The Expropriation Of The Expropriators

In Capital I, Chapter 32 Marx says,

“The monopoly of capital becomes a fetter upon the mode of production, which has sprung up and flourished along with, and under it. Centralization of the means of production and socialization of labour at last reach a point where they become incompatible with their capitalist integument. This integument is burst asunder. The knell of capitalist private property sounds. The expropriators are expropriated.” (p 714-5)

In the light of the 1917 Bolshevik Revolution in Russia, and the domination of the Labour Movement by various forms of Lassallean and Fabian statism over the period, at least since Engels' death, this phrase about the expropriation of the expropriators has been interpreted as meaning something completely different from what Marx meant, and from what he actually says in this and related passages. These statist interpretations stand Marx and his theory on their head, turning it from being a materialist into an idealist doctrine.

The Chapter in which Marx makes this statement is even entitled “The Historical Tendency of Capitalist Accumulation”, and its analysis is about the evolution of the form of capitalist property. That evolution can be summarised as being:

1. The scattered private property of the petty producers (peasants, artisans etc.), is expropriated by capitalist producers.
   
   
   “Self-earned private property, that is based, so to say, on the fusing together of the isolated, independent labouring individual with the conditions of his labour, is supplanted by capitalistic private property, which rests on exploitation of the nominally free labour of others, i.e., on wage labour.” (p 714)
2. The natural operation of capitalist competition creates a process of concentration – individual capitals become larger through accumulation – and centralisation – individual capitals become larger, because large capitals buy up the capital of smaller capitals. This process creates a form of capital where it is dominated by large, privately owned firms. The need to have a large amount of capital in order to establish a firm of the minimum efficient size, means that a monopoly of private capital is established, in the hands of a few very large capitalists.
   
   
   “This expropriation is accomplished by the action of the immanent laws of capitalistic production itself, by the centralization of capital. One capitalist always kills many.” (p 714)
3. But, this monopoly of private capital, i.e. the ownership of capitalist firms by this small number of individual capitalists and their families, itself represents a fetter on its further development, precisely because the establishment of new firms is thereby restricted to these individual capitalists, and as capitalist production becomes ever more characterised by socialised production based on co-operative labour, that must be carried on under an even larger scale, so the resources of even the largest private capitalists, becomes insufficient for its needs. The demands of capital require that the provision of capital itself become socialised.
   
   
   This socialised capital is provided in a number of forms – co-operative enterprises established by workers, joint-stock companies in which a range of investors buy shares to pool their capital, and later the establishment of trusts and cartels, and of state capital. These socialised forms of capital come into conflict with the old private monopoly of capital, and just as the private capitalists had expropriated the petty producers, so these new socialised forms of capital, expropriate the private capitalists. This is the process Marx refers to when he speaks about the expropriation of the expropriators.

But, the phrase about the expropriation of the expropriators has been reinterpreted by the statists to be the equivalent of the socialist revolution. It is a process whereby the state expropriates capital from above. Not only is this contrary to what Marx actually says in describing this process, but it is also contrary to his method and his philosophy.

In Capital III, Marx returns to this process of the expropriation of the expropriators and makes even more clear what he means by it. He says of these forms of socialised capital that expropriate the property of the individual private capitalist monopolists,

“The capitalist stock companies, as much as the co-operative factories, should be considered as transitional forms from the capitalist mode of production to the associated one, with the only distinction that the antagonism is resolved negatively in the one and positively in the other.”

As Engels puts it in his Critique of the Erfurt Programme

“What is capitalist private production? Production by separate entrepreneurs, which is increasingly becoming an exception. Capitalist production by joint-stock companies is no longer private production but production on behalf of many associated people. And when we pass on from joint-stock companies to trusts, which dominate and monopolise whole branches of industry, this puts an end not only to private production but also to planlessness.””

This process of the development of these forms of socialised capital standing in opposition to the monopoly of private capitalist property arises naturally from within the nature of capitalist development rather than having to be imposed upon it from outside by the actions of the state.

For the Co-operatives,

“The co-operative factories of the labourers themselves represent within the old form the first sprouts of the new, although they naturally reproduce, and must reproduce, everywhere in their actual organisation all the shortcomings of the prevailing system. But the antithesis between capital and labour is overcome within them, if at first only by way of making the associated labourers into their own capitalist, i.e., by enabling them to use the means of production for the employment of their own labour. They show how a new mode of production naturally grows out of an old one, when the development of the material forces of production and of the corresponding forms of social production have reached a particular stage.”

And for the Joint Stock companies,

“1) An enormous expansion of the scale of production and of enterprises, that was impossible for individual capitals. At the same time, enterprises that were formerly government enterprises, become public.

