Review of Predictions For 2019 - Prediction 5 - Trump Walks Away From The Presidency

I did say it was a bit of an outside punt, but its unlikely that Trump will actually walk away, despite having become only the third US President to be impeached. All of the other factors described in the prediction, however, have played out as suggested. In the impeachment hearings, it has again been Trump loyalists, including people who gave $1 million to his election campaign, that came forward to say that Trump attempted to put pressure on the President of Ukraine to dig up dirt on Biden and his son, in order to further his own election chances. 

Every day brings more people in Trump's periphery into the spotlight, and also brings further revelations and challenges to Trump and his family. The latest pressure point is some evangelicals turning against him, though, other than we already know about their total hypocrisy, its hard to know how they could ever have supported him to begin with. Sooner or later, all of these challenges from so many angles will overwhelm Trump. His base continues to support him, despite all of the facts, as a question of blind stupidity that is consonant with the bigotry that shapes their behaviour in general, but Trump's base does not form a majority. Indeed, he did not have a majority in 2016, having secured 4 million less votes than Clinton. 

The trick of winning bare majorities, in selected states, so as to get a majority in the Electoral College is not something the Democrats are likely to allow to happen in 2020. Moreover, a radical challenger, like Sanders or Warren, able to appeal to industrial workers, in a way that Clinton did not, and able to mobilise the enthusiastic, young, new membership of the Democrats is likely to be much more effective in turning out an angry anti-Trump vote, as they did in 2018 in the Congressional elections. In the period since then, Democrats, often progressive Democrats, have been winning a series of elections in districts where Trump had won in 2016. 

Before long, its likely that Republicans will begin to question whether sticking close to Trump, to win their own primaries, is sufficient, if it means simultaneously losing in the General Election, as Democrats turn out to vote en masse, and they are supported by a growing number of independents who are opposed to Trump. Holding back Trump's impeachment trial in the Senate could be a good move, so as to allow more of the facts to emerge, more of Trump's associates to be arraigned or turn on him, and for more damaging revelations, for example, on Trump's tax affairs, to get into the public realm. It means that more pressure will be applied to Republican Senators, who may then begin to turn on Trump to save their own skins. 

Michael Bloomberg has been proposing standing as a Democrat, but he would serve a greater purpose by standing as a Republican to challenge Trump. 

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Theories of Surplus Value, Part III, Addenda - Part 21

The existence of loanable money-capital in the hands of money-lending capitalists, and the need of industrial capitalists to borrow it, is what brings about interest, and the competition between the two groups is what determines the rate of interest. The monopoly of landed property, and the need to use the land by industrial capital, and the ability, thereby, of landed property to appropriate surplus profits is what enables them to secure rent. 

“The abolition of landed property in the Ricardian sense, that is, its conversion into State property so that rent is paid to the State instead of to the landlord, is the ideal, the heart’s desire, which springs from the deepest, inmost essence of capital. Capital cannot abolish landed property. But by converting it into rent [which is paid to the State] the capitalists as a class appropriate it and use it to defray their State expenses, thus appropriating in a roundabout way what cannot be retained directly. Abolition of interest and of interest-bearing capital, on the other hand, means the abolition of capital and of capitalist production itself. As long as money (commodities) can serve as capital, it can be sold as capital. It is therefore quite in keeping with the views of the petty-bourgeois Utopians that they want to keep commodities but not money, industrial capital but not interest-bearing capital, profit but not interest.” (p 472) 

Ricardians, in the 19th century, proposed nationalising land for this reason. They argued that if the state received the rent, rather than landlords, it would not then have to raise so much in taxes, which are also a deduction from profits. The bourgeoisie never implemented the idea as they married into the landed aristocracy, became large landowners themselves, and as they feared an appropriation by the state of one form of private property might give ideas to the working-class about the appropriation of all private property. 

As private capital became socialised capital, at the end of the 19th century, the division between industrial capital and interest-bearing capital became more acute. The private capitalists withdrew from their social function in production, which was then taken over by functioning capitalists, day to day professional managers, administrators, technicians etc. The capitalists became merely money-lending capitalists, the owners of fictitious capital, in the shape of shares and bonds, and their derivatives. But, it was by these means and their control of the political regime that they were able to continue to exercise control, as company law gave shareholders, not the company itself (i.e. the managers and workers) the right to appoint company boards etc. 

But, as Marx and Engels point out, in Anti-Duhring, even if socialised capital were to assume its most mature form, as state-capital, it would still be capital. It would process commodities, it would employ wage labour, labour-power sold as a commodity. It would simply be the capitalist par excellence. 

“The modern state, no matter what its form, is essentially a capitalist machine, the state of the capitalists, the ideal personification of the total national capital. The more it proceeds to the taking over of productive forces, the more does it actually become the national capitalist, the more citizens does it exploit. The workers remain wage-workers — proletarians. The capitalist relation is not done away with. It is rather brought to a head. But, brought to a head, it topples over. State ownership of the productive forces is not the solution of the conflict, but concealed within it are the technical conditions that form the elements of that solution.” 

(Anti-Duhring, p 360) 

“In the trusts, free competition changes into monopoly and the planless production of capitalist society capitulates before the planned production of the invading socialist society. Of course, this is initially still to the benefit of the Capitalists. 

But, the exploitation becomes so palpable here that it must break down. No nation would put up with production directed by trusts, with such a barefaced exploitation of the community by a small band of coupon-clippers.” 

(Anti-Duhring p 358) 

The state would borrow money-capital from money-lending capitalists, by issuing bonds, and these money lenders would then be seen as a purely parasitic class obtaining large revenues whilst performing no useful function. Engels though that workers would not tolerate such a situation for long, but experience from the last century, when such large-scale nationalised industry was established, including at the start of the 21st century, when in 2008, the banks were nationalised, calls that into doubt. In fact, its not only the social democrats that have promoted the ideas of such state capitalism, but also many who call themselves Marxists. 

“There are not two different kinds of capital—interest-bearing and profit-yielding—but the self same capital which operates in the process of production as capital, produces a profit which is divided between two different capitalists—one standing outside the process, and, as owner, representing capital as such [but it is an essential condition of this capital that it is represented by a private owner; without this it does not become capital as opposed to wage-labour], and the other representing operating capital, capital which takes part in the production process.” (p 473) 

And, this is what has been seen. Real capital, industrial capital has become socialised capital. The anarchy of early 19th century free market competition has been replaced by planning and regulation at the enterprise, and state level as “capitalist society capitulates before the planned production of the invading socialist society”. But, interest-bearing capital, the money-capital loaned to companies and the state, in exchange for shares and bonds (fictitious capital), has become the main form of private wealth for the dominant section of the ruling class. 

Ultimately, it is only the productive-capital which is capable of self-expansion, and which makes possible the payment of rent, interest and taxes. That is why, ultimately, these other revenues, and their recipients are subordinated to the productive-capital. 

