Theories of Surplus Value, Part III, Chapter 24 - Part 44

Marx then makes a number of observations on Jones' comments on rent. Jones correctly observes that, under capitalism, rent depends entirely on profit. Rent is surplus profit. The concept of surplus profit itself only has meaning on the basis of the existence of an average rate of profit. The development of an average rate of profit depends on a free and frictionless movement of capital and labour, so that surplus profits are competed away. Surplus profits, resulting in rent, occur when no such free movement of capital and labour is possible. 

“In reality friction takes place (at the expense of the working class) between the one-sided character which the division of labour and machinery impose on labour-power on the one hand, while on the other hand, it confronts capital [which is thereby differentiated from its undeveloped form in craft-build industry] merely as the living potentiality of any type of labour in general, which is given this or that direction according to the profit that can be made in this or that sphere of production, so that different masses of labour are transferable from one sphere to another.” (p 444) 

An example of this friction, at the expense of the working class, which results in surplus profits, and rent, can be seen with Brexit, or with the imposition of tariffs by Trump in the US etc. The surplus profits also come with higher costs of production (as for example the higher cost of food and raw materials that the Corn Laws imposed) and thereby a limitation on capital accumulation, economic growth, slower productivity, and lower living standards. 

Marx quotes Jones' comparison of this freedom of mobility of capital and labour under capitalism, and the monopoly and rigidity of previous modes of production, where peasant producers were stuck in their own localities, and methods of production did not change for centuries. Such conditions, as Jones described, still existed in much of Asia. As Marx himself wrote, elsewhere, it was British colonialism that actually brought the only social revolution that had ever happened in India. 

When Marx wrote the Communist Manifesto about capitalism rescuing millions from “the idiocy of rural life”, he was referring to the fact that this unchanging condition for century after century, with methods, ideas and culture simply being handed down from one generation to the next, had an actual dulling effect on the wits of those subjected to those conditions. 

“On the other hand, the capitalist mode of production, whose characteristic features are mobility of capital and labour and continual revolutions in the methods of production, and therefore in the relations of production and commerce and the way of life, leads to great mobility in the habits, modes of thinking, etc., of the people.” (p 444) 

Back To Part 43

Forward To Part 45

Labour Manifesto – Public Services Funding (2)

In Part 1, I set out why Marx's analysis shows why its not possible, under capitalism, for workers' wages, including the social wage, to be paid for by anyone other than the workers themselves. Of course, real wages, the standard of living rises over time, and that includes the social wage. But, that is a different matter. Real wages, the standard of living, rises, because social productivity rises. A given amount of labour produces an ever increasing amount of output. Suppose 100 units of labour produces 10,000 units of output. Of this, 5,000 units, 50%, is appropriated as profits by capital, and the other 5,000 units by labour. Ten years later, as a result of rising productivity, the same 100 units of labour produces 15,000 of output. Of this, the workers now obtain 6,000 units. Their standard of living has risen by 20%. However, capital now obtains the remaining 9,000 units of output as profit. Its share has risen not by 20%, but by 80%. 

Marx describes this situation in Theories of Surplus Value, in his analysis of the work of Hodgskin. It is the difference between portion and proportion. Both capital and labour obtain larger portions, because output itself has increased by 50%, but the proportion of this total output obtained as profits has risen from 50% to 60%, whilst the proportion obtained by labour, as wages, has fallen from 50% to 40%. If we were to put it in constant money terms, the money wages of workers would have fallen, even though their standard of living has risen, whilst the money profits, as well as the actual physical quantity of output, obtained as profits will have risen. The rate of exploitation of labour rises, even as living standards are increased. This is part of the process that Marx describes as The Civilising Mission of Capital. 

So, it is quite possible for the social wage, the actual amount of goods and services provided as Public Services, to rise, just as with the nominal wage, provided that social productivity rises sufficiently to enable it, but such rises in social productivity will also, simultaneously be the means by which the rate of exploitation of labour is increased, and so that an even larger share of the increased output is appropriated by capital as profits. The problem in Britain has been, over the last 30 years, since the time of Thatcher, that government policies have encouraged a low wage, including low social wage economy, that disincentivised capital from replacing labour with technology, and so has caused productivity levels to fall to very low levels. 

Under Thatcher and Major, nominal wages were pushed down following the defeat of the Miners in 1985. As large swathes of manufacturing industry was closed down, higher paying skilled and semi-skilled jobs disappeared, and were replaced by a large number of unskilled, temporary, insecure jobs, and wages fell along with it. At the same time the social wage was cut. The Tories sold off state capital on the cheap; they sold off council houses that quickly fell into the hands of private landlords; they allowed public services to rot, in the same way that private landlords allow the properties they rent out to deteriorate for lack of maintenance. 

I pointed out ten years ago, some of the delusions in relation to the Left and the NHS, but its also important, in current conditions, to note the point made there about variations in the public's satisfaction levels with the NHS. I quoted the Social Trends Survey, 

“It found that the percentage of those satisfied with the NHS stood at 55% in 1983, and fell steadily until 1994, when it stood at 44%. It then fell again sharply down to 34% in 1997. After Labour came to power satisfaction rose steadily rising to an all-time high of 64% in 2009. But, it has to be remembered that, even to get to this figure, which is not even double the 1997 low, Labour had trebled the funding of the NHS! The figures also show that the highest degree of satisfaction (75%), was in the 65+ age range, with the level of satisfaction falling in each lower age range down to 61% in the 18-34 age range. This is understandable given that the NHS was created when the over 65's were in their formative years, and so most closely associate with it.” 

As a result of ten years of Tory austerity, it has not taken long for them to undermine the NHS once again. But, it should not be thought that this automatically transfers into support for Labour's plans for the NHS either. As I pointed out, this is similar to what happened with Council Houses. Even with the trebling of funding for the NHS under the Blair/Brown government, it did not prevent the rise of MRSA infections, or the obscenity of what happened at Stafford Hospital and elsewhere. 

I quoted the Patients Association Report “The NHS At 60”. 

“61.1% of people used the NHS exclusively, with 25.5% saying they used both the NHS and Private Healthcare, 1.7%, only used private healthcare, with no response from the rest.. 

Interestingly, and keying into the points made by Aglietta, although GP's were the first point of reference for information on Health Matters, the Internet was the first port of call for 22% of respondents... 