2) The capital, which in itself rests on a social mode of production and presupposes a social concentration of means of production and labour-power, is here directly endowed with the form of social capital (capital of directly associated individuals) as distinct from private capital, and its undertakings assume the form of social undertakings as distinct from private undertakings. It is the abolition of capital as private property within the framework of capitalist production itself.

3) Transformation of the actually functioning capitalist into a mere manager, administrator of other people's capital, and of the owner of capital into a mere owner, a mere money-capitalist...

This result of the ultimate development of capitalist production is a necessary transitional phase towards the reconversion of capital into the property of producers, although no longer as the private property of the individual producers, but rather as the property of associated producers, as outright social property. On the other hand, the stock company is a transition toward the conversion of all functions in the reproduction process which still remain linked with capitalist property, into mere functions of associated producers, into social functions." 

But, there is a difference between the socialised capital represented by the workers' co-operatives and the socialised capital of the Joint Stock Companies, and their successors, the trusts, cartels and state capital - “the antagonism (between capital and labour)is resolved negatively in the one and positively in the other.”

In relation to the Workers Co-operatives each member of the Co-operative is a worker and each has a single vote. As Marx describes it in his Programme for the First International,

“In order to prevent co-operative societies from degenerating into ordinary middle-class joint stock companies (societes par actions), all workmen employed, whether shareholders or not, ought to share alike. As a mere temporary expedient, we are willing to allow shareholders a low rate of interest.”

The Joint Stock companies on the other hand are a socialised form of capital, which are able to mobilise far greater sums of capital than was the monopoly of private capital because they are able to pool the resources of millions of investors, including those of the rising middle class, and even some better paid workers, but each shareholder has multiple votes based upon their share ownership, and so the same processes of the concentration of wealth are reproduced within them.

“Since property here exists in the form of stock, its movement and transfer become purely a result of gambling on the stock exchange, where the little fish are swallowed by the sharks and the lambs by the stock-exchange wolves. There is antagonism against the old form in the stock companies, in which social means of production appear as private property; but the conversion to the form of stock still remains ensnared in the trammels of capitalism; hence, instead of overcoming the antithesis between the character of wealth as social and as private wealth, the stock companies merely develop it in a new form."

The “antagonism against the old form”, i.e. the form of private capitalist property leads to the “expropriation of the expropriators” by these new large Joint Stock companies.

“Success and failure both lead here to a centralisation of capital, and thus to expropriation on the most enormous scale. Expropriation extends here from the direct producers to the smaller and the medium-sized capitalists themselves. It is the point of departure for the capitalist mode of production; its accomplishment is the goal of this production. In the last instance, it aims at the expropriation of the means of production from all individuals. With the development of social production the means of production cease to be means of private production and products of private production, and can thereafter be only means of production in the hands of associated producers, i.e., the latter's social property, much as they are their social products. However, this expropriation appears within the capitalist system in a contradictory form, as appropriation of social property by a few; and credit lends the latter more and more the aspect of pure adventurers.”

But, credit is not just the means by which the joint stock companies are developed, it is also the means by which the workers co-operatives can be developed on a national basis. And, the fact that Marx talks about this development of the workers co-operatives on a national basis by the utilisation of credit, demonstrates clearly that he was far from having a conception of the “expropriation of the expropriators” as being some top down process driven by the state.

“They (the co-operatives and the joint stock companies) show how a new mode of production naturally grows out of an old one, when the development of the material forces of production and of the corresponding forms of social production have reached a particular stage. Without the factory system arising out of the capitalist mode of production there could have been no co-operative factories. Nor could these have developed without the credit system arising out of the same mode of production. The credit system is not only the principal basis for the gradual transformation of capitalist private enterprises. into capitalist stock companies, but equally offers the means for the gradual extension of co-operative enterprises on a more or less national scale.” (Capital III)

If the “expropriation of the expropriators” was merely an act of expropriation of all capital conducted from above by the state then there would be no reason for credit to have to perform any role within this process of the gradual extension of worker owned property. Yet, the statists have turned this phrase into meaning exactly that. A further examination demonstrates why such an interpretation is at odds with Marx's method and philosophy.

Marx's method is based upon his theory of historical materialism. That is it understands all current phenomena in relation to their historical development. That method thereby explains the material basis of current phenomena, how they have arisen, and limits itself to a description of how that process is currently unfolding. Going further than that into offering up predictions or schema of how historical development may proceed in the more distant future is anathema to Marx's method and philosophy. In fact, in the Programme for the First International, Marx would not even set down prescriptions as to how workers should go about creating co-ops outside advice based upon his analysis.

