been a hyper inflation of the prices of stocks, bonds and property. Had the money gone into actual productive investment, so that more factories were built, more machines were bought to go into the factories, more workers were employed in the factories, and more raw materials were bought to be processed by those machines and those workers, then not only would the economy have grown more rapidly, but the additional demand for all of these factors of production, would have sucked that additional money into general circulation, and inflation would have soared. 

This is the basic problem with Modern Monetary Theory. It has looked at QE and seen there has been no rise in inflation, but does not question why that is. The truth is that a Labour government, if it faced problems of borrowing on global capital markets, could simply print the additional money. The Bank of England could buy the additional debt, and the government could use the debt to finance real investment in infrastructure and so on. But, then the economy is stimulated – the one thing central banks and states have tried to avoid over the last ten years, so as to keep interest rates down, and keep asset prices inflated – wages would rise, raw material prices would rise, profits would be squeezed, but as wages rise, and more workers are employed, firms are led to produce more wage goods, as the demand for them rises, and they now have to finance this additional investment by using a larger portion of their profits to do so, rather than paying it out as dividends. Firms have less profit to put into the money markets, and have to borrow in those money markets on a greater scale. They have to issue new shares and corporate bonds, so that as their supply rises, their price drops, causing yields to rise. As the prices of shares and bonds drop, the guaranteed capital gains that speculators in these assets have come to expect, disappear. The speculators sell out of those assets, causing crashes, whilst the money starts to flow into real productive investment in search of profits. 

The consequence is that as asset price bubbles burst, and money flows into real productive investment, economies grow more rapidly, but the rapid influx of the vast oceans of liquidity currently tied up in financial and property assets causes general price inflation to spike higher, and as it does so, real interest rates spike higher too, as the demand for money-capital rises relative to its supply. The days of being able to borrow cheaply in the bond markets are coming to a close, and unless a Labour government has borrowed very big, very early, by issuing a lot of long dated bonds, it will find that its cost of borrowing rises to levels that make its spending plans unachievable without significant rises in taxation. 

Labour also says it will make smaller loans available to small businesses via a new Post Bank based in Post Offices. This does not seem to be a particularly well thought out proposal. Credit Unions that enable members of local communities to deposit savings, and to make small loans, work because those who lend and borrow have some connection. The amounts of lending tend to be small, and those who borrow can be helped to ensure that they pay back what they owe. But, lending to small businesses is different. A number of peer to peer lending companies have developed that lend to small businesses, to fill the gap left by the fact that banks no longer lend on any significant scale to small businesses. It has been far more lucrative for banks to lend to house-buyers, and to buy the bonds of large companies, where the underlying collateral has benefited from capital gains, than to lend to small businesses. Where money has been lent to small businesses, many of them have gone bust. There are around 150,000 zombie firms in Britain, that are only able to just repay the interest on their bank loans, but do not make enough money to repay the capital sum borrowed. 

It is very unlikely that local Post Offices are going to have the specialised staff required to be able to judge whether any application by a small business for a loan is likely to be repaid on the basis of the commercial prospects of the firm. Three-quarters of all small businesses go bust within the first five years, and a large proportion of those go bust within the first year. Making a large number of these loans to small businesses, by people who are not properly qualified to assess this business risk looks like a guaranteed way of throwing large amounts of money down the drain that could have been utilised more effectively elsewhere. Again, it looks like a populist measure designed to suggest that Labour is on the side of small businesses as against the multinationals and billionaires. 

Labour says, 

“Years of under-investment and neglect by Westminster have left too many communities feeling powerless and too many areas left behind with low- quality jobs, weak productivity and slow growth.” 

In fact, its not neglect that has led to that, but deliberate government policy! In the 1980's, Thatcher's government deliberately de-industrialised large parts of the country, in order to weaken the position of workers and their unions. She used North Sea oil revenues to pay for high levels of unemployment so as to weaken and defeat the unions. She built a low wage, low skill economy that was kept afloat by debt. The debt helped to inflate asset price bubbles whether in property, or in stock markets. And, each time that those bubbles burst, such as in 1987, 1990, 1994, 2000 and 2008, the central bank intervened to pump additional liquidity into the economy to reflate them. The low wages, low levels of growth, and low levels of productivity are not an accident, but the result of deliberate policy to inflate and reflate asset prices, the main form of wealth of the top 0.01%. Labour's approach is back to front in thinking that wages can be raised by raising productivity. Throughout history it has been high wages that force capital to invest in developing labour-saving technologies that raise productivity, and which thereby also raise living standards. Here Labour's proposals are way too timid. 

