Paul wants the small British economy, increasingly under pressure and isolated as a result of Brexit, to ignore the lessons of history, and the laws of economics, and simply go into increasing amounts of debt to be paid for by printing more and more bits of coloured paper in the delusion that this worthless paper is money, so as to pay for its consumption!
In reality, things are worse than that. Paying for consumption via increased debt, and then paying for the debt by increased printing of money tokens leads to other negative consequences. Debt involves the payment of interest on that debt. The payment of interest is a deduction from profits, the manifestation of the surplus value produced within an economy. In order to grow an economy it is necessary to maximise the surplus value, so that it can be accumulated as additional means of production, and be able to put more workers into productive employment. The more that is sucked out of profits into interest payments, rents, or taxes to finance unproductive government expenditure, the less is available to invest in the economy. The slower the economy grows, the greater the proportionate burden on it of interest payments to cover its debt.
But, as Marx showed, the accumulation of capital is never simply a matter of just more of it being accumulated. Even where more capital is accumulated of basically the same kind, the same kinds of machines and so on, the larger scale of production results in economies of scale, a greater division of labour and so on, so that productivity rises. But, increased accumulation of capital also goes along with the introduction of new more productive machines and so on. This increases productivity much more. The consequence of this higher productivity is that the company or the country that enjoys it, as against its competitors, not only is able to undercut them, but it has the effect of making its labour have the appearance of complex labour. In other words, its as though an hour of its labour is worth multiple hours of labour of its competitors.
Suppose Country A and Country B both produce textiles. Country A has spinning machines with 100 spindles per machine. Country B still uses hand spinning using a single spindle. In an hour, Country A labour produces at least 100 times as much yarn as Country B. It is as though the labour in Country A is complex labour, producing 100 times as much value in an hour as that of Country B, because both sell their yarn on a global market, at global market prices. As Marx describes, this means that even though the workers in Country A may be paid higher wages, and have a much higher standard of living, they will produce far more surplus value than the workers in Country B. Despite appearances, it is the more affluent workers in Country A that are far more highly exploited. (See: Capital I, Chapter 22)
If both countries work a 10 hour day, and 2 hours are required to cover wages in B, but 3 in A, with its higher wages, then,
A 10 (equal to 1,000 B hours) – 3 = 997 hours surplus.
B 10 hours – 2 = 8 hours surplus.
So, A, despite its 50% higher wages for its workers, produces more than 120 times as much surplus value as B, as a direct result of its higher productivity arising from its employment of large amounts of fixed capital. This is why imperialism, based upon industrial capital is far more concerned with this production of relative surplus value than it is with the production of mercantile profits based upon unequal exchange, which was the preoccupation of colonialism. Its why capital accumulates more in those centres where large amounts of fixed capital in infrastructure, and so on leads to higher levels of productivity, and so higher profitability.
Going back to the earlier example, then, of the two countries that had the same level of productivity, one producing cars and the other producing wheat, if Country A, decides to increase its consumption, and to fund it by borrowing, this is not changed by then printing additional money tokens to cover this borrowing. If country A wants to consume 200 million tons of wheat, and assuming Country B can supply it, Country A can borrow the value of this additional 100 million tons from Country B (or from other lenders). But, printing more Dollars so as to repay these loans, does not change anything compared to an attempt to just buy the additional 100 million tons with additional currency. The currency is again similarly depreciated, so that more of it has to be handed over to buy wheat, as well as to cover any interest payments on the debt now undertaken.
Whatever, interest Country A must now pay on the debt it has incurred, is value which it cannot now use to accumulate capital within its own economy. The less it can accumulate capital, the less productive its economy becomes, and so with falling labour productivity, the more the value of an hour of its labour falls compared to the value of an hour's labour in Country B – and elsewhere. The parity of Dollar and Euros, in the example, was based upon a parity of labour productivity in each country. But, now, as capital accumulation and productivity in A declines, because it must use a portion of its surplus to finance interest payments, this condition of parity of productivity is removed, and so the parity of currency disappears too. If both a Dollar and a Euro originally represented 10 hours of labour, then a Euro would buy the product of 10 hours of labour in both countries. But, now, whilst it continues to buy the product of 10 hours of labour in Country B, it will buy, say, the product of 12 hours of labour in Country A, because of its lower level of productivity. The Euro would rise to the equivalent of $1.2.
The consequence of this disparity in productivity, and fall in the value of the currency is that workers in Country A, must now work longer/harder to sustain the same standard of living. But, as Marx describes in Capital I, the standard of living, or value of labour-power is not some arbitrary quantum, but is itself objectively determined. Workers need to eat a given amount, they need to be housed and clothed, and educated. The effect of the falling currency, and rising inflation is that these costs rise. Even if workers face a fall in their standard of living, the consequence is that the surplus value they produce falls, which means that the country faces an even bigger problem in accumulating capital, so as to raise its level of productivity, expanding its economy, and so paying back its debts.
This is the vicious circle that all less developed, and debt-ridden economies face. It cannot be overcome by simply printing huge amounts of pretty coloured paper, as the people of Weimar discovered in the 1920's.
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