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Forward To Part 22

Theories of Surplus Value, Part III, Addenda - Part 20

Taking the social capital as a whole, it must employ labour-power, which produces the total surplus value, which is then allocated proportionately amongst capitals, via the formation of an average rate of profit. But money can act directly as capital simply as money-lending capital. The owner of loanable money-capital only needs to lend it, for it to return to them as an increased amount of money. As Marx set out previously, if someone lends a machine, what they are actually doing is lending the equivalent of a certain amount of money-capital, equivalent to the value of the machine. 

But, in reality, this is an illusion, which is why this money-lending capital is really fictitious capital. It is not the act of lending that results in a self-expansion of money-capital but only its productive use, as real capital. It is the borrower of the money-capital who metamorphoses it into productive-capital (machine, material, labour-power) who thereby brings about its self-expansion by the production of surplus value/average profit. It is only because they do so that they can share this profit with the money-lender by paying them an agreed amount of interest. 

If we take the actual circuit of the interest-bearing capital it is M – M – C … P … C` - M` - Mi. In other words, the original interest-bearing capital is the same money-capital that the productive-capitalist metamorphoses into productive-capital. It simply appears twice, once in the hands of the money lender and again in the hands of the productive-capitalist. It is actually only at this point that the real circuit of the capital begins, because it is only then that it operates as real capital that produces additional value. It is only as a result of that circuit that the capital self-expands, and a portion of the profit is then separated off to pay interest to the money lender. The circuit of interest bearing capital M – M`, actually lies outside the circuit of capital. 

But, it is precisely because capital as capital is self-expanding value, and whose value is the rate of profit, that those who own it can charge a price for its use by those who want to borrow it. That price is the rate of interest. 

“Rent is likewise simply a name for a part of the surplus-value which the industrialist has to pay out, in the same way as interest is another part of surplus-value which, although it accrues to him (like rent), has to be handed over to someone else.” (p 472) 

The difference is that interest depends upon the use value of capital being that it produces the average rate of profit, whereas rent depends on preventing competition bringing about this average rate of profit. Competition brings about the average rate of profit by capital accumulating faster in high profit areas, so that prices fall until only an average profit is made. Similarly, because supply does not rise so fast in low profit areas, prices rise until the average profit is made. That means that all capital, whether it produces a lot, a little or even no surplus value gets its proportionate share of the total surplus value, by this process. Because all capital, thereby, produces average profit, a price for it, the rate of interest, can be charged. 

But, landed property prevents competition from acting in this way to remove surplus profits. Agricultural and mineral production is historically characterised by an average organic composition of capital that is lower than the average for industrial capital. That means that it produces a larger proportion of surplus value and so a higher than average rate of profit. Capital is then led to want to invest in agricultural/mineral production to obtain this higher rate of profit. However, it can only do so if the owners of the land will rent it to them. The larger the surplus profit, and so the larger the demand for land to rent, the higher the rent charged by the landlord. It is then the existence of this surplus profit that makes possible a rent, and it is the fact that landed property exists which means that this rent ends up in the landlord's pocket, so that competition can never drive down agricultural/mineral profits to the average rate, or agricultural/mineral prices to their price of production. 

“Monopoly of landed property enables the landowner to do this. It enables him to pocket the difference between value and cost-price. On the other hand—as far as differential rent is concerned—this monopoly enables the landowner to pocket the excess of the market value over the individual value of the product of a particular piece of land; in contrast to the other spheres of production, where this difference in the form of surplus profit flows into the pockets of the capitalists who operate under more favourable conditions than the average conditions which satisfy the greater part of demand, thus determining the bulk of production and consequently regulating the market value of each particular sphere of production.” (p 472) 

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There's No Such Thing As Progressive Patriotism

Rebecca Long-Bailey, in announcing her intention to stand to replace Corbyn as Labour Leader, says that she would be a champion of "progressive patriotism".  There is no such thing.  Patriotism is the last refuge of the scoundrel according to Johnson; for Wilde it is "the virtue of the vicious".  Putting the word progressive in front of patriotism is not only to create an oxymoron, but to illustrate that its proponents are duplicitous, vicious scoundrels.  That Long-Bailey proposes to make such an objective the forefront of her campaign simply illustrates what was known all along, which is that she would represent a continuation, and, in all likelihood, an intensification of all of that reactionary nationalism that lay behind Corbyn's own disastrous pro-Brexit stance, as promoted by the reactionary nationalism of the Stalinists that stood behind him, and who now stand behind Long-Bailey.

Lenin put it like this,

“One such idea is refined nationalism, which advocates the division and splitting up of the proletariat on the most plausible and specious pretexts, as for example, that of protecting the interests of ‘national culture’, national autonomy or independence’, and so on and so forth.

The class conscious workers fight hard against every kind of nationalism, both the crude, violent Black Hundred nationalism, and that most refined nationalism, which preaches the equality of nations together with… the splitting up of the workers’ cause, the workers’ organisations, and the working class movement according to nationality. Unlike all the varieties of the nationalist bourgeoisie, the class conscious workers, carrying out the decisions of the recent (Summer 1913) conference of the Marxists, stand not only for the most complete, consistent and fully applied equality of nations and languages, but also for the amalgamation of the workers of the different nationalities in united proletarian organisations of every kind”

( Lenin – “Corrupting the Workers With Refined Nationalism” emphasis as in original)

In the 19th century, it was still possible for patriotism/nationalism to fulfil a progressive role.  The American patriots who overthrew the rule of George III, in 1783, following the revolutionary war, as part of their national revolution, were progressive.  They created the basis for the US nation state to develop as a bourgeois-democratic state.  Garibaldi, and his patriotic red shirts were progressive in bringing about a unified, bourgeois Italian state.  Even the Prussians, who brought about a unified Germany by military means, were progressive.

All of these were progressive, because they took the development of society forward.  They were the forces that acted as the midwives of historical changes that were already underway.  The British nation state had already been constructed over a prolonged period.  It reflected the fact that capitalist development in Britain required a large single market, in which common tariffs, and regulations existed.  A single state to enforce those conditions is required.

The spread of capitalism across the globe meant that every other part of the world had to follow in this trajectory.  It meant that the 300 nationalities that existed in France, split across a wide number of principalities, had to be forged into a single nation state, the same with Germany, Italy, and so on.  The United States, which had already created a nation state, as a result of its revolution, still needed to ensure that the power of the centralised Federal State held sway over the demands for the separate states to plough their own furrow.  It completed its revolution, via the Civil War, which imposed that power of the Federal State.

Even in South America, where the old European colonial powers had held sway over empires, the national revolutions undertaken by Bolivar and others, established independent bourgeois nation states.  That process was completed, by the destruction of the old colonial empires in Asia and Africa after WWII, in part on the insistence of the US, and in part on the basis that the old colonial powers could no longer afford to hold on to them, and in part due to the struggles of national liberation movements in those countries.  From that point on, there has been nowhere in the world where patriotism/nationalism has any progressive role to play.  It is now, everywhere, a reactionary force.

