Anti-Duhring, Part I, Philosophy Dialectics, XII – Quantity and Quality - Part 10 of 14

Contrary to the theory of the subjectivists, and neoclassical economists, therefore, it is not the consumer/demand that determines value/price on the basis that something is only ever worth what someone is prepared to pay for it. Rather, the consumer must accept, for any commodity they demand, the price that the seller is asking, and that price is, also, not arbitrary, but determined by its value/price of production. The buyer may, of course, on that basis, decide that, at that price, it does not represent use-value for them. They withdraw their demand for it. The consequence of this withdrawal of demand can only be to reduce the level of supply, not to determine the value/price of the commodity.

The reduction of demand, will cause, in the short-term, an excess of supply over demand, and consequent fall in market price, to clear the excess.   Mill, Say and Ricardo did not deny the possibility of such overproduction of some commodities, but denied it could be the case for all commodities simultaneously.  But, they failed to recognise that money (as opposed to currency/money tokens) is also a commodity.  It is a requirement of money that it be a commodity, i.e. have both a use-value, and a value, for it to become money in the first place, which is why money tokens/currency, or things like Bitcoin, are not money.  Money is the general commodity, but, as such, in acting as money, rather than as a commodity in its own right, it must give up its role as commodity.  To be used as money, gold (not all gold, but only that acting as money, i.e. universal equivalent) has to give up its use-value as commodity, for example its use in jewellery.

Gold as money, as the general commodity, can be demanded as money, but then, unlike other commodities is not consumed, or necessarily exchanged.  It can be hoarded or held on to.  So, Marx points out an overproduction of all commodities, can, occur simultaneously, other than for money itself.

He notes,

“At a given moment, the supply of all commodities can be greater than the demand for all commodities, since the demand for the general commodity, money, exchange-value, is greater than the demand for all particular commodities, in other words the motive to turn the commodity into money, to realise its exchange-value, prevails over the motive to transform the commodity again into use-value.”

(Theories of Surplus Value, Chapter 17)

Because subjectivists, and neoclassical economics make no distinction between market price, and market value, they interpret this fall in market price, as a fall in the value of the commodity, induced by the subjective valuation of it by the consumer. But, then, some of those marginal producers, who were barely making any margin of profit, sell at a loss. Some go bust, and their supply disappears, itself, helping to clear the market. Others will reduce their supply by moving to the production of some other commodity, others by simply closing down some of their business.

The result, therefore, is not a change in the value/price of the commodity, but, simply, a reduction in its supply, and the extent of that new level will still be determined by the market value of the commodity, i.e. the level of supply that can all be sold at that market value, and so produce the average annual rate of profit. However, the market value, as set out earlier, is itself an average of the individual values of all the different producers of that commodity. If the reduced level of demand, results in reduced supply, brought about by the failure of the least efficient producers (who have the highest individual values for their production), then this also means a lower market value.

On that basis, a a lower market value/price of the commodity is consistent with producers, in aggregate, making the average annual rate of profit, on the overall reduced level of supply. To put that in context, if all the firms in this industry operated at the same level of efficiency/rate of profit, the reduction in supply, brought about by whatever means, would have no such effect on the market value, and so price. It would result only in a reduced supply, with the price remaining the same. Indeed, if all firms stayed in production, but, each, simply reduced their output, they would all lose some of the benefits of economies of scale, and so the social cost of production, for each of them would rise, resulting not in a fall in market value/price, but a rise, at this lower level of demand and supply.

In other words, a full understanding requires an understanding of value and use-value, and their role in determining supply and demand, but, then, also, requires an understanding of the whole of the interaction of supply and demand to form market prices, and the role of demand in determining the level of supply, as well as the level of supply/scale of production, and so, to value. As Marx puts it in Capital III, Chapter 10,

“Supply and demand determine the market-price, and so does the market-price, and the market-value in the further analysis, determine supply and demand. This is obvious in the case of demand, since it moves in a direction opposite to prices, swelling when prices fall, and vice versa. But this is also true of supply. Because the prices of means of production incorporated in the offered commodities determine the demand for these means of production, and thus the supply of commodities whose supply embraces the demand for these means of production. The prices of cotton are determinants in the supply of cotton goods.

To this confusion — determining prices through demand and supply, and, at the same time, determining supply and demand through prices — must be added that demand determines supply, just as supply determines demand, and production determines the market, as well as the market determines production.”

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Brexit Britain's Bridge To Nowhere - Part 5

With Trump and Putin carving up Ukraine for the purpose of their own imperialist interests there is no reason Trump is going to sanction any kind of European “coalition of the willing” to insert itself into Ukraine, UK led or otherwise, whatever Starmer and Macron might desire. What is more, although Starmer has tried, with the help of the Brexit media, to present himself as a new Churchill leading the EU – whilst being outside it! - the reality is that the EU have, again, inevitably, burst that bubble, by excluding Brexit Britain from their discussions on the EU's future defence arrangements, and procurement. They will make those decisions, themselves, and present them to Britain, as with any other such internal EU decision making, as a fait accompli.  And, of course, as Brexit Britain, sees its mini-Trump, seek to obtain crumbs from the US table, in the form of some concessions on tariffs, and yet another disadvantageous trade deal, the more that will make it clear that it is an unreliable partner of the EU, which Trump has turned into his main target for ire, along with China.