Although it was the largest number of the various alternatives, only 40% wanted to retain the funding of the NHS out of taxation. Half that number (20.2%) favoured a tax deductible Insurance Payment, whilst 13% favoured Co-Payments, and 7% favoured vouchers for healthcare up to a specific limit. The Patients Association favours the status quo, and provided no information on alternative methods of payment, but it was forced to recognise that put together the alternative methods formed a majority for change from the current system of payment out of tax. It also admitted that this was despite very little information or advertising to inform patients about these potential other forms of funding.” 

Simply assuming that the threat of “privatising” the NHS will be enough to frighten voters into supporting Labour would be to make the same mistake as was made in the 1980's in relation to Council Housing. 

The problem for Labour, therefore, is that, in order to increase real wages, including the social wage, it must bring about a large rise in productivity, but that rise in productivity requires that capital invest on a large scale to bring it about. Increasing nominal wages, and/or the social wage is one means of encouraging capital to do that, but the problem here is that Britain may physically be an island, but economically it is not. If UK wages rise rapidly, and/or if a UK government seeks to raise the Social Wage, paying for it via increased taxes on capital or profits, then, particularly large-scale capital, i.e. precisely that capital which has the capacity to introduce such large scale investment, and on which the economy depends, is likely to respond by simply moving elsewhere. In the context of Brexit, it will simply relocate to elsewhere in the EU. Labour could load more taxes on to those sections of capital that cannot do that, i.e. on to small scale, UK based capitals, but those are precisely the capitals that are already struggling to survive, and for which any additional costs from taxation, along with higher interest rates, will simply lead to them going bust. 

Labour says, 

“We will pay for this by creating a fairer taxation system, asking for a little more from those with the broadest shoulders, and making sure that everyone pays what they owe.” 

As stated earlier, what this always means, therefore, is that it is one section of the working class that pays additional taxes, which are then distributed to others within the working-class. Its ridiculous to lump workers earning over £80,000 into the same category as multi-billionaires, whose unearned income each year, runs into tens of millions of Pounds. And Labour says, 

“We will reverse some of the Tories’ cuts to corporation tax while keeping rates lower than in 2010.” 

Capital will not look at the fact that Corporation Tax is lower than 2010, but only at the prospect of a rise. That is particularly true given that, as a result of the increased costs for business that Brexit involves, companies would be looking for lower rates of Corporation Tax, in the UK, not higher. The consequence of a rise in Corporation Tax will simply be that a smaller proportion of profits will go to investment, and a larger proportion will go in dividends to shareholders. It will, thereby, reduce economic growth, and the tax base, thereby undermining the government's ability to increase future tax revenues to finance its spending. 

This whole problem is a symptom of Labour's social-democratic ideology, and this insistence on trying to resolve problems in the realm of distribution, via taxing and spending, rather than where it has to be tackled, which is in the realm of production, and the ownership and control of capital. As Marx put it, in the Critique of The Gotha Programme, 

“Any distribution whatever of the means of consumption is only a consequence of the distribution of the conditions of production themselves. The latter distribution, however, is a feature of the mode of production itself. The capitalist mode of production, for example, rests on the fact that the material conditions of production are in the hands of nonworkers in the form of property in capital and land, while the masses are only owners of the personal condition of production, of labour power. If the elements of production are so distributed, then the present-day distribution of the means of consumption results automatically. If the material conditions of production are the co-operative property of the workers themselves, then there likewise results a distribution of the means of consumption different from the present one. Vulgar socialism (and from it in turn a section of the democrats) has taken over from the bourgeois economists the consideration and treatment of distribution as independent of the mode of production and hence the presentation of socialism as turning principally on distribution. After the real relation has long been made clear, why retrogress again?” 

So long as control of capital is in the hands of capitalists, of the ruling class, then any attempts to simply alter distribution relations, whether it is by workers being able to temporarily win higher wages, by the state increasing the social wage, or by the state raising taxes on capital, in order to redistribute it as benefits to workers, will simply result in the responses from capital described above. That remains true whether Britain is in the EU or outside it, but being outside the EU only makes matters worse for Britain, because it heaps additional costs on to UK businesses, and thereby slows capital accumulation. It illustrates once again why even a programme of progressive social democracy, let alone socialism is inconceivable outside the EU. 

Labour says, 

“VAT is a regressive tax that hits the poorest hardest and we guarantee no increases in VAT.” 

Quite true, which is why Marx proposed scrapping all such indirect taxes, and replacing them with direct taxation such as Income Tax. Indeed, we should scrap other taxes such as National Insurance, which requires all the costs of collection, but whose receipts are pooled along with other taxes. If there is to be such a separate National Insurance Fund then it should operate properly as such, being completely separated from other taxation, and invested and audited so that we can see its performance, as with private pension funds and mutual funds. But, better still is Marx's proposal that such social insurance should be the preserve of the workers themselves, the money being put into funds owned and controlled by workers themselves. As I have said previously, if workers had control of the £1 trillion already contained in their pension funds, rather than them being under the control of the banks, then we could use those funds to significantly increase the power of workers in society. If in addition, we had the funds that should nominally be in the National Insurance fund, it would give workers even greater power, and we would be able to reject all of the demands from the state to increase the retirement age and so on. 

But, Marx had other reasons for wanting indirect taxation such as VAT to be scrapped, and replaced by direct taxation. Marx was not a fan of the state, as he is often presented by the bourgeoisie. Marx wanted workers to see just how much of their wages was being deducted by the capitalist state. As he put it, 

“Because indirect taxes conceal from an individual what he is paying to the state, whereas a direct tax is undisguised, unsophisticated, and not to be misunderstood by the meanest capacity. Direct taxation prompts therefore every individual to control the governing powers while indirect taxation destroys all tendency to self-government.” 

