GDP
Summary:
GDP is not a Marxist term, but Marxists understand it differently to orthodox economists
Both understand GDP as being equal to the new value (added value) created during the year. Both understand it as, then, being equal to total incomes received during the year.
Orthodox neoclassical economics believes that total incomes equal total expenditures, so that income equals expenditure equals total output. Keynesian economics introduced the role of savings and investment spending, but accepts the underlying tautological relation, which flows from Say's Law, that supply creates its own demand, which, in turn, flows from Adam Smith's argument that the value of commodities resolves entirely into revenues (wages, profit, interest, rent) – what Marx calls Smith's “absurd dogma”.
Marxists reject Smith's “absurd dogma”, and Say's Law, and so understand GDP differently to either neoclassical economics or Keynesian and post-Keynesian economics. The value of commodities does not resolve entirely into revenues – the new value created – but also into the constant capital (raw materials, wear and tear of fixed capital) consumed in their production. In other words, into c + v + s, not just into v + s. So, the value of total output also must resolve into c + v + s, not just v + s, and so not solely into incomes, or new value added.
Total output value is equal to the new value added (incomes) – which divides into consumption plus savings – plus the value of raw materials and wear and tear of fixed capital consumed in production, which forms an income for no one, and is bought not from income but from capital. GDP is equal to new value added, which is equal to incomes, which is equal only to the consumption fund plus savings/net investment.
3 comments:
Boffy, I understand the conceptual point you are making here about GDP in orthodox economics vs. Marx's terms. But when, for example, the BEA measures the GDP of the United States from the income-perspective, they include "consumption of fixed capital" as a form of income. So GDP includes both new value added and transfered value from fixed capital, just as in Marx's theory. It is only Net Domestic Product (which was Kuznet's original focus when developing national accounts for the US) that fully corresponds to Smith's dogma of total disposible income = new value added
That is not the point that Marx or I make. The major component of Department II that Marx sets out as not having a revenue equivalent is not the wear and tear of fixed capital, but is the circulating constant capital itself, i.e. raw materials and auxiliary materials, including all of those processed materials. i.e. components.
The value of coal, for example, produced last year, and consumed in this year's production of coal, steel etc., has no revenue equivalent in this year. It is replaced out of capital, i.e. bought by capital not revenue. Whatever the BLS or any other statistics body includes as income, also does not change that reality that actual revenues - wages, rents, taxes, interest, profit of enterprise - can only equal the new value produced by labour in the current year, which resolves into them.
Oops, sorry should have read "The major component of Department I", obviously, not Department II.
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