Above, I set out that the real explanation for the existence of surplus value is the surplus labour undertaken by labourers. That surplus value is produced in industry as well as in agriculture, contrary to the belief of the Physiocrats. On the one hand, they could only explain the unequal exchange between town and country by claiming that it was a result of the town selling its output above its value. However, they have a similar problem with the surplus value produced in agriculture. Its output was 5 milliards, and only 2 milliards was required to replace its working-capital, which it did in natura. That left a surplus product of 3 milliards, of which only 2 milliards is handed over as rent to landlords.
“The third milliard of the surplus constitutes the interest on the total invested capital of the farmers, that is, ten per cent on ten milliards. They do not receive this interest—this should be carefully noted—from circulation; it exists in natura in their hands, and they realize it only in circulation, by thus converting it into manufactured goods of equal value.” (p 320-21)
The argument of the Physiocrats is that, were it not for this interest, the farmers would not advance the 10 milliard of capital required for production. In this, already, however, we see the need to distinguish within the productive class between the capitalist farmer and the labourers employed by them. It is the capitalist farmer that advances the capital not the labourer, who, in fact, is exploited by it. As Marx sets out in Capital and Theories of Surplus Value, however, this begs the question of where the surplus value of 1 milliards, which takes the form of this “interest” comes from. Moreover, why is it only this 1 milliard that is required as “interest”, rather than 2 milliard or ½ milliard?
According to the Physiocrats, the surplus product arises as a free gift of the land. Its on that basis that the landowner claims the 2 milliard of rent, but, again, why not, then, the whole 3 milliards? In fact, the argument is like that put forward by Duhring, which is stood on its head from the real situation. It would mean that the whole surplus of 3 milliards is due to the landlords, but that they “pay” to the capitalist farmer 1 milliard as the required interest to advance their capital!
The reality, of course, as Marx sets out in Capital III, is that the surplus value is produced by the agricultural labourers, and appropriated as profit by the capitalist farmer. Because of the lower organic composition of capital in agriculture/primary production, it produces surplus profits, i.e. profits above the average annual industrial rate of profit. This makes possible Absolute Rent. In addition, because some land is more fertile than others it produces even greater surplus profits, which are the basis of Differential Rent.
The capitalist farmers, having appropriated the profits produced by their workers, hand over a portion of it, the surplus profit, to the landlord. There is nothing, then, arbitrary in this amount, but, as Marx sets out, is now objectively determined. The landlord obtains these revenues, but without giving anything of equal value in exchange. That the landlord, or the state and church, then, hand back some of these revenues to the farmer, in exchange for actual commodities, does not change that situation. It is the original version of the ridiculous Keynesian argument, used today, that claims that economic expansion can be produced by having the state engage in arms spending. The opposite is the truth.
The state finances arms spending by taxes (even if it borrows to finance it, it must eventually repay the loan plus interest on it out of its tax revenues). Taxes, like rent and interest, are a deduction from surplus value/profit. So, that spending reduces the amount of profit available for capital accumulation, and capital accumulation is the basis of economic expansion. That the state spends some of that tax buying arms from some arms companies, who may, then, employ additional workers, does not change the fact that it has done so by reducing the profits available for capital accumulation in the rest of the economy.
What is more, unlike real capital accumulation, which creates new value (because more labour is employed), which goes back into the economy, arms spending does not create any new value that goes back into the economy. That is particularly the case, where, say, the UK government uses those taxes to buy US arms, fighter jets and so on, which creates jobs in the US, not Britain.
If the government uses tax revenue to build a bridge, the bridge itself is a use-value. It raises productivity, by reducing the time required to transport commodities. It feeds back into the economy. The same is true if the government uses tax revenue to build a new school or hospital. It takes part in the production and maintenance of labour-power, just as much as the food produced by a farmer that is then sold to workers.
But, at best, tax spent on arms, results in a stockpile of weapons that sit there and rust away! Non-use values. At worst, it is used destructively – means of destruction, negative use-values – and so further damages real capital accumulation. Obviously, as Marx sets out, in Theories of Surplus Value, states, sometimes, need to spend money on arms, and employing workers unproductively, as soldiers, where they fear invasion. But such diversion of resources is a reduction in its potential capital accumulation and growth forced on it, and the opposite of being a means of stimulating growth.
If Robinson Crusoe had the choice of spending his surplus labour hours building additional animal pens and stocking them, or building sea defences against an unlikely invasion, what do you think his rational choice would be? The ridiculous claims of the British government about the possibility of a Russian invasion of Britain – the same Russia that has spent more than 3 years just trying to advance a few dozen miles into Eastern Ukraine – are simply a means of it justifying its own additional arms spending, as part of NATO's global imperialist ambitions. The suggestion that such spending would have the benefit of creating jobs and spurring the economy is equally ludicrous. The money would be better spent on repairing the crumbling roads, rail network, schools and hospitals, which is where the real threat to the well being of British workers is to be found.
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