None of this tinkering with taxation and distribution can deal with the underlying cause of inequality, which is the ownership and control of capital. Yet, the reality is that capitalism has itself already largely resolved this problem. The very process of capital accumulation, described by Marx, leads to capital as private property ceasing to exist. It becomes socialised capital. That process was largely accomplished even by the end of the 19th century, as private capital became transformed into cooperatives and joint stock companies. It is absurd that, in fact, Labour seeks to cosset the old less mature forms of small private capital, and to focus its attacks on the more mature form of socialised capital. That was illustrated in Labour's listing of Britain's supposed five worst employers today, all of which were drawn from the ranks of large companies. Of course, no one doubts that large companies can be, and are, guilty of some pretty shoddy practices, but does anyone really think that these companies are even close to being the worst employers in Britain? For one thing, a lot of the information was provided by the unions involved in those companies, yet in many of the 5 million small companies operating in Britain, you would never get anywhere near being able to even join a trades union, before the boss showed you the door! 

In all of those 5 million small private capitals, it continues to be the case that the capital exists still as private property. It is the capital of the large joint stock companies that has already transcended that stage of development, and become socialised capital, and thereby as Marx describes it, the transitional form of property between capitalism and socialism. It is lunacy for a progressive social-democrat, let alone a socialist to favour the former as against the latter, and yet that is what Labour continually does as its populist rhetoric focuses on attacking “the rich”, and so on, rather than analysing and responding to the true nature of capital. Marx notes that this development of socialised capital, in the form of the joint stock company, 

“is the abolition of capital as private property within the framework of capitalist production itself... 

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... 

This is the abolition of the capitalist mode of production within the capitalist mode of production itself, and hence a self-dissolving contradiction, which prima facie represents a mere phase of transition to a new form of production.” 

(Capital III, Chapter 27) 

Capital itself, via the process of capital accumulation, and the concentration and centralisation of capital, has already abolished capital as private property in these large corporations, and turned it into socialised capital, the capital of the associated producers in those companies. All that is now required is to recognise this economic fact in law, and ensuring that it is those associated producers, the workers and day to day professional managers, in those companies, that exercise control over that capital, and not shareholders, who have no economical or logical right to exercise any such control, but yet who do exercise such control. 

As John Kay and Aubrey Silbertson set out thirty years ago, the shareholders do not own the capital of the large companies. They are merely lenders of money to it, creditors like bondholders, landlords, lessors of equipment and so on. The interest/dividends they obtain on the money they lend is indeed, a payment of the price for the capital they sell to the company, and as with any other commodity that is sold, the buyer of that commodity expects to have full control over its use, and not have the seller continue to exercise such control. Instead of tinkering with taxation and distribution, Labour should simply correct this anomaly that is not even consistent with bourgeois property laws, and remove the right of shareholders to have any vote in company matters. Instead of expensive and unnecessary proposals to buy shares from shareholders, in a range of companies, Labour should simply reform company laws on corporate governance so as to ensure that the boards of all companies are elected 100% by the workers and managers in the company, and from the workers and managers within the company. Shareholders like any other lender of money-capital are entitled to a market rate of interest/dividend on the money-capital they lend, and nothing more. 

As Marx describes above, in his Critique of the Gotha Programme, if Labour were to adopt this simple solution, thereby giving workers collectively control over this socialised capital, they could resolve all of these issues immediately. Workers would have a direct interest in using profits for investment in real productive-capital rather than using them for speculation in financial assets, for example. But, again, a Labour government acting alone, in a small, isolated Britain could never achieve this on its own. The first signs that a Labour government might act in this way would cause capital flight. Only if workers across Europe moved forward with such a programme could such resistance by capital be prevented and defeated. Once again this illustrates why any talk about a Jobs First Brexit is sheer fantasy.

Theories of Surplus Value, Part III, Chapter 24 - Part 43

“If workers are simply replaced as motive power without [the machinery] itself being substantially altered, for example, if wind or water [now operate the machinery] where this was done previously [by workers], two lots of capital are freed, the capital previously spent on paying the workers and the capital for which their money income was exchanged. This is an example used by Ricardo.” (p 441) 

This is the point Marx discussed earlier, in relation to the two types of funds released, one relating to capital, the other relating to revenue. A part of the fund which produced the wage goods consumed by the workers laid off is now released. Instead of going to produce wage goods for those workers, it now goes to the production of machines. 

“A large part of the labour previously used directly in the production of means of subsistence is now used in the production of auxiliary capital. This too is in contradiction to Adam Smith’s view, according to which the accumulation of capital is synonymous with the employment of more productive labour. Apart from the examples considered above, the result may be merely a change in the application of labour and a withdrawal of labour from the direct production of means of subsistence and its transfer to the production of means of production, railways, bridges, machinery, canals and so on.” (p 441-2) 

Marx then sets out, using citations from Jones, why it is the mass of existing capital, and also, thereby, the mass of profit, not the rate of profit, that is most important for capital accumulation. Marx gives the following quote from Jones. 

““The astonishing expedition with which a great cotton factory, comprehending spinning and weaving, can be erected in Lancashire, arises from the vast collection of patterns of every variety from those of gigantic steam engines, water wheels, iron girders and joists, down to the smallest member of a throstle or loom in possession of the engineers, mill-wrights, and machine makers. In the course of last year Mr. Fairbairn equipped water wheels equivalent to 700 horses power and steam engines to 400 horses power from his engineer factory alone, independent of his mill-wright and steam-boiler establishment. Hence, whenever capital comes forward to take advantage of improved demand for goods, the means of fructifying it are provided with such rapidity, that it may realise its own amount in profit, ere an analagous factory could be set a-going in France, Belgium or Germany” (Andrew Ure, [Philosophy of Manufactures, London, 1835, p. 39,] Philosophie des Manufactures etc., tome I, Paris, 1836, pp. 61-62). “ (p 442) 

As Paul Mason has described in “Postcapitalism”, in modern economies where intellectual property has become increasingly significant, this is also manifest in the attempt to protect such intellectual property. Its manifestation, however, can be seen in something like the decoding of the human genome. When the first decoding was done, the cost was approximately $3 billion. Once the pattern was established, the cost of each subsequent sequencing became cheaper and cheaper. Together with further advances in computing power, the cost is now down closer to $100. What initially took years to achieve, can be done in hours, and, as AI is introduced that is being extended to ever wider areas of activity. 

