A few weeks ago I wrote about the state of US democracy , about the way US democracy allows failed Republican Vice Presidential candidate, Sarah Palin, as Governor of Alaska, to appoint herself Senator for the State in the event that its existing Senator was sent to gaol. In fact, a look at the US politcal system seems to show a greater number of its political representatives being sent to the Big House compared to Britain. That has little to do with a greater degree of deference by the police to politicians in Britain as the fiasco over Tory MP Damian Green demonstates, but a greater degree of corruption in a system where money talks even more than it does in the hardly democratic British Parliamentary system.
See Also:
US Democracy and
Obama and Political Change
Now, it looks like one of Ms. Palin's associates, the Democratic Governor of Illinois - Barack Obama's State - is likely to join that long line. He is accused of selling the Senator's seat to the highest bidder. As was said on US CNBC, however, today, the asking price was less than the price to buy a seat on the Chicago Mercantile Exchange - also based in Chicago, Illinois - which probably says something about where real power lies in the US. Its no wonder that Chicago's Cook County - you know where the Blues Brothers had to pay the Rent to the Sherriff's Office - has earned itself the name Crook County.
In another example of money talking, however, it has in recent days been saying soemthing else, though perhaps giving out a contradictory message. IN the US yesterday the price of very short term US Government Bonds fell to a yield below zero. In other words, investors were paying the Government to keep their money safe for them! That is an indication of the amount of risk aversion current in financial markets despite the unprecedented level of liquidity and state backed guarantees that have been given. In Britain too, the extent of the Government's fiscal stimulus package, and its borrowing have brought about a reduction in Britain's creditworthiness. The cost of insuring against the British Government defaulting on its debts went up. It is now higher than the cost of insuring against McDonalds defaulting.
Yet, contradicting this picture the Libor and Euribor rates - the rates charged by banks to lend to each other on a very short term basis - has been steadily falling, reflecting that the Credit Crunch is slowly thawing. As I wrote at the weekend, the fact that the US had some truly appaling economic data out last week - jobless claims up by over half a million, the worst since 1974, for one - whilst the DOW, NASDAQ and S&P ended the day up over 2%, and that was despite the longest run of up days for months, seemed to possibly signal that the market was climbing the wall of worry that traders speak of when the bottom has been reached. US markets have been up quite strongly every day this week other than yesterday too, and European and Asian markets have been following suit. In Japan too, the other day, despite very bad figures on Exports and output the market managed to move upwards.
These conflicting messages that Money is sending seem to suggest that although three is understandably a considerable amount of fear around reflected in higher risk premiums, there is a sense that all the bad news has now been priced in and that the various State aid packages are beginning to have some effect. As one analyst put it on CNBC today, although figures put out by businesses in the next quarter are likely to be bad, it is likely that investors will say, "Well its no worse than we expected" so prices will not fall, and might even rise. And by the time the second quarters figures are being pre-announced the Credit Crunch should be near its end, and the stimulus packages will be promoting new growth. That is no doubt why markets are beginning to rally, which in itself will recapitalise the Balance Sheets of fianncial companies, and why the price of Oil and Gold is rising ahead of an expected spurt of inflation, certainly by 2010, and possibly as early as late 2009.
Wednesday, 10 December 2008
Tuesday, 9 December 2008
Porn Free
In my blog, Thinking Outside the Box , I referred to the fact that I had seen that in the San Fernando Valley a group of porn actors had established their own co-operative so that they could control their own work, and the profits that flowed from it.
As I pointed out there, this is no frivolous matter. The Porn industry in the US alone is a multi-billion dollar industry. Without Porn its unlikely that Video machines would have taken off so quickly. Its likely that it was the large number of porn titles on VHS as opposed to Betamax that made the former dominant, and ultimately the only format, even though the latter was technically superior. Similarly, porn has driven new media forms such as DVD and Internet. In America’s San Fernando Valley the Porn Industry sits alongside the mainstream film industry, and increasingly the two have been coming together – again no pun intended.
Like the mainstream industry porn has its own equivalent events and journals. Mainstream has “Variety”, Porn has Adult Video News (AVN). Hollywood has the Oscars, Porn has the AVN Awards. Oscars are awarded for “Best Director” and so on, while the AVN Awards has “Best Anal”, or “Best DP”.
But, a recent article in the Financial Times Rude Awakening also demonstates another aspect of what I was talking about in that blog. It appears that this multi-billion dollar industry is being put under threat by the very cultural and technological changes it has helped to bring about. In short, the YouTube generation has learned that they can do it for themselves. Like Hollywood, the big bucks in Porn come ffrom the fact that a large audience is prepared to pay a relatively small number of performers large amounts of money to see their performances. But, the FT points out that there are now a large number of people prepared to film their own performances and share them with the world.
The FT, points to YouPorn , PornTube , and RedTube (Warning These Links show scenes of an explicit sexual nature) as examples free sites where individuals upload their own videos. Worse for the porn industry some people upload clips of porn videos too, undermining the whole basis of the industry’s profits.
Yet, as I pointed out before this is just a very distinct example of the transformation in the new types of consumption, and production that technology has brought about. The mainstream music industry now uses similar methods for distributing music, and new bands and other types of artists use the Net to get themselves known, to distribute their material etc.
In a recent edition of the BBC’s “Click” programme, an item referred to a new site, which allows Computer Programmers to obtain work by effectively bidding for it online. In place of them being Wage Workers, they become self-employed sellers of a commodity in the form of a piece of work, rather than the commodity “Labour-Power”. But, there is no reason that this type of set-up should be confined just to people like Computer programmers. As I said already, artists of various kinds are using the Internet to distribute their work. The Porntube etc. format as YouTube itself has demonstrated provides the basis for everyone to be a reporter, to have a view, to be an artist, or whatever they want to be. Of course, as is the case with the Internet in general quantity does not mean you get quality. But, on a wider basis than that the same kind of set-up used for programmers could equally well be used for book-keepers, wage clerks, or almost any other type of clerical or administrative job you can think of. In other words, as I described such a process some years ago, it is a process of transforming wage workers back into peasants, but now technological peasants who sell the commodity they produce in cyber space rather than physical space, and pay a rent to a Landlord that owns that cyber space.
In America, there is already at least one small community where this kind of set-up applies. Everyone there works on this kind of basis over the Internet, and never or very, very rarely has to go to what could be described as a conventional workplace. For Marxists, whose ideas about revolutionary change were largely predicated on the kind of social change, and shared values that arise when huge numbers of workers in increasingly large factories are thrown together, this has important consequences. Yet, as social networking sites such as Facebook, as well as sites like YouTube show, at the same time as atomising workers at the level of the factory or workplace, the Internet, and new forms of ICT are creating an even larger community, an even more rapid and open transmission of ideas than could arise within the confines of the workplace. Moreover, that small community in the US had created new forms of social interaction. At home all day, its members found themselves talking to their neighbours far more, forming community organisations to deal with the problems in the community in a way they might not have so readily done if they had been at work all day.
The nature of Capitalism is changing rapidly. Marxists have to adapt their ideas and strategies accordingly.
As I pointed out there, this is no frivolous matter. The Porn industry in the US alone is a multi-billion dollar industry. Without Porn its unlikely that Video machines would have taken off so quickly. Its likely that it was the large number of porn titles on VHS as opposed to Betamax that made the former dominant, and ultimately the only format, even though the latter was technically superior. Similarly, porn has driven new media forms such as DVD and Internet. In America’s San Fernando Valley the Porn Industry sits alongside the mainstream film industry, and increasingly the two have been coming together – again no pun intended.
Like the mainstream industry porn has its own equivalent events and journals. Mainstream has “Variety”, Porn has Adult Video News (AVN). Hollywood has the Oscars, Porn has the AVN Awards. Oscars are awarded for “Best Director” and so on, while the AVN Awards has “Best Anal”, or “Best DP”.
But, a recent article in the Financial Times Rude Awakening also demonstates another aspect of what I was talking about in that blog. It appears that this multi-billion dollar industry is being put under threat by the very cultural and technological changes it has helped to bring about. In short, the YouTube generation has learned that they can do it for themselves. Like Hollywood, the big bucks in Porn come ffrom the fact that a large audience is prepared to pay a relatively small number of performers large amounts of money to see their performances. But, the FT points out that there are now a large number of people prepared to film their own performances and share them with the world.
The FT, points to YouPorn , PornTube , and RedTube (Warning These Links show scenes of an explicit sexual nature) as examples free sites where individuals upload their own videos. Worse for the porn industry some people upload clips of porn videos too, undermining the whole basis of the industry’s profits.
Yet, as I pointed out before this is just a very distinct example of the transformation in the new types of consumption, and production that technology has brought about. The mainstream music industry now uses similar methods for distributing music, and new bands and other types of artists use the Net to get themselves known, to distribute their material etc.
In a recent edition of the BBC’s “Click” programme, an item referred to a new site, which allows Computer Programmers to obtain work by effectively bidding for it online. In place of them being Wage Workers, they become self-employed sellers of a commodity in the form of a piece of work, rather than the commodity “Labour-Power”. But, there is no reason that this type of set-up should be confined just to people like Computer programmers. As I said already, artists of various kinds are using the Internet to distribute their work. The Porntube etc. format as YouTube itself has demonstrated provides the basis for everyone to be a reporter, to have a view, to be an artist, or whatever they want to be. Of course, as is the case with the Internet in general quantity does not mean you get quality. But, on a wider basis than that the same kind of set-up used for programmers could equally well be used for book-keepers, wage clerks, or almost any other type of clerical or administrative job you can think of. In other words, as I described such a process some years ago, it is a process of transforming wage workers back into peasants, but now technological peasants who sell the commodity they produce in cyber space rather than physical space, and pay a rent to a Landlord that owns that cyber space.
In America, there is already at least one small community where this kind of set-up applies. Everyone there works on this kind of basis over the Internet, and never or very, very rarely has to go to what could be described as a conventional workplace. For Marxists, whose ideas about revolutionary change were largely predicated on the kind of social change, and shared values that arise when huge numbers of workers in increasingly large factories are thrown together, this has important consequences. Yet, as social networking sites such as Facebook, as well as sites like YouTube show, at the same time as atomising workers at the level of the factory or workplace, the Internet, and new forms of ICT are creating an even larger community, an even more rapid and open transmission of ideas than could arise within the confines of the workplace. Moreover, that small community in the US had created new forms of social interaction. At home all day, its members found themselves talking to their neighbours far more, forming community organisations to deal with the problems in the community in a way they might not have so readily done if they had been at work all day.
The nature of Capitalism is changing rapidly. Marxists have to adapt their ideas and strategies accordingly.
Global Zero - Deja Vu
Richard Branson has joined with others in a new venture called Global Zero whose intention is to rid the world of nuclear weapons over coming years. It seems a honourable venture, but for anyone that has studied history it is more like deja vu all over again.
States do not fight wars because they have weapons, nuclear, chemical or otherwise. Just the opposite is the case. They build arsenals because they fight wars! Moreover, it has always been the case that the main demand for disarmament, especially in periods of rising tension, has come from those that have the most developed means of producing weapons, and the biggest stockpiles of weapons. That might seem surprising, but a simple consideration of the facts shows why it isn't.
In every war throughout history the decisive weapons have been those developed in the course of the war. Every War begins with the use of the weapons that were used at the end of the last war, and ends with the weapons that will begin the next. It is no surprise that states with large stockpiles of legacy weapons see an advantage in trying to get all their potential adversaries to get rid of their weapons, for the cost of getting rid of their own old stockpiles. After all, they know that their productive and scientific industries will before hostilities begin provide tem with the basis of creating newer, better weapons than those they have so generously given up.
Countries such as Pakistan, India and other less developed states might have difficulty in cranking up production of such weapons when they have given them up, but does anyone really beleive that within weeks of a non-nuclear world entering another War, the US or any other advanced economy would not already have new, more deadly nuclear weapons ready to hurl at its opponents?
No, the threat of nuclear annihilation cannot be removed by such, no doubt, well-meaning ventures, it can only be removed by getting rid of the causes of such wars, not the weapons they are fought with. That means getting rid of Capitalism, and its most warmongering manifestation - Imperialism.
As, I have said before the situation we are in now is almost a clone of the situation that existed at the end of the 19th century, a situation that led Frederick Engels to identify that the world was headed inevitably towards a World War between the competing Capitalist powers. Throughout the 19th Century, Britain had strode the World like a colossus. Its economic power was unbounded, and on the back of that economic and industrial power rested its military hegemony. The 19th century saw booms and slumps within the world economy, and saw the emergence of the 50 year Long Wave cycles analysed by Kondratiev in the 1920's. But, the overarching power of Britain meant that the natural drive to war that stemmed from them at their point of conjuncture, as the Long Wave Boom came to an end, was mitigated, and constrained to minor conflicts. The overarching power of the US sicne World War II has played the same role, which is why the end of the last Long Wave Boom in 1974 did not lead to such a War.
But, by the end of the 19th Century, when the new Long Wave Boom began in the late 1880's, Britain's hegemony was lost. New more dynamic economic powers such as France, Germany, and the US had emerged that challenged Britain's supremacy. As Engels describes, the Germans had effectively infiltrated British manufacture and marketing, and used their contacts and knowledge to win for themselves markets away from Britain. A general prosperity meant that the scramble for markets and sources of raw materials was conducted largely within the confines of economic competition. Prosperity meant that competition for necessary raw materials could be fought out by simply paying a higher price, whilst still being able to make a handsome profit.
It is when the Long Wave Boom ends around 1914 that the strains that this creates become intolerable. It has been becoming increasingly impossible in the dying years of the boom to simply pay higher prices and still make handsome profits. Eventually no profits at all. In order to continue economic competition will no longer suffice. Britain, no longer the dominant economic power remains the dominant military power, and uses its military power to make up for its declining economic power, uses it to maintain its grip over its colonies, its protected sources of supply, and markets. Its competitors demand a share for themselves. War becomes inevitable. The same pattern can be seen now. The US has long since lost its position as the world's most powerful economy. It remains the largest economy, just as was Britain, but not most powerful. Even its size has largely been a mirage, a bloated, obese body gorged on cheap credit. But like Britain, it remains the most powerful military force, and its actions in Serbia, in Iraq and so on, demonstrate that it is more than prepared to use that military power to further the interests of US Capital, of creating strategic US positions around the world to maintain its control over important resources, and markets ready for when economic competition has to give way to the logical extension - military competition.