Yet, the reality is, also, that, in the UK, and across the EU, decades of austerity, as governments sought to keep borrowing, and, thereby, interest rates at unsustainably low levels, so as to prevent further crashes in the inflated prices of assets, has meant that infrastructure is crumbling, and the same applies in the US and North America. But, as I have written, over the last 20 years, that has become impossible to maintain, even with the attempts to, also, hold back economic growth so as to hold back the demand for capital, to hold down interest rates.

At every point, the laws of capital poke holes in the dam. The demand for labour-power continues to rise, household incomes rise, aggregate demand rises, causing firms to have to accumulate capital. Everywhere, across the globe, real interest rates are rising, despite attempts by central banks to reduce their short term policy rates, and, in the EU, and UK, any additional spending on weapons, will cause borrowing to rise further, and already that is seen in rising government yields. It amounts, also, to throwing money into the fire, and acts to reduce capital accumulation and growth. To expect that, in conditions like those, today, of labour shortages, which are the opposite of those in the 1980's, that workers, across Europe, are going to passively sit back and accept cuts in welfare, pensions and so on, whilst governments ramp up spending on weapons is not realistic. Already, the German government has had to change the constitution to scrap its own borrowing constraints, not only to cover its spending on arms, but also to cover the inevitable spending German workers will demand on Germany's crumbling roads, railways, bridges and other infrastructure.  That spending on infrastructure, as against the spending on weapons, will stimulate further growth and capital accumulation in the EU, with a consequent further rise in demand for labour, rise in wages, and increasing squeeze on profits.

These conditions are the opposite of those in the 1980's, when the microchip revolution had raised productivity, and put workers on the back foot, as well as on the dole, and which, also, raised the rate of surplus-value, and rate of profit, by reducing the value of constant and variable capital. It created a huge release of capital, not least as a result of the moral depreciation of large amounts of fixed capital. As the supply of money-capital from realised profits increased at a much faster rate than the demand for that money-capital, so interest rates fell, and that secular trend of falling rates continued for another 30 years. The falling interest rates caused asset prices to rocket, and each time they fell, the state intervened to protect the global ruling-class, a class of coupon-clippers and speculators, which owns it wealth in the form of those assets – fictitious capital.

In today's conditions, which are more like those of the early 1960's, we have high levels of profits, and a high rate of profit, which has not yet been seriously impinged by rising relative wages. But labour shortages mean that relative wages will rise, and the consequence is also that interest rates will rise, as the demand for money-capital rises relative to the supply of it from profits. Rising interest rates mean falling asset prices, and it is only the certainty of continually rising asset prices, underpinned by the state and central banks, which has meant that money continued to pour into such speculation, rather than into real capital investment. The idea put forward, for example, by Jack Conrad, in the Weekly Worker, that “the world is awash with surplus capital - capital that cannot be profitably invested in the production of surplus value” is false.

Profits and the rate of profit remains high, and so does the rate of surplus value, because workers have not yet been able to turn the growing labour shortages into rising relative wages. They remain weak, and currently pose no threat to capital, even in the way they did in the 1980's, which is why not only does capital not need to turn to fascism, but fascism, which is based upon the petty-bourgeoisie, is, currently, detrimental to its interests, meaning that so are those, like Trump et al, that, also, represent the interests of the petty-bourgeoisie. What Conrad does, as with Varoufakis, whom he quotes, is to “sanewash” the idiocy of Trumpist/Brexitist/Starmerist policies. They follow in the shadow of bourgeois commentators like Gillian Tett of the FT, who have an ideological interest in perpetuating the myth that there is some clever logic behind Trump's obviously moronic behaviour, as also Brad DeLong has described. There is, of course, a logic to both Brexit, and to Trump's actions, but that logic is one driven by the interests of the petty-bourgeoisie, not the interests of capital, nor even of the ruling-class and its fictitious-capital. But, given that the global economy functions according to the laws of capital, the reality is that policies designed for the interests of the petty-bourgeoisie are both utopian and reactionary, and bound to fail. They are, therefore, indeed, idiotic.

As I wrote, previously, in relation to the argument by Varoufakis,

“Incidentally, its important to, also, note the error of Yanis Varoufakis, in this respect, when he says that the US will suck capital in from the rest of the world, as money flows into Wall Street. That money, what used to be called “hot money”, is not real capital, but simply money flowing in, speculatively, to buy up financial assets, i.e. fictitious capital. It does nothing to raise capital accumulation in the US, or to raise US output and profits. It does push up the Dollar, making US exports more expensive, and imports from elsewhere, cheaper, which itself is contrary to Trump's aim of reducing the trade deficit. But, its not clear, also, that this process, seen in the past, will continue. The hot money flow into US assets, was a “safe haven” flow, and its not at all clear that markets will see Trump's moronic behaviour as providing any such safe haven.”

