Northern Soul Classics - Catch Me I'm Falling - Esther Phillips

 

Anti-Duhring, Part III – Socialism, II – Theoretical - Part 20

But, after 1855, and the passing of the Limited Liability Act, those same processes of capital accumulation, the socialisation of that production, and of the large scale industrial capital itself, leads to an explosion of the joint-stock companies, which, previously, were a minority. It is this form of socialised capital, rather than the worker cooperatives, which became the means by which “the expropriation of the expropriators” was accomplished. It is the joint-stock company, whose form, today, is the limited liability company/corporation, which became the dominant form of socialised capital, as the transitional form of property between capitalism and socialism. The fact that these large corporations, inevitably developed into multinational corporations, breaking themselves out of the fetters of the nation-state is an indication of that transitional nature.

It does not mean that worker cooperatives have no place, today, in that process, but, it does mean recognising the constraints on them. It involves recognising that, to break out of these constraints, a worker cooperative needs to be able to mobilise the mammoth amounts of capital that a multinational corporation does. It also means that, like the multinational corporation, it cannot limit itself to being tied to the nation state, let alone some smaller, local operation. That, also, shows why the statist notions about nationalisation are, now, both idealist and utopian, and consequently a reactionary delusion.

As I set out many years ago, even in Marx and Engels' time, they argued that it was necessary for worker cooperatives to combine their capitals, including cooperatives in different industries, as well as to plough their profits into a centralised pool to be used for a planned expansion of cooperative production.

“Then what is the only salutary basis for co-operative industry? A NATIONAL one. All co-operation should be founded, not on isolated efforts, absorbing, if successful, vast riches to themselves, but on a national union which should distribute the national wealth. To make these associations secure and beneficial, you must make it their interest to assist each other, instead of competing with each other—you must give them UNITY OF ACTION, AND IDENTITY OF INTEREST.

To effect this, every local association should be the branch of a national one, and all profits, beyond a certain amount, should be paid into a national fund, for the purpose of opening fresh branches, and enabling the poorest to obtain land, establish stores, and otherwise apply their labour power, not only to their own advantage, but to that of the general body.

This is the vital point: are the profits to accumulate in the hands of isolated clubs, or are they to be devoted to the elevation of the entire people? Is the wealth to gather around local centres, or is it to be diffused by a distributive agency?”

(Ernest Jones Letters)

Ernest Jones, who Marx and Engels, initially, saw as the future leader of the working-class, was writing, here, on behalf of the First International. His position, even nearly two centuries ago, is way in advance of those, today who, instead want to promote the idea of localism.

That combination, today, has to extend even further beyond the constraints of the nation state, and to utilise the kind of credit that Marx and Engels – and , here, Jones – refer to. It means mobilising the large pools of workers' savings in their pension funds that did not exist even 50 years ago, let alone in Marx and Engels' time. We certainly should have democratic control by workers over them, and certainly, as the repeated attacks by the state on pensioners shows, should not rely on the state to provide them. No wonder the ruling-class not only deny workers the right to control their collective property in the form of the socialised capital of the joint-stock companies/corporations, but also deny them control of their own money accumulated in the workers' pension funds!

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Anti-Duhring, Part III – Socialism, II – Theoretical - Part 19

A century later, it is even more apparent, and the scale of production is such that even that idea of nationalised industries in each nation state is consigned to history. The EU, 80 years ago, began as its original member states created the European Coal and Steel Community to regulate and plan production on a multinational scale. The atomic energy industry in Europe, from the start, was set up as a planned and regulated, European industry. The idea that a puny and rapidly declining British nation state can compete, globally, in steel production is risible. The British coal industry has already gone, but, similarly, if the British state seeks to continue a British steel industry, by nationalising it, separate from an EU steel industry, it will just throw potential money-capital down the drain that could have been better used in some other industry. British steel production could only continue if it was part of a large-scale EU steel industry, which itself requires EU wide planning and regulation of production.

“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.” (p 358)

Here, clearly can be seen the vision of Marx and Engels, and just how markedly it differs from that of the petty-bourgeois socialists and nationalists, including those who, for much of the last century, masqueraded as Marxists. In contrast to the “anti-capitalists”, and opponents of globalisation, Marx and Engels, as well as their early adherents such as Kautsky, Pannakoek, Plekhanov, Lenin and Trotsky, saw this development of ever larger-scale capitals, and the consequent destruction of nation states by this “imperialist” capital, not just as inevitable and unstoppable, but as, partly for that reason, also progressive. Today's “anti-capitalists”, “anti-globalists”, and “anti-imperialists” are like the petty-bourgeois moral socialists and Luddites who responded to the form and not the content of that development.

The Luddites saw machinery destroying their petty-bourgeois, handicraft production, and responded by breaking into the factories and breaking the machines, or setting fire to the factories, much as previous peasant rebellions responded by burning the barns and manor houses of the landlords. But, Marx and Engels point out in The Communist Manifesto, it was not the machines that were the cause of that misery but the social context in which those machines were employed, as capital, not simply as means of production. The machines were actually a powerful basis upon which the lives of the labourers could be hugely improved, if they were used as means of production, instruments of labour, not as capital. It is what the labourers in the Lancashire textile cooperatives and the agricultural cooperative at Ralahine discovered.

Of course, as described previously, the centralisation of the means of production and the development of machine production itself could not have arisen without the existence of the private industrial capitalists. The first conscious response to that, of course, is, therefore, the creation of worker cooperatives, such as those described above. In Marx's Inaugural Address to the First International, in 1864, he not surprisingly highlights the huge significance of the cooperatives. But, he, also, sets out the constraints on their ability to simply expand without the working-class doing what the bourgeoisie had previously done, which is to wage a political struggle to remove all of the political fetters on their continued expansion. In Capital III, Chapter 27, he sets out, in that regard, also, the role of credit, in facilitating the extension of this cooperative production.

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Anti-Duhring, Part III – Socialism, II – Theoretical - Part 18

Engels notes, as he and Marx, also, describe in Capital III, Chapter 27, this process whereby even the planning and regulation of production by these oligopolies breaks down, and leads to even greater socialisation of production.