In the run up to WWI there was no shortage of people, particularly in Britain that proposed disarmament, and other pacifist slogans. Almost, to a man, the same people when War was about to break out sided with their own ruling classes and backed their side in the War. Even the socialists, the supposed Marxists - though they were nothing of the kind - who had organised hug Conferences, and demonstrations against the War, caved in. Only a few - the Zimmerwald Left - refused to be dragged along. But, in opposing the War, they still did not allow themselves to be dragged along by the kind of Pacifism that Branson's venture epitomises, and which shamefully most of the so called revoluitonary Left also advocates today. They made clear that Imperialist War was the necessary and inevitable consequence of Capitalist competition. It was not possible to prevent such wars by reformists measures, by street demonstrations, Parliamentary motions or other such devices which sought to control the actions of the Bourgeois State. As Leon Trotsky put it, workers can only control the actions of the State if they control the State.
But, the necessary conclusion from that is that such wars can only be prevented if workers take control of the State, and that means they have to overthrow Capitalism itself. It was necessary not to oppose the War by pacifist measures, but for socialists to become the best soldiers to fight alongside their fellow workers and explain this to them, and thereby ultimately to show that the answer to War was to turn their guns on their own rulers. That was to be revoluitonary defeatists, to advocate not the military victory of your opponent, but the revolutionary overthrow of your own rulers using the very weapons they had put at your disposal. In 1917, the Russian soldiers having done that to the Tsar, shouted across th trenches to their German comrades, "We have done our bit to end this War, by throwing out our Tsar. Now you do the same and throw out your Kaiser, then we can all go home."
Yet, despite the terrible tragedy of WWI with the loss of life of tens of millions of working people that simple lesson was not learned. In the run up to WWII it was not only the pacifists and reformsists that advocated the same kind of disarmamanet, and anti-war Conferences and demonstrations. Those who were supposed to be the heirs of Lenin and the Zimmerwaldists were at the forefront of such diversions. To his credit Trotsky opposed such moves. He called on socialists to engage in military training, to attempt to bring it under Trade Union control, to be the best soldiers and so on, and to build revolutionary nuclei within the armed forces so that at some point during the War, just s had happened in WWI, the forces would become available for a revoluitonary overturn in one or more of the contending adversaries countries. Yet, even within the ranks of the so called Trotskyists, certainly in the ranks of those that veered between the Trotskyists and the Stalinists and reformists, this posiiton was not at all universal.
Today, it is not at all so. The statism that infects the whole of the Left almost without exception leads to the kind of Pacifist nonsense that suggests that War can be stopped by Public Opinion, by mass demonstrations, by Conferences, or even by limited strikes. The implication is that the foreign policy of the capitalist State can be controlled by the working class, just as the implication is given that Workers can exercise "Workers Control" over capitalist property nationalised by that State without the working class being on the verge of ovethrowing it. The whole history of the twentieth century shows it cannot.
Workers can only exercise control over property when they themselves own that property, and even then the bouregoisie will try to use its State to frustrate even that. Less still can they control the State and its actions unless they own that State, unless it is their State. If the working class - indeed humanity as a whole -is to avoid a catastrophe on unimaginable scale when the current Long Wave Boom ends around 2020-2025, that lesson has to be relearned, and relearned quickly.
States do not fight wars because they have weapons, nuclear, chemical or otherwise. Just the opposite is the case. They build arsenals because they fight wars! Moreover, it has always been the case that the main demand for disarmament, especially in periods of rising tension, has come from those that have the most developed means of producing weapons, and the biggest stockpiles of weapons. That might seem surprising, but a simple consideration of the facts shows why it isn't.
In every war throughout history the decisive weapons have been those developed in the course of the war. Every War begins with the use of the weapons that were used at the end of the last war, and ends with the weapons that will begin the next. It is no surprise that states with large stockpiles of legacy weapons see an advantage in trying to get all their potential adversaries to get rid of their weapons, for the cost of getting rid of their own old stockpiles. After all, they know that their productive and scientific industries will before hostilities begin provide tem with the basis of creating newer, better weapons than those they have so generously given up.
Countries such as Pakistan, India and other less developed states might have difficulty in cranking up production of such weapons when they have given them up, but does anyone really beleive that within weeks of a non-nuclear world entering another War, the US or any other advanced economy would not already have new, more deadly nuclear weapons ready to hurl at its opponents?
No, the threat of nuclear annihilation cannot be removed by such, no doubt, well-meaning ventures, it can only be removed by getting rid of the causes of such wars, not the weapons they are fought with. That means getting rid of Capitalism, and its most warmongering manifestation - Imperialism.
As, I have said before the situation we are in now is almost a clone of the situation that existed at the end of the 19th century, a situation that led Frederick Engels to identify that the world was headed inevitably towards a World War between the competing Capitalist powers. Throughout the 19th Century, Britain had strode the World like a colossus. Its economic power was unbounded, and on the back of that economic and industrial power rested its military hegemony. The 19th century saw booms and slumps within the world economy, and saw the emergence of the 50 year Long Wave cycles analysed by Kondratiev in the 1920's. But, the overarching power of Britain meant that the natural drive to war that stemmed from them at their point of conjuncture, as the Long Wave Boom came to an end, was mitigated, and constrained to minor conflicts. The overarching power of the US sicne World War II has played the same role, which is why the end of the last Long Wave Boom in 1974 did not lead to such a War.
But, by the end of the 19th Century, when the new Long Wave Boom began in the late 1880's, Britain's hegemony was lost. New more dynamic economic powers such as France, Germany, and the US had emerged that challenged Britain's supremacy. As Engels describes, the Germans had effectively infiltrated British manufacture and marketing, and used their contacts and knowledge to win for themselves markets away from Britain. A general prosperity meant that the scramble for markets and sources of raw materials was conducted largely within the confines of economic competition. Prosperity meant that competition for necessary raw materials could be fought out by simply paying a higher price, whilst still being able to make a handsome profit.
It is when the Long Wave Boom ends around 1914 that the strains that this creates become intolerable. It has been becoming increasingly impossible in the dying years of the boom to simply pay higher prices and still make handsome profits. Eventually no profits at all. In order to continue economic competition will no longer suffice. Britain, no longer the dominant economic power remains the dominant military power, and uses its military power to make up for its declining economic power, uses it to maintain its grip over its colonies, its protected sources of supply, and markets. Its competitors demand a share for themselves. War becomes inevitable. The same pattern can be seen now. The US has long since lost its position as the world's most powerful economy. It remains the largest economy, just as was Britain, but not most powerful. Even its size has largely been a mirage, a bloated, obese body gorged on cheap credit. But like Britain, it remains the most powerful military force, and its actions in Serbia, in Iraq and so on, demonstrate that it is more than prepared to use that military power to further the interests of US Capital, of creating strategic US positions around the world to maintain its control over important resources, and markets ready for when economic competition has to give way to the logical extension - military competition.
In the run up to WWI there was no shortage of people, particularly in Britain that proposed disarmament, and other pacifist slogans. Almost, to a man, the same people when War was about to break out sided with their own ruling classes and backed their side in the War. Even the socialists, the supposed Marxists - though they were nothing of the kind - who had organised hug Conferences, and demonstrations against the War, caved in. Only a few - the Zimmerwald Left - refused to be dragged along. But, in opposing the War, they still did not allow themselves to be dragged along by the kind of Pacifism that Branson's venture epitomises, and which shamefully most of the so called revoluitonary Left also advocates today. They made clear that Imperialist War was the necessary and inevitable consequence of Capitalist competition. It was not possible to prevent such wars by reformists measures, by street demonstrations, Parliamentary motions or other such devices which sought to control the actions of the Bourgeois State. As Leon Trotsky put it, workers can only control the actions of the State if they control the State.
But, the necessary conclusion from that is that such wars can only be prevented if workers take control of the State, and that means they have to overthrow Capitalism itself. It was necessary not to oppose the War by pacifist measures, but for socialists to become the best soldiers to fight alongside their fellow workers and explain this to them, and thereby ultimately to show that the answer to War was to turn their guns on their own rulers. That was to be revoluitonary defeatists, to advocate not the military victory of your opponent, but the revolutionary overthrow of your own rulers using the very weapons they had put at your disposal. In 1917, the Russian soldiers having done that to the Tsar, shouted across th trenches to their German comrades, "We have done our bit to end this War, by throwing out our Tsar. Now you do the same and throw out your Kaiser, then we can all go home."
Yet, despite the terrible tragedy of WWI with the loss of life of tens of millions of working people that simple lesson was not learned. In the run up to WWII it was not only the pacifists and reformsists that advocated the same kind of disarmamanet, and anti-war Conferences and demonstrations. Those who were supposed to be the heirs of Lenin and the Zimmerwaldists were at the forefront of such diversions. To his credit Trotsky opposed such moves. He called on socialists to engage in military training, to attempt to bring it under Trade Union control, to be the best soldiers and so on, and to build revolutionary nuclei within the armed forces so that at some point during the War, just s had happened in WWI, the forces would become available for a revoluitonary overturn in one or more of the contending adversaries countries. Yet, even within the ranks of the so called Trotskyists, certainly in the ranks of those that veered between the Trotskyists and the Stalinists and reformists, this posiiton was not at all universal.
Today, it is not at all so. The statism that infects the whole of the Left almost without exception leads to the kind of Pacifist nonsense that suggests that War can be stopped by Public Opinion, by mass demonstrations, by Conferences, or even by limited strikes. The implication is that the foreign policy of the capitalist State can be controlled by the working class, just as the implication is given that Workers can exercise "Workers Control" over capitalist property nationalised by that State without the working class being on the verge of ovethrowing it. The whole history of the twentieth century shows it cannot.
Workers can only exercise control over property when they themselves own that property, and even then the bouregoisie will try to use its State to frustrate even that. Less still can they control the State and its actions unless they own that State, unless it is their State. If the working class - indeed humanity as a whole -is to avoid a catastrophe on unimaginable scale when the current Long Wave Boom ends around 2020-2025, that lesson has to be relearned, and relearned quickly.
Saturday, 6 December 2008
Climbing A Wall of Worry?
Traders in the financial markets hav a whole series of aphorisms much like people who work in any other trade. Like those of other trades, these aphorisms are based on years of experience passed down over the generations. For example, there is "Sell in May and Go Away, come back again on St Ledger Day." This could be taken as being like the Banking aphorism known as the 3-6-3 rule, borrow at 3%, lend at 6% and be on the golf course by 3 o'clock. That is it could simpy be advice to go on holiday for several months during the Summer. In fact, its not. Stock market records going back over 100 years show that if, in fact you did, sell your shares at the beginning of May, and came back after St. Ledger day, and began buying again you would on average have made 30% more than if you had held your shares throughout that period.
In America, they have an aphorism that as the first week in January goes so goes January, and as January goes, so goes the Year. There are other similar seasonal aphorisms, for example, they talk about a Santa Claus Rally, as stocks often rise in the run up to Xmas and New Year. There are similar predictions of performance based on the coming to Ofice of a new President and so on.
One of the other aphorisms is of the market "Climbing a Wall of Worry". What this means is that before the Market can begin to engage in a sustained recovery from prolonged declines it has to be able to encounter a whole series of bad news without selling off disastrously. It is a symptom of the psychology of the market that when it is entering period of sustained declines - a Bear Market - then any piece of bad news, or even news that can be interpreted badly, or is just not as good as it could have been, is used by traders and investors as an excuse to sell on the esxpectation that things will get worse. Conversely, there comes a point when that psychology goes into reverse. Everyone has already thought the worst, sold up, priced shares as though the end of the world is coming, and so when things turn out not so bad a few brave souls dip their toes into the water, and buy.
In fact, the most succesful investors over the years have probably been those known as Contrarians, those who do the opposite of what the majority are doing. So when the world and his dog were buying shares, particularly technology shares in 2000, the contrarians, were selling, even if they had bought in the first place. Warren Buffett never bought technology shares to begin with saying he didn't invest in things he didn't understand. Conversely, the Contrarian buys, precisely at that point when everyone else has sold when they feel they will never buy shares ever again. In the 1930's people like Sir John Templeton made their fortunes precisely by buying a wide range of very cheap shares.
The point? Yesterday, the US announced the worst increase in unemployment since 1974, an increase of more than 1/2 million. It came on the back of a whole series of bad news. If there was something for investors o worry about, it was the string of bad news that had hit the markets over the last week or so. Yet, the DOW Jones index rose more than 200 points. The broader based S&P 500 rose also more than 2%, and the technology and energy heavy NASDAQ rose by a similar amount. Is this an indication that indeed, the market is climbing a wall of worry? Possibly. The market has been extremely volatile in recent weeks moving down several hundred points, then up several hundred points often within the space of a single trading session. That is often a sign that a bottom is being formed in the market as traders and investors jostle over whether prices can move lower or not.
There are good reasons for believing that it is, though that doesn't mean that there cannot be sudden large dips along the way. What reasons are there. First of all, the market tends to anticipate developments in the economy by around 6 months. Typically, a Credit Crunch lasts for two years. This has been the Mother of all Credit Crunches so it is risky to anticipate its demise will occur on cue. But, it began in the Summer of 2007, and that means it should begin to unwind by the Summer of 2009 i.e. in a round 6 months time. There are some signs that that is beginning to happen not unrelated to the unprecented intervention of the capitalist State throughout the world economy in increasing liquidity, in recapitalising the banks, in underwriting risk and so on. It is slow, but there are signs that it is beginning to happen. Rising share prices will help that as it strengthens Bank Balance Sheets itself, and begins to create a climate of greater confidence, necessary for banks to begin lending to each other again.
It is almost exclusively the Credit Crunch which has been responsible for trhe economic slowdown. It was inevitable that economies like the US and UK with huge debt overhangs would have to slow down in order to achieve the necessary rebalancing of the world economy between these huge debtor nations, and the rapidly growing creditor nations in Asia, and the Middle East, but it is the Credit Crunch which has sharpened that necessary adjustment intensely. The unwinding of the Credit Crunch will have a marked effect on economic recovery. In a world economy which is till likely to be growing at around 4% - way above the 2.5% required for a global recession - and where the world's fourth largest economy - China - is projected to grow by 10% next year, any such recovery is likely to quickly spread.
