Conrad fails to distinguish between the owners of fictitious-capital (the ruling-class), and the owners of real industrial capital. But, in the age of imperialism, i.e. the era of large-scale socialised capital, as Marx sets out, in Capital III, Chapter 27, the real owners of that socialised capital are the associated producers, i.e. the workers, including the professional managers/functioning capitalists, who are, now, drawn from the ranks of the working-class. That, other than in the worker cooperatives, those associated producers do not exercise control of their own property, does not change that social relation, it only emphasises the contradiction that exists, and which must result in a crisis that resolves it. Fictitious-capital does not stand in opposition to the workers/associated producers, as workers, i.e. owners of labour-power, but does so in opposition to them as the collective owners of socialised capital.
The rentiers, the owners of fictitious-capital, i.e. the ruling class, seek to maximise their revenues in the form of interest/dividends or else, today, have sought to obtain huge capital gains from rises in asset prices. But, the more the ruling class denude profits, by increasing their share in the form of interest/dividends, the less is available for profit of enterprise, i.e. for real capital accumulation. The more real capital is accumulated, the more the demand for loanable money-capital, and so the higher the rate of interest, but, then, the consequence is to cause asset prices to fall.
So, the ruling-class, which has come to rely on those capital gains, has a direct, material interest in holding back economic growth, and the demand for capital, so as to hold down interest rates, and so prevent a crash in asset prices such as that of 2008. As conservative social-democratic governments, in the last 30 years, have also seen inflating asset prices as some kind of magical source of wealth, of “free money” that could just be tapped by periodically, realising capital gains, further encouraged such behaviour.
The fact that by holding back capital accumulation, they, also, hold back the expansion of surplus-value, upon which both interest/dividends and profit of enterprise depend, and so must, ultimately, result in a financial crisis (i.e. not an overproduction of capital, but the opposite an under-production/accumulation of capital), and collapse of those asset prices, as happened in 2008, does not change the fact that this is what the ruling-class and its state is driven to do, in the short-term.
Because Conrad fails to understand or analyse this contradiction between these two forms of property – fictitious-capital and industrial capital – and sees only “capital” and capitalists, he fails to understand the real world of, today. He continues to operate on the basis of a model of “private” capitalism, that both Marx and Engels showed ceased to exist a century and a half ago. He fails to understand the contradictions between fictitious-capital and real industrial capital, and the laws of motion of each, and so equates a surplus of loanable money-capital with a surplus of real industrial capital, despite the fact that Marx, in Capital III, Chapter 30 et al, showed that there is no relation between the two. Indeed, Marx noted,
“Talk about centralisation! The credit system, which has its focus in the so-called national banks and the big money-lenders and usurers surrounding them, constitutes enormous centralisation, and gives to this class of parasites the fabulous power, not only to periodically despoil industrial capitalists, but also to interfere in actual production in a most dangerous manner — and this gang knows nothing about production and has nothing to do with it. The Acts of 1844 and 1845 are proof of the growing power of these bandits, who are augmented by financiers and stock-jobbers.”
What Trump, as with Truss and the Brexiters, has shown is that not only are they the enemy of real industrial capital, but, by promoting the interests of the reactionary, nationalist petty-bourgeoisie, they are also the enemy of the ruling class owners of fictitious-capital, as seen in the collapse of asset prices under Truss and, now Trump. As Chris Bryant writes for Bloomberg Opinion,"Wall Street Thought That Trump Was Their Guy. They Were Wrong"
If the objective owners of all that real capital, the workers who are the collective owners of socialised capital, and represent its interests, actually had control of it, they would have no problem finding profitable industries into which to invest their profits and money-capital. The problem is that they do not have such control. Instead, control rests in the hands of non-owners, in the hands of shareholders, and their representatives. It is an indication of just how much, as with the old landed aristocracy, the ruling-class, today, not only has no useful social function, but is actually an impediment to the further development of capital itself.