“It is the business of the International Working Men's Association to combine and generalise the spontaneous movements of the working classes, but not to dictate or impose any doctrinary system whatever. The Congress should, therefore, proclaim no special system of co-operation, but limit itself to the enunciation of a few general principles.”

In the Communist Manifesto, Marx and Engels rail against schema mongering by those who would try to dictate the course of history from above.

“Historical action is to yield to their personal inventive action; historically created conditions of emancipation to fantastic ones; and the gradual, spontaneous class organisation of the proletariat to an organisation of society especially contrived by these inventors. Future history resolves itself, in their eyes, into the propaganda and the practical carrying out of their social plans. 

In the formation of their plans, they are conscious of caring chiefly for the interests of the working class, as being the most suffering class. Only from the point of view of being the most suffering class does the proletariat exist for them.”

This view of socialist transformation, therefore, springs not from the real development of the material conditions, and the changes in consciousness of the workers this engenders, but is necessarily idealist and elitist. Socialism becomes something brought to the workers from above by an elite that has uncovered the truth of the revelation of the Idea. That elite might be Lassalle's Royal Prussian Government, or it might be the Fabian's intellectual elite, or it may be Lenin's Vanguard Party, or else it might be Stalin's bureaucratic state apparatus.

In Capital, therefore, the process he is describing of the “expropriation of the expropriators” cannot be a description of some future political revolution, but can only be a description of the processes, Marx saw having already unfolded, and continuing to unfold around him. The expropriation of the expropriators he is describing could only be a description of the expropriation of private capitalist property by socialised forms of capitalist property, such as the co-operatives and joint stock companies. Anything else would have involved Marx in speculation and schema mongering about future events that would have been wholly at odds with his method.

In fact, as Engels points out, they had made that very mistake in 1848. At that point, witnessing the bourgeois revolutions, they anticipated them being quickly followed in a process of permanent revolution, by proletarian revolutions. But, Engels in later life points out that such a process was impossible, because at the time the only country with a sizeable working-class was England, and even there it was not mature. As late as 1870, ahead of the Paris Commune, Marx warned the Paris workers against rising in rebellion, because they were not yet ready to take on the role of ruling class. As Engels points out in The Peasant War in Germany

“The worst thing that can befall a leader of an extreme party is to be compelled to take over a government in an epoch when the movement is not yet ripe for the domination of the class which he represents and for the realisation of the measures which that domination would imply. What he can do depends not upon his will but upon the sharpness of the clash of interests between the various classes, and upon the degree of development of the material means of existence, the relations of production and means of communication upon which the clash of interests of the classes is based every time. What he ought to do, what his party demands of him, again depends not upon him, or upon the degree of development of the class struggle and its conditions. He is bound to his doctrines and the demands hitherto propounded which do not emanate from the interrelations of the social classes at a given moment, or from the more or less accidental level of relations of production and means of communication, but from his more or less penetrating insight into the general result of the social and political movement. Thus he necessarily finds himself in a dilemma. What he can do is in contrast to all his actions as hitherto practised, to all his principles and to the present interests of his party; what he ought to do cannot be achieved. In a word, he is compelled to represent not his party or his class, but the class for whom conditions are ripe for domination. In the interests of the movement itself, he is compelled to defend the interests of an alien class, and to feed his own class with phrases and promises, with the assertion that the interests of that alien class are their own interests. Whoever puts himself in this awkward position is irrevocably lost. We have seen examples of this in recent times. We need only be reminded of the position taken in the last French provisional government by the representatives of the proletariat, though they represented only a very low level of proletarian development. Whoever can still look forward to official positions after having become familiar with the experiences of the February government — not to speak of our own noble German provisional governments and imperial regencies — is either foolish beyond measure, or at best pays only lip service to the extreme revolutionary party.”

The statist version of the “expropriation of the expropriators”, thereby stands Marx on his head.

The Fabian conception involves the workers subordinating their interests to those of capital, as the process is to unfold only gradually by means of the actions of the capitalist state. The Stalinist conception within capitalism is no different, but within systems where capitalism has been overthrown it involves the workers subordinating their interests to those of the bureaucratic state. The Leninist conception involves the workers acting as merely foot soldiers for the vanguard party.

Instead of the political revolution flowing from the social revolution resulting from the transformation of social relations on the back of the change in material conditions, instead the change in material conditions, and the social revolution arising from it, is to flow from a political revolution, that results from “ the propaganda and the practical carrying out of their social plans” of one of these elites.

The consequence of this is that even under Lenin the self-government of the workers is not to be allowed where it conflicts with the vision of the Idea developed by the Party; under Trotsky it results in the militarisation of labour; under Stalin in forced collectivisation; under Mao in The Great Leap Forwards.