Moreover, Capitalist governments throughout the world are engaging in huge Keynesian demand management programmes to stimulate economic growth. In the US, Obama is promising, am economic stimulus package that could be up to 1 trillion dollars, focussed on infrastructure projects. Last week a group of technical specialists said that such a programme could create millions of new jobs within months, because States have the capability to begin work on road and bridge building and repair almost immediately. Obama is giving them an icnentive saying that if they don't use the funds provided quickly they will lose them.
In Britain, the measures of the Pre-Budget Statement have been largely misunderstood. There has been a focus on the 2.5% VAT cut as though the intention were to encourage people to buy this or that item. The idea is that in ocnsumer's overall spending they will have 2.5% more to spend. If you spend £10,000 in a year you will have £250 more to spend than you otherwise would have had. Its also likely that Brown is keeping some powder dry in order to encourage a more unified fiscal package throughout the whole of Europe, which itself has announced a fiscal stimulus, but which is so far inadequate, and shows the need even on the basis of Capitalist rationality for a centralised European State with centralised Fiscal and Monetary Power.
A certain stimulus has already been given by the fall in the price of oil and other raw materials. However, as I have said previously these falls have to be treated cautiously. In large part the falls have been the consequecne of forced selling by Hedge Funds, Financial Institutions, and speculators with Long positions. The hedge Funds and Financial Institutions became forced sellers to shore up their cash positions as the Credit Crunch bit deep. The speculators found themselves trying to catch a falling knife as prices careered downhill, and had to rush to get out. Now conversely, doom and gloom about the severity of recession is probably causing those same speculators to sell energy and commodities short forcing prices lower still. I'm not alone in that view. Last week I saw leendary commodities trader Jim Rogers on CNBC making pretty much the same argument.
According to one report I saw recently, the marginal cost of a barrel of oil is around $85. With oil at current prices that means that companies would make a loss on any new production. Capitalists do not produce things to make a loss, and any prolonged weakness in the price will simply result in new ventures being cancelled, and output reduced, forcing prices back up. And as the Financial Times reported a couple of months back the same is likely to be true of other commodity prices. The main demand for those materials comes from China, and its bilateral deals with countries in Africa and Latin America remain in place. In the meantime domestic demand in China is set to increase rapidly.
So, if the Financial markets have been climbing a wall of worry over the last week it could indeed be a sign that the market has bottomed signalling an end to the economic downturn around the middel of next year. Its likely, in the nature of things that that recovery will be patchy. Its unlikely that the US will simply let the big three motor companies simply disappear, for example. Its likely that what is happening is a jockeying for position. The companies will undoubtedly declare Chapter 11 Bankruptcy to gain protection against Creditors, and will use that - which is its purpose - to massively restructure i.e. get rid of thousands of workers, scrap th pension scheme and Health Insurance Scheme etc. - prior to the Government recapitalising them on the basis of producing new greener vehicles, possibly also tied to some joint ventures and investment of foreign Capital. That will not be without its consequences for the rest of the US economy.
But, that is the reality of Capitalism now for workers in the West. They face huge reductions in living standards over a period of years even as their economies grow, because that is required by Capitalism in order to bring about a semblance of equalisation with the Value of labour power in the global market place.
In America, they have an aphorism that as the first week in January goes so goes January, and as January goes, so goes the Year. There are other similar seasonal aphorisms, for example, they talk about a Santa Claus Rally, as stocks often rise in the run up to Xmas and New Year. There are similar predictions of performance based on the coming to Ofice of a new President and so on.
One of the other aphorisms is of the market "Climbing a Wall of Worry". What this means is that before the Market can begin to engage in a sustained recovery from prolonged declines it has to be able to encounter a whole series of bad news without selling off disastrously. It is a symptom of the psychology of the market that when it is entering period of sustained declines - a Bear Market - then any piece of bad news, or even news that can be interpreted badly, or is just not as good as it could have been, is used by traders and investors as an excuse to sell on the esxpectation that things will get worse. Conversely, there comes a point when that psychology goes into reverse. Everyone has already thought the worst, sold up, priced shares as though the end of the world is coming, and so when things turn out not so bad a few brave souls dip their toes into the water, and buy.
In fact, the most succesful investors over the years have probably been those known as Contrarians, those who do the opposite of what the majority are doing. So when the world and his dog were buying shares, particularly technology shares in 2000, the contrarians, were selling, even if they had bought in the first place. Warren Buffett never bought technology shares to begin with saying he didn't invest in things he didn't understand. Conversely, the Contrarian buys, precisely at that point when everyone else has sold when they feel they will never buy shares ever again. In the 1930's people like Sir John Templeton made their fortunes precisely by buying a wide range of very cheap shares.
The point? Yesterday, the US announced the worst increase in unemployment since 1974, an increase of more than 1/2 million. It came on the back of a whole series of bad news. If there was something for investors o worry about, it was the string of bad news that had hit the markets over the last week or so. Yet, the DOW Jones index rose more than 200 points. The broader based S&P 500 rose also more than 2%, and the technology and energy heavy NASDAQ rose by a similar amount. Is this an indication that indeed, the market is climbing a wall of worry? Possibly. The market has been extremely volatile in recent weeks moving down several hundred points, then up several hundred points often within the space of a single trading session. That is often a sign that a bottom is being formed in the market as traders and investors jostle over whether prices can move lower or not.
There are good reasons for believing that it is, though that doesn't mean that there cannot be sudden large dips along the way. What reasons are there. First of all, the market tends to anticipate developments in the economy by around 6 months. Typically, a Credit Crunch lasts for two years. This has been the Mother of all Credit Crunches so it is risky to anticipate its demise will occur on cue. But, it began in the Summer of 2007, and that means it should begin to unwind by the Summer of 2009 i.e. in a round 6 months time. There are some signs that that is beginning to happen not unrelated to the unprecented intervention of the capitalist State throughout the world economy in increasing liquidity, in recapitalising the banks, in underwriting risk and so on. It is slow, but there are signs that it is beginning to happen. Rising share prices will help that as it strengthens Bank Balance Sheets itself, and begins to create a climate of greater confidence, necessary for banks to begin lending to each other again.
It is almost exclusively the Credit Crunch which has been responsible for trhe economic slowdown. It was inevitable that economies like the US and UK with huge debt overhangs would have to slow down in order to achieve the necessary rebalancing of the world economy between these huge debtor nations, and the rapidly growing creditor nations in Asia, and the Middle East, but it is the Credit Crunch which has sharpened that necessary adjustment intensely. The unwinding of the Credit Crunch will have a marked effect on economic recovery. In a world economy which is till likely to be growing at around 4% - way above the 2.5% required for a global recession - and where the world's fourth largest economy - China - is projected to grow by 10% next year, any such recovery is likely to quickly spread.
Moreover, Capitalist governments throughout the world are engaging in huge Keynesian demand management programmes to stimulate economic growth. In the US, Obama is promising, am economic stimulus package that could be up to 1 trillion dollars, focussed on infrastructure projects. Last week a group of technical specialists said that such a programme could create millions of new jobs within months, because States have the capability to begin work on road and bridge building and repair almost immediately. Obama is giving them an icnentive saying that if they don't use the funds provided quickly they will lose them.
In Britain, the measures of the Pre-Budget Statement have been largely misunderstood. There has been a focus on the 2.5% VAT cut as though the intention were to encourage people to buy this or that item. The idea is that in ocnsumer's overall spending they will have 2.5% more to spend. If you spend £10,000 in a year you will have £250 more to spend than you otherwise would have had. Its also likely that Brown is keeping some powder dry in order to encourage a more unified fiscal package throughout the whole of Europe, which itself has announced a fiscal stimulus, but which is so far inadequate, and shows the need even on the basis of Capitalist rationality for a centralised European State with centralised Fiscal and Monetary Power.
A certain stimulus has already been given by the fall in the price of oil and other raw materials. However, as I have said previously these falls have to be treated cautiously. In large part the falls have been the consequecne of forced selling by Hedge Funds, Financial Institutions, and speculators with Long positions. The hedge Funds and Financial Institutions became forced sellers to shore up their cash positions as the Credit Crunch bit deep. The speculators found themselves trying to catch a falling knife as prices careered downhill, and had to rush to get out. Now conversely, doom and gloom about the severity of recession is probably causing those same speculators to sell energy and commodities short forcing prices lower still. I'm not alone in that view. Last week I saw leendary commodities trader Jim Rogers on CNBC making pretty much the same argument.
According to one report I saw recently, the marginal cost of a barrel of oil is around $85. With oil at current prices that means that companies would make a loss on any new production. Capitalists do not produce things to make a loss, and any prolonged weakness in the price will simply result in new ventures being cancelled, and output reduced, forcing prices back up. And as the Financial Times reported a couple of months back the same is likely to be true of other commodity prices. The main demand for those materials comes from China, and its bilateral deals with countries in Africa and Latin America remain in place. In the meantime domestic demand in China is set to increase rapidly.
So, if the Financial markets have been climbing a wall of worry over the last week it could indeed be a sign that the market has bottomed signalling an end to the economic downturn around the middel of next year. Its likely, in the nature of things that that recovery will be patchy. Its unlikely that the US will simply let the big three motor companies simply disappear, for example. Its likely that what is happening is a jockeying for position. The companies will undoubtedly declare Chapter 11 Bankruptcy to gain protection against Creditors, and will use that - which is its purpose - to massively restructure i.e. get rid of thousands of workers, scrap th pension scheme and Health Insurance Scheme etc. - prior to the Government recapitalising them on the basis of producing new greener vehicles, possibly also tied to some joint ventures and investment of foreign Capital. That will not be without its consequences for the rest of the US economy.
But, that is the reality of Capitalism now for workers in the West. They face huge reductions in living standards over a period of years even as their economies grow, because that is required by Capitalism in order to bring about a semblance of equalisation with the Value of labour power in the global market place.
What Time Is It?
Lat week, BBC2’s “Horizon”, asked the question, “Do You Know What Time It Is?” Brian Cox appears to be becoming the new face of science on TV. Recently, he fronted the programme about the “Big Bag Machine”, The Large Hadron Collider at CERN where he works as a particle physicist. He is a good choice for trying to encourage an interest in science in the new generation. He looks more like he should be in a Manchester pop group than splitting atoms.
The question he asks here, obviously seems a simple one to anyone without a knowledge of the basics of 20th Century science. But, anyone that knows even a pop version of either Einstein or Quantum Mechanics, knows that the question is not at all a simple one. Yet, the reason it is not simple for either of these two theories of the Universe is different according to each theory. Why should this be of particular interest for a Marxist? Because Marxism is not just a theory of Economics, Politics or Sociology, it is a Philosophy of the fundamental questions of science, of the very nature of existence. From the beginning the creators of Marxism Marx and Engels engrossed themselves in natural science, because the fundamental aspect of their theory was materialism. But also, some of the fundamental questions that Marxists ask about the world depend for their validity on the very questions that Science answers.
Some of the answers that Brian Cox put forward in respect of the question of time, actually pose a problem for some of the basic tenets of Marxism, however, as I will try to demonstrate. They pose questions that need to be answered.
The programme proceeded by moving from the basic questions about time to the more complex. For example, when we ask the question, “What Time Is It?”, what do we mean? Our current Calendar is fairly recent in human history, and is not shared by Muslims, Jews and so on. From what point are we measuring time from? If we mean what time of day then that depends where we are on the globe, how accurate our timepiece etc.
But, the more esoteric nature of the question arises when we ask about the nature of time itself. Does time begin with the Big Bang, or was there time before the Big Bang, and if so does this mean that something existed prior to the Big Bang? This means that asking these questions about time also involves asking questions about the nature of the Universe, and its creation. Big Bang theory says that Time itself began with the Big Bang. Yet, even the most prominent proponent of the Big Bang Theory, Stephen Hawking, if I read him correctly, now believes this to be incorrect. Rather, the latest attempt to produce a unified theory of everything that can bring together Einstein’s theory of the very large, with the Quantum Theory of the very small, String Theory, suggests that the Big Bang was just one event in one dimension of a Universe or multiverse comprising many filaments.
Both Relativity Theory and Quantum Theory mean that the question “What Time is it?” is not susceptible to a straight forward answer. On the one hand Relativity Theory tells us that there are no absolutes – a concept which also lies at the heart of dialectics – everything including Time is relative. Time, Relativity Theory tells us, and it has been demonstrated to be true, moves faster or slower for all of us depending upon where we are, or what we are doing. The faster you move the slower time moves for you compared to everyone else. The closer you are to a gravity source again the slower time moves for you than everyone else, so, indeed, time moves slower for your feet than it does for your head!!! The force of gravity is so strong at the Event Horizon of a Black Hole that time is slowed so much that it actually stops.
Quantum Theory also in another sense says that there are no Absolutes, but in a different sense. Quantum Theory says that everything is about uncertainty and probability. Yet, in another sense this DOES mean that there are absolutes. One experiment fires a single particle of light – a photon – towards a target, but places a filter with slots between the source and target. The result is astounding. Despite the fact that only one Photon is fired what we find is that this Photon passes through every possible slot. It is as though the Photon – travelling at the speed of light where time stands still – goes back and tries a different route to the target. In fact, because there is a higher probability of the particle passing through certain slots compared to others what we see is a distribution, what statisticians call a probability distribution that resembles a wave.
The other aspect of Quantum Theory is the Uncertainty Principle. This certainly causes some problems for Marxists in respect of their materialism. The uncertainty principle says that the charge of a particle is uncertain until it is observed. This doesn’t mean that we just don’t know what that charge is, but that the particle itself doesn’t know whether it is positive or negative until such time as it is observed!!! The importance of this I will come back to later. One of the consequences of this is what is called “Quantum Entanglement” . This means that two particles even though they are separated in space can be linked together. When one particle is observed to determine its charge this act determines the charge as its opposite in the other particle.
In something that is more like science fiction, scientists have actually been able to use the principle of Quantum Entaglement to create a teleportation machine that has successfully teleported information between particles over from one side of a river to the other. See: here .