If Labour wants to raise productivity levels, it should propose a large, progressive rise in the Minimum Wage. But, Labour also needs to stop setting the Minimum Wage as an hourly rate. Even £20 an hour is not much good to you if you only get three or four hours work each week. Labour should set the minimum weekly wage at £400, rising each year in line with inflation, or average wages, whichever is the greater. It should set a Minimum Hourly Rate of £12, so that someone working a 40 hour week would get £480. Labour should combine this with its proposals for a 32 hour week. In that way, capital will be incentivised to introduce new labour saving technologies. 

But, again, such a progressive policy is only achievable on an EU wide basis. Any large firms that have the option of relocating to the EU, whilst still being able to export to the UK, will obviously choose to do so. Britain outside the EU, will instead face pressure from firms not to raise Minimum Wages, but to cut them. Certainly all of those small, inefficient, low profit firms that Labour is pinning its hopes on, can only survive by paying low wages, and providing poor conditions. Indeed, that is why all of those small firms back the right-wing of the Tory Party, and back Brexit. 

Labour says that it will create 1 million new jobs as part of its Green New Deal, but with unemployment back to levels seen in the 1970's, though not yet back down to the levels of the 1960's, when it was between 1-2%, its difficult to see where the workers for these jobs are to come from. The latest data shows that the workforce is shrinking as EU workers go home. If Brexit goes ahead then even more EU workers are likely to leave, and its not likely that workers from elsewhere will want to come to Britain given its attitude to foreigners either. There is already a shortage of around 50,000 lorry drivers, rising to 75,000; we have huge shortages of NHS staff, social workers and so on. Given the additional demands for building workers, if Labour goes ahead with its house building programmes, then finding the workers to fill all these vacancies, plus a million more for green energy jobs looks a stretch, especially as training in the skills for these jobs will take several years, and will itself involve additional investment in education and so on. It looks likely a recipe for labour shortages causing spikes in wages in particular industries, which in turn cause destabilising disproportions. 

To give one other example, a lot of brick production in Britain has been mothballed, because of the low levels of construction over the years. Most of the bricks are now imported from Europe. Whenever construction picks up, often there is a delay in being able to obtain the bricks, and shortages cause short-term spikes in prices. If construction of new houses and so on is ramped up quickly then that problem will be magnified. Brick production in Britain could be ramped up again, but would not be immediate, and given Labour's environmental objections to fracking, imagine the objections there would be to large scale opening up of new marl holes to provide the clay required for all these new bricks! 

Labour says, 

“We will not achieve the promise of a fair and sustainable economy if we repeat the mistakes of the carbon era, when the capture of a natural resource for private profit created a vastly unequal and polluting economy dominated by powerful vested interests. 

It’s not just carbon. From the depletion of fish stocks to the burning of the Amazon, profit has proved a poor regulator for use of our natural resources.” 

True, but its not just private profit that had that effect. The nationalised coal industry in Britain was no better, and the Plan For Coal, was continually subordinated to the economic, short-term interests of the government. Indeed, some of the worst pollution on the planet was caused, not by private capitalists, but by the Stalinists of Eastern Europe, where the state run industries treated both the environment and workers as totally disposable in their attempts to maintain their own kleptocratic plundering of those societies. 

Labour says, 

“We will put people and planet before profit by bringing our energy and water systems into democratic public ownership. In public hands, energy and water will be treated as rights rather than commodities, with any surplus reinvested or used to reduce bills. Communities themselves will decide, because utilities won’t be run from Whitehall but by service-users and workers. 

Public ownership will secure democratic control over nationally strategic infrastructure and provide collective stewardship for key natural resources.” 

Which is all well and good, but does not spell out how this will be achieved. Ultimately, if the state owns these companies then it will exercise ultimate control. There is no reason that the capitalist state is going to give real control to workers over this capital, any more than it did with the NCB, British Steel, British Leyland and so on. He who pays the piper calls the tune, and in any nationalised industry, the funding will come from the capitalist state. Moreover, the interests of workers in these industries are not identical to those of consumers. You can bet that the state will have its own representatives on Boards, and as divergent interests between the stakeholders manifest themselves, the state's representatives will manipulate them in its own interests. A look at the way, something like a consumer cooperative works illustrates the problem. There workers are actually barred from being on the Board, but consumers themselves also find that they become passive, meetings are ill-attended, and so the Board actually becomes dominated by the full-time bureaucrats employed by the co-op. A look at what happened with the Co-op bank demonstrates this problem. 