For A Political Revolution At The Co-op - Part 7

In previous parts I have demonstrated that the argument put by statists, that the problems that arose at the Co-op Bank should be addressed by workers demanding nationalisation, by the capitalist state, has nothing to do with Marxism. State Capitalism may represent a relatively progressive form, just as do monopolies, compared to the less developed forms of Capitalism that arose in the 19th century, but it is only a relatively more progressive form due to the fact that state capitalism, like monopoly, is more mature. Relative to worker owned property, such forms are not progressive at all, but reactionary. Far from advocating state-capitalism as an alternative to the development of worker owned property, Marxists advocate worker owned property as the alternative to state capitalism. A good account of that is given here – Reforming The Northern Irish Economy - A Job For The State.

But, in doing so, Marxists do not in any sense believe or suggest that such a course of action is free from problems. If constructing Socialism was easy, workers would have done it long ago. Marx was certainly under no illusion that the process of creating Socialism was easy, straight forward, or could proceed quickly or in a straight line. In the Grundrisse, for example, he wrote,

"As the system of bourgeois economy has developed for us only by degrees so too its negation, which is its ultimate result." (p 712).

Why is it that bourgeois economy is only negated by degrees rather than being overthrown overnight by some kind of top down, statist conception of the “expropriation of the expropriators”? It is precisely because Socialism can only be created by the workers themselves from their own independent actions, it can only arise on the back, as with every other mode of production, of the development of these new productive and social relations, which prove themselves, in practice, to be superior to those they replace. Marx describes in Capital not only the theory of why the worker-owned co-operatives were more efficient than capitalist enterprises, but also describes the facts of how they were in practice more efficient, and more profitable than capitalist enterprises.

“It is manifest from the public accounts of the co-operative factories in England that — after deducting the manager's wages, which form a part of the invested variable capital much the same as wages of other labourers — the profit was higher than the average profit, although at times they paid a much higher interest than did private manufacturers. The source of greater profits in all these cases was greater economy in the application of constant capital. What interests us in this, however, is the fact that here the average profit ( = interest + profit of enterprise) presents itself actually and palpably as a magnitude wholly independent of the wages of management. Since the profit was higher here than average profit, the profit of enterprise was also higher than usual.”

Capital Vol III

James Connolly described the same thing in relation to the Ralahine Co-operative.

“To those who fear that the institution of common property will be inimical to progress and invention, it must be reassuring to learn that this community of ‘ignorant’ Irish peasants introduced into Ralahine the first reaping machine used in Ireland, and hailed it as a blessing at a time when the gentleman farmers of England were still gravely debating the practicability of the invention. From an address to the agricultural labourers of the County Clare, issued by the community on the introduction of this machine, we take the following passages, illustrative of the difference of effect between invention under common ownership and capitalist ownership: –

“This machine of ours is one of the first machines ever given to the working classes to lighten their labour, and at the same time increase their comforts. It does not benefit any one person among us exclusively, nor throw any individual out of employment. Any kind of machinery used for shortening labour – except used in a co-operative society like ours – must tend to lessen wages, and to deprive working men of employment, and finally either to starve them, force them into some other employment (and then reduce wages in that also) or compel them to emigrate. Now, if the working classes would cordially and peacefully unite to adopt our system, no power or party could prevent their success.”

But, of course, as Marx described in his Inaugural Address to the First International, as he describes in Capital, in relation to the Lancashire Co-ops, and as Connolly describes in relation to Ralahine, the capitalists will not make this process easy. They will charge the workers high rates of interest on money bororwed, they will deprive them of credit, charge higher prices for materials etc., where they can, as well as using more overt methods to frustrate the efforts of the workers. This is no different from the problems every other rising class has faced in trying to develop its forms of property in opposition to the existing forms.

But, worker owned property, precisely because it is based upon co-operation and collective ownership, does face additional problems to these previous forms of property, precisely because it requires a much higher level of development, not just of the productive forces, but also of the workers themselves, as the new ruling class. Feudal landlords and individual capitalists can pursue the task of developing their private property almost subconsciously, on the basis of personal self-interest. But, workers must almost forego the idea of self-interest in favour of collective interest, in order to develop worker-owned, co-operative property. It requires a significant level of cultural and political development, and a recognition that their own self-interest can only be furthered by that very pursuit of collective interest. Lenin describes precisely this factor. He discusses Kautsky's demonstration once again of the superiority of worker owned co-ops in agriculture. But, Lenin points out the condition for their success, and the problem this posed for Russia.