“They determine the total amount to be produced, parcel it out among themselves and thus enforce the selling price fixed beforehand. Since such trusts usually go to pieces as soon as business becomes bad, for this very reason they push towards a still more concentrated socialization. The whole branch of industry is converted into one big joint-stock company, and internal competition gives place to the internal monopoly of this one company; this happened as early as 1890 with English alkali production, which, after the fusion of all the forty-eight large works, is now carried on by a single company, under centralized direction with a capital of £6 million.” (p 358)

It became part of ICI in 1926, which, in turn, was taken over by Tata Chemicals, as part of the Indian Tata industrial empire.

Nearly 40 years ago, Simon Clarke wrote,

“Indeed it would be fair to say that the sphere of planning in capitalism is much more extensive than it is in the command economies of the soviet bloc. The scope and scale of planning in giant corporations like Ford, Toyota, GEC or ICI dwarfs that of most, if not all, of the Soviet Ministries. The extent of co-ordination through cartels, trade associations, national governments and international organisations makes Gosplan look like an amateur in the planning game. The scale of the information flows which underpin the stock control and ordering of a single Western retail chain are probably greater than those which support the entire Soviet planning system.”

(Capital and Class, Winter 1990)

In “The Poverty of Philosophy”, Marx makes the same point against Proudhon. Bourgeois commodity production engenders competition, which “breaks down the Chinese walls” of feudal monopoly. That competition, then, leads to a huge expansion of production, as the bourgeoisie become the ruling-class and create bourgeois nation states, which they use to remove the remaining fetters on bourgeois production. Competition means winners and losers. The winners get bigger, the losers disappear. The advantages of the winners increase, as they get bigger, because of economies of scale etc. They become monopolies, but not like the those of the feudal regime, based on patronage and protection. They are monopolies arising naturally out of the process of competition, and laws of capital accumulation.

The capitalist nation state is, then, led to involve itself, not as the feudal state did to create monopolies, but, now, to regulate them in the interest of capital as a whole. But, Marx notes that this, then simply raises this competition to a higher level. It becomes a competition of national capitals backed by capitalist nation states. Even by WWI, this became apparent, as Trotsky put it in The Program of Peace.

“Capitalism has transferred into the field of international relations the same methods applied by it in “regulating” the internal economic life of the nations. The path of competition is the path of systematically annihilating the small and medium-sized enterprises and of achieving the supremacy of big capital. World competition of the capitalist forces means the systematic subjection of the small, medium-sized and backward nations by the great and greatest capitalist powers... The war uncovered and accelerated this process by introducing the factor of open violence. The war destroys the last shreds of the “independence” of small states, quite apart from the military outcome of the conflict between the two basic enemy camps.”

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Northern Soul Classics - If She Wants Him - The Ad Libs

 

Anti-Duhring, Part III – Socialism, II – Theoretical - Part 17

Even in Marx and Engels time,

“It is this counterpressure of the productive forces, in their mighty upward growth, against their character as capital, this increasingly compulsive drive for the recognition of their social nature, which forces the capitalist class itself to treat them more and more as social productive forces, as far as this is at all possible within the framework of capitalist relations. The period of industrial boom with its unlimited credit inflation no less than the crash itself operating through the collapse of large capitalist establishments, drives towards that form of the socialisation of larger masses of means of production which we find in the various kinds of joint-stock companies. Many of these means of production and communication are so colossal from the outset that, like the railways, they exclude all other forms of capitalistic exploitation. At a certain stage of development this form, too, no longer suffices; [the large-scale producers in one and the same branch of industry in a country unite in a “trust”, an association for regulating production.” (p 357-8)

Within the confines of capitalism, even this increasing regulation, planning and monopoly of production continually, and cyclically hits the buffers, because commodity production implies continued competition, even if it is, now, monopolistic/oligopolistic competition. To overcome that requires an ever larger single market, regulated by an ever larger state. Either the nation state annexes other nation states – resulting in imperialist wars – or else those states voluntarily associate. In Theories of Surplus Value, Marx noted that private industrial capital was the inevitable means, the historically necessary condition for the centralisation of the means of production, because, although considered abstractly, there was no reason why the independent commodity producers could not have done so, by forming a cooperative, in reality, no such development was possible.

There was no reason such producers would do so, and their individual relation to their own means of production engendered a powerful, individualist and competitive mindset within them that precluded it. Kautsky found the same thing. It is only when wage-workers, who have developed a collectivist ideology emerge that they are able to bring about the creation of such producer cooperatives. When peasant farmers create cooperatives, faced with competition from large capitalist farms, they usually establish marketing cooperatives and cooperatives for the shared use of very expensive machinery, rather than voluntarily turning themselves into an agricultural cooperative.

Fairly equal nation states are unlikely to voluntarily merge for similar reasons. Each one believes it will come out on top in the global competitive struggle, including when it becomes a military struggle. Only when a series of smaller nation states realise that their only hope is to combine, if they are to compete with larger states, are they likely to do so, as with the creation of the EU. Even then, formerly dominant nation states seek to assert themselves within the bloc. One reason the EU has not moved more quickly to the creation even of a centralised federal state is the continued protection of existing interests by national elites. The working-class has no reason to constrain its voluntary association across existing national borders, which have become an outdated anachronism, not just holding back human progress, but threatening humanity itself, as those national borders form the basis around which wars are fought, wars which, now, lead to thermonuclear destruction.

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Anti-Duhring, Part III – Socialism, II – Theoretical - Part 16

But, of course, Marx and Engels did not end their analysis of capitalist development at the point of the dominance of the private industrial capitalist (the monopoly of private capital), and the nation state. Those were simply moments in the process of development of capitalism as a necessarily global system in which, also, the free market competition it had been based around becomes a regulated and planned production, even within the capitalist system itself. They set out how capitalism itself evolved in the 19th century, so that what had once been a progressive development in the form of the private industrial capitalist and the nation state, became a fetter on its further development, and that fetter was burst asunder, by the development of large-scale, socialised capital, state-monopoly capitalism/imperialist capital.