Patriotism/nationalism only had a progressive role to play in so far as it was a means of replacing small scattered states with large centralised nation states, in just the same way that Marx describes the progressive role of capitalism in replacing the small scattered independent means of production of the peasant and artisan producer, with the concentrated and centralised means of production of the capitalist producer.  It is a necessary means to an end.  But, that end has now been achieved.  Not only has it been achieved, but society has moved beyond the limits imposed by the primitive nature of that initial transformation.

Not only did capitalism sweep away all of the independent scattered means of production, and replace them with capital, as large-scale, concentrated and centralised means of production, but it also swept away these earlier primitive forms of capital.  It replaced free market competition with oligopolistic competition, and with the planned and regulated market and production that goes with it; it replaced the private capitalist, even the biggest private capitalists, with socialised capital.  And, alongside this development, it not only created a world market, but it it created the need for much larger states than the old nation state, as the basic economic unit.  Only the largest states, like the US, and China could continue to function as nation states, themselves essentially being federations of separate nation states, whilst the small European states, the South American states, the Asian states, and African states, have found the need to combine together in large economic blocs, like the EU, Mercosur, ASEAN, and the ACFTA.  All of these are, necessarily, proto-states, on their way to forming into new super states to compete with the US and China.

Progressive politics, today, involves taking forward this new movement, in the same way that, in the 19th century, it involved forging together the individual principalities into the nation state.  Today, those that attempt to promote the nation state as against these larger states are reactionaries; they are the ones trying to hold back the course of history of human development, in the same way that George III, the European colonialists, and the opponents of Garibaldi did in the 18th and 19th centuries.

Already, by the 19th century, after the British state had come into existence, British patriotism was reactionary.  It harked back to ideas based upon something that had already been achieved.  It did so, not in order to thereby push forward with some progressive development, but as a means of holding back further progressive development.  It did so in order to utilise the ideas that had once had progressive content for what was now a wholly reactionary objective.  It was used to set apart Britain from other countries, and thereby to set British workers aside from their foreign comrades.  It is what creates the conditions for the slaughter of the First World War, fought out for the benefits of profits for the capitalist class.

By the end of the 19th century nearly all bourgeois nation states that would exist had been created.  Even those of Africa and Asia essentially existed, even though they were under the political control of colonial masters.  That is why Lenin wrote,

“We must always and unreservedly work for the very closest unity of the proletariat of all nationalities, and it is only in isolated and exceptional cases that we can advance and actively support demands conducive to the establishment of a new class state or to the substitution of a lesser federal unity etc. for the complete political unity of a state.”

Lenin – “The National Question in Our Programme

In those cases, of the colonies, it was not a matter of creating new class states but of freeing existing class states from their colonial masters.  But, the existing nation states like Britain, France, Germany and so on, did not suffer any such political domination.  Patriotism/nationalism, in their case, is immediately reactionary, and used only to promote the interests of the national bourgeoisie of that particular country, a section of the bourgeoisie, which, because it is nationally based, always tends, thereby, to be small, and narrow in vision.  It is used to separate the workers from their foreign comrades, and to tie them to the national bourgeoisie.

The Progressive Patriotism touted by Long-Bailey is no such thing.  It is necessarily reactionary from start to finish.  Swathing it in radical rhetoric is nothing new.  It is the age old method of the demagogue, be it Stalin, Mussolini, Hitler, or Mosely.  It is the same soup as offered up by the Strasserites as with the Mosely Memorandum.  It repeats the mistakes of the last election campaign of trying to avoid tackling the bigotry and reactionary ideas that infect sections of society, including sections of the working-class, not even by closing your eyes to it, but by accommodating to it, whilst offering up economic bribes handed down from on high.  It led to disaster in the election, and it will lead to even greater disaster if Labour pursues that route in the future.

“Those who seek to serve the proletariat must unite the workers of all nations, and unswervingly fight bourgeois nationalism, domestic and foreign. The place of those who advocate the slogan of national culture is among the nationalist petty bourgeois, not among the Marxists.”

(Lenin and Equal Rights for Nations Within One State)

Review of Predictions For 2019 - Prediction 4 - Electric Cars Become Cheaper Than Petrol/Diesel Cars

Over a four year period, electric cars are now cheaper than petrol/diesel or hybrid cars. That is because, although electric cars are slightly more expensive to buy, the running costs are so much lower. The cost per mile is a fraction of that of petrol/diesel, and maintenance costs are also lower. In my prediction, I was, however, also expecting that the actual cost of buying electric would now be cheaper. That hasn't happened, but the price of electric continues to fall rapidly relative to petrol/diesel. Every major manufacturer is now expanding their range of electric vehicles. 

In addition, first time buyers of electric vehicles get a discount of £3,500 off the cost. Other incentives include 75% of the cost of installing a charging point at home, and the ability to obtain low tariff rates for overnight electricity, which is the main time cars would be charged at home. In the meantime, free charging points are being erected in many locations. Employers are being encouraged to provide them for their workers, supermarkets have a clear incentive to provide them to entice customers into their stores. 

The rate of development of technology, and the rapid pace of adoption of electric vehicles means that as production levels are ramped up, the price of electric vehicles will soon itself be lower than that for petrol/diesel. The fact that electric vehicles are cheaper over a four year period itself creates a powerful incentive for people to switch, which, as demand rises, will again stimulate additional production. 

Governments proposed ending production of petrol/diesel-engine cars by 2040, but, in fact, manufacturers will have stopped production long before then. Already some have said they will not produce any new petrol/diesel models from around 2025, leaving them producing only existing ranges as petrol/diesel. But, few people will want to buy a new car that is based on a model that is several years old. So, its likely that, soon after 2025, main car makers will phase out petrol/diesel production altogether. That will be a great contributor to the reduction in greenhouse gas emissions, particularly in China, where many of these new electric cars will will be sold. 

This rise of the electric car will soon after be followed by the large-scale roll-out of self-driving cars, as technology, and, in particular, AI, develops rapidly alongside 5G, and then 6G mobile internet networks. That opens the potential for car ownership to become a thing of the past, as it becomes yet another area in which service industry dominates. Car travel will become a service in the same way that today Netflix and Amazon subscriptions have become the way that people view TV and films, rather than having to buy a DVD player, and rent or buy DVD's. It will simply be a matter of calling up a self-driving car on a smart phone, in the same way as today you might call up an Uber. You tell it where to go, and leave it, when you have done with it. Incidentally, the cheapness and convenience of this form of transport will also spell the death-knell for local bus services, and light rapid transit and tram services.

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Theories of Surplus Value, Part III, Addenda - Part 19

Merchant capital acts as the servant of productive-capital. It depends on the average rate of profit, created in production, as the basis of itself obtaining this average profit. It acts as the agent of industrial capital to create new markets, and new sources of supply of the raw materials required by productive-capital. It does this, initially, via the colonial system, originally established in conjunction with feudalism, as huge merchant companies, like the East India Company, take charge of large areas of the globe. Once large-scale industrial capital becomes dominant, this colonial system itself becomes an impediment, as these large industrial companies themselves derive their profits from the production of relative surplus value, obtained from the industrial labour they employ across the globe. 

