Part 5 – (Digression) The Era of Speculation and Gambling (2) – Capital, Profit and Capital Gain
If share X costs £1 to buy, and pays a dividend of £0.10 per share, that is a yield of 10%. If the dividend remains £0.19 per share, but the price of the share rises to £2, it is a yield of only 5%. Speculators – which is what the ruling-class, today, are – can simply move money to where a higher yield is available. So, they might sell the shares of X and buy the shares of Y, or else buy bonds, land or property. The consequence of that, however, is, then, just to raise the prices of these other assets, and, thereby, to reduce the yield on those assets. The speculators that bought early, get both the higher yield, and a capital gain, when they sell.
A problem for the ruling-class owners of fictitious-capital, and its ideologists, in this respect, as Marx describes in Capital I and III, is that they do not really understand what capital is, and so, also, do not understand what profit or interest is. In Capital I, Marx goes into great detail in examining the claims of the bourgeois economists who, in the 19th century, simply represented the arguments of the private industrial capitalists. Those arguments never explained what profit was, or where it came from, but amounted to just a moral justification of its existence and appropriation by the capitalist.
In other words, even after the ideas of the Mercantilists were superseded, the bourgeois theories that replaced them were no better. The Mercantilists argued that “profit” came from “unequal exchange”. Marx notes that the Mercantilists were not as stupid as some of their later critics claimed. The Mercantilists like James Steuart, described profit as “profit on alienation”. In effect, profit arises as a consequence of the exchange of commodities, so that the seller makes a profit by selling commodities above their value. Marx sets out why this cannot be true for profit as a whole. Sellers are not only sellers but also buyers. If all sellers sell commodities at, say, 10% above their value, then, those same sellers, in aggregate, as buyers of commodities, likewise, pay 10% above their value. In aggregate, what sellers gain as sellers, they lose as buyers.
Marx points out, however, that its no coincidence that the ideas of the Mercantilists arose, and became predominant in the Netherlands and Britain, in the 17th Century, when those countries were the leading mercantile powers, and were establishing their colonial empires. As Marx notes, Mercantilists, such as Steuart, realised the limits of the idea of profit on alienation, but it could quite clearly be seen that, if you are a major colonial power, like the Netherlands or Britain, you could buy “low” from producers of food and materials, in the colonies, process those commodities, and, then, sell them “high” back to those colonies, the balance of trade being made up in money (gold or silver).
This “unequal exchange” would amass large amounts of wealth in the coffers of colonial powers. But, there was, clearly, a limit to that as well. In the period after WWII, as anti-colonial struggles spread across the globe, Stalinists and Third Worldists sought to utilise this Mercantilist theory of profit to describe the “development of underdevelopment” in the economies of the Third World. As a consequence of “unequal exchange” between the “imperialist” centre, and the third world periphery, value was incessantly dragged away from the latter and towards the former, thereby, denying the latter of the surplus value required for capital accumulation and development, whilst, supposedly, explaining the continued growth in the imperialist heartlands, rather than its predicted decline and crisis.
As an explanation of imperialism and imperialist capital, rather than as an explanation of colonialism and merchants capital, it was nonsense. Industrial capital does not make profit from “unequal exchange”, but from the creation of surplus-value in production, and imperialist capital is industrial capital par excellence. Large-scale industrial capital (imperialist capital) does not make profit from unequal exchange, but, similarly, from an ever-expanding scale of production, an ever-expanding exploitation of labour, on a global scale (i.e. capital accumulation and development, rather than underdevelopment), and the need, thereby, to create a global capitalist economy.
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