In other words, all of those things that the moral socialists and petty-bourgeois nationalists see as an evil that must be resisted in the name of their “anti-capitalism” and “anti-imperialism”, Marx and Engels saw as the fundamental, progressive signs of the metamorphosis of this mode of production into Socialism. Moreover, as I have set out, elsewhere, Lenin, also, makes this point, as against the petty-bourgeois, ultra-Lefts of his time.

“This is precisely the case with our “Left Communists”, who in words (and of course in their deepest convictions) are merciless enemies of the petty bourgeoisie, while in deeds they help only the petty bourgeoisie, serve only this section of the population and express only its point of view by fighting—in April 1918!!—against . . . “state capitalism”. They are wide of the mark!

… the continuation of the anarchy of small ownership is the greatest, the most serious danger, and it will certainly be our ruin (unless we overcome it), whereas not only will the payment of a heavier tribute to state capitalism not ruin us, it will lead us to socialism by the surest road. When the working class has learned how to defend the state system against the anarchy of small ownership, when it has learned to organise large-scale production on a national scale, along state capitalist lines, it will hold, if I may use the expression, all the trump cards, and the consolidation of socialism will be assured...

To make things even clearer, let us first of all take the most concrete example of state capitalism. Everybody knows what this example is. It is Germany. Here we have “the last word” in modern large-scale capitalist engineering and planned organisation, subordinated to Junker-bourgeois imperialism. Cross out the words in italics, and in place of the militarist, Junker, bourgeois, imperialist state put also a state, but of a different social type, of a different class content—a Soviet state, that is, a proletarian state, and you will have the sum total of the conditions necessary for socialism.

… socialism is inconceivable unless the proletariat is the ruler of the state. This also is ABC. And history (which nobody, except Menshevik blockheads of the first order, ever expected to bring about “complete” socialism smoothly, gently, easily and simply) has taken such a peculiar course that it has given birth in 1918 to two unconnected halves of socialism existing side by side like two future chickens in the single shell of international imperialism. In 1918 Germany and Russia have become the most striking embodiment of the material realisation of the economic, the productive and the socio-economic conditions for socialism, on the one hand, and the political conditions, on the other.

“… socialism is merely the next step forward from state-capitalist monopoly.

“. . . State-monopoly capitalism is a complete material preparation for socialism, the threshold of socialism, a rung on the ladder of history between which and the rung called socialism there are no intermediate rungs ”.

(Lenin – Left-Wing Childishness)

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Anti-Duhring, Part III – Socialism, II – Theoretical - Part 15

Globalisation has been a powerful and progressive development that reduced circulation costs and so raised profits, without the need for a corresponding investment of capital. The creation of large single markets, like the EU, is integral to that process. But, the large growth of the petty-bourgeoisie in the same period, as part of that process, engendered all of those old reactionary, individualist ideas of the past. It not only fuelled the reactionary notions of trying to turn the clock back to the days of the nation state, but, inevitably, was forced to go beyond that to a return to the old provincialism and regionalism.

However, each time petty-bourgeois populism attempts to implement these utopian and reactionary schemas, as with Brexit, Trump etc., they quickly fail, and are forced to confront the reality, just as much as the ruling-class owners of fictitious-capital have been forced to recognise the reality that their dividends/interest are a deduction from profits, and, in the end, profits only grow by an expansion of capital, an expansion of the quantity of labour exploited.

“... the ultimate causes of all social changes and political revolutions are to be sought, not in men's brains, not in their growing insight into eternal truth and justice, but in changes in the modes of production and exchange. They are to be sought, not in the philosophy, but in the economics of each particular epoch. The growing recognition that existing social institutions are irrational and unjust, that reason has become unreason, and kindness a scourge, is only a sign that changes in the mode of production and exchange have silently been taking place with which the social order adapted to earlier economic conditions is no longer in keeping. From this it also follows that the means of eliminating the abuses that have been brought to light must also be present, in a more or less developed condition, within the changed relations of production themselves. These means are not to be invented out of one's brain, but discovered by the brain, in the existing material facts of production.” (p 343-4)

Marx and Engels set out, already, in Capital III, and, here, in Anti-Duhring, what these changed conditions were, and that had become dominant by the end of the 19th century.  I have set them out again, in summary. But, I have also set out, here, how the most recent development of those, now, over-ripe conditions means that the irrationality has reached a crescendo.

The ruling capitalist class is, now, the immediate, mortal enemy of capital.

Engels sets out the state of play at that time.

“It is now pretty generally conceded that the existing social order is the creation of the ruling class of today, of the bourgeoisie. The mode of production peculiar to the bourgeoisie, which since Marx has been called the capitalist mode of production, was incompatible with the local privileges and the privileges of estate as well as with the reciprocal personal ties of the feudal system. The bourgeoisie shattered the feudal system and on its ruins built the bourgeois social order, the realm of free competition, of freedom of movement, of equal rights for commodity owners and all the glories of capitalism.” (p 344)

For petty-bourgeois socialism, it is as though Marx and Engels analysis ends there. This bourgeois development created all those bourgeois rights and freedoms and created the bourgeois nation state. They want to leap from there to Socialism, treating the modern economy and bourgeois society as though it is essentially no different to this era of private industrial capitalism. It justifies their hostility to imperialism both in the form of state-monopoly capital, and its concomitant the destruction of the old bourgeois nation states.

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Anti-Duhring, Part III – Socialism, II – Theoretical - Part 14

The role of the boards of Directors, is to represent the interests of shareholders, not the company. As set out before, shareholders, as owners of interest-bearing capital/fictitious capital, seek to maximise their revenue in the form of interest/dividends. The interest of the company, however, is to maximise its profit of enterprise/retained profit, and so to minimise all other deduction from profit, such as rent, interest/dividends and taxes.

A company that simply borrows money from a bank, or in the bond market, pays only the going, competitive rate of interest on the money it borrows, though, as Marx describes, the worker cooperatives always found they were charged higher rates of interest. But, precisely because shareholders have control over companies, and appoint the boards of directors that set the dividend payments, they are able to pay themselves more than any such competitive market rate of interest. The consequence is that, where a company agrees a higher dividend pay-out, other owners of loanable money-capital seek to obtain it. By buying the company's shares. That causes the market price of those share to rise, and consequently the dividend yield (dividend/share price) to fall back towards the average.