The merchant's profit is dependent on, and derivative from the surplus value created by productive-capital. Interest is a derivative of profit, which is itself dependent upon the creation of surplus value. Interest-bearing capital is an inevitable product of industrial capital, because the starting point of any new industrial capital is the possession of money-capital. The large profits of industrial capitals cannot all be invested by the capital that produced them, immediately. Nor can the other money reserves accrued by these capitals. Yet, those pools of money-capital cannot be allowed to remain sterile. The money-capital is then thrown into the money market, where other industrial capitals that currently lack sufficient funds, to finance their capital accumulation, are able to borrow it. The reservoirs of loanable money-capital, thereby, accumulate separate from the accumulation of real productive-capital. The owners of the loanable money-capital are not the same as the borrowers of that money-capital, and, it is the competition between these two groups that determines the rate of interest. 

Ultimately, this rate of interest is constrained by the rate of profit. The rate of profit is the value of capital. 

“The value of money or of commodities as capital is not determined by the value they possess as money or as commodities, but by the amount of surplus-value which they “produce” for their owners. The product of capital is profit.” (p 471) 

Under capitalism, money can be spent as money, i.e. as currency or means of payment, to buy commodities or assets, or it can be used as capital. But, so can any other commodity. I can buy a commodity simply to consume it. If I use money for that purpose, I have used the money only as money. Alternatively, I might by the commodity I want to consume by exchanging some other commodity, in my possession, for it. As Marx set out previously, in this respect, every commodity is money. Money is simply the general commodity. 

What determines whether this general commodity, or any other commodity, acts only as a commodity/money or whether it acts as capital, is the purpose to which it is put. In other words, is it used only to obtain some other commodity, in exchange, of equal value, for the purpose of consumption, or is it used for the specific purpose of creating additional value. If I own a machine, and I use it productively, to produce commodities for sale, I use the machine as capital, not as a commodity. I do not expect to sell the commodity only for an equivalent amount of value to that which I have expended as constant and variable-capital for its production. I expect also to realise an amount of profit equal to the average profit. If we assume that the price of production of this commodity is equal to its exchange-value, then this profit will be equal to the surplus value created in its own production, i.e. the excess of the amount of new value created by labour in its production over the value of the labour-power employed for its production. 

Similarly, if I own an amount of money, which I use to buy the machine plus materials and labour-power, to produce the commodity, the money itself, here, has been used as capital, money-capital, which is metamorphosed into the productive-capital, which is actually the basis of the production of surplus value, and the only means by which the money-capital can be metamorphosed into a greater capital value. To produce surplus value/profit, productive-capital must engage in production. 

Back To Part 18

Forward To Part 20

Review of Predictions For 2019 - Prediction 3 - The EU Elections See Support For Right-Wing Populism Decline

This prediction was correct. For several years, the advance of right-wing populism and nationalism has been predicted across Europe. There are obvious symbols of that trend, such as the Faragists in Britain, Le Pen in France, Wilders in the Netherlands, Orban in Hungary, and so on. All of these parties can be seen as part of a similar global trend towards right-wing populism and nationalism, as manifest by Trump in the US, Bolsinaro in Brazil, Modi in India, and so on. They all also share a similar ideology to that which emanates from the right-wing kleptocratic government of Putin in Russia, whose fingerprints have been found on a range of interventions in elections in the US and Europe. Indeed, large amounts of funding for the Tories has come from Russians closely associated with Putin. 

But, as predicted, this right-wing populism and nationalism appears to have already past its high water mark. The election of Boris Johnson's right-wing populist, nationalist government might appear to contradict that, but, even here, in terms of the votes cast, around 54% went to anti-Brexit/second referendum parties, as against only 46% for overtly pro-Brexit parties. A look at the UK election map on a geographic basis makes it look as though the Tories have widespread support, but the geographic maps, as opposed to population maps, are deceiving. The large areas of blue on a geographic map reflect the fact that the Tories have control over seats in shire counties, which are large in land area, but more sparsely populated, and now also in some depopulating towns in the North and Midlands, particularly in areas where old manufacturing industries once existed, and where the old workers from those industries are congregated, and dying out. Looked at in terms of population maps, it is, in fact, clear that the support for the Tories is restricted to a narrow segment of the population that tends to be elderly, and in decline. 

The same population maps show support for Labour, in particular, to be concentrated in the areas of higher population density, in the cities, including the cities of the North, where the concentration of the new industries, in services and technology tend to be based, and so where younger, better educated populations exist. In addition, the Tories, as well as Labour and the Liberals, have been all but wiped out in Scotland by the SNP. 

In 2016, the vote in favour of Brexit, was followed by a reaction which saw large numbers of young people take up a more active involvement in politics, particularly in swelling the ranks of the Labour Party. No sooner had the vote in favour of Brexit been carried than a majority turned against that decision, and in every poll since 2016, there has been a majority against Brexit. Farage's Brexit company bragged that it had won the 2019 EU parliament elections, but that was not true. In fact, a majority of seats, as well as a majority of votes went to parties opposing Brexit. A similar thing has happened in the US. Trump was a champion of Brexit prior to his election. His own election similarly brought forward a reaction against it. Large numbers of young people again became politically active, and they have brought forward new more progressive representatives. The US Social Democrats like Bernie Sanders, once seen as a bit of an oddity, are now the ones who determine the agenda for that party. 

By contrast, in France, the Left which had disgraced itself under Hollande's Blairism, and failed to offer a credible or attractive offer in the shape of Hamon or Melonchon, saw itself eclipsed by Macron. That would have been likely to have happened in Britain were it not for the lack of a proportional representation voting system, and the dire political strategy and tactics the Liberals. The French voters had no great affinity with him either, as shown by the large number of abstentions in the election, but enough were prepared to back him in order to defeat Le Pen. The experience of Macron, as with Clinton in the US in 2016, is a warning to the Blair-rights, and other centrists who would respond to Trump and Johnson, by again seeking to return to those failed centrist politics of the 1990's and early 2000's that created the conditions for the rise of Trump and Brexit to begin with. Trump cannot be beaten by a Biden, or if he was, it would only be a precursor to someone worse than Trump taking over at the following election. Similarly, Johnson will not be beaten by a Cooper, Nandy, Starmer, and still less a Phillips. It is their politics that created the conditions that led to the current situation. Their politics was possible in the conditions of the previous thirty years, but it is not possible today. 

The experience of Macron illustrates the point. He defeated Le Pen electorally, but his own social base was weak. The politics on which he was based is the same Blair-right politics that had failed, and opened the door to right-wing populism. After a very short honeymoon following his election, that was demonstrated by the fact that his popularity sank through the floor. He defeated Le Pen, but could not change the economic conditions that created the social base for Le Pen. Le Pen's voters simply channelled their opposition by other routes, in particular, via the rise of the gilettes jaunes. Macron has attempted to resolve the problems of French capitalism in the same way that others of his persuasion have tried, by simply attempting to screw workers even harder. As I wrote several years ago, in relation to Britain, the chances of success for that are slim. This is not the 1980's. Workers wages have already been squeezed in the 1980's, and 1990's. They began to recover in the early 2000's, only to be curtailed with the onset of the financial crisis, and its economic consequences. The ability to reduce wages further is restricted, whilst the conditions of slow but steady rises in employment levels, means that the pressure is actually for wages to rise. 