Its only in a worker owned cooperative, where the workers themselves must exercise day to day democratic management over the labour process, and where they have skin in the game as owners of the capital, that any real industrial democracy exists on a sustainable basis. Rather than its expensive and unnecessary plans to nationalise large companies that already represent socialised capital, Labour should simply change the laws on corporate governance, removing the right of shareholders to vote in any company meetings, thereby placing them in the same position as bondholders and all other creditors. It should introduce new corporate governance laws to ensure that the boards of companies are 100% elected by and from the workers and managers in the company. In that way we can bring about real industrial democracy, and, on the basis of it, begin to ensure that production indeed does begin to be organised on the basis of providing for need rather than for profit. 

Labour's plans for steel production are pie in the sky, because steel production is one of those areas where large economies of scale are vital, other than for some specialist steels. China already dominates global steel production, and a small British steel industry simply is not going to compete with it. That is especially true if Britain is outside the EU. Throwing money into a small British steel industry is unfortunately simply throwing money down the drain. It would be better to divert that money into the development of other metals production, and the production of the new age of materials, such as carbon fibre, graphene and so on, but even in some of these, and even where they were developed originally in Britain, it is China, which can simply invest on a scale not possible for the small British economy, and can sell into its own vast market, that has become the world leader. This again demonstrates the problem even of trying to build social democracy in one small country, let alone Socialism. 

Theories of Surplus Value, Part III, Chapter 24 - Part 36

Marx cites another passage from Jones which highlights a point I have made elsewhere. 

““… where the capital is in a great degree fixed, or where it is sunk on land… the trader is obliged to continue to employ, much more nearly (than if there had been less fixed capital) the same amount of circulating capital as he did before, in order not to cease to derive any profits from the part that is fixed” (op. cit., p. 73).” (p 434) 

In other words, where production involves large amounts of fixed capital, the capitalist is obliged to keep production going, and at a higher level than they would if all of their capital was in the form of circulating capital. If all capital is circulating capital, then, if demand falls, or profitability falls, production can be cut back, thereby reducing costs. However, if fixed capital is involved, its costs have already been incurred. Even less profitable production provides a contribution towards this fixed capital cost. Moreover, if the fixed capital is left idle or under utilised, it may suffer a material or moral depreciation, thereby inflicting a capital loss on the capitalist. 

““… of the state of manners to which the dependence of the workmen on the revenues of their customers has given birth in China, you would, perhaps, get the most striking picture, in the Chinese Exhibition, so long kept open by its American proprietor in London. It is thronged with figures of artisans with their small packs of tools, plying for customers, and idle when none appear—painting vividly to the eye the necessary absence, in their case, of that continuity of labour which is one of the three great elements of its productiveness, and indicating sufficiently, to any well-informed observer, the absence also of fixed capital and machinery, hardly less important elements of the fruitfulness of industry” (Richard Jones, [Text-book of Lectures on the Political Economy of Nations, Hertford, 1852,] p. 73).” (p 434) 

Marx cites a further passage from Jones, describing the situation of such artisans in India. He describes the way each village set aside a portion of its revenue to cover the services of such artisans who provided the services that the villagers could not provide for themselves. 

“The position and rights of these rural artisans soon became, like all rights in the East, hereditary. The band found its customers in the other villagers. The villagers were stationary and abiding, and so were their handicraftsmen.” (p 435) 

In the Indian towns, however, the artisans, whilst dependent upon the same fund of revenue had no permanent employment. Not tied down by any great use of fixed capital, they were again led into migrations in search of customers. 

“If their customers change their location for long—nay, sometimes for very short—periods, the non-agricultural labourers must follow them, or starve” (pp. 73-74).” (p 435) 

Noting the nature of the Asiatic Mode of Production as distinct from either feudalism or capitalism, in Europe, Jones notes, 

““… the […] greater part of that fund” for the handicraftsmen in Asia is “distributed by the State and its officers. The capital was, necessarily, the principal centre of distribution…” (p. 75). 