More than a century before the existence of internet trolls, Engels writes of Duhring's approach,
“The method has the further advantage that it offers no real foothold to an opponent, who is consequently left with almost no other possibility of reply than to make similar summary assertions in the grand manner, to resort to general phrases and finally thunder back denunciations at Herr Dühring — in a word, as they say, to engage in a slanging match, which is not to everyone's taste.” (p 157)
Duhring, however, did lapse from this method and provided “two examples of the detestable Marxist doctrine of the Logos.” (p 157)
As with Burnham, in Science and Style, Duhring attacks the “nebulous Hegelian notion that quantity changes into quality.” (p 157) In fact, science has itself, most forcefully, demonstrated the validity of that proposition, before our eyes, as liquids go from clear to coloured and back again, solely as a result of quantum level changes in their atomic structure, explained by chaos theory, and also set out in the Butterfly Effect. Long before that, the theory of evolution is based on the accumulation of small, quantitative changes in the genetic structure of species, which, at a certain point, results in a qualitative break, and creation of a new species.
Duhring presents this representation, in Marx's Capital, as “an advance, when it reaches a certain limit, becomes capital merely by this quantitative increase!”, (p 158).
Of course, Marx says no such thing. The closest to it is Marx's account of the quantitative increase of commodity production and exchange, as the serfs and former feudal retainers move to the towns, in the 15th century, and become independent, small scale producers of industrial commodities. It is this development of the market, which makes larger-scale industrial production possible, whilst competition between these producers leads to the ruin of some of them, who, then, become wage-labourers in the employ of their successful competitors. It is that fact, and that they no longer have their own means of production, depending upon that of their employers, which means that those means of production become capital.
Engels summarises Marx's actual position, set out in Capital.
“On the basis of his previous examination of constant and variable capital and surplus-value, Marx, draws the conclusion that “not every sum of money, or of value, is at pleasure transformable into capital. To effect this transformation, in fact, a certain minimum of money or of exchange-value must be presupposed in the hands of the individual possessor of money or commodities.””. (p 158)
He goes on to explain that, if the rate of surplus value is 50%, it would require two workers to produce enough surplus-value, as the equivalent of a day's wages/value of labour-power. If someone employed these two workers, they would need enough money to pay their wages, but also to buy the instruments of labour, and materials for them to process. Even then, it would only enable the employer to obtain the same standard of living as if they were, themselves, a labourer.
“As the aim of capitalist production is not mere subsistence but the increase of wealth, our man with his two workers would still not be a capitalist. Now in order to live twice as well as an ordinary worker, and turn half the surplus-value produced back into capital, he would have to be able to employ eight workers, that is, he would have to possess four times the sum of value assumed above.” (p 158)
It is not, as Jack Conrad claims, that "the world is awash with surplus capital - capital that cannot be profitably invested in the production of surplus value”. The working-class, as in the post-war period, is in an upward trend, but it is near the start of that trend, as in the 1960's, not at the end of it, as in the 1920's or the 1970's/80's. Conrad's analysis is wrong, because he confuses Trump's regime with the US ruling class, and, also, confuses the interests of the US ruling-class - a class of rentiers and speculators – with the interests of US capital itself. Trump himself, is certainly a rentier, but his political regime rests upon, not the ruling-class, nor upon real capital, but on the petty-bourgeoisie, and its associated layers. As with all such regimes, it explains its Bonapartist nature, as described by Marx, in The Eighteenth Brumaire.
With profits, the rate of profit, and the rate of surplus value at high levels, the idea that capital cannot be invested profitably, so as to produce surplus value, which would signify a crisis of overproduction of capital, is risible. Just look at what happens, for example, when one of those owners of astronomical amounts of money-capital – be it, Musk, Bezos or whoever – does precisely what Marx describes in the passage quoted earlier, and uses that money-capital productively, i.e. turns themselves, once more, into an industrial capitalist. Has Musk found any problem making profits, producing surplus value by investing huge amounts of capital in the space industry? Absolutely, not, and that is just one industry.
The realm of biotechnology, genetic technology, medical science, robotics, cybernetics and so on are wide open for profitable investment on a massive scale. The problem is not the lack of potential for such profitable investment, but that the immediate and guaranteed returns from simply using money for speculation, to obtain capital gains has far outweighed it. The ruling-class, after all, is a parasitic class of rentiers and speculators that removed itself from any functional role in production more than a century ago, and is at home in this world of coupon-clipping and speculation, as against the more tedious business of actually accumulating real capital, and all of the risks that go with it.