“With development, machinery becomes cheaper, partly relatively—in comparison with its power—and partly absolutely; at the same time, however, a massive concentration of machinery takes place in the workshop, so that its value increases in proportion to the living labour employed, although the value of its individual components declines: 

The driving force—the machine which produces the motive power—becomes cheaper as the machinery which transmits the power and the machine which the power operates, are improved, as friction is reduced, etc.” (p 442) 

Even in relation to the value of the fixed capital, relative to labour, this is not necessarily true today. The cost of computing power has become so cheap that it is often the very complex labour that utilises this power that comprises the largest portion of value. However, AI is rapidly changing that too, in a range of occupations. 

Marx notes the significance of this, in relation to the fact, as Jones says, a majority of labourers, across the globe, had still not reached the level of becoming wage labourers. 

““Over by far the greater part of the globe, the great majority of the labouring classes do not even receive their wages from capitalists; they either produce them themselves, or receive them from the revenue of their customers. The great primary step has not been taken which secures the continuity of their labour; they are aided by such knowledge only, and such an amount of mechanical power as may be found in the possession of persons labouring with their own hands for their subsistence. The skill and science of more advanced countries, the giant motive forces, the accumulated tools and machines which those forces may set in motion, are absent from the tasks of the industry which is carried on by such agents alone” ([Richard Jones, Text-book of Lectures on the Political Economy of Nations,] p. 43).” (p 443) 

In fact, as Jones also says, that was still true in many of the agricultural districts of England itself, at the time he was writing. 

Marx notes, 

“Capitalist production leads to separation of science from labour and at the same time to the use of science in material production.” (p 443) 

Back To Part 42

Forward To Part 44

Labour Manifesto – Public Services Funding (1)

There is a fundamental problem with Labour's programme. It is the problem that afflicts all social-democratic programmes. The problem is that it suggests that goods and services (wage goods) can be provided, but that someone else will pay for them. It is a necessary consequence of an ideology based upon provision of public services by the capitalist state, which that state funds out of taxation. At the heart of this problem lies the fact that social-democracy, as a bourgeois, reformist ideology, based upon Ricardian/Fabian economics, does not understand what basic economic categories such as capital, wages, or taxes are. 

If we take wages, for example, then as Marx describes, at length, in Capital and elsewhere, they are the phenomenal form of the value of labour-power, and the value of labour-power is determined by the value of the commodities required to reproduce labour-power. In other words, it is the superficial appearance that the value of labour-power assumes having been mediated by the laws of competition, by the interaction of demand and supply in the market.  If we look at the value of total output, it resolves into three funds. The first fund is that which reproduces the value of constant capital consumed in production. That is it reproduces the value (current reproduction cost) of the raw materials consumed in production, plus the value of wear and tear of fixed capital consumed in production, so that these use values can be physically replaced “on a like for like basis” (Capital III, Chapter 49) out of current production. The value contributed to output by this constant capital, is always equal to the value that must be withdrawn from current output, because these are one and the same thing. The value of the consumed materials and fixed capital, is equal to its current reproduction cost, not its historic price. Precisely for that reason it cannot form any part of surplus value. 

The rest of the value of total output is the consequence of the new value created by labour. It divides into two components/funds. The first fund is that which reproduces the labour-power consumed in production. It is the wage fund. The second fund is what is left over after the wage fund is deducted. It comprises the surplus value, which is used to provide for the unproductive consumption of capitalists, and other unproductive sections of society. It also provides the fund from which the accumulation of capital is undertaken. Capital is a social relation, because all of the “things” that are generally considered to comprise “capital”, i.e. means of production, such as factories, machines, raw materials, and wage goods can be found in other modes of production, but without them being capital at all. What makes all of these “things” capital, is the fact that, under capitalism, these “things” are only advanced to production on condition that the labourer provides free labour, i.e. produces surplus value which is appropriated by capital. This remains true even where capital is owned by the state, or even by the workers themselves, as is the case with a cooperative, or as is the case with socialised capital in the form of a joint stock company. 

As Marx puts it in Capital III, Chapter 27, 

“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... 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.” 

If we take all of the things that are provided as Public Services, in the main, they are wage goods. That is they are goods and services required to reproduce labour-power. They are paid for out of the wage fund. If these goods and services were not provided as Public Services, then, in so far as they are necessary for the reproduction of the labour-power required by capital, workers would have to buy them out of their wages, in the same way that they buy other vital items required for the reproduction of their labour-power, such as food, clothing, heating and so on. Similarly, wages would then have to be high enough to cover the purchase of these goods and services by workers, or else labour-power would not be sufficiently reproduced, the supply of adequate labour-power would fall, and so wages, as the market price of this labour-power would rise. As Marx puts it, in Value, Price and Profit, 

“As to the limits of the value of labour, its actual settlement always depends upon supply and demand, I mean the demand for labour on the part of capital, and the supply of labour by the working men... 

I think I have shown that their struggles for the standard of wages are incidents inseparable from the whole wages system, that in 99 cases out of 100 their efforts at raising wages are only efforts at maintaining the given value of labour” 

All that public service provision does, as with Welfarism in general, is to ensure that variations within the working-class itself are evened out, so that all sections of the class are able to obtain the minimum levels of these goods and services required for the reproduction of labour-power, so that capital itself can be reproduced. Public service provision ensures that a range of these goods and services that might otherwise not be provided to every member of the working-class, at prices that they could afford, are thereby provided instead by the capitalist state, which thereby acts in the interests of capital as a whole, which requires this reproduction of labour-power. Moreover, for some of these goods and services, certainly in the twentieth century, the large, national scale of production required, was most effectively undertaken by the capitalist state itself, which was able to organise production of things like education and healthcare on mass production/Fordist lines, and to ensure that workers set aside a minimum portion of their wage fund for this purpose, by the legally enforced deduction of taxes and national insurance to cover the provision of these goods and services. 

In essence, the working-class, as a whole, collectively buys the education, healthcare, social services, and so on required by it as a class, and thereby ensures that these are provided collectively to each member of that class, including those whose wages, ill-health, unemployment and so on, would otherwise have meant they would have been unable to afford them. That it does so, by paying for them, superficially, via the taxation system, merely hides the true reality that this is a purchase of wage goods, and funded out of society's wage fund, i.e. out of that fund of new value created by workers which is always destined for the reproduction of labour-power. 