“From Samarcand, southward to Beejapoor and Seringapatam, we can trace the ruins of vanishing capitals, of which the population left them suddenly” (and not as in other countries [as a result of a gradual] decline) “as soon as new centres of distribution of the royal revenues, that is, of the whole of the surplus revenues of the soil, were established” (p. 76).” (p 435) 

Marx also notes, 

“See Dr. Bernier, who compares the Indian towns to army camps. This is due to the form of landed property which exists in Asia.” (p 435) 

Back To Part 35

Forward To Part 37

End The Chaos. Stop Brexit. Revoke Article 50

Boris Johnson says that a Tory government will, "Get Brexit Done".  It won't.  Labour says that it would negotiate its own fantasy Brexit deal.  It won't.  It also says that it would then end the Brexit chaos via a referendum.  It wouldn't.  The Liberals are right that the only way to end the Brexit chaos is to stop Brexit, by Revoking Article 50.  But, the Liberals are not going to be the government, no matter what religious ecstasies Swinson might drive herself into, in believing that she is going to experience a second coming.

The problem facing all those that want Brexit, including those that use the argument that the 2016 Referendum Result has not been implemented, is that what was promised by the Brexiteers, in that referendum was a lie.  Because it was a lie, it never could have been delivered.  In 1975, the opponents of the Common Market objected to it on the grounds that it was a Customs Union, and that within it free trade was promoted.  In the years that followed, when those arguments failed to gain any traction, the opponents of Europe changed tack.  People like Farage, instead argued that they opposed the EU, because what people had voted for in 1975 was a Common Market, not a political union.  In fact, that is not true either, because, in 1975, the legislation to establish the European Union, out of the EEC, had also already been passed.  But, Farage et al used this argument to say that if Britain had simply been in the Common Market that would be fine, but that what they objected to was the EU, and its political project for ever closer union.

So, when they came to campaign in the 2016 Referendum that is essentially the message they sought to convey.  Not only Farage, but also David Davies, Boris Johnson and Michael Gove assured us that Britain could have "the exact same benefits" of being in the Customs Union and Single Market, but without being in the EU.  That was a lie, an obvious absurdity, and is the basic reason why the promise of the Brexiteers could never be kept.  When they came to implement this promise, they faced the obvious reality that they could not keep it.

Labour, of course, had done the obvious thing of demanding, as part of its Six Tests, that the Tories did, in fact, keep this impossible promise.  If you want someone to blame for the fact that the referendum result has not been implemented more than three years on, then look no further than the Brexiteers themselves who gave this impossible promise in the first place.  In other words, blame the proponents of Brexit who lied about what was and was not possible.

The Tories could not deliver a Brexit deal that provided the "exact same benefits" of being in the EU, whilst being outside it.  (But, of course, that also meant that Labour, too, could never deliver on a deal that complies with its Six Tests either!)  They could have delivered the economic benefits of being inside the Customs Union and Single Market, had they, from the start, negotiated on that basis, i.e. to be members of both.  But, even that would not have been the "exact same benefits" of being in the EU, because, outside the EU, Britain would have no say in negotiating EU trade deals, it would have no say in determining the external tariff for the Customs Union, or in determining the rules, regulations and standards to be applied within the Single Market.  And, contrary to what both the Tory Brexiters and Labour have claimed, nor is it possible to negotiate your own trade deals, whilst being a member of the Customs Union.

And, it is precisely because it has been impossible for them to deliver on this undeliverable promise that has meant that they have been unable to push a deal through parliament, for the last three years.  Its not that parliament has refused to implement the referendum decision, but that the referendum decision was itself undeliverable, on the basis of the prospectus and promises that the Brexiteers obtained their majority.

If Johnson and the Tories win the General Election, they will not thereby "Get Brexit Done".  All they will do is to get the equivalent of a decree nisi in the divorce of Britain from the EU.  It will still then have years of negotiations with the EU, in determining the relations between them.  And, the reality is that the promise that the Brexiteers made of obtaining "the exact same benefits" will continue to be unachievable.

The Brexiteers say that they will obtain these "exact same benefits" by negotiating a Canada style free trade agreement with the EU.  But, of course, a Canada style free trade deal does not provide the "exact same benefits" as being in the EU.  Moreover, even negotiating such a free trade deal would be likely to take years.  The Tories say, "look, we start from a position where we already have the same regulations as the EU, and so negotiating a deal will be easy."