But, in the same way, the speculative money that flows towards these shares flows away from other shares (and other speculative assets). The market price of those shares/assets then would fall, and so on. Speculative money moving to buy shares would cause bond prices, property prices etc., to fall, with a corresponding rise in bond yields, rental yields and so on.

Shareholders, therefore, simply by assigning to themselves a larger amount of interest/dividends than would represent a competitive market rate of interest, bring about changes in all asset prices and yields. But, as Marx sets out in Capital III, Chapter 23, it is still constrained by the laws of capital.

“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.”

Shareholders cannot simply continue to pay themselves more out of profits as interest/dividends. On the one hand, the process described above creates a vicious circle. Dividend/interest payments rise, asset prices rise, yields fall, but, also, if more and more profit is simply shelled out as dividends/interest, less is available as profit of enterprise/retained profit, so, at some point, the actual industrial capital that creates the profit out of which that interest is paid does not grow. If industrial capital does not grow, i.e. if the social relation it represents does not expand, so that more labour is exploited, surplus value does not grow, and so the profit out of which all those revenues (interest/dividends, rents, taxes and profit of enterprise) are taken does not grow.

It is those laws of capital that have imposed themselves on the ruling-class over the last thirty years. They, also, found nuance, reflection and contradiction in the political sphere. The drawing of ever greater interest/dividends from profits, in the old imperialist state, showed up as deindustrialisation and asset stripping, but the other side of that was a combined and uneven development of large-scale industrial capital in China/Asia, Latin America, and later Africa. The globalisation of production, of which this was part, itself facilitated the continuation of the delusion in the West. It reduced unit costs, and facilitated trade, raising profits. In the same way that Britain, in the 19th century, used its surplus money profits to provide credit to those countries that used it to buy British exports, so China and other countries, now, ploughed money into western credit markets. They loaned money to he US, buying US bonds and so on, pushing up their price and reducing yields.

In the West, the US and UK in particular, the process of deindustrialisation led to a resurrection of the petty-bourgeoisie. It is most noticeable in the UK where, since the 1980's, it has grown by 50%. Napoleon called Britain a nation of shopkeepers, but, since the 1980's, it has been a nation of precarious, self-employed traders, symbolised by “white van man”. That includes those traders involved in the growing trade in illicit substances, home-made porn etc. The majority of adverts on Youtube etc., now assume that their audience are all involved in some kind of small business activity.

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Anti-Duhring, Part III – Socialism, II – Theoretical - Part 13

This introduces a further contradiction, which is obscured by the fact that, other than in the worker-cooperative, control over the socialised capital is exercised, not by its collective owners (the associated producers, i.e. the workers), but by a section of its creditors, i.e. the shareholders. That is true of a consumer cooperative and a nationalised industry, just as much as with a limited company. Indeed, with nationalised companies, the state, although the only shareholder, itself obtains the money-capital by borrowing on the bond markets, giving the private owners of fictitious capital an indirect influence on those companies.

Similarly, the Directors of those companies are appointed to represent the interest of the state as shareholder/creditor, and not the interests of the company – let alone its workers, as the real collective owners of it. It is no surprise, then, when the state appoints the very same Directors that circulate around the boards of limited companies, to carry out that role.

Marx points out that, in relation to the joint-stock companies, the revenues (new value created) resolve into wages, rent, interest and profit of enterprise, as with all industrial capitals. But, the fact that these companies employ professional managers, who act as “functioning capitalists”, means that the actual payments do not coincide with these revenues. A part of what is actually profit of enterprise/retained profit, which should be available for capital accumulation, as the property of the company, instead appears as “wages” for some of the company Directors, and, also, appears as “interest/dividends” to shareholders.

In these socialised capitals, the professional managers, or “functioning capitalists”, i.e. those that perform the functions of entrepreneur, by bringing together the factors of production efficiently, exercising day to day control over production, distribution, sales and marketing, etc., are drawn from the working-class, which is why this industrial capital, in its imperialist phase, requires an extension of “free” public education, to ensure the supply of this managerial/administrative/scientific/technical labour-power. Again, these welfarist concepts, associated with social-democracy, mushroomed from the latter part of the 19th century.

“The general relaxation of conventional barriers, the increased facilities of education tend to bring down the wages of skilled labour instead of raising those of the unskilled." (J. St. Mill, Principles of Political Economy, 2nd ed., London, 1849, I, p. 479.)”

(Capital III, Chapter 23, Note 79, p 389)

As Marx sets out, these actual functioning capitalists/professional managers etc., who are the personification of this socialised capital, are not to be confused with the Directors and CEO's, CIO's etc., that are set in place by shareholders to sit above them. For these Boards, as representatives of the shareholders, the actual functioning capitalists, are a potential threat to the interest payments and fictitious wealth of the ruling-class/shareholders.

“On the basis of capitalist production a new swindle develops in stock enterprises with respect to wages of management, in that boards of numerous managers or directors are placed above the actual director, for whom supervision and management serve only as a pretext to plunder the stockholders and amass wealth. Very curious details concerning this are to be found in The City or the Physiology of London Business; with Sketches on Change, and the Coffee Houses, London, 1845.

'What bankers and merchants gain by the direction of eight or nine different companies, may be seen from the following illustration: The private balance sheet of Mr. Timothy Abraham Curtis, presented to the Court of Bankruptcy when that gentleman failed, exhibited a sample of the income netted from directorship ... between £800 and £900 a year. Mr. Curtis having been associated with the Courts of the Bank of England, and the East India House, it was considered quite a plum for a public company to acquire his services in the boardroom' (pp. 81, 82).

The remuneration of the directors of such companies for each weekly meeting is at least one guinea. The proceedings of the Court of Bankruptcy show that these wages of supervision were, as a rule, inversely proportional to the actual supervision performed by these nominal directors.”