Macron's attempts to attack workers are almost bound to fail, as the recent strikes against cuts in pensions demonstrate. Any upturn in the EU economy will only act to strengthen the position of workers further. We can only hope that that is what happens, because any economic downturn will instead strengthen the influence of Le Pen. Macron's failure and attempt to simply apply centrist politics and their concomitant attack on workers will have been only an interlude before opening the door to Le Pen. 

But, in general, across Europe, the forces of right-wing populism and nationalism have been pushed back. An immediate effect of the vote for Brexit has been to strengthen support for the EU amongst EU citizens. Polls show that support at record high levels. In the EU parliament elections, in May, pro-EU parties increased their number of MEP's. It is now at the same level it was at in 2004. Its true that Euro-sceptic and far-right parties have advanced, but they have done so at the expense of the Conservatives, and Christian Democrats, who comprise the largest bloc of right-wing populists. Even then the Far-Right and Eurosceptics have only advanced from around 23% of MEP's to around 25%. Meanwhile the biggest advance in May's elections was made by Greens. 

In national elections, right-wing populists where they were in office, as in Britain, Hungary, and Poland have remained in office, but they have made no further advances in other countries. Besides Le Pen's failure, Wilders failed in the Netherlands. In Austria, although the Social Democrats lost 12 of their 52 seats, the far right Freedom Party lost 20 of its 51 seats, whilst the Greens gained 26 seats. 

What is also striking is the extent to which, in Poland and Hungary, which have had some of the best GDP growth in Europe, of between 4-5% p.a. there has been a similar upsurge in opposition, as seen in the US and Britain, in response to the right-wing governments. What is also significant is that in both Poland and Hungary, these right-wing governments have been led to introduce their own measures of Keynesian state intervention. These measures like the Mosely Memorandum, or like the measures of state intervention introduced by Mussolini and Hitler, demonstrate the reality of the domination of modern economies by large-scale oligopolistic capital, and the requirement, therefore, of the state to pursue measures that defend its interests. Ultimately, its what drives even those nationalistic governments such as that of Orban to recognise that those interests can only be pursued within the context of EU membership.

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Theories of Surplus Value, Part III, Addenda - Part 18

As described in Capital II, this function of making and receiving payments for goods bough and sold, by firms, which is an essential part of the circuit of capital, corresponding to that part of the circulation period when commodity-capital is metamorphosed into money-capital, and then back into productive-capital, becomes the preserve of a specific form of commercial capital, i.e. money-dealing capital. But, as also set out in Capital II, the other element of the part of the circuit of industrial capital, concerned with circulation also takes on an independent existence of its own. In other words, every productive-capital having produced a mass of commodity-capital, must sell it, in order to metamorphose its capital value into money-capital, before it can metamorphose the money-capital back into productive-capital. It must employ capital for that purpose of selling its output. Merchant capital, specialising in performing that task, and thereby reducing the amount of capital required to do so, separates off from the productive-capital. 

Marx discusses the way this arises as part of the primary accumulation of capital. 

“The merchant, instead of buying commodities, buys wage-labour with which he produces the commodities which he intends to sell on the market. But commercial capital thereby loses the fixed form which it previously possessed in contrast to production. This was the way the medieval guilds were undermined by manufacture and the handicrafts confined to a narrower sphere... 

The producer, conversely, becomes a merchant. For example, the cloth producer himself buys material in accordance with the size of his capital, etc., instead of gradually obtaining his material in small amounts from the merchant and working for him. The conditions of production enter into the process [of production] as commodities which he himself has bought. And instead of producing for individual merchants or for particular customers, he now produces for the world of commerce.” (p 469) 

The increase in trade creates the conditions by which markets are established and expanded, which makes possible larger scale production, which is a precondition for capitalist production, and the dissolution of guild production. But, this capitalist production, by then destroying guild and other production, as a result of the low prices if its commodities, itself then acts to create new markets and to dominate them. It is these low prices, as Marx says in The Communist Manifesto, which acts as the battering rams, which it uses to break down all Chinese walls to those markets. 

“As soon as manufacture gains strength (and this applies to an even greater extent to large-scale industry), it in turn creates the market, conquers it, opens up, partly by force, markets which it conquers, however, by means of its commodities. From now on, trade is merely a servant of industrial production for which a constantly expanding market has become a very condition of existence...” (p 470) 

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Forward To Part 19

Northern Soul Classics - I Gotta Have You - Bobbie Brown

Friday Night Disco - Everybody Needs Somebody To Love - Wilson Pickett

Review of predictions For 2019 - Prediction 2 – Global Growth Heads Towards 5%

In fact, the last IMF forecast for 2019 global GDP growth is 3.2%, rising to 3.5% in 2020. Its certainly not a “slump”, long depression, secular stagnation, or even a recession, as some predicted, though they have normally predicted such events for every year since 2008, and, for some, before that, but nor is it anywhere near 5%. The biggest drag on global GDP growth has been the manufacturing sector, although that sector is increasingly only a minor contributor to GDP overall. In advanced economies, service industry accounts for around 80% of GDP, with manufacturing at less than 20%, but in industrialising economies like China, too, service industry, now, also constitutes the major part of new value and surplus value production, and is the fastest growing sector. 

The reason that GDP did not head towards 5% as I expected is quite simple - Trump's trade war, Brexit and increasing economic nationalism and protectionism. In my predictions for the previous year, I had predicted growth of 4%, which came in close at 3.7%. However, I pointed out, in my prediction for this year, that the reason that it had fallen short by this small amount, in 2018, was the effect of Trump's trade war, and Brexit. Consequently, I added the rider that similarly, the prediction for 2019 was speculative, because it was unknown what would happen with either of those two factors. We now know. Rather than Trump's trade war coming to an end, he ramped it up much further, causing retaliation from China, and from the EU. The effect was to slow US growth, and Chinese growth. The slowdown of Chinese growth hit Germany, as a major exporter of manufactured goods to China. A slowdown of Germany, as the EU's biggest economy, had an obvious impact on growth for the whole of the EU itself. 

But, EU growth was also hit by two other factors. Firstly, Trump's trade war itself extended to the EU, with his imposition of protective tariffs of 25% on steel and aluminium, and further restrictions on cars and other products. A WTO ruling in favour of the US in relation to Airbus also saw the US impose further tariffs on a range of EU products in retaliation, before a WTO ruling, in a similar vein, against Boeing was made. The WTO is likely to rule that Boeing, which depends hugely on support from the US state, was even more flagrantly in breach of WTO rules. Given that Trump has rushed to impose punitive tariffs on EU products, its likely that the EU will act in the same way. The overall result is to reduce global trade, to raise costs of production, and to slow capital accumulation and economic growth. 