Well, that is what they also said about the Withdrawal Agreement!  But, the argument itself is also obviously facile.  When two third parties come to negotiate a trade deal, both have something to gain from the arrangement, over their existing relations.  Its rather like the difference between getting married and getting divorced.  If you are getting married, it rather suggests that you have good relations with each other; you have something to gain in being able to maximise the enjoyment of each others company; you may have financial benefits of the union, as perhaps a second home can now be sold, household expenses and chores can be shared, and so on.  By contrast, in a divorce, it implies that even cordial relations have broken down.  It is no longer a matter of both parties having something to gain from the negotiations, but of both having something to lose, and each party seeking to minimise their losses from the situation.

So too with Brexit.  there is nothing that either party will gain from the separation, only a question of who can minimise their losses, and necessarily the most powerful party, the EU, will be in a position to achieve that, whereas, Britain will not.  There is absolutely no reason why the EU will agree to anything in any trade negotiations that will be beneficial to Britain.  That is the opposite of the situation in them negotiating a deal with Canada, where the EU expects to make gains from increased trade.  No one believes that increased trade will result from Brexit.  Moreover, the avowed intent of the Brexiteers is to introduce a rapid and increasing divergence of British regulations from those of the EU, which will mean that trade between the EU and UK would decline even further.  By contrast, a deal with Canada or some other third party suggests that eisting divergences in regulations could be lessened.  Indeed, that is one reason that Donald Trump has insisted on the right to break his MCA deal with Canada, if Canada moves closer to EU standards, and away from US standards.  So, there is no reason why the EU would negotiate a free trade deal with the UK, when the UK will pose an increasing threat to its single market, as a result of these increasing divergences, as the UK becomes increasingly subservient to Trump's America.

For the ERG Libertarian ultras this is not a problem.  They are ideologically driven zealots.  In the same way that the Tory Party left the centrist European Peoples Party formation in the European Parliament, in order to align itself with the various xenophobes, neo-nazis, misogynists and homophobes, so too the ERG ultras want to turn the clock back to a period of 18th century free market liberalism.  They view the commitment to leave the EU by the end of 2020, deal or no deal, as simply a question of waiting until that date to cut themselves adrift completely.

Its unlikely that the ruling class will sit by passively whilst they were to drive the economy off that cliff edge.  Boris Johnson himself knows that such a strategy is not feasible, which is why, when it came to it, he did not "die in a ditch", but, like May before him, instead asked the EU for an extension.  Indeed, he even had to concede more than had Theresa May, by introducing the EU's original backstop position of imposing a border down the Irish Sea, between the mainland and Northern Ireland!

Given eight or nine months, Britain can negotiate what would essentially be a Managed No Deal.  That is it could negotiate a series of sector by sector arrangements that avoid the catastrophe of a Crash Out No Deal.  It could negotiate a larger number of more permanent licences to allow British lorries to travel inside the EU; it could negotiate to remain part of some EU regulatory bodies on air safety, medicines and so on, though it will pay through the nose to do so.  That avoids the immediate catastrophe, but it does not change the fact that Brexit will put Britain on a downward trajectory, and if the nationalist ultras of the ERG are able to get their way, the increasing divergence of the UK from the EU, will mean that the potential for trade between the UK and EU will continue to decline with a steady decay of the UK economy along with it.  Instead of a sudden heart attack caused by a crash out Brexit, Britain would instead suffer a more prolonged agony.

And, the implications of that are obvious.  There is already a majority of voters in favour of reversing the 2016 decision.  That is why the Brexiters dare not agree to another referendum.  Certainly they would not agree to one other than under a Johnson led government that could ensure that it was a rigged vote in favour of Leave.  The proposal of the Liberals that they would vote through Johnson'd deal provided it was subject to another referendum is like Turkey's voting for Christmas.  But, if Brexit goes ahead, these deleterious effects will soon begin to manifest themselves.  The Brextremists have repeatedly warned that a failure to implement Brexit would see rioting on the streets, but on every occasion that Brexit has been delayed it has been met by nothing more than stoney silence on the part of the masses, other than cheering on the part of those that back Remain.

The forces of Remain are young and dynamic; the forces of Leave are old and passive.  There will be no rioting if Brexit is cancelled, only sighs of relief.  But, if Brexit goes ahead there will be increasing social tension, because those that oppose it will be able in short order to point out - "We told you so."  And, as is always the case in such situations, it will not be long before some of those most vociferous in complaining about the plight that has befallen them will be people who voted Leave, and who will chime in with the age old mantra, "Why did no one warn us that this would happen", as they did, for example, after they had speculated on stock markets, and property markets, prior to the crashes of 1987, 2000 and 2008.