Welfarism has other benefits for capitalism. Firstly, in the 19th century, workers themselves recognised the need to provide these kinds of goods and services collectively. They created trades union funds to cover a range of eventualities from strike funds to emigration funds, to welfare funds to provide for periods of sickness and unemployment, as well as education funds to be able to educate themselves, and political funds to pursue independent political representation. They also created Friendly Societies that provided similar kinds of social insurance provision, and their cooperatives provides worker owned and controlled healthcare and education. The bourgeoisie recognised an obvious danger, as workers began not only to take over factories and run them cooperatively, but also began to create all of these other forms of independent self-government. By creating National Insurance schemes that workers were compelled to contribute to by law, they diverted all of these funds out of the control of workers, and placed them directly at the disposal of the capitalist state. Marx warned workers against allowing such developments in The Programme of the French Socialist Party, and Engels wrote of similar proposals put forward by German Socialists in The Erfurt Programme, 

“These points demand that the following should be taken over by the state: (1) the bar, (2) medical services, (3) pharmaceutics, dentistry, midwifery, nursing, etc., etc., and later the demand is advanced that workers’ insurance become a state concern. Can all this be entrusted to Mr. von Caprivi? And is it compatible with the rejection of all state socialism, as stated above?” 

Welfarism prevents independent working-class self activity and self-government. It diverts that part of the wage fund that workers would use, under their own ownership and control, for such purposes, thereby creating its own forms of social provision, under new systems of workers' democracy, establishing basic forms of workers' state in opposition to the capitalist state, and instead places it directly under the control of the capitalist state. It enhances the power of the capitalist state over society, and its control over the reproduction of labour-power. It enhances its own ideological control, by presenting this welfare state as in some sense neutral, as even a concession from capital, and so also reinforces the idea that the capitalist state itself is neutral, and can be controlled by workers, simply via the election of social-democratic governments. Via the schools and universities, the capitalist state even more reinforces bourgeois ideology, as these education factories instil bourgeois ideas in the heads of those that pass through, training them to become useful automatons in the great capitalist production machine. 

The idea that these Public Services can be paid for by someone else other than the working-class itself, is an absurdity so long as capitalism continues to exist.  Indeed, it reinforces bourgeois ideology because it implies that this social wage, and so also the nominal wage are paid for and provided advanced by capital.  But, as Marx, Hodgskin, Jones and others demonstrated, the wage fund is itself created by the workers themselves.  It is the workers who produce the wage goods that they consume, it is the workers that in he process create the new value that capital appropriates, and out of which it then returns only a part to the workers as wages, keeping the rest itself as profit.

At certain times, the accumulation of capital accelerates at such a pace that it outstrips the supply of labour-power. That happened in the late 1840's, in the early 1910's, and again in the late 1960's/early 1970's. This causes wages to rise, and profits to be squeezed, causing a crisis of overproduction of capital. Marx again refers to such situations in Value, Price and Profit. For example, in the early United States capital was exported from Europe, but there were few workers, so wages were high, and workers saved from these wages, so that they could buy land and become peasant farmers. It meant that US capital had to respond to these high wages by more rapidly introducing labour-saving machinery, as well as encouraging rapid immigration, and freeing Southern slaves so that they could be turned into wage slaves in the Northern industrial cities. 

Adam Smith believed that because capital would grow more quickly than the supply of labour, then wages would naturally rise, and profits would eventually disappear. Capital did indeed grow more quickly than the labour supply, but this growth of capital, in the form of the quantity of raw materials processed by a given quantity of labour, was a consequence of ever rising social productivity caused by the introduction of new types of labour-saving equipment, and this very process was, thereby, also the means by which the cyclical crises of overproduction of capital was overcome. It meant that, as this labour-saving technology replaced labour, a relative surplus population was created, and this caused the rise in wages to be reversed, which also thereby caused profits to rise. Marx notes, 

“Take, for example, the rise in England of agricultural wages from 1849 to 1859. What was its consequence? The farmers could not, as our friend Weston would have advised them, raise the value of wheat, nor even its market prices. They had, on the contrary, to submit to their fall. But during these eleven years they introduced machinery of all sorts, adopted more scientific methods, converted part of arable land into pasture, increased the size of farms, and with this the scale of production, and by these and other processes diminishing the demand for labour by increasing its productive power, made the agricultural population again relatively redundant. This is the general method in which a reaction, quicker or slower, of capital against a rise of wages takes place in old, settled countries. Ricardo has justly remarked that machinery is in constant competition with labour, and can often be only introduced when the price of labour has reached a certain height, but the appliance of machinery is but one of the many methods for increasing the productive powers of labour. The very same development which makes common labour relatively redundant simplifies, on the other hand, skilled labour, and thus depreciates it.” 

(Value, Price and Profit) 

Whenever a situation arises in which the growth of capital causes a shortage in supply of labour-power (extensive accumulation), which causes wages to rise and profits to fall, capital always automatically responds in this way. Firstly, a more slowly expanding or even contracting mass of profit means that the fund available for capital accumulation itself provides a barrier to further expansion, and economic growth. Secondly, as with the early United States, it results in attempts to increase the size of the workforce, and thereby the social working-day. Immigration is encouraged, as happened in Britain in the post-war period; overtime working is encouraged; women are encouraged to join the workforce; children are encouraged into employment; older people are encouraged to remain in employment; in developing economies, peasants are encouraged to leave the land and move to the towns and cities. But, when all of these things have been used, the final weapon of capital is always to introduce new technologies to replace labour, to create a relative surplus population, unemployment, and thereby to reduce wages. 

The first experiments in introducing welfare states came in precisely these times when there were relative labour shortages. They began in Prussia in the first part of the 19th century, and were extended by Bismark, as the German economy expanded rapidly at the end of the 19th century. In Britain, the first proposals were drawn up at the start of the 20th century. The basic outlines of the Welfare State was set down by Neville Chamberlain, as Tory Chancellor in the 1920's, and was simply codified by the Liberal Beveridge in the 1930's, and implemented by the Attlee government in the 1940's. Again, this rise in the social wage accompanied the relative shortage of labour that developed in the post-war period. But, this social wage cannot be separated from the nominal wage. Both are paid for out of the wage fund, and the same laws apply to the social wage as applies to the nominal wage. The total wage has to be funded from the wage fund, and if it rises to a degree, due to a relative shortage of labour, that it begins to squeeze profits unsustainably, then capital will respond in the way it always does, by looking for ways of creating a relative labour surplus, and thereby reducing wages. 