This is a problem for Marxists. Marxists stand on the ground of materialism. One of the classic questions that distinguishes Materialists from Idealists is the tree falling in the wood question. That is, does the tree actually fall in the wood if no one is there to observe it? The idealist says no, because for the idealist everything that exists in what we call the material world is nothing more than a construction of the Mind. The Mind produces ideas, and those ideas become manifest in the material world. The materialist says, yes, because for the Materialist the Mind is itself only a product of the material world, a complex of chemicals, and chemical reactions. The Material world exists whether the Mind exists or not. But, the Uncertainty principle throws that into doubt, it puts humans back at the centre of the Universe, because it gives to the tree in the forest question a new twist, “Does the particle have positive charge without it being observed to have such?” Answer “No”.!!!
Marxism rests on two basic ideas – Materialism and Dialectics. In fact, there is some confusion over the relationship between the two. For Marx, the bedrock of his theory was Materialism not dialectics. Marx began from the thesis that everything was real, and it was from this reality of a material world that humans had evolved, and within that the human mind, and ideas. Ideas developed as a function of the material world, though not mechanically. The human Mind has the power to abstract, and so an idea plucked from the world of reality can be manipulated within the mind, abstracted from, joined with other ideas similarly processed, and thereby produce a whole series of other ideas not directly taken from the material world. When Marx wrote Capital, it was overtly this method that he used. Collecting facts about that material world, in particular how Man in that world had gone about producing the needed for his survival and development, and how the changes in the way he achieved that in turn changed the way man related to man, and the ideas this engendered within him.
But, Marx recognised that a fundamental characteristic of Matter, and, therefore, of the material world is that it is constantly changing. But, the earliest philosophers had recognised that the very process of change involves a contradiction. One of the best examples is Xeno's Paradox . Xeno concluded that movement i.e. change was impossible because it involved such a contradiction of thing being in two places at the same time. There are many similar examples. Take that of tangent. A tangent is a straight line that touches at a point the circumference of a circle. Calculus tells us that at this point the angle of the straight line and the angle of the circle are equal!!! Yet, how can it be that a circle which involves a continual curve is equal to a straight line???
One of the reasons this gave early philosophers a problem was this very fact that it meant that one of the basic elements of logic – the syllogism – was broken. Aristotle, formulated the syllogism, and its basic form is that A = A. That is a thing is always equal to itself. In modern compuing this syllogism is broken all the time. A common piece of code which is used in respect of changes, for example to build a simple counter is A = A+1, where the new value of A is whatever the value of A was plus 1. But, as Trotsky demonstrated in his polemic against the renegade Marxist Burnham, the syllogism fails at an even more basic level of reality. He points out that not only the symbols representing A will differ if examined ever more closely, but that if we take these two A’s to be physical things, for instance a 1lb of sugar, then we will find that if we measure these two things very accurately, we will find they are not the same. To come back to the issue of time, he points out that a lb of sugar is not even equal to itself, because the molecules and atoms that make up the sugar are themselves continually changing, and so if you measure this lb of sugar it will be different at the end of the measuring from what it was at the beginning. Only if you could compare something with itself outside the passage of time could it be equal to itself, but everything exists in time, and time is perpetually moving forward – even Einstein’s theory doesn’t change that because time still moves forward even at different rates, and where it stops in a black hole you could not measure anything, because time would have stopped for the measurer too.
But, this has caused some confusion. The dialectic has become for some Marxists a kind of totem, they have gone some way to turning the dialectic back off its head from where Marx had turned it. Marx took the dialectic of Hegel in its Idealist form and put it the right way up. Hegel was an Idealist, and so for him the starting point of the dialectic was the Idea. The Idea continually moved forward in Men’s heads – actually for Hegel in he Head’s of Philosophers like himself who then translated the Idea into the Material World through the agency of The State. So for Hegel the dialectic was a kind of mystical force in its own right which drove on development in the material world. For Marx this was nonsense. Ideas changed because the material world changed, and the two reacted upon each other. The dialectic was not a material force, nor even a material force, but was simply a description of that very characteristic of matter that it was in continual flux. To turn the dialectic into anything else other than a description of that process of change is to turn it half way back up again, to invest it with the kind of mystical property that Hegel gave it. So, Marx in writing Capital uses dialectical terminology – largely because he wanted to rail against those that were decrying Hegel – not because he began from a search for such contradictions – he didn’t – but as an effective means of describing, in philosophical terms, that very process of change which Capitalist development represented. Marx overturned not just the content, but also the form of the Hegelian dialectic. It is for a materialist nothing more than a convenient concept by which to describe those very processes of change at a quantum level that our normal terms are unable to deal with.
But, here is where the issues raised in the programme do cause a problem for Marxists stemming from the two theories of time – that resulting from Relativity Theory, and that stemming from Quantum Theory. As Cox elaborated the consequence of Einstein’s Theory is that time and our passage through it is rather like a tube that follows a given path. According to this the Past, Present and Future are not only a function of when, but of where. In other words there is a place where our past exists that we could travel back to, as well as a place where our Future exists, where again we could similarly travel to. This presents an obvious problem for Marxists. If that were true then it means that the Future is predestined. In that case we cannot alter it, and so there is no point in us trying. But, this conclusion flows directly from the Einsteinian view of time as being continuous, that it can be continually broken down into smaller and smaller periods of time to infinity. That is central to the concept of the dialectic as described by Trotsky in “In Defence of Marxism”.
In opposition to this Einsteinian view, the Quantum Theory puts forward the idea that there is no such predestination, Time is not a path through space, but itself grows into the future. On this view Time is not infinitely divisible, but is granular, that is it is possible to get down to individual distinct granules of time. If we view the Dialectic in a purely mechanical way as some kind of totem then this clearly would represent a problem, because it would mean that Trotsky’s argument falls. It would be possible to examine something during one of these granules of time, though that would seem to pose another problem as to whether although this granule of time existed as distinct from other granules, it too could be divided, in which case Trotsky’s argument surely still holds. But, in some ways that issue is irrelevant. If the dialectic is nothing more than a concept that allows us to deal with what appear to be contradictions arising from the nature of matter as continually in flux, then if Quantum Theory gives us a more accurate, a scientific means rather than philosophical grounds on which to understand that phenomena then why worry? The question also arises what is the space that exists between these granules of Time? Perhaps one way of udnerstanding this is through the uncertainty principle, and maybe this gives the explanation to to those other dialectical paradoxes. Perhaps, it is not that a a straight line and a curve are both the same at the point of tangency, but that their nature is ucnertain like the charge of a particle until observed. Perhaps, there is a 50% chance that at the point of tangency the point is curved, and an equal 50% chance that it is straight. Similarly, the space between granules of time might not be space at all but appear as nothing, only because it represents a movement of time that is uncertain. Perhaps in this "space" in fact what we have is a 50% possibility that time is moving forward, with a 50% chance that it is moving backwards.
There is, however, another paradox that appears to arise from Quantum Theory and the Uncertainty principle. If, the charge of a particle is determined at the point that it is observed then is it the case that this event determines not only the present and future of the particle, but also its past. In other words does the observation determine what the particle has always been, even though until that time it was undetermined, so the past of the particle is in fact altered. But, if that is the case to what extent does this have a ripple effect backwards in time?
At the moment no one has been able to provide a means of unifying the Einsteinian Theory with Quantum Theory, though as stated earlier String Theory looks the best bet at being able to achieve that. Until such time neither theory can be said to provide us with a complete theory of the Universe. Another possibility could be that Time itself is no different than other aspects of the material Universe including its forces, and is itself made up of time particles, that would certainly explain why time like light is affected by gravity. It would also explain why Time slows down the faster you travel. If as einstein says nothing cantravel faster than light then this sets a limit for how fast Time Particles coudl travel. If Time particles travel at the speed of light then the faster you travel the slower they are moving relative to you. A the speed of light they would be stationary compared to you so Time would stand still. In that case, it could be that just as with the case of the photon that went through every possible slot so too time particles could act in the same way, so that an infinity of futures is created, with some being more probable than others. Indeed, it could be that the Universe itself exists simply because it was one of a whole range of probabilities more or less likely including some in which no Universe was created.
The question he asks here, obviously seems a simple one to anyone without a knowledge of the basics of 20th Century science. But, anyone that knows even a pop version of either Einstein or Quantum Mechanics, knows that the question is not at all a simple one. Yet, the reason it is not simple for either of these two theories of the Universe is different according to each theory. Why should this be of particular interest for a Marxist? Because Marxism is not just a theory of Economics, Politics or Sociology, it is a Philosophy of the fundamental questions of science, of the very nature of existence. From the beginning the creators of Marxism Marx and Engels engrossed themselves in natural science, because the fundamental aspect of their theory was materialism. But also, some of the fundamental questions that Marxists ask about the world depend for their validity on the very questions that Science answers.
Some of the answers that Brian Cox put forward in respect of the question of time, actually pose a problem for some of the basic tenets of Marxism, however, as I will try to demonstrate. They pose questions that need to be answered.
The programme proceeded by moving from the basic questions about time to the more complex. For example, when we ask the question, “What Time Is It?”, what do we mean? Our current Calendar is fairly recent in human history, and is not shared by Muslims, Jews and so on. From what point are we measuring time from? If we mean what time of day then that depends where we are on the globe, how accurate our timepiece etc.
But, the more esoteric nature of the question arises when we ask about the nature of time itself. Does time begin with the Big Bang, or was there time before the Big Bang, and if so does this mean that something existed prior to the Big Bang? This means that asking these questions about time also involves asking questions about the nature of the Universe, and its creation. Big Bang theory says that Time itself began with the Big Bang. Yet, even the most prominent proponent of the Big Bang Theory, Stephen Hawking, if I read him correctly, now believes this to be incorrect. Rather, the latest attempt to produce a unified theory of everything that can bring together Einstein’s theory of the very large, with the Quantum Theory of the very small, String Theory, suggests that the Big Bang was just one event in one dimension of a Universe or multiverse comprising many filaments.
Both Relativity Theory and Quantum Theory mean that the question “What Time is it?” is not susceptible to a straight forward answer. On the one hand Relativity Theory tells us that there are no absolutes – a concept which also lies at the heart of dialectics – everything including Time is relative. Time, Relativity Theory tells us, and it has been demonstrated to be true, moves faster or slower for all of us depending upon where we are, or what we are doing. The faster you move the slower time moves for you compared to everyone else. The closer you are to a gravity source again the slower time moves for you than everyone else, so, indeed, time moves slower for your feet than it does for your head!!! The force of gravity is so strong at the Event Horizon of a Black Hole that time is slowed so much that it actually stops.
Quantum Theory also in another sense says that there are no Absolutes, but in a different sense. Quantum Theory says that everything is about uncertainty and probability. Yet, in another sense this DOES mean that there are absolutes. One experiment fires a single particle of light – a photon – towards a target, but places a filter with slots between the source and target. The result is astounding. Despite the fact that only one Photon is fired what we find is that this Photon passes through every possible slot. It is as though the Photon – travelling at the speed of light where time stands still – goes back and tries a different route to the target. In fact, because there is a higher probability of the particle passing through certain slots compared to others what we see is a distribution, what statisticians call a probability distribution that resembles a wave.
The other aspect of Quantum Theory is the Uncertainty Principle. This certainly causes some problems for Marxists in respect of their materialism. The uncertainty principle says that the charge of a particle is uncertain until it is observed. This doesn’t mean that we just don’t know what that charge is, but that the particle itself doesn’t know whether it is positive or negative until such time as it is observed!!! The importance of this I will come back to later. One of the consequences of this is what is called “Quantum Entanglement” . This means that two particles even though they are separated in space can be linked together. When one particle is observed to determine its charge this act determines the charge as its opposite in the other particle.
In something that is more like science fiction, scientists have actually been able to use the principle of Quantum Entaglement to create a teleportation machine that has successfully teleported information between particles over from one side of a river to the other. See: here .
This is a problem for Marxists. Marxists stand on the ground of materialism. One of the classic questions that distinguishes Materialists from Idealists is the tree falling in the wood question. That is, does the tree actually fall in the wood if no one is there to observe it? The idealist says no, because for the idealist everything that exists in what we call the material world is nothing more than a construction of the Mind. The Mind produces ideas, and those ideas become manifest in the material world. The materialist says, yes, because for the Materialist the Mind is itself only a product of the material world, a complex of chemicals, and chemical reactions. The Material world exists whether the Mind exists or not. But, the Uncertainty principle throws that into doubt, it puts humans back at the centre of the Universe, because it gives to the tree in the forest question a new twist, “Does the particle have positive charge without it being observed to have such?” Answer “No”.!!!
Marxism rests on two basic ideas – Materialism and Dialectics. In fact, there is some confusion over the relationship between the two. For Marx, the bedrock of his theory was Materialism not dialectics. Marx began from the thesis that everything was real, and it was from this reality of a material world that humans had evolved, and within that the human mind, and ideas. Ideas developed as a function of the material world, though not mechanically. The human Mind has the power to abstract, and so an idea plucked from the world of reality can be manipulated within the mind, abstracted from, joined with other ideas similarly processed, and thereby produce a whole series of other ideas not directly taken from the material world. When Marx wrote Capital, it was overtly this method that he used. Collecting facts about that material world, in particular how Man in that world had gone about producing the needed for his survival and development, and how the changes in the way he achieved that in turn changed the way man related to man, and the ideas this engendered within him.
But, Marx recognised that a fundamental characteristic of Matter, and, therefore, of the material world is that it is constantly changing. But, the earliest philosophers had recognised that the very process of change involves a contradiction. One of the best examples is Xeno's Paradox . Xeno concluded that movement i.e. change was impossible because it involved such a contradiction of thing being in two places at the same time. There are many similar examples. Take that of tangent. A tangent is a straight line that touches at a point the circumference of a circle. Calculus tells us that at this point the angle of the straight line and the angle of the circle are equal!!! Yet, how can it be that a circle which involves a continual curve is equal to a straight line???