(ibid)

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Anti-Duhring, Part III – Socialism, II – Theoretical - Part 12

In other words, the accumulated stock of fixed capital has assumed mammoth proportions. Any large scale technological revolution that causes a significant moral depreciation of fixed capital brings about a big capital loss for the owners of that fixed capital. At the same time, however, this same fact of the mammoth scale of the fixed capital, relative to the circulating capital, means that, each year, as the fixed capital reduces in value – not from depreciation but from wear and tear – it brings about a corresponding rise in the rate of profit, for the firms using this existing fixed capital.

Large-scale socialised capital, therefore, has an interest in ensuring that this fixed capital can be fully and continuously employed, over a long duration, so that it recover its value in wear and tear, as quickly as possible. So, this socialised capital, whether controlled by workers or shareholders, requires the kind of long-term planning, and attempts to achieve stability, that social-democracy represents. As Engels put it in the Critique of The Erfurt Programme,

“I am familiar with capitalist production as a social form, or an economic phase; capitalist private production being a phenomenon which in one form or another is encountered in that phase. What is capitalist private production? Production by separate entrepreneurs, which is increasingly becoming an exception. Capitalist production by joint-stock companies is no longer private production but production on behalf of many associated people. And when we pass on from joint-stock companies to trusts, which dominate and monopolise whole branches of industry, this puts an end not only to private production but also to planlessness.”

The position of shareholders is, then, typically contradictory. Like the private industrial capitalists, and unlike the workers, they only see a justification in the introduction of machines/technology, where the cost is lower than the wages saved. But, like the worker and unlike the private industrial capitalist, they see the need to plan production, and, via the capitalist state, the economy so as to avoid crises. Publicly, of course, they proclaim their belief in the free market, and opposition to central planning, except, of course, when it comes to the central planning done by central banks, and their belief that such institutions can control the price of capital! In the heyday of imperialist capital in the 1930's to the mid 1970's, the ruling class made no secret of their corporatist belief in such economic planning.

As owners of fictitious-capital, (interest-bearing capital, i.e. shares, bonds etc.) shareholders stand in a contradictory and antagonistic relation to the owners of industrial capital, be they private industrial capitalists or the workers/associated producers as collective owners of socialised capital (again be it in the form of a cooperative, joint stock company/corporation etc.) As Marx notes in Capital III, Chapter 23,

“It is indeed only the separation of capitalists into money-capitalists and industrial capitalists that transforms a portion of the profit into interest, that generally creates the category of interest; and it is only the competition between these two kinds of capitalists which creates the rate of interest...

“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.”

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Anti-Duhring, Part III – Socialism, II – Theoretical - Part 11

Even within the laws of capital, however, it can be seen how, if workers exercised control over their collective property/socialised capital, this would be modified. Marx and Engels explain, in Capital III, Chapter 15, that the private industrial capitalists only introduce machines where the cost of the machine is less than the wages they save from its introduction. If the new value created by labour is, say, equal to £100, but resolves into £20 wages and £80 profit, the machine must cost less than £20.

Marx and Engels note that, in the worker cooperatives, this is not the case. For the worker, the criterion for introducing a new machine/technology is only that its value is less than the labour-time it saves. If an hour's labour is equal to £10, so that the £100 of new value, above, is equal to 10 hours of labour, a machine can be introduced if its value is less than £100. This is the difference between the private cost of production, and social cost of production, which is the basis of profit. The social cost of production of the commodity is £100/10 hours labour, but its private cost of production for the capitalist is only what he pays in wages, i.e. £20/2 hours labour.

For society, anything that reduces the social cost of production is an advantage, but it does not appear that way to the private capitalist. So, rather than waiting until a crisis of overproduction of capital arises, before engaging in innovation, a cooperative commonwealth would, from the start, have an incentive to be continually innovating, so as to reduce the burden of labour, raise productivity, and, thereby, increase real social wealth. Marx points out that that was seen in the Lancashire textile cooperatives, and Connolly noted the same with the agricultural cooperative at Ralahine.

What is true of the worker cooperative is, also, true of the other forms of socialised capital. In the joint-stock company/corporation, the workers within it, as the collective owners of that capital, have the same motivation for innovation as those in the worker cooperative. The difference is that the ruling-class deny that right to them, deny them the right to control their own collective property and, instead, place it in the hands of shareholders, whose interests are quite different. Shareholders see things in the same way as the private industrial capitalist, in so far as the use of machines/technology is concerned, but, as the size of fixed capital has become so astronomical, also, understand that the investment time-horizon has become significantly extended.

Marx, also, refers to this in, Theories of Surplus Value, Chapter 23.

“Thus there can be no doubt that in the case of all capitals employing a great deal of fixed capital—provided the scale of production remains unchanged—the rate of profit must rise in proportion as the value of the machinery, the fixed capital, declines annually, because wear and tear has already been taken into account. If the coal producer sells his coal at the same price throughout the ten years, then his rate of profit must be higher in the second year than it was in the first and so forth...

“This extra profit may be equalised also as a result of the fact that—apart from wear and tear—the value of fixed capital falls in the course of time, because it has to compete with new, more recently invented, better machinery. On the other hand this rising rate of profit, which results naturally from wear and tear, makes it possible for the declining value of the fixed capital to compete with newer, better machinery, the full value of which has still to be taken into account. Finally, the coal producer sold his coal more cheaply [at the end of the second year], on the basis of the following calculation: 50 on 100 means 50 per cent profit, 50 per cent on 95 comes to 47½ ; if therefore he sold the same quantity of coal [not for 105 but] for 102½—then he would have sold it more cheaply than the man whose machinery, for example, began to operate only in the current year. Large installations of fixed capital presuppose possession of large amounts of capital. And since these big owners of capital dominate the market, it appears that only for this reason their enterprises yield surplus profit (rent). In the case of agriculture, this rent derives from working relatively fertile land, but here we are dealing with a case where relatively cheaper machinery is utilised.}”

(Theories of Surplus Value, Chapter 23, p 388-389)

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Anti-Duhring, Part III – Socialism, II – Theoretical - Part 10

With privately owned industrial capital, such conditions enable the capitalists to gradually expand their business. They expand, at first, by replacing their older machines, as they wear out, with the newer, more productive, machines/technology. That is intensive accumulation, and leads to rising levels of productivity and rates of profit. In addition, the existence of cheap labour-power, and low rates of interest encourages new entrepreneurs to chance their arm, often in new types of production.