It is simply not possible, therefore, for Labour to claim that it can increase the social wage, i.e. increase spending on the provision of Public Services whilst paying for this increase from sources other than the wage fund, i.e. by in some way securing the funds for such spending from capital. Were it to do so, then not only does it face the problems of capital flight, of strikes by capital, and so on, but it will face the normal problem that capital will simply invest in labour-saving technologies, creating a relative surplus population, unemployment, and thereby reducing its nominal wage costs. Now, this shift of emphasis by capital on to investment in these new labour-saving technologies is indeed required, and the means by which the UK's appalling productivity can be remedied, but that is a different matter. The fact remains that any rise in the social wage will be paid for in a fall in the nominal wage. It will not be paid for by capital. 

Theories of Surplus Value, Part III, Chapter 24 - Part 42

The introduction of the cotton gin represents intensive accumulation. It demonstrates the point that Marx makes in setting out the difference between his law of a falling rate of profit and that of his predecessors. In other words, here, the new machine relatively replaces labour, whilst the actual amount of labour, and mass of surplus value rises, i.e. 20,000 workers are employed, rather than 10,000, so the mass of surplus value doubles, but this is 30,000 fewer than would otherwise have been required to produce the 5 million kilos. And, here, the rate of surplus value rises rather than falls. 

Marx, then, describes more fully this difference between extensive and intensive accumulation. 

“The conversion of a part of the surplus product into auxiliary capital can take place in two ways: [firstly,] increase in the auxiliary capital already in existence, that is, its reproduction on a larger scale; [secondly,] discovery of new use-values or of a new use for well-known use-values, and new inventions of machinery or of motive power leading to the creation of new kinds of auxiliary capital. In this context, extension of knowledge is obviously one of the conditions for increasing the auxiliary capital or, what amounts to the same thing, for the conversion of surplus product or surplus money (foreign trade is important in this connection) into additional auxiliary capital. For example, the telegraph opens up a whole new field for the investment of auxiliary capital, so do the railways, etc., and so does the whole gutta-percha and India rubber production. 

This point about the extension of knowledge is important.” (p 440-1) 

Extensive accumulation always sets additional labour in motion. If a firm has one machine and one worker, if it buys an additional identical machine, it must also employ an additional worker to operate it. But, in addition, its consumption of raw material will double, so additional labour must be employed by its suppliers, to produce this additional material. But, this is not the case with intensive accumulation. The firm that now employs 2 machines and 2 workers, may process 1,000 units of material. If it introduces a new machine that replaces the 2 older machines, it will now require only 1 worker, and its consumption of raw material is not changed, so no additional labour is required by its suppliers either. 

“When a machine replaces labour, it always demands less new labour (for its own production) than it replaces. Perhaps the old labour is simply given a new direction. In any case, labour is freed, which after a greater or lesser amount of trials and tribulations may be used in other ways. The human material for a new sphere of production is thus provided.” (p 441) 

And, as set out previously, capital is also, thereby freed. If £1,000 was previously laid out as variable-capital, and now, £200 is laid out for the machine, and only £300 for variable-capital, because fewer workers are required, then £500 of this variable-capital is released. Whether this £500 of variable-capital can be used to employ the workers who were laid off depends on a series of other factors, for example, whether the fall in value of the commodity causes an expansion in demand for it, whether some other line of production opens up, whether the unemployed workers are of the right type, in the right place to take up such employment etc. 

This also the point referred to elsewhere, in relation to Marx's comments in the Grundrisse about how this development of productivity frees capital and labour, which is then employed in new spheres, widening the range of production and consumption, with this new production, thereby, also forming the means whereby the surplus production in the old spheres can be realised. 

Back To Part 41

Forward To Part 43

Labour Manifesto – Environment

Labour says, 

“We will maintain and continuously improve the existing EU standards of environmental regulation.” 

As an objective perfectly admirable, except that given the much larger size, and proximity of the EU, whatever Britain does to combat pollution itself will be overshadowed by what happens in the EU. Moreover, if Britain leaves the EU, which is presumably the goal of Labour's commitment to negotiate its own Brexit deal, it will already be facing a large competitive disadvantage with its largest and closest trading partner. Lumping further additional costs on to British business, compared to EU businesses, by these proposed higher standards, will not only act to undermine UK growth, and so the tax revenues etc. that are required to fund additional environmental improvements, but it will also lead to businesses migrating from the UK to the EU. The idea that any of these major issues can be dealt with by the small British state going it alone is simply fanciful. 

The Manifesto says, 

“Labour will introduce a new Clean Air Act, with a vehicle scrappage scheme and clean air zones, complying with World Health Organisation limits for fine particles and nitrous oxides.” 

But, trying to police such measures is next to impossible, and costly. Fifty years after smokeless zones were introduced, and we got rid of coal fires, we now have every new, and nearly new, development littered with log burners, and multi-fuel burners, churning out choking pollutants. Far simpler to just ban such polluting devices in the first place. But, again introducing such regulations is only rational on a larger scale, such as an EU wide basis. Higher standards for any form of energy production, or engine only make sense on an EU wide basis, because otherwise, producers of such equipment have to produce to different standards for different markets, raising costs. 

Labour says, 

“We will provide an extra £5.6 billion in funding to improve the standard of flood defences and respond to the increased risk of flooding, prioritising areas at risk in North West England, Yorkshire and the East Midlands that have been neglected by Conservative investments.” 

But, flood defences are a waste of money, and counterproductive. In the US, where large scale flood defences were built along the Mississippi, and other rivers, they have started to be dismantled. The reason is that all they do is to prevent rivers from naturally flooding into their flood plains. They send increasing volumes of water downstream so that they cause these downstream areas to flood where they never did in the past. That appears to be what has happened recently in South Yorkshire, for example. The flood defences which prevent rivers flooding into their natural flood plains not only have these deleterious effects on other areas, but they also encourage builders to build in the flood plains. When houses get flooded in these areas, because, often, insurers will not insure the properties, the householders then expect to be made good by the taxpayer. 