The rise in the price of gold, to record highs, shows that the global ruling class of speculators, as well as the world's central banks are already finding alternatives to the Dollar into which to deposit their money, as a safe haven.

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Anti-Duhring, Part I, Philosophy Dialectics, XII – Quantity and Quality - Part 9 of 14

Before setting out Engels' response to that, I want to focus on the preceding statement about “all must be sought in each and each in all”. I want to examine Marx's analysis of value and price, and supply and demand, of value and use-value, in this context. Marx shows that value, and, consequently, prices cannot be explained by supply and demand. Rather, supply is a function of value, and demand a function of use-value. This is set out, in detail, in Theories of Surplus Value, Chapter 20. Producers will only continue to produce commodities if the price they obtain for them provides the average annual rate of profit on the capital advanced. What determines that is the value of the commodity, i.e. its social cost of production, as against the demand for it at that price.

If the demand for the commodity, at that price, is enough to ensure that all of the supply is taken up, then, in aggregate, the producers of this commodity will make the average annual profit. As Marx says, this level of demand fluctuates, in the short-term, sometimes being above or below the level of supply, causing the market price to rise above, or fall below, this equilibrium or natural price, but, thereby, averaging out to it. Producers have to learn, by experience, just how long a period is involved, for their particular commodity, in this averaging, as against what represents a structural shift, such that, at the equilibrium price, demand will continue to be either above or below the supply.

The supply is made up of the supply from a range of producers, each of which operate at different levels of efficiency – individual values. The social cost of production/individual value of Producer 1 is different to that of Producers 2, 3, 4, …,n, and it is the aggregate of these different individual values that is the basis of the market value of the given commodity, and which is the basis of its natural or equilibrium price. Consequently, if Producer 1 is the most efficient, and Producer n the least efficient, and so on, because they all sell at this average market value, Producer 1 will make more than the average annual rate of profit, and Producer n will make less than the average annual rate of profit. It is only by taking the industry as a whole, the aggregate of these different profits that it makes the the average, annual rate of profit.

Of course, as Marx and Engels set out, in Capital III, and Theories of Surplus Value, this annual rate of profit is itself vastly different to the rate of profit/profit margin, because of the role of the rate of turnover of the capital. The higher the rate of turnover, the greater the difference. For example, if the annual rate of profit is 30%, and the advanced capital turns over once, the rate of profit/profit margin is also 30%, but if it turns over ten times, during the year, it is only 3%. The significance of this is fairly obvious that any market fluctuation that causes prices to fall will have a much less damaging effect on commodities where the profit margin is 30% than in those where its 3%. In the latter case, it is the difference in selling at a profit or a loss, and so, for the least efficient firms, already selling with a profit margin below 3%, the difference between survival and failure.

Indeed, as large-scale industrial capital raised productivity massively, and, with it, raised the rate of turnover of capital, it, necessarily, reduced the rate of profit/profit margin, on this huge volume of output, even as it maintained or raised the annual rate of profit. That occurred, as Marx sets out in Capital III, not as bourgeois economists and capitalists claim, because firms voluntarily reduce their margins in order to sell more, but, because, as the annual rate of profit rises, as productivity increases – both reducing the value of constant and variable capital, and because a given amount of advanced capital now produces more surplus value/profit during the year, as a result of it turning over more times – that rise in turnover, likewise means that any given annual rate of profit, represents a lower rate of profit/margin. That is most notable in relation to commercial capital, as set out in Capital III, Chapter 18.

It was also this which meant that this large-scale industrial capital needed to avoid strikes, so as to keep production continuous, and needed the state to plan and regulate the economy, so as to avoid such fluctuations in demand and prices. It needed the ever-expanding single-market/state that is the basis of imperialism.

So, it is value that determines supply. As Marx sets out in Capital III, and in Theories of Surplus Value, Chapter 20, and in The Grundrisse, however, it is use-value that determines demand. If I don't like commodity A, I will not demand it, no matter how cheap it is. Similarly, if I am a steel producer, and require a certain quantity of iron ore to produce steel, I do not require more iron ore than that. It has no use-value for me over and above the quantity I need for production.

“No grounds exist therefore for assuming that the possibility of selling a commodity at its value corresponds in any way to the quantity of the commodity I bring to market. For the buyer, my commodity exists, above all, as use-value. He buys it as such. But what he needs is a definite quantity of iron. His need for iron is just as little determined by the quantity produced by me as the value of my iron is commensurate with this quantity.”

(Theories of Surplus Value,Chapter 20)

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