One of the reasons this gave early philosophers a problem was this very fact that it meant that one of the basic elements of logic – the syllogism – was broken. Aristotle, formulated the syllogism, and its basic form is that A = A. That is a thing is always equal to itself. In modern compuing this syllogism is broken all the time. A common piece of code which is used in respect of changes, for example to build a simple counter is A = A+1, where the new value of A is whatever the value of A was plus 1. But, as Trotsky demonstrated in his polemic against the renegade Marxist Burnham, the syllogism fails at an even more basic level of reality. He points out that not only the symbols representing A will differ if examined ever more closely, but that if we take these two A’s to be physical things, for instance a 1lb of sugar, then we will find that if we measure these two things very accurately, we will find they are not the same. To come back to the issue of time, he points out that a lb of sugar is not even equal to itself, because the molecules and atoms that make up the sugar are themselves continually changing, and so if you measure this lb of sugar it will be different at the end of the measuring from what it was at the beginning. Only if you could compare something with itself outside the passage of time could it be equal to itself, but everything exists in time, and time is perpetually moving forward – even Einstein’s theory doesn’t change that because time still moves forward even at different rates, and where it stops in a black hole you could not measure anything, because time would have stopped for the measurer too.
But, this has caused some confusion. The dialectic has become for some Marxists a kind of totem, they have gone some way to turning the dialectic back off its head from where Marx had turned it. Marx took the dialectic of Hegel in its Idealist form and put it the right way up. Hegel was an Idealist, and so for him the starting point of the dialectic was the Idea. The Idea continually moved forward in Men’s heads – actually for Hegel in he Head’s of Philosophers like himself who then translated the Idea into the Material World through the agency of The State. So for Hegel the dialectic was a kind of mystical force in its own right which drove on development in the material world. For Marx this was nonsense. Ideas changed because the material world changed, and the two reacted upon each other. The dialectic was not a material force, nor even a material force, but was simply a description of that very characteristic of matter that it was in continual flux. To turn the dialectic into anything else other than a description of that process of change is to turn it half way back up again, to invest it with the kind of mystical property that Hegel gave it. So, Marx in writing Capital uses dialectical terminology – largely because he wanted to rail against those that were decrying Hegel – not because he began from a search for such contradictions – he didn’t – but as an effective means of describing, in philosophical terms, that very process of change which Capitalist development represented. Marx overturned not just the content, but also the form of the Hegelian dialectic. It is for a materialist nothing more than a convenient concept by which to describe those very processes of change at a quantum level that our normal terms are unable to deal with.
But, here is where the issues raised in the programme do cause a problem for Marxists stemming from the two theories of time – that resulting from Relativity Theory, and that stemming from Quantum Theory. As Cox elaborated the consequence of Einstein’s Theory is that time and our passage through it is rather like a tube that follows a given path. According to this the Past, Present and Future are not only a function of when, but of where. In other words there is a place where our past exists that we could travel back to, as well as a place where our Future exists, where again we could similarly travel to. This presents an obvious problem for Marxists. If that were true then it means that the Future is predestined. In that case we cannot alter it, and so there is no point in us trying. But, this conclusion flows directly from the Einsteinian view of time as being continuous, that it can be continually broken down into smaller and smaller periods of time to infinity. That is central to the concept of the dialectic as described by Trotsky in “In Defence of Marxism”.
In opposition to this Einsteinian view, the Quantum Theory puts forward the idea that there is no such predestination, Time is not a path through space, but itself grows into the future. On this view Time is not infinitely divisible, but is granular, that is it is possible to get down to individual distinct granules of time. If we view the Dialectic in a purely mechanical way as some kind of totem then this clearly would represent a problem, because it would mean that Trotsky’s argument falls. It would be possible to examine something during one of these granules of time, though that would seem to pose another problem as to whether although this granule of time existed as distinct from other granules, it too could be divided, in which case Trotsky’s argument surely still holds. But, in some ways that issue is irrelevant. If the dialectic is nothing more than a concept that allows us to deal with what appear to be contradictions arising from the nature of matter as continually in flux, then if Quantum Theory gives us a more accurate, a scientific means rather than philosophical grounds on which to understand that phenomena then why worry? The question also arises what is the space that exists between these granules of Time? Perhaps one way of udnerstanding this is through the uncertainty principle, and maybe this gives the explanation to to those other dialectical paradoxes. Perhaps, it is not that a a straight line and a curve are both the same at the point of tangency, but that their nature is ucnertain like the charge of a particle until observed. Perhaps, there is a 50% chance that at the point of tangency the point is curved, and an equal 50% chance that it is straight. Similarly, the space between granules of time might not be space at all but appear as nothing, only because it represents a movement of time that is uncertain. Perhaps in this "space" in fact what we have is a 50% possibility that time is moving forward, with a 50% chance that it is moving backwards.
There is, however, another paradox that appears to arise from Quantum Theory and the Uncertainty principle. If, the charge of a particle is determined at the point that it is observed then is it the case that this event determines not only the present and future of the particle, but also its past. In other words does the observation determine what the particle has always been, even though until that time it was undetermined, so the past of the particle is in fact altered. But, if that is the case to what extent does this have a ripple effect backwards in time?
At the moment no one has been able to provide a means of unifying the Einsteinian Theory with Quantum Theory, though as stated earlier String Theory looks the best bet at being able to achieve that. Until such time neither theory can be said to provide us with a complete theory of the Universe. Another possibility could be that Time itself is no different than other aspects of the material Universe including its forces, and is itself made up of time particles, that would certainly explain why time like light is affected by gravity. It would also explain why Time slows down the faster you travel. If as einstein says nothing cantravel faster than light then this sets a limit for how fast Time Particles coudl travel. If Time particles travel at the speed of light then the faster you travel the slower they are moving relative to you. A the speed of light they would be stationary compared to you so Time would stand still. In that case, it could be that just as with the case of the photon that went through every possible slot so too time particles could act in the same way, so that an infinity of futures is created, with some being more probable than others. Indeed, it could be that the Universe itself exists simply because it was one of a whole range of probabilities more or less likely including some in which no Universe was created.
Tuesday, 2 December 2008
A Reply To Dr. Paul Cockshott
This is a reply to Dr. Paul Cockshott who wrote to me commenting on my blog "A Reply To Bourgeois Academics" see his comment here , in which he references a work by Allin Cottrell and himself on the Falling Rate of Profit. The discussion itself was started as a result of my blog The Tendency of the Rate of Profit to Rise .
Paul and Allin's article can be found here
Paul,
Thank you for the link to your article on the Falling Rate of Profit as a response to my previous blogs. I suppose the first thing to say is that your article is about the Tendency of the Rate of Profit to Fall whereas my original blog which sparked this discussion was in fact a suggestion that current development within Capitalism were creating a Tendency for the Rate of profit to RISE. By the by, I seek below to look at the points you make in your article in so far as they relate to the ideas I presented on the Rising Rate of Profit.
You state early on.
“Point 3 is perhaps more questionable.”
(The enhancement of the productivity of labour involves workers working with an increased “mass” of machinery or means of labour, and working up a larger quantity of materials per unit time.)
“Certainly there are many examples of technological change that conform to this pattern: the switch from fluvial transport to railways, or from handlooms to machine ones, but there are also counterexamples. Sometimes, as for instance in the move from metal casting to plastic moulding for many uses, the more advanced process accomplishes its results more cheaply while deploying a lesser “mass” of means of production.”
In fact, I made precisely this point in arguing the RISING Rate of Profit. I wrote,
“Similarly, if we look at other items of consumption we find that in fact the materials used are negligible. A mobile phone, a PC, an LCD TV, the various services we use such as cinema, theatre etc. In fact a mobile phone probably uses far less materials than did the old type of land line, the LCD certainly less than a CRT screen. Again the largest component in the value of these products is not the Capital or material used in the production, but the intellectual labour that went into their development etc. Look at the huge amounts now spent on Computer games, yet a CD or DVD takes very few material resources to produce, very little in the way of Constant Capital. But it does take the labour of skilled games programmers. Or music. When I was first collecting records 40 years ago to amass 1,000 records consumed a fair amount of vinyl. Now 20 times that amount can be stored on a tiny stick, instead of the cost of transporting all the vinyl etc to record shops the music can be downloaded all over the world instantaneously over the Internet.”
Nor in fact, do I believe that Marx was unaware of such a potential. Certainly he was aware that rising productivity could reduce the cost of such material inputs considerably. He also set out the way in which technological change meant that investment was not only in additional machines of the same type, but of machines of a “better” type, and this point – the idea that a single advanced machine can replace several less advanced machines – is essentially no different from the argument of the replacement of one type of material input for another.
You also say,
“point 4:
(Although the value of the means of labour, materials, etc (in Marx’s terminology, constant capital) will not generally increase in full proportion to the “mass”, it will nonetheless increase, and faster than the variable capital. The organic composition of capital tends to rise.)
this may not always be true, but it is at least plausible and we will not question it here.”
But, in fact Marx does not say what you attribute to him in Point 4. He specifically says that the QUANTITY of the mass of means of production might RISE, whilst its VALUE actually FALLS. See p. 236 Capital Vol III Lawrence & Wishart Ed.
“If the pursuit of profit (via the pursuit of higher labour productivity) has the effect of raising both c/v and s/v, does that not leave the overall effect on the rate of profit indeterminate?”
Yes, it does, but that is why Marx talks of this Law as being a Tendency, and why he sets out all of these countervailing factors!
“Neither s/v nor c/v has any obvious theoretical upper bound.”
But, that is clearly not true. There is no upper bound to C/V as C can expand to infinity, but there must be a logical upper bound to s/v because it is not possible for workers to live on air. Marx gives the answer to your objection in Capital Vol III as I quoted in my original article.
“But as Marx, explains there are limits to this. The working day cannot be longer than 24 hours. Even if the productivity of Labour rises so that the amount of time out of this 24 that a worker requires to meet their own needs falls to just 1 hour, leaving 23 hours to be appropriated by the capitalist, the amount of surplus value appropriated will still be less than from 24 workers who provide just 1 hour of surplus value for the Capitalist.”
The real objection to the Law here is I believe that which I set out in my article. That is that the conditions of modern Capitalism have created a situation in which the new types of Consumption – consumption which forms an increasing part of consumers expenditure – are for commodities that are more of the type which Marx would have described as “luxuries”, they are goods where the important component of their value is not Constant Capital, but is Complex Labour. The consequence is that in reality for these types of commodities C/V is not rising, and therefore, the very condition which Marx required for a Falling Rate of Profit is reversed.
Hence,
“Although the recent rise in house prices – itself a function of the fact that an increasing number of single people who in previous generations would have lived with their parents now demand a home of their own, along with the increasing number of people with two or more homes – means that a large portion of workers income is spent on shelter, the proportion spent on food has continued to decline, and even here at least some is spent not on food itself, but on eating out i.e. entertainment really. Similarly with clothing an increasing amount is spent not just for the necessity of clothing but on paying for a designer label, or the latest fashion etc. On top of that is an increasing amount spent on things such as mobile phones and other electronic gizmos, on entertainment, and other services.
The nature of this consumption is completely different from the type of consumption theorised by Marx, and the nature of the production of these items of consumption is different too. Marx looked at the consumption of luxury goods by the rich. In general he concluded the organic composition of Capital in these industries was lower than in the production of wage goods. The reason was that the nature of the production required a higher degree of skilled labour power. One of the reasons a luxury good is a luxury good is because it is more unique than something mass produced. An expensive piece of jewellery cannot simply be reproduced over and over again by a machine, cannot be churned out by unskilled labourers. It requires the labour power of a skilled artisan. Such workers do not abound, their labour power is not simple labour but complex labour valued at several multiples that of an unskilled worker. An 8 hour day of such a worker might then be equal to 72 or 144 hours of an unskilled worker. The Surplus Value appropriated in a single day might amount to 36 or 72 hours, even allowing for the higher wages of the artisan.”
“Marx clearly had an ideological investment in the idea that the falling rate of profit was primary. This proposition licensed the conclusion that “the real barrier of capitalist production is capital itself” (Capital, III, p. 248). The very process that constituted capitalism’s historical “justification” – namely, its development of the productivity of social labour to an unprecedented level – was at the same time the source of a falling rate of profit, which places a roadblock in the way of further development.”
But, we can see why Marx could come to this conclusion for reasons completely separate from ideological considerations. To a large degree competition drives Capital Accumulation. Capitalists have to accumulate in order to remain competitive. But, there are limits. Clearly, if the Average Rate of Profit is falling for all Capitalists then the same psychological factors will work equally on all of them. In search of a higher return on their Capital they may seek not to invest at home, but to invest abroad. They may seek to speculate, or they may all reduce accumulation in order to divert a greater proportion of Surplus Value to unproductive consumption. All of these decisions are ones which are specific to Capital as Capital. Workers would not reduce accumulation for any of these alternatives simply because the rate of profit had fallen, becaue they would look at production from the standpoint of the production of Use Values not Exchange Values.
“It then seems plausible that as s/(s+v) gets closer to 1.0 it will become increasingly difficult to find an offset on this account for an ongoing rise in c/(s+v), or in other words a rising rate of exploitation can’t keep capitalism out of trouble for ever.”
You say this as though Marx did not spell this out himself. He did, as the example I gave above paraphrasing his explanation demonstrates.
“The falling rate of profit is a macro-economic phenomenon, but it derives, he (Roemer)argues from the decisions of individual capitalists unaware of the macroeconomic consequences of decisions that they make.”
It is impossible to understand Marx’s economics within the constraints of the bourgeois economic concepts of macro and micro economics precisely because Marx understood the Capitalist economy for what it is a dialectically interrelated whole. The Falling Rate of Profit is not a macro or a micro economic phenomenon, but a Capitalist phenomenon. You cannot theorise it as a macro-economic phenomenon arising from individual decisions of Capitalists precisely because Capitalism IS such a system of decentralised decision-making. Now would the problem be removed even were we to envision some State capitalist economy with centralised decision making. Ultimately, Capitalists are interested not in the Rate of Profit, but with the absolute volume of Profit available to them. Competition forces them to seek to maximise this absolute volume of Profit by maximising the Rate of Profit on their Capital. Removing competition would remove that constraint, it would not remove the drive to maximise the volume of profit, and the way of maximising the volume of profit remains maximising the exploitation of labour. It is that need to maximise s/v that drives the increase in c/v.