And, the fact is that as every year passes, about a million of those older voters that backed Brexit die, and leave the electorate, whilst a similar number of young voters, who overwhelmingly back Remain join the electorate.  Again, from a simple electoral calculation, for Labour to adopt any position other than opposing Brexit is unfathomable.  In coming elections, as with this one, it will be impossible for labour to win unless it has a clear and militant position of taking Britain back into the EU.

And, so Labour's current position is also a recipe for simply prolonging the agony.  For the reasons set out above, it is no more possible for Labour to get its fantasy Brexit deal, which relies on a belief in the possibility of having cake and eating it, than it has been for the Tories to negotiate such a deal.  Labour's problem arose, because it based itself on parliamentary cretinism rather than principle.  As a clever parliamentary tactic, putting forward its Six Tests meant it could beat the Tories over the head with their own impossible promise.  It meant that Labour could combine this with its own reactionary promise to "respect the referendum result".  But, having done so, it tied itself into a destructive, dead-end narrative that some fantasy "Jobs First Brexit" was indeed possible, compatible with its Six Tests, and that it only required the superhuman negotiating skills of a Corbyn government, to achieve it.

Labour has thereby locked itself into promotion of a reactionary position, and fortunately for Corbyn and his Stalinist backers, it is a reactionary position which fits entirely with his own reactionary, pro-Brexit, economic nationalism.  It has locked itself into promising to negotiate a fantasy deal that complies with its Six Tests, despite the fact that those Six Tests were drawn up in the full knowledge that the Tories could not achieve them!  It is now committed, if it takes over government to negotiating a deal in which its Six Tests are met, knowing full well, in advance, that its impossible to meet them.  So, the idea that these negotiations, to reach this unachievable deal, will be completed in three months, is ridiculous.  Those negotiations would be likely to drag on endlessly without resolution, or else, Labour will have to announce in short order that no such deal was reached.  And then what?

As set out above, it would either have to put forward several options.  Either, something like Johnson Deal, a deal in which Britain remains in the Customs Union and Single Market, but has no seat at the table, No Deal, or else Remain.  Its obvious why Starmer and other Labour front-benchers want to argue strongly for Remain even before any such negotiations are undertaken.  Again its impossible to see how any referendum could have validity unless it offered all of these different options.

And, Corbyn's fake neutrality position then becomes seen to be even more absurd.  His apologists claim that he must remain neutral so that whatever the result of this referendum, he can be free to implement it as Prime Minister.  But, if that referendum again produced a majority for Leave, what then?  Corbyn, as a proponent of Brexit, certainly could implement it, but what about all of those Cabinet members that had campaigned against it?  What about all of the Labour MP's that oppose Brexit.  Why would they agree to implement a policy that they view as reactionary, and deeply damaging.  It could only be implemented if Corbyn, and the reactionary nationalists around him formed some kind of bloc with the Tories to implement the decision, a reactionary economic nationalist unity government.

Such a process certainly would not end the chaos and get Brexit out of the way.  It would only lead to even more chaos and division.  But, even if some Brexit deal could be agreed, and voted through in a referendum it would be no better.  The damaging effects of Brexit would continue to manifest themselves, as EU based companies left Britain.  Certainly, the progressive social democratic elements of Labour's Manifest would be impossible to implement, not because of EU objection to state aid rules and so on, but simply because in conditions where Brexit means that the economy shrinks, and companies move out of Britain, any hope of raising additional tax revenues will disappear into thin air, and along with it, will go any prospect of large-scale infrastructure spending and so on.  Labour Grey Book factors in behavioural changes of individuals who may leave to avoid higher taxes, but that amounts to only £5 billion in lost revenues, whereas it makes no such assumptions in relation to companies, who are far more likely to be the ones relocating, and that could leave a £15-20 billion p.a. black hole in Labour's figures.  As is usually the case with such social-democratic programmes, in order to fill this gap, taxes would have to rise further on ordinary workers.