This is just a repeat of what has happened with the banks and the financial crisis. It is an encouragement of moral hazard, and reckless behaviour. The owners of these houses, often expensive houses, because of their pleasant, riverside locations, enjoy the private benefits of such ownership, but, they then demand not to pay the cost of that ownership, so that the cost is then socialised, in the same way that the capital gains of the financial speculators are privatised, whereas their capital losses were socialised via the bailing out of the banks, and reflation of asset prices via QE. In effect, it is the taxpayer who lives in Grenfell Tower, or some other less desirable location, who picks up the tab for the reckless decisions of others to buy expensive houses in a flood plain, which ultimately means that it is the builders who sell those houses that are bailed out. 

Around the coast, such as at Fairbourne, the rationale has been accepted that fighting against nature is an expensive folly. Rather than wasting large amounts of money on flood defences, it would be better to use that money to be building the new council houses we need, and the other infrastructure, and to do so in places that do not require flood defences and so on. Its not as though Britain has a shortage of available land on which to build new housing developments.  Currently, residential properties account for just 1% of the land mass.  It would be better to use resources to be migrating communities, over a period, away from such locations, and into areas away from flood and other environmental risks. 

In addition, a better use of the resources would be to build additional reservoirs, to absorb excess water, so that we can begin to avoid the perennial problems of months of heavy rainfall followed by the introduction of hose pipe bans, if the weather ever does manage to have a few dry days during the Summer. 

A further problem has been created by the policy of high density housing. Putting as many houses on to the smallest pieces of land possible, usually amidst already existing developments, with little green space available on such developments, often also with no gardens, or only the tiniest gardens, means that rainfall has no soil to sink into. It runs rapidly off roof tops and gutters on to concrete and other surfaces, thereby flooding into drains and sewers, many of which are no longer regularly maintained, so that flash flooding is increased, and when the water does get into water courses, it, thereby, hits them in larger, more sudden volumes, causing streams and rivers to flood. If Labour wants to avoid that problem, then ending the policy of building on brownfield sites should be a start. Turn them into green spaces that can absorb water to soak into the water table slowly. Limit the size of new developments to no more than 250 houses, and ensure that each house has a minimum size of garden front and back. Front gardens should be no less than 70 square metres, and back gardens no less than 100 square metres. Each development should be separated from others by a mini-green belt around it, amounting to a quarter to a half mile, comprising open meadow, and copses. 

The Manifesto says, 

“We will embark on an ambitious programme of tree planting, with both forestry and native woodland species.” 

Labour's tree planting programme has been ridiculed, with claims that it amounts to planting 200 trees a minute, 24 hours a day. In fact, its not particularly ludicrous. If 200 people are involved in the programme, its only 1 tree a minute each. If 1,000 are involved only 1 tree every five minutes. Given Labour's proposals to establish a number of new national forests and parks, where its quite possible that more than 1,000 people will be employed, and that they will be using the latest arboricultural equipment, to plough and plant, what it actually amounts to is highly practical, especially given that Labour proposes to pay farmers etc., to do some of this planting. 

More importantly, its not clear that this is a good use of all that land. More trees and forests are indeed required for other purposes, such as biodiversity, but some of the land should also be devoted to increasing the acreage of land based wind turbines. They are not only cheaper, and quicker to erect than offshore wind turbines, but it has been shown that an acre of such turbines reduces CO2 levels more than does an acre of trees. 

“We will establish a new environmental tribunal to ensure that administrative decisions are consistent with environmental and nature-recovery obligations.” 

This is a recipe for NIMBYISM, and delay. If the government is elected to carry out its programme, and local councils are elected with appropriate planning powers, also committed to implementing a strategic plan, they should be enabled to just get on with it. There will always be some special interest group, otherwise, who will find reasons why nothing should ever happen. 

Labour says, 

“A Labour government will maintain agricultural and rural structural funds but repurpose them to support environmental land management and sustainable methods of food production. 

We will invest in more county farms to replace those lost, and will work with agricultural organisations to increase access into farming for new entrants.” 

This just sounds reactionary; an equivalent of its reactionary position of supporting inefficient small business as against large business. It shows again, why continued membership of the EU is necessary. Britain's food requirements are more easily and rationally provided for by the much larger land mass of the EU, and its generally more favourable climate conditions. Trying to prop up UK agricultural production is a bit of a fool's errand, and waste of money, similar to trying to prop up high street shops in the age of online shopping. Britain will, of course, continue to be an agricultural producer, but the agricultural production it requires is not a reactionary reversion to inefficient methods of small scale, low intensity production, but the adoption of large scale industrial farming, using the latest technologies. 

The vast amount of land is in the hands of a tiny number of very large landlords, such as the Prince of Wales, Duke of Westminster and so on. Labour should adopt the policy put forward by radical Ricardians in the early 19th century of the nationalisation of land. Only in that way, can large-scale rational land use be planned. The rents from the land would then flow to the state, thereby reducing the amount of tax that the state has to levy, so enabling greater capital accumulation. Land never belonged to anyone to begin with, but was stolen by individuals from society, so there is a good argument for nationalisation without compensation. That is what a Workers' Government would do. But, we are talking about a Labour government, not a Worker' Government. As a compromise, therefore, Labour could offer to pay a tenth of the total rental the government collects, to the former landowners, for their lifetime. That avoids any upfront costs to the government of taking over the land. 

The Manifesto states, 

“Labour will introduce A Right to Food. We will end ‘food bank Britain’. We will ensure everyone has access to healthy, nutritious, sustainably produced food.” 

But, this seems to completely miss the point. As Labour says, a quarter of all food purchased is wasted. We have the cheapest food ever in Man's history. The problem that Labour identifies “an epidemic in food-related ill health, obesity, malnutrition and diabetes” is not due to food being too expensive or unavailable. It is largely due to it being very cheap, and, in the form of fast food, all too available. Its easy to see why many people resort to fast food. If you are working several jobs to earn enough to live, then come home to have to look after your kids, cooking is not the first thing on your mind. That is why a large part of the solution is not related to cheaper food, and so on, but is to be found in a higher Minimum Weekly Wage, and a reduction in the Working Week. But, its not the whole solution. 

I recently went for my annual health check up. The nurse said I had the blood pressure of a teenager, and the resting pulse of an athlete. Not surprising, given that I do not drink or smoke, and that, as she went through my exercise routine with me, it too is that of someone in their 30's. But, my kids have also been given that positive roll model by me and my wife too. They do not work multiple jobs, do not have kids to look after and so on. On the contrary, they still live with us. Yet, both are overweight. My youngest son, indeed, used to be super fit, having trained in Lau Gar Kung Fu with me from when he was six up to when he was 22. 