“The thrust of his analysis is that if capitalists take the current set of prices and profit rates as givens, then, any decisions that they make on technical changes which are more profitable to them personally, will also be more profitable to the capitalist class as a whole and, in consequence, will tend to raise the aggregate rate of profit for the whole economy. This theoretical project amounts to the search for an adequate microfoundation for the theory of accumulation.”
Roemer is, of course, mistaken here. Or, at least, he is correct that individual Capitalists see investment decisions in terms of this or that innovation leading to higher profitability, and there is a tendency to see what applies to one as applying to all, but this is clearly not so. The introduction of a new machine does not ADD to Value as bourgeois marginal productivity theory suggests. Rather the increased profit for the Capitalist arises from the fact that this innovation reduces his costs to below the average, reduces his individual value to below the average. If all capitalists follow suit then the average necessary labour-time falls, Exchange-Value falls, and the excess Surplus Value disappears.
“When discusssing the rate of profit in value terms we are dividing a quantity of profit by a stock of capital. Profit can be thought of as a flow of value and as such its dimension its units are person hours/annum, which in dimensional terms is just persons since the hours/annum just give us a scalar. Thus the annual flow of profit when measured in value terms corresponds to a certain number of people - the number of people whose direct and indirect output is materialised in the goods purchased out of profits.”
Let me stop you there. This has nothing to do with Marx’s theory of Value. Marx certainly says that certain types of USE Value are the product of different types of CONCRETE Labour – the Labour of a Tailor produces trousers not chairs, but he is at pains to demonstrate that concrete labour does not enter his theory of Exchange Value. On the contrary, his measure – Labour-time – is in units of abstract, generalized Labour completely separated from human beings. Whilst Marx’s theory posits Labour as one source of Value alongside Nature(See "The Critique of the Gotha Programme"), Labour TIME is nothing more than a Numeraire, a numeraire measuring not the Labour of specific human beings, or even the average of the total Labour-time of all human beings, but a measure of that abstract Labour. How else then could Marx theorise COMPLEX Labour contributing in Labour-time a quantity of hours in multiples of Simple Labour.
In fact, from this simple mistake flows the flaw in the rest of your argument.
“Instead one should focus on what the rate of profit tells us. It tells us something about the potential rate of expansion of capital stocks. It sets an upper limit on the rate of expansion that can be achieved out of internal funding - the rate of capital growth that will be achieved if all profit is reinvested.”
If I were being pedantic I could challenge this. It does not for instance, take into consideration existing hoardes of capital, not does it take into consideration workers, landlords or other savings, which could be mobilized, nor the potential for the use of Credit. But, that is a side issue.
“Let us further assume that all profits are reinvested. Thus a 5% rate of profit will imply a 5% growth per annum of the capital stock. Let us also assume at first that the division of value added between wages and profit remains unchanged over time.
This means that total profit per year will be a constant multiple of total wages per year. Under these circumstances it is clear that the rate of profit will fall over time if rate of growth of wage income is less than the rate of profit, and the rate of profit will rise if the rate of growth of wage income is higher than the rate of profit.”
But, given the constraints you have set V could never grow by more or less than the Rate of Profit. For example,
C100 V 100 S100 R = 50%
We then fully allocate S in line with your constraint.
C(1)150 V(1) 150 S(1) 150 R=50% = (V(1) – V)/V x 100.
If, in accordance with your constraint, there is no change in the Organic Composition of Capital then V must increase in the same proportion as C. The only way given this constraint that V could increase faster than R would be if it did so at the expense of S, but that would break your other constraint that all new value is shared equally between S & V i.e. the rate of Exploitation remains constant.
“We then focus on the determinants of the rate of growth of wage income - measured in labour hours per annum. The dimensions give it away, since wage income in these terms corresponds to a number of people - the number of people whose direct and indirect labour supports the employed population.”
Absolutely not for the reasons set out above. Labour-time has nothing to do with concrete Labour with actual human beings, but is a measure of abstract Labour.
“The rate of growth of wage income comes down to the rate of growth of the working population (given the assumption of a constant rate of surplus value). The appropriate focus for analysis of the falling rate of profit is not technological choice but historical demography.”
Again, absolutely not for the reasons given above. It is entirely possible for wages to rise with a constant Rate of Surplus Value with a FALLING population, provided that an increasing proportion of COMPLEX compared to SIMPLE Labour is used. The reason is that a falling number of persons has no direct bearing on the quantity of Labour-time expended. Were your theory correct then we would have expected to see wages rising fastest at those times when population growth was rising fastest, and vice versa. I would contend we have seen the opposite in many cases.
“If we assume that the rate of growth of the employed population is fixed then the effect is that the actual rate of profit tends towards the rate of growth of the employed population:”
I can see no foundation for this assumption either in logic or in empirical data. For the reasons I have given above a falling or slowly growing population is entirely consistent with a labour force that is becoming more educated, more highly skilled, and in which the proportion, therefore, of Complex to Simple labour rises. The consequence is that the quantity of Labour-time grows as a result of this increasing proportion of Complex Labour, and with this growing volume of labour-time comes a growing volume of surplus value. This can be seen in a number of small economies where a small population is employed in highly skilled, high-value added production, and where rates of profit tend to be high.
This can be demonstrated fairly easily. Imagine an economy with two Departments - one Department produces all of the material consumption goods the other produces entertainment. I am leaving aside the production of Producer Goods for the sake of simplicity, and because it is irrelevant for the purpose of demonstration. 10 million people work in Department I, working a total of 10 billion hours of simple Labour-time. 90% of the utput of the Department is exchanged internally amongst its workers and capitalists, leaving 10% to be traded with Department II - that is 1 billion hours of output. In Department II 1 million people work a total of 1 billion hours of simple Labour which they trade with Department I for consumption goods. These 1 million people are employed in 10,000 Music Halls around the country, 100 people working in each.
We know that the output of Department II is equal to the traded output of Department I because both outputs exchange for each other and is equal to i billion hours. Whenever, then the output of Department II Exchanges entirely for the traded output of Department I we know that to be the case, and we can calculate the Value of Department II's output from it, provided that we assume that the Labour employed in Department I is entirely simple labour.
Now the population falls by 900,000 people. All of them were employed in Department II. However, rather than being employed in 10,000 Music Halls around the country they are now by the magic of technological development all employed in a single TV Company that is able to replicate the output of those 10,000 Music Halls. The output of these remaining 100,000 people in Department II exchanges entirely for the entire traded output of Department I, whose Value we know to be equal to 1 billion hours. We know then that the value of the output of these 100,000 people in Department II is also equal to 1 billion hours or else this trade could not occur.
What then do we have. We have a fall in population of 900,000 people. Yet we have the total output of the economy remaining constant 10 billion hours from Department I, 1 billion from Department II. We also have the output of department II remaining constant despite employment in Department II falling to a tenth its previous level. The basis of this is that the Labour employed in Department II is no longer simple labour, it is complex labour each unit of it being the equivalent of ten units of simple labour.
By the same token, wages paid to this complex labour - if we maintain your constraint that all new Value is divided equally between V and S, will be ten times more than that paid to simple labour. This means that not only has output remained constant with a falling population, but average wages will have risen - because wages paid per person in Department I remain constant whilst, wages paid in Department II will have risen tenfold.
This, of course, assumes that the Organic Composition of Capital in Department II has remained constant in accordance with your constraint i.e. all of the Constant Capital used in TV production amounts to exactly that previously used by 10,000 Music Halls. I would suggest, however, that this constraint is unrealistic. It is an unrealistic constraint to place on Marx in respect of a rising Organic Composition of capital leading to a tendency for a falling Rate of profit, because empirical evidence showed that industrial production DID and does necessitate such a rising organic composition. I would suggest it is an unrealistic constraint for the scenario I am depicting of modern technological production, and the expansion of high value service production leading to a falling organic composition of Capital and tendency for the Rate of profit to rise, because empirical observation DOES show on an extended scale the same kind of transformation given in the example above.
I am not dealing here with the further points you make in respect of other factors such as the depreciation of Capital etc on the rate of profit as these are essentially separate from the point you were making about population growth, and the examples you give are framed within your argument about the limitations of population growth on the Rate of profit as modified by these other considerations. Whilst I find these other issues interesting, and I will possibly return to them for discussion later I think discussion of them is best kept separate.
My main argument would be that in trying to conceptualise Exchange Value from the standpoint of concrete labour as opposed to abstract labour-time you have stepped outside Marx’s theory of value, and this provides the basic flaw in your argument. If you wish to come back on those points I would be happy to respond.
Paul and Allin's article can be found here
Paul,
Thank you for the link to your article on the Falling Rate of Profit as a response to my previous blogs. I suppose the first thing to say is that your article is about the Tendency of the Rate of Profit to Fall whereas my original blog which sparked this discussion was in fact a suggestion that current development within Capitalism were creating a Tendency for the Rate of profit to RISE. By the by, I seek below to look at the points you make in your article in so far as they relate to the ideas I presented on the Rising Rate of Profit.
You state early on.
“Point 3 is perhaps more questionable.”
(The enhancement of the productivity of labour involves workers working with an increased “mass” of machinery or means of labour, and working up a larger quantity of materials per unit time.)
“Certainly there are many examples of technological change that conform to this pattern: the switch from fluvial transport to railways, or from handlooms to machine ones, but there are also counterexamples. Sometimes, as for instance in the move from metal casting to plastic moulding for many uses, the more advanced process accomplishes its results more cheaply while deploying a lesser “mass” of means of production.”
In fact, I made precisely this point in arguing the RISING Rate of Profit. I wrote,
“Similarly, if we look at other items of consumption we find that in fact the materials used are negligible. A mobile phone, a PC, an LCD TV, the various services we use such as cinema, theatre etc. In fact a mobile phone probably uses far less materials than did the old type of land line, the LCD certainly less than a CRT screen. Again the largest component in the value of these products is not the Capital or material used in the production, but the intellectual labour that went into their development etc. Look at the huge amounts now spent on Computer games, yet a CD or DVD takes very few material resources to produce, very little in the way of Constant Capital. But it does take the labour of skilled games programmers. Or music. When I was first collecting records 40 years ago to amass 1,000 records consumed a fair amount of vinyl. Now 20 times that amount can be stored on a tiny stick, instead of the cost of transporting all the vinyl etc to record shops the music can be downloaded all over the world instantaneously over the Internet.”
Nor in fact, do I believe that Marx was unaware of such a potential. Certainly he was aware that rising productivity could reduce the cost of such material inputs considerably. He also set out the way in which technological change meant that investment was not only in additional machines of the same type, but of machines of a “better” type, and this point – the idea that a single advanced machine can replace several less advanced machines – is essentially no different from the argument of the replacement of one type of material input for another.
You also say,
“point 4:
(Although the value of the means of labour, materials, etc (in Marx’s terminology, constant capital) will not generally increase in full proportion to the “mass”, it will nonetheless increase, and faster than the variable capital. The organic composition of capital tends to rise.)
this may not always be true, but it is at least plausible and we will not question it here.”
But, in fact Marx does not say what you attribute to him in Point 4. He specifically says that the QUANTITY of the mass of means of production might RISE, whilst its VALUE actually FALLS. See p. 236 Capital Vol III Lawrence & Wishart Ed.
“If the pursuit of profit (via the pursuit of higher labour productivity) has the effect of raising both c/v and s/v, does that not leave the overall effect on the rate of profit indeterminate?”
Yes, it does, but that is why Marx talks of this Law as being a Tendency, and why he sets out all of these countervailing factors!
“Neither s/v nor c/v has any obvious theoretical upper bound.”
But, that is clearly not true. There is no upper bound to C/V as C can expand to infinity, but there must be a logical upper bound to s/v because it is not possible for workers to live on air. Marx gives the answer to your objection in Capital Vol III as I quoted in my original article.
“But as Marx, explains there are limits to this. The working day cannot be longer than 24 hours. Even if the productivity of Labour rises so that the amount of time out of this 24 that a worker requires to meet their own needs falls to just 1 hour, leaving 23 hours to be appropriated by the capitalist, the amount of surplus value appropriated will still be less than from 24 workers who provide just 1 hour of surplus value for the Capitalist.”
The real objection to the Law here is I believe that which I set out in my article. That is that the conditions of modern Capitalism have created a situation in which the new types of Consumption – consumption which forms an increasing part of consumers expenditure – are for commodities that are more of the type which Marx would have described as “luxuries”, they are goods where the important component of their value is not Constant Capital, but is Complex Labour. The consequence is that in reality for these types of commodities C/V is not rising, and therefore, the very condition which Marx required for a Falling Rate of Profit is reversed.
Hence,
“Although the recent rise in house prices – itself a function of the fact that an increasing number of single people who in previous generations would have lived with their parents now demand a home of their own, along with the increasing number of people with two or more homes – means that a large portion of workers income is spent on shelter, the proportion spent on food has continued to decline, and even here at least some is spent not on food itself, but on eating out i.e. entertainment really. Similarly with clothing an increasing amount is spent not just for the necessity of clothing but on paying for a designer label, or the latest fashion etc. On top of that is an increasing amount spent on things such as mobile phones and other electronic gizmos, on entertainment, and other services.
The nature of this consumption is completely different from the type of consumption theorised by Marx, and the nature of the production of these items of consumption is different too. Marx looked at the consumption of luxury goods by the rich. In general he concluded the organic composition of Capital in these industries was lower than in the production of wage goods. The reason was that the nature of the production required a higher degree of skilled labour power. One of the reasons a luxury good is a luxury good is because it is more unique than something mass produced. An expensive piece of jewellery cannot simply be reproduced over and over again by a machine, cannot be churned out by unskilled labourers. It requires the labour power of a skilled artisan. Such workers do not abound, their labour power is not simple labour but complex labour valued at several multiples that of an unskilled worker. An 8 hour day of such a worker might then be equal to 72 or 144 hours of an unskilled worker. The Surplus Value appropriated in a single day might amount to 36 or 72 hours, even allowing for the higher wages of the artisan.”
“Marx clearly had an ideological investment in the idea that the falling rate of profit was primary. This proposition licensed the conclusion that “the real barrier of capitalist production is capital itself” (Capital, III, p. 248). The very process that constituted capitalism’s historical “justification” – namely, its development of the productivity of social labour to an unprecedented level – was at the same time the source of a falling rate of profit, which places a roadblock in the way of further development.”