"It goes without saying that Kautsky very emphatically maintains that communal, collective large-scale production is superior to capitalist large scale production. He deals with the experiments in collective farming made in England by the followers of Robert Owen* and with analogous communes in the United States of North America. All these experiments, says Kautsky, irrefutably prove that it is quite possible for workers to carry on large-scale modern farming collectively, but that for this possibility to become a reality "a number of definite economic, political, and intellectual conditions" are necessary. The transition of the small producer (both artisan and peasant) to collective production is hindered by the extremely low development of solidarity and discipline, the isolation, and the "property-owner fanaticism," noted not only among West-European peasants, but, let us add, also among the Russian "commune" peasants (recall A. N. Engelhardt and G. Uspensky). Kautsky categorically declares, "it is absurd to expect that the peasant in modern society will go over to communal production" (S. 129)."

On pages 124-26 Kautsky describes the agricultural commune in Ralahine, of which, incidentally. Mr. Dioneo tells his Russian readers in Russkoye Bogatstvo,[51] No. 2, for this year. 

Capitalism In Agriculture 

But, of course, this highlights Marx's point precisely. The workers do not arrive at this higher level of consciousness overnight. It is something that can only develop gradually on the back of their own direct experience of attempting to develop their own forms of property themselves, and in seeing other workers engaged in that process. The problem that the Bolsheviks faced in Russia was that the Political Revolution they carried through occurred before the social revolution had been completed, which would have established the material conditions for such a transformation of workers consciousness. It was not just Russian peasants that were imbued with "property-owner fanaticism,", the small working-class was itself still dominated by bourgeois ideas. As Trotsky points out the first two years of the Revolution and Civil War were essentially a Peasant War. The workers that rallied to the ranks of the Bolsheviks, the ones that carried the day for Lenin in his battle over the April Thesis, were not the long-standing members of the Party, but newly radicalised workers drawn in as part of the revolutionary fervour to overthrow the existing regime. Indeed, many of the longer standing members, of the Bolsheviks, left to join the Mensheviks as a result of Lenin pushing through the April Thesis, and most of the more educated, more long standing members of the labour movement, like the Rail workers, were already Menshviks.

I will examine the consequences of that in relation to the Russian revolution, and the parallels with the Co-op in Part 8.

Back To Part 6

Forward To Part 8

When Falling Prices Still Signify A Bubble

Nearly everyone now recognises that London property prices are in a massive bubble. Even the Governor of the Bank of England has hinted at as much, and the Bank has ended its Funding for Lending scheme aimed at providing cheap money to banks to lend to house-buyers. But, the Government has continued to press ahead with its “Help To Buy” scam, designed to buy votes ahead of the General Election, by blowing up the property bubble even further, by providing tax payer subsidies for those that cannot afford to buy overpriced houses. The government does not even openly admit the existence of a bubble in London, but argues that the scam is justified because, in the rest of the country, house prices are lower than they were in 2007, and have not been rising at the same rate as London. Indeed, they even admit that in places they have continued to fall. But, does the fact that prices are still falling mean that these prices are not in a bubble? The answer is no.

The argument that house prices are not in a bubble because they are not at the level of 2007 is silly, because, in 2007, everyone accepts there was a massive property bubble. That indeed is why it burst, and led to the Financial Crisis of 2008. But, the fact that prices may not be at quite the same astronomical level as in 2007, obviously does not mean that they are not in something like the same kind of massively inflated bubble. Just because one bubble is not quite as big as another does not change the fact that it is a bubble. Moreover, its not clear that the current bubble is not even bigger, even if prices are lower, because in the intervening period, incomes have fallen substantially.

But, what about the fact that prices have been and are falling in parts of the country? Doesn't that mean that it can't be a bubble, because usually bubbles continue to blow up until they burst, causing not gradually falling prices, but a huge collapse? The operative word here is usually. Usually, bubbles, including property bubbles behave in that way. Its likely this one will too at some point in the not too distant future. But, there are specific and fairly obvious reasons why this one has also seen falling prices rather than just a sudden bursting of the bubble so far. The Government's “Help To Buy” scam is just the latest example of the reasons why that has been the case. In other words, the bubble would already have burst catastrophically, like all other bubbles, were it not for the fact that the state has kept sticking its fingers in the dyke to prevent it bursting and sweeping the banks away in the deluge.

Its a bit like a bike tyre. You get a burst, but you quickly mend it with a patch, or else you had some gunk in the tube that sealed it; you pump up the tyre and continue, but the repair still lets air out slowly, so you have to keep blowing it up. But, around the original puncture, the tube gets continually weakened, so that if you examine it, the weak spot balloons out, and eventually it fails catastrophically. That's what has happened. In 2007/8 there was the puncture; it was quickly repaired as the banks were nationalised, and huge amounts of money pumped into the financial system, the money directed specifically to reducing mortgage rates; when the effect even of that began to wane, the Government stepped in to pump things up again with repeated measures to provide cheap money to the banks provided they use it to avoid foreclosing on failing mortgages, and to keep the property bubble inflated. The property market is like a bike tube with several weak spots. London is just the weakest spot, and the pressure has caused the biggest bubble to inflate, but the fact that air is leaking from slow punctures elsewhere, doesn't change the fact that the tube is over inflated, and that sooner or later it will burst.