Marx noted,
“In order to quickly settle this question, let us point out that one could also mean by the accumulation of money-capital the accumulation of wealth in the hands of bankers (money-lenders by profession), acting as middlemen between private money-capitalists on the one hand, and the state, communities, and reproducing borrowers on the other. For the entire vast extension of the credit system, and all credit in general, is exploited by them as their private capital. These fellows always possess capital and incomes in money-form or in direct claims on money. The accumulation of the wealth of this class may take place completely differently than actual accumulation, but it proves at any rate that this class pockets a good deal of the real accumulation.”
Marx, also, sets out, in that chapter, indeed, that at times of more rapid economic growth, with rising masses of profits, a surplus of loanable, money-capital can arise, precisely because an increasing proportion of the transactions between firms are conducted, not on the basis of bank credit, or resort to capital markets, but simply on the basis of commercial credit between them.
Indeed, more than that. As Marx described, these two forms of property, fictitious-capital and industrial capital, and the revenues derived from them, are imminently antagonistic to each other.
“These two forms, interest and profit of enterprise, exist only as opposites. Hence, they are not related to surplus-value, of which they are but parts placed under different categories, heads or names, but rather to one another...
The lending capitalist as such faces the capitalist performing his actual function in the process of reproduction, not the wage-worker, who, precisely under capitalist production, is expropriated of the means of production. Interest-bearing capital is capital as property as distinct from capital as a function. But so long as capital does not perform its function, it does not exploit labourers and does not come into opposition to labour.
On the other hand, profit of enterprise is not related as an opposite to wage-labour, but only to interest.”
But, how is that at all reducible to Duhring's conclusion from it that, for Marx, “everything is all the same in the end.”?
Engels notes,
“Thus this insight of his into the well-known philosophical prejudice also enables Herr Dühring to prophesy with assurance what will be the “end” of Marx's economic philosophising, that is, what the following volumes of Capital will contain, and this he does exactly seven lines after he has declared that
“speaking in plain human language it is really impossible to divine what is still to come in the two” (final) “volumes””. (p 155)
Engels quotes Duhring's further rant against Marx and dialectics, which he calls “these deformities of thought and style” (p 156). A similar phrase, “Science and Style”, was used by the ideologist of the petty-bourgeois, Third Camp, James Burnham, as he launched his attack on Marxism and dialectics, and set himself, and that ideological trend, on its right-wing course into the camp of imperialism, as described by Trotsky, whose manifestation, today, is seen in the role of these social-imperialists.
“For the moment, we are concerned in no way with the correctness or incorrectness of the economic results of Marx's researches, but only with the dialectical method applied by Marx. But this much is certain: most readers of Capital will have learnt for the first time from Herr Dühring what it is that they have really read.” (p 156)
Engels notes that, in 1867, Duhring had written what was a relatively rational review of Capital I, and did so without translating it into the Duhringian language he now claimed was “indispensable”.
“Though he even then committed the blunder of identifying Marxist with Hegelian dialectics, he had not quite lost the capacity to distinguish between the method and the results obtained by using it, and to understand that the latter are not refuted in particular by vilifying the former in general.” (p 156)
What, then, of Duhring's conclusion that from the Marxist standpoint “everything is all the same in the end.”? Duhring objects to Marx's method of starting from the whole, and breaking it down into its component parts, in “micrological detail” as Marx does at the start of Capital, by examining the commodity as the basic cell from which the entire structure of capital is erected. Instead, Duhring proceeds “in the grand manner”, in other words, to base himself on a sweeping description of the superficial appearance of things. As Trotsky sets out, this was the same approach taken by Burnham and Shachtman, in relation to their own methodology, when characterising the USSR, so as to relieve themselves of the requirement to defend it as a workers' state, albeit a deformed version.
“Indeed historical treatment in the grand manner and the summary settlement with genus and type are very convenient for Herr Dühring, since he can neglect all known facts as micrological and equate them to zero by this means, so that instead of proving anything he need only use general phrases, make assertions and thunder his denunciations.” (p 157)
That same approach was used by Burnham and Shachtman, in relation to the USSR, and involved moralistic condemnations of the, undeniably, vile nature of Stalin's regime, which, for Burnham and Shachtman, and the petty-bourgeois Third Camp, became beyond the pale with the Hitler-Stalin Pact. This same superficial, subjectivist and moralistic approach, which focuses on the political regime/superstructure, rather than the underlying class nature of the state, has characterised the methodology and practice of that Third Camp of the petty-bourgeoisie every since. On the one side, it bowdlerises the arguments of Trotsky against Stalinism, in the Third Period, to justify support for bourgeois-democracy and “democratic imperialism”, against fascism/authoritarianism; on the other side, it bowdlerises the arguments of Lenin on imperialism, to justify its support for assorted anti-working class movements and regimes, solely on the basis of their “anti-imperialism”.