Over time, the majority of the old machines/technology, gets replaced by the new machines/technology, so that the rise in productivity slows down. To increase production, now, each firm must not juts replace the worn out machines, but invest in additional machines, and additional workers to operate them. This is now extensive accumulation. The demand for labour rises until again a relative shortage is created, wages rise – itself leading to a more rapid rise in the demand for wage goods, and consequently in aggregate demand, as firms scrabble to capture their share of the growing market – and, eventually, profits are squeezed.

More of the profit must be retained for accumulation, proportionally less is thrown into the money market, and, indeed, firms must enter the money market, themselves, to borrow. They must take out bank loans, issue bonds and debentures etc. The demand for loanable money-capital relative to its supply rises, interest rates rise, asset prices fall.

Eventually, wages rise to a level where a new crisis of overproduction of capital relative to labour arises. The rate of profit drops sharply. The less efficient firms cannot even make profit. They must borrow now, not to invest but simply to pay their bills. The rate of interest reaches its highest level. They go bust and lay off their workers so that a surplus of capital is now accompanied by a surplus of labour. The firms and their workers no longer appear in the market as consumers of commodities. There is under-consumption, so that there is now an overproduction of commodities, as well as capital and labour. The cycle begins again.

To overcome the overproduction of capital, capital, as a whole, engages in a new technological revolution. Productivity and profits, and the rate of profit rise. The long-wave cycle, now witnessed five times, applies, also, to socialised capitals. A new, long-wave uptrend began around 1890, as socialised capital began to supplant the monopoly of private capital. During this period, after 1890, we also see the rapid expansion of the organised labour movement, on the basis of social-democracy.

It is, of course, in workers' interest, as Marx sets out in Wage-Labour and Capital, for capital to continue to accumulate, because it is under those conditions that the demand for labour is high, and so wages rise. As, objectively, the collective owners of that socialised capital, they have every reason to want to ensure such continued expansion. But, so long as those means of production exist as capital, so long as production and distribution is determined by the market, by exchange-value, rather than use-value, the same laws of capital will continue to repeat this cycle.

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Anti-Duhring, Part III – Socialism, II – Theoretical - Part 9

Marx was only led even to this conclusion, in relation to the value of the materials, because he saw the reduction in its value, being limited by its nature as derived from agriculture.

“... some kinds of raw materials, such as wool, silk, leather, are produced by animal organic processes, while cotton, linen, etc., are produced by vegetable organic processes and capitalist production has not yet succeeded, and never will succeed in mastering these processes in the same way as it has mastered purely mechanical or inorganic chemical processes. Raw materials such as skins, etc., and other animal products become dearer partly because the insipid law of rent increases the value of these products as civilisation advances. As far as coal and metal (wood) are concerned, they become much cheaper with the advance of production; this will however become more difficult as mines are exhausted, etc.”

(ibid)

But, as I have set out elsewhere, not only does Marx set out some of the factors that contradict that conclusion, such as the reduction in waste, the use of new materials, improved use of auxiliary materials (particularly energy), but the introduction of synthetic materials, changes in the types of commodities and so on, mean that even this argument for a rising organic composition does not hold. Still less does it hold, in economies where the main production of value and surplus value, has moved to service industries rather than manufacture.

So, there is, really, no basis for arguing that c rises relative to v + s, in the long run, and so no basis for any significant tendency for the rate of profit to fall. However, there is, for these same reasons, a very good basis for there being a regular cycle in which the rate of profit rises and falls, because it is squeezed by a rise in relative wages, as industrial capital grows faster than the supply of labour/social working-day, a crisis of overproduction of capital relative to labour, as Marx describes it in Capital III, Chapter 15.

“As soon as capital would, therefore, have grown in such a ratio to the labouring population that neither the absolute working-time supplied by this population, nor the relative surplus working-time, could be expanded any further (this last would not be feasible at any rate in the case when the demand for labour were so strong that there were a tendency for wages to rise); at a point, therefore, when the increased capital produced just as much, or even less, surplus-value than it did before its increase, there would be absolute over-production of capital; i.e., the increased capital C + ΔC would produce no more, or even less, profit than capital C before its expansion by ΔC. In both cases there would be a steep and sudden fall in the general rate of profit, but this time due to a change in the composition of capital not caused by the development of the productive forces, but rather by a rise in the money-value of the variable capital (because of increased wages) and the corresponding reduction in the proportion of surplus-labour to necessary labour.”

If we go back to Marx's analysis of relative surplus value in Capital I, the first form, as set out, has limited life, because other producers adopt the same machine/technology. However, Marx explains that relative surplus value has a second form. If the value of wage goods fall, as a result of the rise in productivity, a smaller portion of the working-day is taken up as necessary labour. A larger proportion is, now, surplus labour. The rate of surplus value rises. For this to resolve a crisis of overproduction of capital, relative to labour supply it must be a generalised technological revolution, not just a piecemeal change in one or two industries. That is what happens with the introduction of steam engines, electric motors, internal combustion engines, assembly lines, and with microchips.

After each of these generalised technological revolutions, the crisis of overproduction of capital, relative to labour, reverses. It becomes a crisis for labour, which is, now, again, overproduced relative to capital. A relative surplus population. The surplus or net product rises, relative to the gross product, creating a period of relatively slower growth. As profit, the money equivalent of the surplus product, rises, whilst gross output grows at slower pace, the rate of interest falls (because the supply of this loanable money-capital, thereby, rises, relative to the demand for it for capital accumulation). It causes asset pries and speculation to rise, leading to asset price bubbles.

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SNNS 61

 

Northern Soul Classics - Reach Out, I'll Be There - The San Remo Strings

 

Anti-Duhring, Part III – Socialism, II – Theoretical - Part 8

But, did this crisis that industrial capital faced then mean that there was no way out for it, and that the mass of profit must fall, as Smith and Hodgskin believed? Would it mean that, even if it escaped this immediate crisis, it would only lead to a bigger crisis and more rapid series of crises, leading to its collapse, as many modern catastrophists have argued? No, Marx explains.