The second factor affecting the EU was, of course, Brexit. Until the actual relation between Britain and the EU is established, it makes it difficult for firms in the EU to make long term investment decisions. If Brexit were to be cancelled, then capital invested in Britain might remain, and other plans for investment might go ahead. Some kind of BRINO would have a similar result. But, if anyone takes Boris Johnson's words about seeking some kind of increasing divergence seriously, then its inevitable that firms will relocate out of Britain and into the EU, so as to avoid the additional costs and frictions that will arise from such divergence and the erection of borders. Some firms have already decided not to wait, and have relocated out of Britain into the EU, but the time taken to establish these new businesses, means that, until they actually begin to produce goods and services, they are a net detractor from the economy. 

There are signs that Trump and China are about to reach a deal. There are two factors impacting on Trump. On the one hand, his line of economic nationalism has played well with the reactionary elements of his base. But, economically, it has been disastrous. The tariffs on steel and aluminium have seriously raised the costs of production of US manufacturers, and thereby resulted in a tie-up of capital, and reduction in the rate of profit. Tariffs on imported consumer goods have raised the cost of living for US workers. But, the retaliation of China for Trump's tariffs was targeted to hit Trump's base. China massively reduced its imports of US agricultural products such as soya beans. US farmers in those mid-western areas where Trump's base is strongest have been hit very hard. In order to shore up his base, Trump has diverted billions of dollars in aid from the Federal Budget to support the farmers. That is money that could have been used productively to rebuild the US's crumbling infrastructure, and thereby raise US productivity levels. But, it also does not resolve the problems of the farmers. It provides them with an income, so that they don't starve, but it does not provide them with a market for their products for the coming year, unless the government is going to buy up their output. It means there is no basis for them to invest in production, and that has a knock on effect to all of their suppliers. 

Trump's economic nationalist agenda in other areas has also been a similarly predictable failure. He promised his base amongst the rust belt that he would restore their industries in coal mining and steel production. He hasn't.  The EIA expects 2019 US coal production to be 8% less than 2018, and 2020 production to be down by a further 14%. US steel production has also declined, reversing a rising trend from around 2015. The reality is that US coal production is set to decline despite Trump's endeavours for the simple reason that other forms of energy are now cheaper, cleaner and more effective. The availability of shale oil and gas has been a major factor, in replacing coal, but also of reducing US carbon emissions, because gas, in particular, produces less emissions per unit of energy produced. But, the US is also developing a range of cheap alternative energy solutions, again despite Trump. 

More US workers now work in alternative energy production than in fossil fuel production, and the gap is widening. Moreover, the alternative energy jobs tend to be higher skilled and higher wage jobs than those in the old industries. This is a fundamental factor that explains the rise of Trump, and of Brexit, and this bifurcation will sharpen. The workers in the old declining industries are themselves old. They are workers that were given only adequate levels of education for the kinds of unskilled and semi skilled jobs they were going to be taking up. They are unlikely to be able to be re-educated or retrained to take on the kinds of jobs required by the growing sectors of the economy, in high value service production, or high value skilled technology jobs in alternative energy production. Those jobs will be undertaken by the young better educated workers. These are the workers who, in Britain, backed Corbyn and opposed Brexit, whereas those that backed Trump or Johnson, and Brexit, are those old workers, who yearn for a past to return that is now lost to them. 

On the one hand, therefore, Trump has to choose, as he enters this year's election, whether to persist with his disastrously failing policy of economic nationalism and protectionism, in order to proclaim that he has stuck to his promises, or whether he has to do a trade deal with China, so as to ensure that the economy does not sink into recession. 

The underlying premise that, in the context of an overall long wave upswing, measures of protectionism and economic nationalism act to reduce growth, and to divert it into alternative channels, rather than to cause an actual slump, remains in place. The fact of slower growth due to those protectionist measures also explains why interest rates did not rise, and so asset prices reversed their declines from 2018, aided and abetted by a resumption of measures of QE. This poses considerable threats to the global financial system once more. As Moneyweek said recently the big risk for 2020 is if everything goes right. If Trump's trade war ends, if Brexit is resolved, so that trade increases, and investment picks up, in a climate in which employment is already at high levels, with wages rising, it is inevitable that this will cause interest rates to rise. Capacity constraints are likely to cause other costs to rise. Rising inflation will create a further requirement for interest rates to rise, with a consequent impact of crashing asset prices. There is a lot today that is identical to the situation in 2007/8. 

We have already seen overnight lending rates spike much higher due to liquidity issues. There is talk now that a liquidity crisis might erupt at the end of the year, which will require that a whole host of more liquid assets have to be sold to raise cash. That is a similar situation to that I described in 2008, in predicting the outbreak of the global financial meltdown that occurred a few weeks later. We have banks now, in a number countries, actually offering mortgages on negative rates of interest, and similarly charging their customers to put money on deposit with them. We have $15 trillion of government debt that has negative yields. If you want to understand why that is look at what happened recently with the issuance of Austrian government debt. The Austrian government issued a 100 year bond in 2017 with a 2% yield. The coupon, the amount of interest paid on such bonds is fixed, for example, the coupon on a £100 bond with a 2% yield is £2 p.a. The yield, therefore, moves up and down with the price of the bond, falling when the bond price rises, and vice versa. Now you might wonder who would be prepared to risk their money for up to 100 years into the future, for just 2%. The answer is plenty of people. Since the issuance of the bond, it has made a capital gain of 60%. This explains why speculators are not concerned about low levels of yields on assets, or even negative yields, because their eye is on the much larger capital gains that can be made from the perpetual rise in asset prices underpinned by the policies of QE implemented by central banks. 

In fact, a condition for faster economic growth is that these asset price bubbles are burst so that potential money capital stops being used for speculation in these assets, and instead starts to be used to accumulate additional productive-capital.

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Theories of Surplus Value, Part III, Addenda - Part 17

[2.] Interest-Bearing Capital and Commercial Capital in Relation to Industrial Capital. Older Forms. Derived Forms 

“The commercial and interest-bearing forms of capital are older than industrial capital, which, in the capitalist mode of production, is the basic form of the capital relations dominating bourgeois society—and all other forms are only derived from it or secondary: derived as is the case with interest-bearing capital; secondary means that the capital fulfils a special function (which belongs to the circulation process) as for instance commercial capital. In the course of its evolution, industrial capital must therefore subjugate these forms and transform them into derived or special functions of itself.” (p 468) 

The same thing applies with landed property. Landed property clearly precedes capitalism. Feudal landed property and feudal rent is not the same as capitalist landed property and capitalist rent. Capitalism has to take these existing forms of property and reshape them to meet its own requirements. Under feudalism, it is rent that acts to limit profit, whereas under capitalism it is profit that determines and limits rent. In precapitalist modes of production, because borrowing only occurs in instances of distress, and because the number of lenders is small, interest rates are very high. Under capitalism, borrowing is an integral part of economic life and accumulation, whilst the sources of loanable money-capital are greatly increased, so that interest rates are much lower. Moreover, the rate of interest can never be higher than the average rate of profit, because, if it was, industrial capitalists would make a loss on the money-capital they borrowed to use productively. 