But, as I've pointed out in the past, its not just the Government that is involved in keeping the bubble inflated – The Great Property Market Conspiracy. Besides its desire to get elected in 2015, the reason for the “Help To Buy” scam is no concern for house-buyers, but only a concern for the banks that will go bust, when the property market collapses, just as they did in Ireland and elsewhere. The banks themselves, therefore, have good reason to keep the bubble inflated for as long as possible, because it maintains the illusion of their balance sheets, and gives them time to recapitalise using cheap state financing. They have every reason to avoid foreclosing at the moment, and instead to engage in “extend and pretend, even though millions of house-buyers are failing to meet their monthly payments, despite record low mortgage rates, and even though many of them have large amounts of additional debt besides. If the banks began to foreclose, house prices would go into a firesale that no amount of government meddling could prevent. So, the state, the banks and the estate agents all have an incentive in trying to deny that a bubble exists, but equally each has an incentive in denying that prices are falling, because that would only encourage potential buyers to put off their purchase. Keeping the bubble inflated requires that a continued supply of “bigger fools” enters the market to buy property at unsustainably high levels.

So, when representatives of the banks etc. appear on TV, its notable that they avoid answering these questions. A representative of the Nationwide, when asked, on TV, the other day, about the historically high figure of house prices to average household income, instead replied that mortgage payments were at historically affordable levels. But, of course, with interest rates at 300 year lows, you would expect mortgage payments to be affordable. But, in fact, that is one reason that house prices have been inflated! Yet, even with mortgage payments at these most affordable levels, millions of mortgage payers have been unable to meet those payments! Given that interest rates are rising – the yield on the UK 10 year Gilt has doubled over the last few months – and this will pass through into mortgage payments, whatever the Bank of England does, then monthly mortgage payments are set to rise very sharply.

In fact, the story over low interest rates is itself something of a con. Interest rates are only low for mortgages, and then only if you have a sufficient deposit. If you have a 20% deposit, you can get a mortgage with an interest rate of around 3%, but if you only have a 5% deposit, in or out of the “Help to Buy” scam, the interest rate is more likely to be around 6%. Moreover, if paying your mortgage means you have to pay for other bills using credit card debt, then you will be paying 20-30% interest, and god forbid even that does not suffice, and you have to rely on borrowing from a Pay Day Loan shark, as millions of people now do, you will be paying up to 4000% interest. What real relevance does the Bank of England's 0.5% official interest rate have to the interest rates millions of borrowers have to pay in the real world. It is only of relevance in setting a cap on the level of interest paid by banks to savers.

But, in any case, over coming months, as global interest rates rise, mortgage payments are likely to rise by at least 50%, and probably more. In fact, one of the reasons, 6,000 people applied, in the last 3 months, for mortgages under the Help To Buy scam, but only 750 houses have been bought, is that under the new guidance for affordability, many of the applicants would face mortgage payments amounting to more than 50% of their income, if rates rise, and so do not qualify for a loan. If that test were applied to those who already have a mortgage many millions would also fail it.

The other aspect of this scam is to persuade people that they must buy ahead of prices rising, yet even the building society figures do not give any evidence of that. The latest figures from Nationwide suggest an 8% rise nationally, but that hides a 15% rise in London, and a 2% rise in the rest of the country. Even this figure is bogus. It is a figure for asking prices not selling prices. Asking prices always rise at the start of the year. It usually means that sellers have to then wait longer to sell, and have to reduce their price in order to do so, several months later. There does seem to have been change in the market recently with more houses being sold, but they are still being sold at lower prices.

The two houses in my village that have been up for sale for two years, have now been sold in the last month or so, but both at significantly less than the original asking price, and also less than their latest asking price. One a very big, four bedroom, detached house with about an acre of garden, and stunning views was originally put up for sale for £500,000. It was reduced several times down to £425,000 only a few months ago. Its actual selling price was £405,000, a more or less 20% reduction. The other house an even bigger semi with about the same amount of land, was put up for sale at the same time for £450,000. The attached semi sold in 2010 for £500,000 having been put up at £550,000. It has had several reduction down to £350,000 a couple of months ago. Its actual selling price is not available yet, but is again likely to be around £320,000.