The performance of US financial markets during this year has been strongly correlated to the view of whether Trump would or would not go ahead with the tariffs. First, speculators, based on the first Presidency thought their impact would be small, because, as the saying goes, “Trump had to be taken seriously, but not literally.” When Trump announced his tariffs, US stock markets and bond markets fell, money flowed out of the country, and the Dollar fell. When, within 24 hours, he rowed back on the announcement, they rose.
US bond yields, like those across the globe, are rising, for the reasons set out earlier. The demand for money-capital is rising relative to its supply from profits, both as a result of the demand from corporations, and from states to finance spending on infrastructure etc. But, there is, also, a secondary movement, as money moves out of shares, in response to the uncertainty, and prospect of diminished trade and profits, caused by Trump's policies, and moves into the safer haven of bonds, causing bond prices to rise, and so bond yields to fall.
At the same time, rising interest rates, cause bond yields to rise, and so bond prices to fall, itself causing money to flow from shares and other assets, such as property, into bonds, and so causing those other asset prices to fall – not a prospect beneficial to Trump, given his ownership of property assets. The immediate effect of Trump's "Reciprocal" (there is nothing reciprocal about them) Tariffs, has been to crater the US stock market. He once said that any President who presided over a 1,000 point drop in the DOW Jones Index should be impeached. In the first hours of trading the DOW fell be more than 1,500 points! The money flooded out of shares into US bonds, as a safe haven, and because of the view that Trump is sending the US economy into recession.
As with everything out of Trump's regime, the claim that the tariffs are reciprocal, charging others half of what they charge the US, is a lie. Challenged to provide their workings out of how they made this calculation, they could not, but it didn't take long for others to work out the crude basis of what they had done. Rather than calculating the tariffs that other countries were charging them, they simply took the US trade deficit with each country and divided it by the total exports from that country to the US. They then levied a tariff equal to half that percentage. Even then, a country like Britain that runs a trade deficit with the US has still faced a 10% tariff, of which thee is little it can do outside the greater umbrella of the EU, which it has lost as a result of Brexit. The idiocy of Trump's approach is seen in the fact that, on this basis it has levied tariffs on islands only inhabited by penguins!
There is an obvious flaw in the logic presented by Jack Conrad. He wrote, quoting Varoufakis,
“European and Asian central banks accumulate the dollars that flow in when Americans import European and Asian commodities. By “not swapping their dollars for their own currencies”, the European Central Bank, the Bank of Japan, the People’s Bank of China and the Bank of England suppress the demand for (and thus the value of) their own currencies. This helps their export companies to boost sales to America and earn even more dollars. In a “never-ending circle”, these fresh dollars accumulate in the coffers of the foreign central bankers who, “to gain interest safely, use them to buy US government debt”.”
For some globally traded commodities, such as oil, for example, they are priced in Dollars, as the world reserve currency. To buy them, countries must exchange their own currency for Dollars, to pay for their import. Oil exporting countries, thus accumulate Dollars. But, then, these “Petrodollars”, are circulated, via global financial markets, back to the US, to buy US financial assets. But, take the sale of VW cars from Germany to the US. The cars are priced in €'s, not $'s. Let us say that a VW is priced at €50,000. To import this car, a US importer must acquire €50,000, which, if the exchange rate is €1 = $1.10, means that the US importer must exchange $55,000, to obtain €50,000, which they then hand over to VW, with the $55,000 now sitting in the vault of the Bundesbank. But, this transaction has, itself, already created a demand for €50,000, to buy the car, a demand satisfied by the Bundesbank, which, ultimately exchanges them for Dollars. This demand for €'s, to buy VW's, raises the value of the €, contrary to Conrad's argument.