“It encounters these older forms in the epoch of its formation and development. It encounters them as antecedents, but not as antecedents established by itself, not as forms of its own life-process. In the same way as it originally finds the commodity already in existence, but not as its own product, and likewise finds money circulation, but not as an element in its own reproduction. Where capitalist production has developed all its manifold forms and has become the dominant mode of production, interest-bearing capital is dominated by industrial capital, and commercial capital becomes merely a form of industrial capital, derived from the circulation process. But both of them must first be destroyed as independent forms and subordinated to industrial capital.” (p 468) 

The capitalist state used its power to forcibly reduce the rate of interest charged by usurers, which threatened to impede the initial process of capital accumulation. In a similar way, in an era when the dominant section of the capitalist class holds its wealth in the form of fictitious capital, the capitalist state, via the central banks, used its power to print money so as to buy up those financial assets when their prices crashed, and used measures of austerity to hold back economic growth, after 2010, so as to limit the rise in interest rates, for the same reason. 

“But this is a method characteristic of the least developed stages of capitalist production. The real way in which industrial capital subjugates interest-bearing capital is the creation of a procedure specific to itself—the credit system. The compulsory reduction of interest rates is a measure which industrial capital itself borrows from the methods of an earlier mode of production and which it rejects as useless and inexpedient as soon as it becomes strong and conquers its territory.” (p 468-9) 

The credit system is a creation of capitalism. Credit is divided into commercial credit and bank credit. Commercial credit is a system created by industrial capital itself, whereby each firm provides mutual credit to every other. Within the prescribed limits of the system, it involves no interest being charged. For example, if a firm sells its output to other firms on the basis of payment within 30 days, it essentially lends the equivalent amount of money for 30 days. Provided its customers settle the bill within 30 days, they incur no interest for having been loaned this money for that period. But, the company giving the credit can do this, because it too is likewise given 30 days credit on the commodities it buys from its suppliers. In doing so, each firm is enabled to produce up to a higher level of output than if each had to wait until they had cash to make purchases. 

Its only when credit becomes tight, because payments are not made on time, and there is fear that payment may not be made, so that firms stop offering such credit, that they have to turn to bank credit, to provide such short-term financing. Industrial capital undermines usurer's capital, because each firm can issue its own commercial paper as means of effecting this mutual credit. The amount of actual money required is thereby reduced significantly. The credit takes the form of Bills of Exchange, and, as soon as clearing houses exist, a large number of those bills can then be netted off against each other. 

If A sells £100 of goods to B, for payment in 30 days, and the same occurs with B to C, C to D, D to E, who in turn sells £100 of goods to A, then all of these individual bills cancel each other out. No money is required to finance this trade amounting to £600. 

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Forward To Part 18

Review Of 2019 Predictions - Prediction 1 – May Calls A February General Election

On the face of it, this prediction was clearly wrong. In reality, it was remarkably accurate. Clearly, May did not call a General Election in February. However, the prediction went on to say, 

“Put it this way, given the damage that Corbyn's “pro-Brexit” stance is doing to Labour, she would be mad not to, unless, in the meantime, by some miracle, she got her existing deal through parliament.” 

In terms of the logic as to why she would be “mad” not to call an election, it was impeccable, and validated by what transpired. But, also, in terms of the assessment that Corbyn's “pro-Brexit” stance was draining support from Labour, towards the Liberals, Greens, Plaid and SNP, meaning that Labour had no chance of winning an election, it was also 100% correct. 

May did, again, fail to get parliamentary approval for her Withdrawal Agreement, as I predicted. The March 29th Brexit deadline date came and went, as she had to ask for an extension. In May's local council elections, voters took the opportunity to treat them as a proxy for a Brexit referendum. Both the Tory and Labour pro-Brexit positions got hammered. Labour, which should have won huge numbers of Council seats, and taken control of large numbers of councils, actually lost 80 seats. The more Brexity the party, the worse it did. UKIP was effectively wiped out. Despite that, the Tories lost 1300 seats. By contrast, the Liberals gained more than 700 seats, and the Greens gained 200. 

The message was clear. Corbyn's pro-Brexit stance, was a disaster. Yet, he and those around him, like McCluskey, Milne and Murphy, continued to argue the need to push this reactionary nationalist fantasy of a “Jobs First Brexit”. Instead of recognising that, and coming out more clearly for a more militant anti-Brexit position, Labour simply ploughed the same furrow even deeper. Everyone knew that the consequences would be dire come the European parliament elections, at the end of the month. By the time those elections took place, Farage had created his Brexit company, which essentially replaced UKIP, which had been destroyed. 

Those elections played out as expected. The Brexit company picked up all of those disgruntled Tory voters that were angry that May had not been able to implement Brexit. The Tories were reduced to just 9.1% of the vote. It was the worst election result for the Tories in their 185 year history, which in itself, is a lesson for those who want, now, to write off Labour, which still secured 33% of the vote in this last general election, which is significantly better, also, to the 27% it obtained in 1983. Labour's 33% is also better than the 30.3% that Kinnock obtained in 1987, and only slightly worse than the 34% Kinnock obtained in 1992. 

Those trying to portray Labour's defeat as somehow catastrophic are doing so in spite of the facts, and largely for their own political ends. In 1987, Labour won 229 seats, only marginally better than the 202 seats it won this time. The real basis of the Tory majority in this election is the fracturing of the anti-Tory, anti-Brexit vote. In 1987, the SNP won just 3 seats, compared to the 48 today. Adjusting for that, even the seats tally for Labour in 2019 was better than under Kinnock in 1987 and only marginally worse than for 1992. That is consistent with the prediction that Labour's disastrous Brexit position would make it impossible for Labour to win, and would split the Remain vote, allowing the Tories in. 

The only variation to this prediction is that, as it turned out, May was a terrible politician who failed to take advantage of the opportunity that had opened up for her. She failed to get her Withdrawal Deal approved, and she failed to turn the Tory Party hard right to consolidate the Tory Leave vote before calling a General Election. The Tory Party ditched her, and put in someone who would push the strategy I outlined in January. Boris Johnson, was elected Leader. He purged the centrists, he swung hard right to absorb the ERG, and to destroy Farage's Brexit company, he threatened a No Deal Brexit, though there was no chance he would have ever implemented it. And, indeed, when push came to shove, he didn't. The October 31st deadline came and went, and he did not do or die, in a ditch or otherwise. And, despite all of the hyperbole, nor did he get the Withdrawal Agreement reopened, or get rid of the backstop. What he actually did was to capitulate to the EU, and simply accepted the deal that the EU had previously put to Theresa May that places the border down the Irish Sea, rather than on the island of Ireland. It is, indeed, precisely why Johnson's deal is opposed by both Farage and by the DUP.