But, we can see why Marx could come to this conclusion for reasons completely separate from ideological considerations. To a large degree competition drives Capital Accumulation. Capitalists have to accumulate in order to remain competitive. But, there are limits. Clearly, if the Average Rate of Profit is falling for all Capitalists then the same psychological factors will work equally on all of them. In search of a higher return on their Capital they may seek not to invest at home, but to invest abroad. They may seek to speculate, or they may all reduce accumulation in order to divert a greater proportion of Surplus Value to unproductive consumption. All of these decisions are ones which are specific to Capital as Capital. Workers would not reduce accumulation for any of these alternatives simply because the rate of profit had fallen, becaue they would look at production from the standpoint of the production of Use Values not Exchange Values.
“It then seems plausible that as s/(s+v) gets closer to 1.0 it will become increasingly difficult to find an offset on this account for an ongoing rise in c/(s+v), or in other words a rising rate of exploitation can’t keep capitalism out of trouble for ever.”
You say this as though Marx did not spell this out himself. He did, as the example I gave above paraphrasing his explanation demonstrates.
“The falling rate of profit is a macro-economic phenomenon, but it derives, he (Roemer)argues from the decisions of individual capitalists unaware of the macroeconomic consequences of decisions that they make.”
It is impossible to understand Marx’s economics within the constraints of the bourgeois economic concepts of macro and micro economics precisely because Marx understood the Capitalist economy for what it is a dialectically interrelated whole. The Falling Rate of Profit is not a macro or a micro economic phenomenon, but a Capitalist phenomenon. You cannot theorise it as a macro-economic phenomenon arising from individual decisions of Capitalists precisely because Capitalism IS such a system of decentralised decision-making. Now would the problem be removed even were we to envision some State capitalist economy with centralised decision making. Ultimately, Capitalists are interested not in the Rate of Profit, but with the absolute volume of Profit available to them. Competition forces them to seek to maximise this absolute volume of Profit by maximising the Rate of Profit on their Capital. Removing competition would remove that constraint, it would not remove the drive to maximise the volume of profit, and the way of maximising the volume of profit remains maximising the exploitation of labour. It is that need to maximise s/v that drives the increase in c/v.
“The thrust of his analysis is that if capitalists take the current set of prices and profit rates as givens, then, any decisions that they make on technical changes which are more profitable to them personally, will also be more profitable to the capitalist class as a whole and, in consequence, will tend to raise the aggregate rate of profit for the whole economy. This theoretical project amounts to the search for an adequate microfoundation for the theory of accumulation.”
Roemer is, of course, mistaken here. Or, at least, he is correct that individual Capitalists see investment decisions in terms of this or that innovation leading to higher profitability, and there is a tendency to see what applies to one as applying to all, but this is clearly not so. The introduction of a new machine does not ADD to Value as bourgeois marginal productivity theory suggests. Rather the increased profit for the Capitalist arises from the fact that this innovation reduces his costs to below the average, reduces his individual value to below the average. If all capitalists follow suit then the average necessary labour-time falls, Exchange-Value falls, and the excess Surplus Value disappears.
“When discusssing the rate of profit in value terms we are dividing a quantity of profit by a stock of capital. Profit can be thought of as a flow of value and as such its dimension its units are person hours/annum, which in dimensional terms is just persons since the hours/annum just give us a scalar. Thus the annual flow of profit when measured in value terms corresponds to a certain number of people - the number of people whose direct and indirect output is materialised in the goods purchased out of profits.”
Let me stop you there. This has nothing to do with Marx’s theory of Value. Marx certainly says that certain types of USE Value are the product of different types of CONCRETE Labour – the Labour of a Tailor produces trousers not chairs, but he is at pains to demonstrate that concrete labour does not enter his theory of Exchange Value. On the contrary, his measure – Labour-time – is in units of abstract, generalized Labour completely separated from human beings. Whilst Marx’s theory posits Labour as one source of Value alongside Nature(See "The Critique of the Gotha Programme"), Labour TIME is nothing more than a Numeraire, a numeraire measuring not the Labour of specific human beings, or even the average of the total Labour-time of all human beings, but a measure of that abstract Labour. How else then could Marx theorise COMPLEX Labour contributing in Labour-time a quantity of hours in multiples of Simple Labour.
In fact, from this simple mistake flows the flaw in the rest of your argument.
“Instead one should focus on what the rate of profit tells us. It tells us something about the potential rate of expansion of capital stocks. It sets an upper limit on the rate of expansion that can be achieved out of internal funding - the rate of capital growth that will be achieved if all profit is reinvested.”
If I were being pedantic I could challenge this. It does not for instance, take into consideration existing hoardes of capital, not does it take into consideration workers, landlords or other savings, which could be mobilized, nor the potential for the use of Credit. But, that is a side issue.
“Let us further assume that all profits are reinvested. Thus a 5% rate of profit will imply a 5% growth per annum of the capital stock. Let us also assume at first that the division of value added between wages and profit remains unchanged over time.
This means that total profit per year will be a constant multiple of total wages per year. Under these circumstances it is clear that the rate of profit will fall over time if rate of growth of wage income is less than the rate of profit, and the rate of profit will rise if the rate of growth of wage income is higher than the rate of profit.”
But, given the constraints you have set V could never grow by more or less than the Rate of Profit. For example,
C100 V 100 S100 R = 50%
We then fully allocate S in line with your constraint.
C(1)150 V(1) 150 S(1) 150 R=50% = (V(1) – V)/V x 100.
If, in accordance with your constraint, there is no change in the Organic Composition of Capital then V must increase in the same proportion as C. The only way given this constraint that V could increase faster than R would be if it did so at the expense of S, but that would break your other constraint that all new value is shared equally between S & V i.e. the rate of Exploitation remains constant.
“We then focus on the determinants of the rate of growth of wage income - measured in labour hours per annum. The dimensions give it away, since wage income in these terms corresponds to a number of people - the number of people whose direct and indirect labour supports the employed population.”
Absolutely not for the reasons set out above. Labour-time has nothing to do with concrete Labour with actual human beings, but is a measure of abstract Labour.
“The rate of growth of wage income comes down to the rate of growth of the working population (given the assumption of a constant rate of surplus value). The appropriate focus for analysis of the falling rate of profit is not technological choice but historical demography.”
Again, absolutely not for the reasons given above. It is entirely possible for wages to rise with a constant Rate of Surplus Value with a FALLING population, provided that an increasing proportion of COMPLEX compared to SIMPLE Labour is used. The reason is that a falling number of persons has no direct bearing on the quantity of Labour-time expended. Were your theory correct then we would have expected to see wages rising fastest at those times when population growth was rising fastest, and vice versa. I would contend we have seen the opposite in many cases.
“If we assume that the rate of growth of the employed population is fixed then the effect is that the actual rate of profit tends towards the rate of growth of the employed population:”
I can see no foundation for this assumption either in logic or in empirical data. For the reasons I have given above a falling or slowly growing population is entirely consistent with a labour force that is becoming more educated, more highly skilled, and in which the proportion, therefore, of Complex to Simple labour rises. The consequence is that the quantity of Labour-time grows as a result of this increasing proportion of Complex Labour, and with this growing volume of labour-time comes a growing volume of surplus value. This can be seen in a number of small economies where a small population is employed in highly skilled, high-value added production, and where rates of profit tend to be high.
This can be demonstrated fairly easily. Imagine an economy with two Departments - one Department produces all of the material consumption goods the other produces entertainment. I am leaving aside the production of Producer Goods for the sake of simplicity, and because it is irrelevant for the purpose of demonstration. 10 million people work in Department I, working a total of 10 billion hours of simple Labour-time. 90% of the utput of the Department is exchanged internally amongst its workers and capitalists, leaving 10% to be traded with Department II - that is 1 billion hours of output. In Department II 1 million people work a total of 1 billion hours of simple Labour which they trade with Department I for consumption goods. These 1 million people are employed in 10,000 Music Halls around the country, 100 people working in each.
We know that the output of Department II is equal to the traded output of Department I because both outputs exchange for each other and is equal to i billion hours. Whenever, then the output of Department II Exchanges entirely for the traded output of Department I we know that to be the case, and we can calculate the Value of Department II's output from it, provided that we assume that the Labour employed in Department I is entirely simple labour.
Now the population falls by 900,000 people. All of them were employed in Department II. However, rather than being employed in 10,000 Music Halls around the country they are now by the magic of technological development all employed in a single TV Company that is able to replicate the output of those 10,000 Music Halls. The output of these remaining 100,000 people in Department II exchanges entirely for the entire traded output of Department I, whose Value we know to be equal to 1 billion hours. We know then that the value of the output of these 100,000 people in Department II is also equal to 1 billion hours or else this trade could not occur.
What then do we have. We have a fall in population of 900,000 people. Yet we have the total output of the economy remaining constant 10 billion hours from Department I, 1 billion from Department II. We also have the output of department II remaining constant despite employment in Department II falling to a tenth its previous level. The basis of this is that the Labour employed in Department II is no longer simple labour, it is complex labour each unit of it being the equivalent of ten units of simple labour.
By the same token, wages paid to this complex labour - if we maintain your constraint that all new Value is divided equally between V and S, will be ten times more than that paid to simple labour. This means that not only has output remained constant with a falling population, but average wages will have risen - because wages paid per person in Department I remain constant whilst, wages paid in Department II will have risen tenfold.
This, of course, assumes that the Organic Composition of Capital in Department II has remained constant in accordance with your constraint i.e. all of the Constant Capital used in TV production amounts to exactly that previously used by 10,000 Music Halls. I would suggest, however, that this constraint is unrealistic. It is an unrealistic constraint to place on Marx in respect of a rising Organic Composition of capital leading to a tendency for a falling Rate of profit, because empirical evidence showed that industrial production DID and does necessitate such a rising organic composition. I would suggest it is an unrealistic constraint for the scenario I am depicting of modern technological production, and the expansion of high value service production leading to a falling organic composition of Capital and tendency for the Rate of profit to rise, because empirical observation DOES show on an extended scale the same kind of transformation given in the example above.
I am not dealing here with the further points you make in respect of other factors such as the depreciation of Capital etc on the rate of profit as these are essentially separate from the point you were making about population growth, and the examples you give are framed within your argument about the limitations of population growth on the Rate of profit as modified by these other considerations. Whilst I find these other issues interesting, and I will possibly return to them for discussion later I think discussion of them is best kept separate.
My main argument would be that in trying to conceptualise Exchange Value from the standpoint of concrete labour as opposed to abstract labour-time you have stepped outside Marx’s theory of value, and this provides the basic flaw in your argument. If you wish to come back on those points I would be happy to respond.
Everybody’s Getting Flated
Not much more than 6 months ago Central Banks and Governments around the world were worried about mounting inflation. Workers were being warned not to try to ask for wage increases that would keep up with rapidly rising prices, because that would mean second round inflation setting in. Dire warnings were in the media everyday about people starving from rising food prices, people freezing to death due to rapidly rising energy prices, about people being unable to travel because of rapidly rising petrol costs. Today, its not inflation that is the talk of the media, but deflation. Whichever kind of flation there is, its workers that are asked to pick up the tab by Capitalism.
According to Mervyn King, Governor of the Bank of England, as a result of statistical anomalies, price indices are almost certain to show falls in coming months. Whether, that becomes outright deflation as happened in Japan during the 1990’s is not yet certain. Certainly, Ben Bernanke is taking the possibility of deflation in the US seriously as he stated in his testimony yesterday. He is looking at a number of measures that the Fed could take to pump even more liquidity into the system to counter the possibility. He famously said some years ago that the fed could always prevent deflation, by simply printing dollar bills, and dropping them from helicopters. In fact, the Fed has many more tools it can use before such a drastic solution was required. Prominent Hedge Fund Manager, Hugh Hendry, who runs the Eclectica Fund in the UK is also betting on deflation here. According to a report on Bloomberg yesterday he is seeking to protect himself by buying WWI Debt!
In fact, as I predicted a few weeks ago in Where We Are Going it was highly likely that western economies would suffer a deflation, but the deflation is unlikely to be the kind of consumer price deflation suffered by Japan. It will be a deflation of over-inflated asset prices – of Shares, Property and Bonds. I predicted that these would fall by as much as 50%. Already the DOW has fallen from a high of 14,000 to below 8,000. All other asset prices are following a similar trajectory.
The same causes which led these asset prices to bubble up are now sending them down despite the huge amounts of liquidity pumped into the system. Anyone that saw “The Ascent of Money” on Channel 4 last night will understand the process. The programme focussed on John Law’s infamous Mississippi Scheme. Law had offered the French Monarchy a way out of their economic problems. He promoted the idea of a paper money printed by the Government, and with the full authority of the absolutist Monarchy. By increasing liquidity into a depressed economy economic activity was stimulated. In addition Law set up his Mississippi Company which sold shares in a Company that was to exploit the supposed wealth of Louisiana. It was a classic Ponzi scheme that relied on taking in new money in investments in order to raise the value of shares that made existing shareholders believe that their investment was successful, that their shares had increased in value. The more the shares went up the more the company appeared a certain bet, and the more therefore, other investors thought they had to get in on the deal. Its just like when house prices are rising very rapidly everyone thinks that their house has become more valuable, and those without houses think they must buy before its too late, when in actual fact it’s the last time to be buying, better to wait for them to fall and buy them cheap. As things bubbled away Law printed even more money. The consequence was inevitable. Eventually, the economic reality had to assert itself. As Marx sets out in his “A Contribution to a Critique of Political Economy”, with a paper currency, the more you print of it the less that paper becomes worth. Once any potential stimulus effect has run its course the only consequence can be inflation.
Its amazing that in a recent article the AWL could come out with the same kind of economics as John Law. They wrote,
“It blows a hole in the "not enough money" argument as used a million times to justify social cuts and wage cuts.. If the Government can find £1107 billion in credit for the banks, it can find credit for any social goal you can imagine. Some social goals may be unrealistic because there are not enough real productive resources to realise them; but the arguments about "not enough money" are just top-dressing from the argument about real productive resources.”