And the same applies at other price ranges. Last month I went to the property auction where we had my cousin's house was up for sale as part of his estate. The estate agents eager for business had been keen to tell us that the house, a double fronted, two-bedroom detached house with garden, in a semi-rural location, would attract builders and speculators. There would be no problem the price being bid up from a reserve of £55,000 to at least £70,000 and above they originally claimed. I doubted it from the beginning, and was not surprised then when it failed even to get bidders at the reserve price of £50,000.

As one of the estate agents told me separately, one effect of “Help To Buy” is that where people do want to buy, the need only to put down a 5% deposit means that where people were prepared to pay up to £50,000 for a terraced house, now they aren't, because they can buy a £100,000 semi instead. That is always the case with government subsidies, it causes unforeseen distortions. The real indication of the situation is given, not by the fiddled figures on asking prices, but by looking at the number of transactions. Although they have risen from their very low levels, which is partly due to Help To Buy, they remain at very low levels, because prices are in a massive bubble, and people cannot afford to buy as first-time buyers, and they cannot afford to make up the now much bigger gap between the price of their existing house, and the house they would like to move up to. The low level of transactions is an indication of low levels of demand at current prices. The only answer to that is either for incomes to rise massively – more than double current levels – which is not going to happen, or else for house prices to fall massively, at least halve, and more likely a fall of around 75%.

Current government policies instead of helping are making the situation worse. Sooner, probably rather than later that will become apparent via a new property price collapse.

Northern Soul Classics - Baby Hit and Run - The Contours

More Motown Northern Magic this time from the voice of Dennis Edwards of the brilliant Contours.

Capital II, Chapter 11 - Part 4

The essential point about variable capital is that the capitalist exchanges a constant sum to buy a commodity, labour-power, that creates a variable sum. Marx reiterates the point that it does not matter whether this constant sum paid out, is in the form of money wages, or in the form of means of subsistence provided to the workers. But, he needs to be careful here. In practice this is true, because under capitalism, this payment in kind is always a rare exception. But, in principle, for the reasons set out in Chapter 10, and in examining commodity exchange in Volume I, if it were generalised, surplus value would become impossible.

If all commodities were only ever bought by capitalists, those capitalists would only be prepared to pay for them what they cost to produce, and their cost of production to capitalists is always less than the value of those commodities, because it does not include the unpaid labour-time.

If capitalist A has a commodity, which has cost them £10 to produce, there is no reason capitalist B will pay them £12 for it. But, if they do, and then capitalist B sells A a commodity for £12, that cost them just £10 to produce, what A gained as a seller they lose as a buyer. Its as though both commodities sold at their cost of production. So, no surplus value can be created. Surplus Value can only arise and be realised when wage workers appear in the market as buyers of commodities.

If workers, like slaves, are paid not in wages, but in means of subsistence, bought by capitalists, then those capitalists WILL be the only purchasers of commodities, so surplus value would be competed away. It is only because workers are wage workers, deprived of their own means of production, and unable themselves to exploit labour-power, that they appear in the market as buyers of commodities not at the cost of production, but at their exchange value, which includes the labour-time expended on them that has not been paid for. Its precisely on that basis, as Marx sets out in the Grundrisse, that exchange value only assumes its mature form, where wage workers constitute the majority of consumers.

Back To Part 3

Forward To Part 5

Capital II, Chapter 11 - Part 3

Marx reiterates a point made in Volume I that although its stated that the capitalist advances capital for wages, the reverse is true. Wages are always paid in arrears. The worker advances his labour-power to the capitalist, by working for a day, week, month or whatever, before being paid. On some occasions the worker might be given an advance on their wages in the form of a loan, but this is then deducted from the wages when they are paid at the end of the period.

The fact that the capitalist, in turn, might not get back the capital they have advanced, as variable and other productive capital, for some time, does not affect this. The seller of a commodity, here the worker selling labour-power, doesn't care what the buyer does with it after. The capitalist can't buy a machine cheaper just because it will take them a longer rather than a shorter time to get its value back.

Variable capital, paid as wages, buys Labour-power, a commodity whose value is constant and equal to the value of the means of subsistence required for its reproduction. But, this labour-power has the unique ability not only to reproduce this value of its own reproduction, but to produce a surplus value over and above it. But, this unique characteristic is hidden when labour is viewed instead simply from the perspective of circulation, and only distinguished from other types of capital as being circulating rather than fixed capital. As circulating capital, it is no more capable of producing surplus value than its other components such as raw and auxiliary materials.

As a consequence, Ricardo cannot provide any analysis of the source of surplus value, and so ignores it.