This is clearly a wider societal problem, and much more complex than the availability of cheap, healthy foods. In the 1960's, we used to imagine the future in which, the time taken for eating could be reduced by just having a pill that provided all the nutrition required. Today, eating and drinking has become a major social arena for leisure and entertainment. When I was young, entertainment involved burning off hundreds of calories, playing football during the day, and dancing at night. Today, it involves consuming hundreds of calories eating fast food during the day, and drinking alcohol at night. 

We have TV full of food programmes of one sort or another, but their main function is not to teach people how to cook cheap healthy meals, but is itself a form of passive entertainment, encouraging people to sit in doors on their settees watching this or that celebrity cook, whilst nibbling on their nachos, or the pizza they have just had delivered. 

“We will set maximum sustainable yields for all shared fish stocks, redistribute fish quotas along social and environmental criteria and, if people vote to leave the EU, require the majority of fish caught under a UK quota to be landed in UK ports.” 

But, what will be the point of that? The EU migrant food processing workers will have gone home, so that, as with the fruit and vegetables now rotting in the fields, because there are no migrant workers to pick them, the fish will also rot. Moreover, if Britain is outside the EU, then the EU will impose large tariffs on UK landed fish, of around 45%, so that it will be impossible for UK fishing companies to sell their production in the EU profitably. The EU will not abstain from imposing those tariffs unless the UK agrees to opening up its fishing waters to EU fleets. 

If Labour wants to improve recycling, as well as to free up the time of individuals, it should scrap the multitude of recycling schemes imposed on households by local councils, which transfers the cost, time and responsibility from the Council to the individual. The multitude of waste bins, recycling bins, and rules that households have to follow are an absurdity. Walk along the streets of any estate, and you will see more litter than ever scattered around, because the various boxes, always end up getting blown over, opened up by animals and so on. From an economic perspective, this is the very opposite of obtaining the benefits of economies of scale. In Germany, the responsibility is placed much more on the local authority to undertake the recycling. It means that each household can simply put all its waste into one bin, and then large-scale, high-tech investment at council recycling plants sorts through all of the waste, and separates it accordingly. 

As a County Councillor some years ago, I went on a visit to one of the council's recycling plants and noticed what a farce it is, because all of the different types of waste were tipped into various large skips, but then someone had to go round each of these skips and manually check that nothing extraneous had been deposited in it. Total lunacy. 

“We will invest in three new recyclable steel plants in areas with a proud history of steel manufacturing.” 

Again, this is total fantasy outside the EU. Before even the formation of the EEC, Europe created the European Coal and Steel Community, as a post-war example of international social-democracy, of the need to introduce planning and regulation on an increasing scale. Any rational future for steel, as with every other large-scale industry, requires planning and regulation on an EU wide basis. That is why Labour's proposals for Brexit are themselves a reactionary absurdity.

Theories of Surplus Value, Part III, Chapter 24 - Part 41

“What is new in Jones’s presentation is that the increase in the auxiliary capital over and above a certain level is contingent on an increase of knowledge. Jones declares that the necessary conditions are: 1) the means to save the additional capital, 2) the will to save it, 3) some inventions by means of which the productive power of labour is increased sufficiently to produce the additional capital and to produce a profit on it.” (p 440) 

As I've described previously, where there is extensive accumulation, so that simply more machines of the same kind are employed, there is no consequent rise in productivity. In other words, if 1 worker and 1 machine produce 1,000 units of output, per day, 2 workers and 2 machines will produce 2,000 units per day. Any increase in productivity, here, will result only from economies of scale, or greater division of labour. Its only if 2 workers with 2 machines, of a different kind, are able to produce 3,000 units per day that there is a rise in productivity. So long as the amount of employed labour can be increased (longer social working day) the amount of surplus product/value will rise. But, as soon as the amount of employed labour starts to hit its limits, the rise in the mass of surplus product/value also hits a limit. Moreover, as the demand for labour-power rises, wages rise – first higher overtime payments, then higher hourly rates, etc., – and this causes a squeeze on profits. 

But, Marx also introduces another factor here. 

“In the production of cotton, for example, the planters in America (like those in India at the present time) were able to plant large areas, but did not have the means for converting the raw cotton into cotton by means of cleaning at the right time. Part of the cotton rotted in the fields. This kind of thing was ended by the invention of the cotton gin. Part of the product is now converted into cotton gin. But the cotton gin does not merely replace its own cost; it also increases the surplus product.” (p 440) 

In other words, it is conceivable that the raw cotton could all have been cleaned, in time, had very large amounts of labour been employed in that task. But, all these additional workers would have to have been paid, and this large demand for labour-power would have raised the wages of those workers. This example also illustrates another point made by Marx in Capital I, in relation to the introduction of machines to replace labour. It is not just a question of a machine replacing actually employed labour, but of replacing potentially employed labour. Here, these many thousands of additional workers required to clean the raw cotton were not actually employed. The cotton gin does not replace employed labour, but replaces the labour that would otherwise have had to be employed to achieve the given level of output. So, if previously 1 million kilos of raw cotton was picked and cleaned by 10,000 workers, it would have required 50,000 workers to pick and clean 5 million kilos. The cotton gin enables these 5 million kilos to be picked and cleaned by, say, 20,000 workers. That means that rather than workers being physically replaced, the workforce is doubled. Yet, it is 30,000 less than it would have been for this level of output. The introduction of the machine has saved the labour of 30,000 workers. Provided the machine costs less than the wages of these 30,000 workers, it will have reduced the cost of production of cotton. 

If the workers were each paid £10, then to produce the 5 million kilos would have cost £500,000 in wages, but undoubtedly more, as the demand for labour-power would have pushed up wages. If the cotton gin costs £50,000 and now £200,000 is paid in wages, the cost of production is £250,000, representing a saving of £250,000. Now, the whole 5 million kilos can be sold, and the value of the cotton gin, along with the wages of the 20,000 workers is reproduced in the value of the cotton. Moreover, by reducing the market value of cotton, it results in an expanded level of demand, and expansion of the market. 

Back To Part 40

Forward To Part 42