See: The Bailouts
In other words workers needs could be easily accommodated by Capitalism if only it printed more money as Law had advised the French Monarchy. Amazing!!! Once again the message the AWL give to workers is that their needs can be met within the confines of Capitalism, that the way of meeting those needs is not via independent working class action, via the development of workers property, or co-operatives etc., but via the good graces of the bourgeois state to whom they make their grovelling appeals.
The AWL ask “who pays for the bail-outs”, for the Banks. But, the answer belies their naïve, liberal solution to workers problems. As I set out in my three-part analysis of the crisis linked to above, initially, it will be the Capitalist class that will pay for the measures to save the system in the short term. As Marx demonstrated, Tax is a deduction from Surplus Value. Whether the State pays for its intervention via Tax now, or by borrowing now paid for by Taxation later that necessarily means a greater deduction from Surplus Value on a global scale – as I argued part of the solution to the recapitalisation of the Banks etc. is being found through mobilising vast reserves of Surplus Value held in Asia, the Middle East etc. But, Capital is being forced to pay that cost now, in order to stabilise itself. It is choosing that option rather than the option of open class warfare, of the 1930’s or 1980’s, to throw the cost on to the workers, precisely because the current Long Wave Boom has created the conditions – has created those vast reserves of available Surplus Value – that enable such a solution as its best option. However, no Marxist can be under any illusion that Capital, once it has stabilised itself, – and the Long Wave Boom means it will quickly stabilise itself – will attempt to claw back that cost from the working class. And the way it will do that will be precisely through the consequences of the huge increase in liquidity used for that stabilisation, the same consequecnes there would be if the AWL’s solution to workers problems were adopted – massive inflation, which always depreciates wages, and even more depreciates the icnomes of those on fixed incomes such as pensioners, those in Benefits etc.
Who will pay for the bail-outs – the workers. Who would pay for the AWL’s suggested solution – again the workers. The AWL will no doubt tell us that their answer also involves workrs being protected by a Sliding Scale of Wages, but these are the people who tell us that you can't raise slogans whose consequences will be the opposite of what you seek. The reality is that workers have no way of forcing such a Sliding Scale on the bosses state. To bring about such solutions - let alone the amazing notion that workers are going to establish a Workers Government! - would require effectively a situation of dual power to exist, and clearly that is not the case, and everything the AWL say and write tells us that they really don't believe its likely either. Even were it likely the AWL's soluiton amounts to a maximalist call for "Socialism Now".
The reality is that whilst asset prices have and will have a huge deflation, commodity prices are likely to rise, and before long rise very rapidly. The prices of primary products such as Oil, metals etc. have fallen sharply in recent weeks. There are a number of reasons. The Long Wave Boom, as in all previous manifestations caused prices to rise sharply as Supply could not be expanded fast enough to meet demand. Seeing, what appeared to be a one-way bet, Futures Traders engaged in speculative buying. The financial crisis led some institutions to have to sell profitable Long positions in energy and raw materials in order to obtain cash to shore up their Balance Sheets. The more this took the form of forced selling, the more Futures prices fell, dragging spot prices down with them. Eventually, all of this feeds through to the real economy, which slows down, and leads to further falls in Futures prices as demand is seen falling away rapidly. Similar, forced selling of the shares of Mining and Energy companuies shares had a similar effect, and now the general gloom means that no one wants to buy these assets despite the huge amounts of liquidity being pumped into the system, just as no one wanted to buy shares in Law’s Mississippi Company once confidence had been lost, no matter how much money was printed.
But, a considerable amount of Euro and North American centricity has been going on. China has slowed considerably from its 12% p.a. GDP growth. It is now estimated to be around 8%. But, this is 8% in the world’s 4th largest economy, rapidly approaching becoming the world’s largest economy. Other Asian economies continue to grow rapidly, and the bilateral deals done by China and other Asian economies with some African Lion economies, and with Latin American economies mean that they too have continued to grow. China has engaged in the kind of huge State directed economic intervention that only a centrally planned economy can effect. It now expects to grow next year by 10%.
Even after, the recent falls in primary product prices, they remain considerably above the levels of even just a few of years ago. As the Chinese RMB, and other Asian currencies appreciate against the dollar the home currency prices of these resources will not rise so fast for them as for the US, and Europe. This will stimulate their demand for these products, and provide addiitonal competitive advantage in the production of manufactured goods made from them. It is Chinese and Asian demand that is determinant for the world prices of energy and raw materials and foodstuffs, and even with a slow down there is no sign that the growth in this demand is going to even reduce much let alone go into reverse.
But, herein also lies another reason that consumer prices are bound to rise in the US and Europe. Not only will the rise in primary product prices resume in the not too distant future, a rise that will be more marked as a result of falling currencies, but that same destruction of currency values against the RMB and other Asian currencies will mean that all of those imported Chinese and Asian manufactured goods will also be rising in price.
The Capitalists and Stalinists of the East and Middle East might come to the rescue of Anglo-Saxon Capitalism in the short-term, but only to draw out a greater cost in the longer-term. The Capitalists might bear the cost of resolving the crisis now out of reductions in their Surplus Value, but only to claw back that cost from the working class in the longer-term. The Capitalists of the East and Middle East who draw their Surplus Value from the workers, and the Stalinists who draw their revenue from the wealth created by the workers will become richer and more powerful. The workers of the East and Middle East will become better off compared to the workers of the Anglo-Saxon economies.
That is the reality of the working of the Capitalist economy on a global scale. The solution to the problems of workers that arise from it cannot be provided by solutions such as “printing money”, nor even of redistributive taxation, or any other measure that counts on the bouregois state. Those solutions can only be provided by workers themselves, through the establishment of workers Co-operatives, and other forms of worker owned property, and ultimately on the establishment on an international scale of an economy based on co-operation not competition.
According to Mervyn King, Governor of the Bank of England, as a result of statistical anomalies, price indices are almost certain to show falls in coming months. Whether, that becomes outright deflation as happened in Japan during the 1990’s is not yet certain. Certainly, Ben Bernanke is taking the possibility of deflation in the US seriously as he stated in his testimony yesterday. He is looking at a number of measures that the Fed could take to pump even more liquidity into the system to counter the possibility. He famously said some years ago that the fed could always prevent deflation, by simply printing dollar bills, and dropping them from helicopters. In fact, the Fed has many more tools it can use before such a drastic solution was required. Prominent Hedge Fund Manager, Hugh Hendry, who runs the Eclectica Fund in the UK is also betting on deflation here. According to a report on Bloomberg yesterday he is seeking to protect himself by buying WWI Debt!
In fact, as I predicted a few weeks ago in Where We Are Going it was highly likely that western economies would suffer a deflation, but the deflation is unlikely to be the kind of consumer price deflation suffered by Japan. It will be a deflation of over-inflated asset prices – of Shares, Property and Bonds. I predicted that these would fall by as much as 50%. Already the DOW has fallen from a high of 14,000 to below 8,000. All other asset prices are following a similar trajectory.
The same causes which led these asset prices to bubble up are now sending them down despite the huge amounts of liquidity pumped into the system. Anyone that saw “The Ascent of Money” on Channel 4 last night will understand the process. The programme focussed on John Law’s infamous Mississippi Scheme. Law had offered the French Monarchy a way out of their economic problems. He promoted the idea of a paper money printed by the Government, and with the full authority of the absolutist Monarchy. By increasing liquidity into a depressed economy economic activity was stimulated. In addition Law set up his Mississippi Company which sold shares in a Company that was to exploit the supposed wealth of Louisiana. It was a classic Ponzi scheme that relied on taking in new money in investments in order to raise the value of shares that made existing shareholders believe that their investment was successful, that their shares had increased in value. The more the shares went up the more the company appeared a certain bet, and the more therefore, other investors thought they had to get in on the deal. Its just like when house prices are rising very rapidly everyone thinks that their house has become more valuable, and those without houses think they must buy before its too late, when in actual fact it’s the last time to be buying, better to wait for them to fall and buy them cheap. As things bubbled away Law printed even more money. The consequence was inevitable. Eventually, the economic reality had to assert itself. As Marx sets out in his “A Contribution to a Critique of Political Economy”, with a paper currency, the more you print of it the less that paper becomes worth. Once any potential stimulus effect has run its course the only consequence can be inflation.
Its amazing that in a recent article the AWL could come out with the same kind of economics as John Law. They wrote,
“It blows a hole in the "not enough money" argument as used a million times to justify social cuts and wage cuts.. If the Government can find £1107 billion in credit for the banks, it can find credit for any social goal you can imagine. Some social goals may be unrealistic because there are not enough real productive resources to realise them; but the arguments about "not enough money" are just top-dressing from the argument about real productive resources.”
See: The Bailouts
In other words workers needs could be easily accommodated by Capitalism if only it printed more money as Law had advised the French Monarchy. Amazing!!! Once again the message the AWL give to workers is that their needs can be met within the confines of Capitalism, that the way of meeting those needs is not via independent working class action, via the development of workers property, or co-operatives etc., but via the good graces of the bourgeois state to whom they make their grovelling appeals.
The AWL ask “who pays for the bail-outs”, for the Banks. But, the answer belies their naïve, liberal solution to workers problems. As I set out in my three-part analysis of the crisis linked to above, initially, it will be the Capitalist class that will pay for the measures to save the system in the short term. As Marx demonstrated, Tax is a deduction from Surplus Value. Whether the State pays for its intervention via Tax now, or by borrowing now paid for by Taxation later that necessarily means a greater deduction from Surplus Value on a global scale – as I argued part of the solution to the recapitalisation of the Banks etc. is being found through mobilising vast reserves of Surplus Value held in Asia, the Middle East etc. But, Capital is being forced to pay that cost now, in order to stabilise itself. It is choosing that option rather than the option of open class warfare, of the 1930’s or 1980’s, to throw the cost on to the workers, precisely because the current Long Wave Boom has created the conditions – has created those vast reserves of available Surplus Value – that enable such a solution as its best option. However, no Marxist can be under any illusion that Capital, once it has stabilised itself, – and the Long Wave Boom means it will quickly stabilise itself – will attempt to claw back that cost from the working class. And the way it will do that will be precisely through the consequences of the huge increase in liquidity used for that stabilisation, the same consequecnes there would be if the AWL’s solution to workers problems were adopted – massive inflation, which always depreciates wages, and even more depreciates the icnomes of those on fixed incomes such as pensioners, those in Benefits etc.
Who will pay for the bail-outs – the workers. Who would pay for the AWL’s suggested solution – again the workers. The AWL will no doubt tell us that their answer also involves workrs being protected by a Sliding Scale of Wages, but these are the people who tell us that you can't raise slogans whose consequences will be the opposite of what you seek. The reality is that workers have no way of forcing such a Sliding Scale on the bosses state. To bring about such solutions - let alone the amazing notion that workers are going to establish a Workers Government! - would require effectively a situation of dual power to exist, and clearly that is not the case, and everything the AWL say and write tells us that they really don't believe its likely either. Even were it likely the AWL's soluiton amounts to a maximalist call for "Socialism Now".
The reality is that whilst asset prices have and will have a huge deflation, commodity prices are likely to rise, and before long rise very rapidly. The prices of primary products such as Oil, metals etc. have fallen sharply in recent weeks. There are a number of reasons. The Long Wave Boom, as in all previous manifestations caused prices to rise sharply as Supply could not be expanded fast enough to meet demand. Seeing, what appeared to be a one-way bet, Futures Traders engaged in speculative buying. The financial crisis led some institutions to have to sell profitable Long positions in energy and raw materials in order to obtain cash to shore up their Balance Sheets. The more this took the form of forced selling, the more Futures prices fell, dragging spot prices down with them. Eventually, all of this feeds through to the real economy, which slows down, and leads to further falls in Futures prices as demand is seen falling away rapidly. Similar, forced selling of the shares of Mining and Energy companuies shares had a similar effect, and now the general gloom means that no one wants to buy these assets despite the huge amounts of liquidity being pumped into the system, just as no one wanted to buy shares in Law’s Mississippi Company once confidence had been lost, no matter how much money was printed.
But, a considerable amount of Euro and North American centricity has been going on. China has slowed considerably from its 12% p.a. GDP growth. It is now estimated to be around 8%. But, this is 8% in the world’s 4th largest economy, rapidly approaching becoming the world’s largest economy. Other Asian economies continue to grow rapidly, and the bilateral deals done by China and other Asian economies with some African Lion economies, and with Latin American economies mean that they too have continued to grow. China has engaged in the kind of huge State directed economic intervention that only a centrally planned economy can effect. It now expects to grow next year by 10%.
Even after, the recent falls in primary product prices, they remain considerably above the levels of even just a few of years ago. As the Chinese RMB, and other Asian currencies appreciate against the dollar the home currency prices of these resources will not rise so fast for them as for the US, and Europe. This will stimulate their demand for these products, and provide addiitonal competitive advantage in the production of manufactured goods made from them. It is Chinese and Asian demand that is determinant for the world prices of energy and raw materials and foodstuffs, and even with a slow down there is no sign that the growth in this demand is going to even reduce much let alone go into reverse.
But, herein also lies another reason that consumer prices are bound to rise in the US and Europe. Not only will the rise in primary product prices resume in the not too distant future, a rise that will be more marked as a result of falling currencies, but that same destruction of currency values against the RMB and other Asian currencies will mean that all of those imported Chinese and Asian manufactured goods will also be rising in price.
The Capitalists and Stalinists of the East and Middle East might come to the rescue of Anglo-Saxon Capitalism in the short-term, but only to draw out a greater cost in the longer-term. The Capitalists might bear the cost of resolving the crisis now out of reductions in their Surplus Value, but only to claw back that cost from the working class in the longer-term. The Capitalists of the East and Middle East who draw their Surplus Value from the workers, and the Stalinists who draw their revenue from the wealth created by the workers will become richer and more powerful. The workers of the East and Middle East will become better off compared to the workers of the Anglo-Saxon economies.
That is the reality of the working of the Capitalist economy on a global scale. The solution to the problems of workers that arise from it cannot be provided by solutions such as “printing money”, nor even of redistributive taxation, or any other measure that counts on the bouregois state. Those solutions can only be provided by workers themselves, through the establishment of workers Co-operatives, and other forms of worker owned property, and ultimately on the establishment on an international scale of an economy based on co-operation not competition.
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