Similarly, the Bundesbank, and other European banks, may, then, use those Dollars to buy US government bonds, because, whilst the Dollars provide no interest, the bonds do. But, if those Dollars flow back into US financial markets in that way, they also, inflate the US currency supply, just as much as if they returned to purchase US commodities. Dollars coming in to buy US bonds (or indeed any other asset) go into the bank account of the seller of those assets. As the US currency supply is inflated in that way, so the effect is to devalue the currency unless it corresponds to an increase in the value of US output. If, as in the last 30 years, the majority of that currency, instead, goes not to productive investment/capital accumulation, but simply to a continual paper chase from one asset to another, the currency is devalued, and those asset prices continue in an upward inflationary spiral, also, continually, pushing down the yields on those assets. As Marx described it,
“It would be still more absurd to presume that capital would yield interest on the basis of capitalist production without performing any productive function, i.e., without creating surplus-value, of which interest is just a part; that the capitalist mode of production would run its course without capitalist production. If an untowardly large section of capitalists were to convert their capital into money-capital, the result would be a frightful depreciation of money-capital and a frightful fall in the rate of interest; many would at once face the impossibility of living on their interest, and would hence be compelled to reconvert into industrial capitalists.”
In fact, that is precisely what has been seen over the last 40 years, as, globally, money-capital was accumulated, and used for speculation, for the purchase of bonds, shares, property and other such assets and derivatives, rather than being used for productive purposes. Asset prices were continually inflated, and consequently, yields/interest rates fell. But, the owners of those assets/fictitious capital, did not care because, as the asset prices soared, what they lost in revenues (interest/dividends) they more than gained in capital gains. When, Conrad says,
“the world is awash with surplus capital - capital that cannot be profitably invested in the production of surplus value”,
what he should have said is that it is awash with money-capital that has been accumulated, rather than used productively, and the consequence has been to inflate asset prices, and depress yields/interest rates. In fact, Marx and Engels describe a similar situation in relation to the financial crisis of 1847, where large amounts of profits went into financial speculation, particularly in railway shares, not because the money could not be invested profitably in real capital accumulation, but because a) financial speculation offered even greater immediate capital gains, and b) the problem accumulating the real capital was not an inability for it to produce surplus value (i.e. an overproduction of capital), but a physical constraint on being able to produce the required factories, machines and so on. As I also set out, in my book "Marx and Engels Theories of Crisis".
“But all the newly erected factory buildings, steam-engines, and spinning and weaving machines did not suffice to absorb the surplus-value pouring in from Lancashire. With the same zeal as was shown in expanding production, people engaged in building railways. The thirst for speculation of manufacturers and merchants at first found gratification in this field, and as early as in the summer of 1844, stock was fully underwritten, i.e., so far as there was money to cover the initial payments...
The enticingly high profits had
led to far more extensive operations than justified by the available
liquid resources. Yet there was credit-easy to obtain and cheap. The
bank discount rate stood low: 1¾ to 2¾% in 1844, less than 3% until
October 1845, rising to 5% for a while (February 1846), then dropping
again to 3¼% in December 1846. The Bank of England had an unheard-of
supply of gold in its vaults. All inland quotations were higher than
ever before.”
But, for the ruling class, which owns those assets/fictitious-capital, it has benefited from an astronomical rise in its paper wealth, as well as being able to compensate for any reduction in interest/dividends, by simply converting a portion of those capital gains into money. As Marx describes above, that, of course, is not something you can do if you are merely a small saver. But, that, in turn, had its consequence, as those small savers looked to utilise those savings, to also, purchase speculative assets, be it shares, or by becoming a buy-to-let landlord, which, also, then, led to a further upward twist in the inflationary spiral of asset prices.
As that process has reached its limits, even with central banks printing more and more currency/money tokens to buy up fictitious-capital, when those prices crash, and with governments imposing austerity to hold back economic growth and the demand for capital, its no wonder that, in Britain, we now see Blue Labour, seeking to goose those asset prices once more, by seeking to utilise public sector pensions to engage in more speculation, and, now, we see Reeves, reportedly planning to reduce the amount that savers can keep safe in Cash ISA's, so as to have them, instead, put that money into stocks and shares ISA's.
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.”
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 inCapital 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.”
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.
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, inTheories 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 moresurplus 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.”