“Similarly the fact is ignored that the part of the value added to the product by the capital laid out in wages is newly produced (and therefore really reproduced), while the part of the value which the raw material adds to the product is not newly produced, not really reproduced, but only preserved in the value of the product, conserved, and hence merely reappears as a component part of the value of the product.” (p 222)

But, then, looked at from this perspective, both of these types of capital, fixed and circulating, can only transfer their value to the end product. The only distinction is that the latter transfers it piecemeal. But, in either case it is impossible, on this basis, for a surplus value to arise. The source of the surplus value is obliterated.

“It is therefore understandable why bourgeois Political Economy instinctively clung to Adam Smith’s confusion of the categories “constant and variable capital” with the categories “fixed and circulating,” and repeated it parrotlike, without criticism, from generation to generation for a century.” (p 223)

The Physiocrats avoided this confusion because, for them, surplus value was not a product of capital but of the special role that nature plays in assisting agricultural labour. So, this is completely separate from their views on the different types of capital, which they can then differentiate in accordance with the period for which it is advanced.

Back To Part 2

Forward To Part 4

Capital

Marx uses the term 'Capital' in a number of ways. He talks of Capital in a number of forms, which are specified, for instance “Productive-Capital”, “Money-Capital”, “Commodity-Capital”, each of which are specific physical forms of Capital. Each of these imply a definition of Capital itself as something more than just these specific forms of it. In this sense, Marx also talks of Capital as being “a social relation”, as well as being “self-expanding value”. In fact, both of these last two definitions are aspects of the same thing. Capital is self-expanding value, but value can only self-expand within the context of a specific social relation. When Marxists speak of “Capital” then they mean something different to its usual use in vocabulary. In fact, it means something even more specific than the more restricted use that bourgeois economists apply compared to its normal use in every day language.

The essence of “Value” is labour. Value is labour, and the measure of value is labour-time. Value can always be expanded, therefore, simply by adding or performing more labour. A primitive commune creates value by performing communal labour - hunting, fishing, making tools etc. It can always create more value by performing more labour. But, there is no means by which this value can expand without the performance of additional Labour-time. It cannot be self-expanding value.

The same is true of other forms of society. In a slave-owning society, for example, the majority of people are not slave-owners, but self-sufficient peasants. Each peasant family produces an amount of value equal to the labour-time it performs. If, it produces products that are surplus to its requirements, and decides to exchange them for other products it requires, so that these surplus products become transformed into commodities, and the value of the products becomes measured in a quantity of other products, i.e. it takes the form of an exchange value, this process does not lead to the creation of any additional value. One amount of value/labour-time is simply exchanged for an equivalent amount of value/labour-time.

This is still true for the slave-owner. As Marx sets out in the Grundrisse and in Capital slaves occupy the same position in the economy as does any other pack animal, and the same is true of a machine. That is a slave, a beast of burden and a machine can all produce surplus products, in that they can produce more products than are required for their production and maintenance, but they do not produce a value greater than is required for their production and maintenance. The owner of a slave, ox, or water mill will have to expend value for their purchase and maintenance, and that value will be transferred into the value of the products they help produce, but nothing more. The illusion is created that these things create additional value only because where they are used to produce commodities, the exchange value of those commodities is determined by the average social labour-time required for their production, and that may be higher than the individual value of commodities produced using slave labour, pack animals or machines. The difference between the individual value and the social value, therefore appears as a surplus value, but if all commodities were produced using slaves, pack animals and machines in the same way, then the difference between the individual value and social value would disappear, and the surplus value would disappear with it.

The same is true of a communist society. A communist society will produce value equal to the labour-time expended. Workers will receive tokens equal to the labour-time they have contributed, and giving them an entitlement to an equivalent proportion of the total social labour-time expended, after deductions have been made to cover administration costs etc. As Marx puts it in the Critique of the Gotha Programme,

“Here, obviously, the same principle prevails as that which regulates the exchange of commodities, as far as this is exchange of equal values. Content and form are changed, because under the altered circumstances no one can give anything except his labour, and because, on the other hand, nothing can pass to the ownership of individuals, except individual means of consumption. But as far as the distribution of the latter among the individual producers is concerned, the same principle prevails as in the exchange of commodity equivalents: a given amount of labour in one form is exchanged for an equal amount of labour in another form.”

So, again although such a society produces a surplus product – a product greater than was needed to replace the means of production and the labour-power consumed in producing the current output – no surplus value is created.

It is only in the specific conditions of Capitalism, where Capital employs wage-labour, that a surplus value is produced. It is the production of surplus value, which is the means by which Capital self-expands.

“But it is only within the process of production that the value laid out in labour-power is converted (not for the labourer but for the capitalist) from a definite, constant magnitude into a variable one, and only thus the advanced value is converted altogether into capital-value, into capital, into self-expanding value.” 

(Capital II pp 217-8)

Capital is then both a social relation and self-expanding value, and one entails the other.