Already, the problem with Labour's social-democratic redistributive agenda has been seen.  They make the normal mistake of confusing wealth and affluence.  Its true that if you earn more than £80,000 p.a. (approx.) then you are in the top 5% of income earners.  But, as the contributor to QT pointed out, for most workers on that amount of money, it certainly does not feel that way.  That is for two reasons.  Firstly, there is a vast inequality of incomes even within that top 5%.  The top 5% includes someone on that £80,000, as well as someone getting several tens of millions of Pounds a year in income.  It makes little sense to lump these two people into the same bracket.  As someone pointed out, if you are earning £80,000 a year as a worker in London, its still not enough even to get you on to the housing ladder.

But, secondly, and precisely for this latter reason, there is a huge difference between income and wealth.  Someone earning £80,000 may seem affluent, to someone on average earnings of £25,000, but it does not mean they are rich, they may not be able even to buy a house, for example.  Wealth does not refer to income, but to your stock of assets.  In the past, it was most important in terms of your stock of productive-capital, but today its significance is in terms of your stock of financial and property assets, from which you can in turn derive revenue from rents and interest, as well as capital gains.  It makes little sense to put in the same bracket, someone earning £80,000 a year, who still cannot buy a house, with say the Duke of Westminster, who owns vast amounts of property, or with the billionaires who own vast amounts of shares, bonds and so on, and whose wealth enables them to convert capital into revenue, by liquidating capital gains running into hundreds of millions of Pounds each year.  In short, Labour's programme, as a reformist, redistributive programme continues to attack merely better off sections of workers, rather than attacking the underlying basis of inequality in society, which stems from the ownership and control of capital.

And, the fact is that even Labour's reformist, social-democratic programme can only be implemented on an EU wide basis.  A fundamental requirement for it to move forward is for Labour to oppose Brexit, and to begin the task of building an EU wide, progressive social-democracy.  The only way to end the chaos caused by the Brexit vote, is to stop Brexit itself.  It requires that Labour come out clearly to say that if elected it will end the chaos by stopping Brexit, by immediately revoking Article 50.  If Labour will not do that officially, it requires that rank and file LP members come together to do it instead.  It means that we will have to adopt a strategy of fighting the election on the basis of a guerrilla war to support the most militant pro-Remain candidates in each seat, fighting the election on this seat by seat basis.  We need to maximise the number of militant pro-Remain MP's in parliament to stop Brexit.

Theories of Surplus Value, Part III, Chapter 24 - Part 35

[b) Jones on the Influence Which the Capitalist Mode of Production Exerts on the Development of the Productive Forces. Concerning the Conditions for the Applicability of Additional Fixed Capital] 

Marx cites a long passage from Jones where he describes the difference between the labourers in China, who ply their wares or services on the streets, as against those employed as wage labourers. The former cannot work continuously. They move around the town looking for customers. But, employed by capital, the capitalist provides the customers that keep them continually employed. But, the capitalist, who has bought their labour-power, also has an incentive to ensure, by their superintendence, that they are continually employed. This is one way that capitalism raises the productivity of labour by reducing “down-time”, and so continually raising the intensity of labour. The other form of precapitalist labour, described by Jones, is that of say the tailor, employed in private homes, to make and repair clothes. 

Marx notes, 

“The transition from labourers who perform casual services—making clothes, coats, trousers, etc., in the landowner’s house—to workers employed by capital, is already very well described by Turgot.” (p 433) 

Marx also notes that whilst capitalist production is distinguished from the kind of precapitalist artisan or peasant production by the greater intensity of labour, it is not distinguished from slave labour, in that respect. Jones is wrong to identify the longer working day or greater intensity of the working-day as representing a greater productive power of labour, Marx says, because this productive power is manifest in a greater output from a given quantity of labour. A worker who produces 100 units of output in 5 hours labour does not become more productive if they work for 8 hours and produce 160 units of output. Their productivity level remains 20 units per hour. The productive power of their labour only increases if their output per hour rises, for example, to 30 units per hour. But, this is notably a function of the use of fixed capital. It is the difference between the production of absolute surplus value, via the lengthening of intensification of the working day, as against producing relative surplus value, as a consequence of rising social productivity. 

“Furthermore, Jones correctly emphasises that the continuous labour of the non-agricultural labourers lasting from morning to night is by no means something which arises spontaneously, but is itself a product of economic development. In contrast to the Asiatic form and to the Western form of labour (prevailing in former times, partly even today) in the countryside, the urban labour of the Middle Ages already constitutes a great advance and serves as a preparatory school for the capitalist mode of production, as regards the continuity and steadiness of labour.” (p 434) 

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