Ricardo noted that when wages rise so that it is no longer cheaper to use women to pull canal barges, industrial capital turns to the use of horses, which are, in fact, more efficient, especially when barges become bigger and heavier, as more freight is moved around. Industrial capital does not engage in major technological revolutions, which involve it in greater immediate expense, unless it becomes worthwhile to do so. But, this introduction of technology/machines shows again why the idea of a relatively fixed labour supply, leading to falling profits, whilst valid in the medium term, is false in the long-term. If labour productivity rises, less labour is required, or put another way, its as though one worker is now equivalent to 2, 3 or more workers. In Capital I, Marx explains the way this higher productivity results in the creation of relative surplus value in two ways.

Firstly, if one producer introduces some new machine that raises the productivity of the labour they employ, it has this effect of making their labour like complex labour. In other words, it is as though the new value they create in an hour is equivalent to 2,3 or more hours labour of workers employed by other producers of that commodity. That is so because they produce 2,3, or more times the quantity of those commodities, all of which sell at the market value. Its the same as where a farmer has the benefit of more fertile land.

But, this particular advantage disappears when other producers of the commodity introduce the same machine – just as when the use of drainage and irrigation etc., raises the fertility of all land. Now, all of that labour reverts back so that it all produces an hour of new value in each hour worked. However, far more commodities are now produced in that hour so that the unit value of each commodity falls. This, in fact, is central to Marx's explanation of the real basis of the long-term tendency for the rate of profit to fall.

In other words, the value of a commodity is comprised of the value of the constant capital (materials and wear and tear of fixed capital) consumed in its production, plus the new value created by labour in its production. The latter resolves into variable capital (the value of the commodities required to reproduce labour-power) and surplus-value/profit. So, if this new value falls, as a proportion of the value of each commodity unit, as a result of the rise in productivity, but the value of constant capital (c) remains the same, then the value of constant capital rises relative to the new value created (v + s). Unless s rises relative to v (a higher rate of surplus value), s falls relative to c, and to c + v, i.e. the rate of profit falls, even if the total mass of profit rises.

But, in Theories of Surplus Value, Chapter 23, Marx points out, again, that this effect is, also, grossly overstated. Firstly, he points out that where there is a generalised technological revolution, the rise in productivity reduces the value of all those commodities that comprise the constant capital.

If “one worker produces a spinning-machine whereas previously he produced only a spindle, then the ratio of value remains the same...”

A spinning machine, spins much more yarn than a spinning wheel, so the value of the machine is much less per unit of output. What increases is the amount of material spun, in terms of its physical quantity/use value, but, as he noted, it is not these physical quantities that ultimately count, but the relationship of their respective values.

“For us, however, the main thing is: does this fact explain the decline in the rate of profit? (A decline, incidentally, which is far smaller than it is said to be.) Here it is not simply a question of the quantitative ratio but of the value ratio.”

The technical composition of capital is what lies, objectively, behind the rise in the organic composition required to drive the long-run tendency for the rate of profit to fall, i.e. rising productivity means that the physical quantity of material processed rises relative to both the labour required to process it, and the fixed capital which brings about the higher productivity. But, that ignores the role of that rise in productivity in relation to the value of that material itself.

“The cheapening of raw materials, and of auxiliary materials; etc., checks but does not cancel the growth in the value of this part of capital. It checks it to the degree that it brings about a fall in profit.”

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Let Piddington Go

I wrote a while ago that the logic of nationalism leads to a break-up of the nation state.  In the last few days that has been born out.

On the one hand, we have the nationalists in Scotland, Wales and Northern Ireland, demanding that the British nation state be broken up, reversing the main progressive development of the 18th/19th century, largely now driven by the reality imposed by the reactionary English nationalism that led to Brexit.  In England itself, that same failure of Brexit leads to a similar drive towards regionalism, provincialism and parochialism, as seen in the attempts to create regional and metropolitan fiefdoms in the guise of elected mayors.

The ultimate idiocy of that has now come in the form of the referendum in Piddington, again driven by the inevitable failure of Brexit to "bring back control", leading the reactionary bigots, and racists to put forward such a solution rather than have refugees housed in their midst.  The well-healed of the area, of course take the same attitude to many other issues, wanting all the benefits of their rural idylls, without any of the attendant infrastructure.

Well, we should let them go, as they claim to want.  The sooner the better.  Let them then have to pay for their own infrastructure, energy supplies, water supplies, waste services, NHS and so on.  And, of course, they would have no rights to employment outside their borders, or even right to cross that border.  Brexit proved a disaster within weeks, and continues to be so.  The proponents of a Passport to Piddington, would not even get that project off the ground.

Anti-Duhring, Part III – Socialism, II – Theoretical - Part 7

In a joint-stock company/corporation, these same laws of capital apply, but the nature of the ruling-class, today, as a class of parasitic owners of fictitious-capital, brings about the new contradictory social relations referred to earlier. Industrial capital, to be competitive, in the global market, must continually accumulate, and each individual capital must seek to accumulate at a faster pace than its competitors. To do that, it must make more profits and/or retain more profit to use for the purpose of accumulation.

But, the accumulation of industrial capital, as Marx describes in Theories of Surplus Value, Chapter 21, is faster than the growth of the population (labour supply/social working-day).

“We have seen that over 20 years, capital increased sevenfold, whereas, even according to the “most extreme” assumption of Malthus, the population can only double itself every twenty-five years. But let us assume that it doubles itself in twenty years, and therefore the working population as well. Taking one year with another, the interest would have to be 30 per cent—three times greater than it is. If one assumes, however, that the rate of exploitation remained unchanged, in 20 years the doubled population would only be able to produce twice as much labour as it did previously (and [the new generation] would be unfit for work during a considerable part of these 20 years, scarcely during half this period would it be able to work, in spite of the employment of children); it would therefore produce only twice as much surplus labour, but not three times as much.”