Forward To Review of Prediction 2

Theories of Surplus Value, Part III, Addenda - Part 16

This superficial appearance of interest-bearing capital or money as synonymous with capital, on the one hand leads the vulgar economists to equate it with either being capital, or at least the basic form of capital. Something similar can be seen in the arguments of the proponents of historic pricing for whom it is this circuit of money-capital – M – C … P … C` - M` that is characteristic, rather than Marx's insistence that it is the circuit of industrial capital P … C` - M`.M – C … P that is determinate. And, in the form of interest-bearing capital, the most obviously parasitical form of capital, it provides an obvious easy target for vulgar critics of capitalism. That was not always the case. Initially, it was the proponents of capitalism that sought to attack the usurers, whose rate of interest threatened to prevent real capital accumulation. 

“The polemic waged by the bourgeois economists of the seventeenth century (Child, Culpeper and others) against interest as an independent form of surplus-value merely reflects the struggle of the rising industrial bourgeoisie against the old-fashioned usurers, who monopolised the pecuniary resources at that time. Interest-bearing capital in this case is still an antediluvian form of capital which has yet to be subordinated to industrial capital and to acquire the dependent position which it must assume—theoretically and practically—on the basis of capitalist production. The bourgeoisie did not hesitate to accept State aid in this as in other cases, where it was a question of making the traditional production relations which it found, adequate to its own.” (p 467) 

Interest-bearing capital, unlike merchant capital, does not increase the mass of realised profit. It does not share in the mass of surplus value, by obtaining the average rate of profit. Indeed, as Marx says, the rate of interest can never be as high as the average rate of profit, because, if it were, it would neutralise the profit of the industrial capital. In other words, if the average rate of profit is 10%, and the rate of interest is 10% there would be no point the industrial capitalist borrowing, say, £1,000, because the £100 profit they make on it would all be consumed as payment of interest. But, interest-bearing capital does perform a useful function for industrial capital. Firstly, where commercial credit is not available, bank credit can take its place, enabling production and circulation to go beyond the bounds it would otherwise have been constrained by. Holding reserves of money-capital itself is seen as unproductive by industrial capital. On the one hand, any unused money reserves from realised profits can be thrown into the money markets – and this is the source of the main additions to the supply of money-capital – so as to earn interest. On the other hand, when they need additional money capital, to finance accumulation, they do not have to wait until their own reserves of money-capital have grown sufficiently, because they can themselves go into the money markets to borrow the required funds. Moreover, as the banks act to centralise all of the numerous reserves of money-capital and savings throughout the economy, they thereby create larger reserves of such money-capital than could otherwise have been mobilised. 

The development of interest-bearing capital is then, like credit, an integral aspect of the development of industrial capitalism itself. It makes little sense then to pick out interest-bearing capital, or as it has more recently been termed, financialisation, for criticism rather than a critique of capital itself, of which it is merely a manifestation, and one particular aspect. 

“It is clear that any other kind of division of profit between various kinds of capitalists, that is, increasing the industrial profit by reducing the rate of interest and vice versa, does not affect the essence of capitalist production in any way. The kind of socialism which attacks interest-bearing capital as the “basic form” of capital not only remains completely within the bounds of the bourgeois horizon. Insofar as its polemic is not a misconceived attack and criticism prompted by a vague notion and directed against capital itself, though identifying it with one of its derived forms, it is nothing but a drive, disguised as socialism, for the development of bourgeois credit and consequently only expresses the low-level of development of the existing conditions in a country where such a polemic can masquerade as socialist and is itself only a theoretical symptom of capitalist development although this bourgeois striving can assume quite startling forms such as that of “crédit gratuit” for example. The same applies to Saint-Simonism with its glorification of banking (Crédit mobilier later).” (p 467-8) 

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Theories of Surplus Value, Part III, Addenda - Part 15

It is only productive-capital, and in particular variable-capital, that produces surplus value. The real self-expansion of value occurs in production because the employed labour creates more new value than is required to reproduce the labour-power that is consumed in production. That is why the other forms of capital – interest-bearing capital, and merchant-capital, including money-dealing capital – are subordinated to it. Merchant capital does not produce surplus value, but, by reducing the costs of circulation, increasing the amount of realised profit, claims its right to obtain the average rate of profit, as an integral part of the industrial capital. Interest-bearing capital, like landed property, not only does not produce surplus value, but also does nothing to increase the mass of realised profit. Interest, like rent, is merely a parasitic excrescence that acts to drain surplus value away from productive investment. 

The whole point of capitalist production is to increase the physical mass of capital, and thereby the mass of labour employed, so as to increase the mass of surplus value further. It is expressed in the circuit of industrial capital, set out by Marx in Capital II – P... C` - M`. M – C … P.   And, more specifically its expanded form,

As Marx says, 

“The money form is a transient form in the real process of capital.” (p 466),

which is a repetition of what he says, in Capital III, 

“In so far as reproduction obtains on the same scale, every consumed element of constant capital must be replaced in kind by a new specimen of the same kind, if not in quantity and form, then at least in effectiveness.”

(Chapter 49, p 849), 

and, 

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

(Capital III, Chapter 24) 

Yet, the superficial appearance is given that the purpose of capital is to increase the mass of money, as at least symbolised by the circuit M – C – M`. But, in its most fetishised form, as interest-bearing capital becomes M – M`. 

“This is the quite tangible form of self-expanding value or of money-making money, and at the same time the quite irrational form, the incomprehensible, mystified form.” (p 466) 

This is a mirror of what has been seen, also, in relation to commodities. The commodity arises because products are increasingly traded. A product is a use value produced by labour. Every product, thereby, combines use value and value/labour. The value is inevitably individual value, i.e. determined by the labour embodied within it. The more these products become traded, the more this value assumes the form of a social or market value. In other words, if communities A – D each come to trade, say cloth for wine, with community E, then the representatives of E will soon begin to exchange a given quantity of wine for a given quantity of cloth. The producers of cloth will each produce cloth with different individual values, determined by the labour-time that each requires for production. But, as the trade develops, E will exchange a given amount of wine for cloth, at a rate of exchange that represents the average value, or social or market value for cloth. 

This is the process that Marx describes, in Capital I, Chapter III, in his value form analysis, which describes how values are transformed into exchange values, alongside products being transformed into commodities. The end result of this process is that a single commodity is separated out to act as the universal equivalent form of value, to become the general commodity, or money commodity. On this basis, the value of the product, which is inseparable from it as a use value, and measurable only intrinsically by labour-time, becomes transformed first into exchange-value, the relative measurement of that value in terms of a quantity of some other use value, and then this exchange-value itself takes on a life of its own, and becomes independent exchange-value incarnate, in the form of money. 

Now the same is true with capital, as interest-bearing capital. It is again money that appears to be capital itself, to be the representative of all capital, whilst being no specific type of capital, or even real capital at all. That is like money which becomes the generalised commodity, the representative of all commodities, whilst abandoning its nature as a commodity in its own right, to perform that function. This was something, as Marx showed earlier, that Ricardo, Mill and others could not understand, of how value could be alienated, and take on independent existence as money, and who continued to see money, particularly gold, still in terms of it being a commodity, and its development simply in terms of its functional convenience to circulation. 

“We started with money as the converted form of the commodity. What we arrive at is money as the converted form of capital, just as we have perceived that the commodity is the precondition and the result of the production process of capital.” (p 467) 

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