Marx uses the term “interest”, here, rather than profit, because he is analysing the argument of Hodgskin, who used that term.

Adam Smith had noted this point, and extrapolated from it the conclusion that the market price of capital (profit) must fall, and the price of labour (wages) must rise, eventually eliminating profit completely. It formed the basis of his explanation for the long-term falling rate of profit. As Marx sets out, in Theories of Surplus Value, Chapter 21, early advocates of labour such as Hodgskin, made a similar argument. Marx sets out why this explanation for the long-term tendency for the rate of profit to fall, which relies on the mass of profit itself being reduced, absolutely or relatively, compared to wages, is wrong. Basically, the argument that the mass of profit must fall, as it hits a buffer of inadequate labour supply, assumes that the labour supply, itself, is relatively fixed. In the long-term, it isn't. Ricardo had already set out what was wrong with that aspect of Smith's argument. Ricardo noted that, where labour is plentiful, capital will use it inefficiently, because its cheap. He uses the example of women pulling canal barges, because they were cheaper than horses.

However, at some point, as industrial capital expands, this existing supply of cheap labour does, indeed, as Smith had argued, begin to run out. The demand for labour rises, and, as seen in Britain, and every subsequent industrialisation, the supply is increased, as labour displaced from the land is drawn into the towns. Nor is the supply of labour only a question of the number of available labourers. It is also a question of how long each worker works. In other word, the labour supply/social working-day, is comprised of the working-day multiplied by the number of workers.

So, industrial capital increases the labour supply/social working-day by, on the one hand, drawing into the workforce all of these latent reserves from the countryside, and, on the other, it, also, lengthens the working-day to previously unheard of levels. So, the mass of surplus value rises, as a result of this rise in absolute surplus-value. In Capital I, drawing extensively on the work done by Engels in The Condition of The Working Class, Marx describes this process, and the way industrial capital used this cheap labour wastefully, until it was used up.

"Agents were appointed with the consent of the Poor Law Commissioners. ... An office was set up in Manchester, to which lists were sent of those workpeople in the agricultural districts wanting employment, and their names were registered in books. The manufacturers attended at these offices, and selected such persons as they chose; when they had selected such persons as their ‘wants required’, they gave instructions to have them forwarded to Manchester, and they were sent, ticketed like bales of goods, by canals, or with carriers, others tramping on the road, and many of them were found on the way lost and half-starved. This system had grown up unto a regular trade. This House will hardly believe it, but I tell them, that this traffic in human flesh was as well kept up, they were in effect as regularly sold to these [Manchester] manufacturers as slaves are sold to the cotton-grower in the United States.... In 1860, ‘the cotton trade was at its zenith.’ ... The manufacturers again found that they were short of hands.... They applied to the ‘flesh agents, as they are called. Those agents sent to the southern downs of England, to the pastures of Dorsetshire, to the glades of Devonshire, to the people tending kine in Wiltshire, but they sought in vain. The surplus-population was ‘absorbed.’”

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Anti-Duhring, Part III – Socialism, II – Theoretical - Part 6

In both cases, it forms no part of the circuit of industrial capital. 

As Marx sets out in Capital II and III, this loanable money-capital/interest-bearing capital, sits outside the circuit of industrial capital. It is why this fictitious-capital play no part in the determination of the average industrial rate of profit, and obtains not this average rate of profit (or, indeed, any “profit”), but only interest as a deduction from profit. Far from shareholders being just a continuation of the old, private industrial capitalists, they are, for this very reason, as Marx describes, in Capital III, antagonistic to the interests of industrial capital, and particularly, the current, collective owners of socialised, industrial capital, i.e. “the associated producers”.

Where the private industrial capitalists were antagonistic to workers, as workers, because higher relative wages means lower relative profits, the owners of fictitious-capital (shares, bonds) are antagonistic to workers, not as workers, but as, objectively, the owners of socialised industrial capital. The ruling-class, as owners of shares and bonds, seek to maximise the amount they get as interest/dividends, just as landlords seek to maximise the amount they get as rent, but that means the smaller the amount of profit retained for capital accumulation, i.e. profit of enterprise. It is why the ruling class seeks to retain control over that socialised capital, so that it maximises its revenues – not, now, profit but interest/dividends and capital gains – and appoints Directors to that end.

The workers – associated producers – as collective owners of the socialised capital, as Marx notes in Capital III, Chapter 27, resolve the contradiction between capital and labour by becoming their own capitalist. That is most clearly seen in the worker cooperative. In the worker cooperative, the workers exercise democratic control over that capital, and they also appoint their own day to day managers to carry out the role of “functioning capitalist”, who, to use Marx's description is like an orchestra conductor.

But, even in the worker cooperative, the means of production are still capital, and must remain so as long as commodity production continues to determine the nature of the economy. Each company/cooperative continues to produce commodities for sale, and so competes against other commodity producers. It is exchange value that determines production, not use-value. In order to be competitive, each company must keep the individual value of what it produces below the market value.

It does that by all the same means that every other capital does. Wages cannot rise above the value of labour-power, for example. If they do, then, the rate of surplus value falls. The firms profit falls below the average profit. Over time, this lower level of profit means the cooperative cannot accumulate the capital required to expand production; it loses market share.

The other way a capital stays competitive, even if it does pay higher wages, is precisely this accumulation of capital. In Capital I, Marx notes that, in the 19th century, although British textile workers' wages were 50% higher than those in Europe, British textiles were always cheaper than those produced in Europe, and British profits were also higher. The reason was that the larger scale of production, in Britain, the greater number of machines, and more advanced nature of those machines, meant that, even with higher wages, unit labour costs, and also, unit fixed capital costs, were much lower.

But, in order to accumulate that capital in the first place, it is necessary to maximise profit, so as to be able to buy more and better fixed capital. In a capitalist economy, a worker cooperative is still bound by these laws of capital. The difference for the cooperative is that, in seeking to maximise its rate of surplus value/exploitation, it does so for this purpose of being able to accumulate capital, and so ensure its competitiveness, and longer-term future. Soviet Russia faced the same situation in 1917.

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