Saturday, 29 April 2017

Theories of Surplus Value, Part I, Chapter 4 - Part 54

Marx's actual example proceeds as follows. Wages are £1 per worker. £300 is advanced as wages. £310 is advanced for materials. He assumes that the number of workers is halved, so wages fall to £150, but because the same quantity of output is produced, the same quantity of material is required, so this component of c remains £310.

He says, 

“If the value of the machinery was four times as much as the rest of the capital, it would now be £1,600.” (p 214)

Again, this is not quite correct as it would be £1,840. This is not significant and would only complicate the calculations. On the basis that the fixed capital loses 10% p.a. in wear and tear, £160, and previously amounted to only £40, Marx derives the following table.



Machinery
Raw Material
Wages
Total
Surplus-value
Rate of Profit
Total Product
Old capital
40
310
300
650
150 or 50%
23 1/13%
800
New Capital
160
310
150
620
150 or 100%
24 6/31%
770

As shown, the result here is that the rate of profit rises, because the mass of surplus value has remained constant whilst the advanced capital has declined. More capital is advanced as fixed capital, but a much bigger reduction results from the fall in wages.

On the assumptions made, there is a £30 release of capital, which can, therefore, be used for additional accumulation. But, as described earlier, the foundation of Marx's argument here is false. So, he writes,

“If a labourer without machinery needs 10 hours to produce his own means of subsistence, and if with machinery he only needs 6, then (with 12 hours’ labour) in the first case he works 10 for himself and 2 for the capitalist, and the capitalist gets one-sixth of the total product of the 12 hours.” (p 215)

But, for any particular industry this additional productivity – other than for individual firms, initially and temporarily – does not result in a higher rate of surplus value, for the reasons set out above, and set out by Marx in Capital I. The higher productivity simply results in a lower value of each unit of output, as the same quantity of labour is spread amongst a much greater quantity of use values. If weavers produce 1000 metres of cloth per day, instead of 500 metres, the value of each metre halves, so that twice as much cloth as before must be produced and sold to reproduce the labour-power.

It is only if all labour, or at least all labour employed in producing wage goods, enjoys this rise in productivity that it raises the rate of surplus value, by reducing the value of labour-power.

Northern Soul Classics - S.T.O.P. - The Lorelei

Friday, 28 April 2017

Friday Night Disco - Day Tripper

Bojo To Trump - "How High Shall We Jump?"

Boris Johnson was one of the leading proponents of Brexit.  It was sold to millions of British people on the flaky foundation of a return of sovereignty.  In fact, Britain has not yet even Brexited, but it has already become apparent that rather than regaining sovereignty, it has given up whatever sovereignty it had.  Bojo's latest antics indicate the extent to which a rapidly declining Britain is merely a vassal state of the US, so that Bojo's latest outburst tells us that when Trump shouts "Jump", Britain's only response is "Yes sir.  How high sir?"

No sooner had May triggered Article 50, than she scuttled off to the US, to supplicate herself, fawningly before Emperor Trump.  She tried to cover her selling of UK plc to the dealmaker by claiming that she had obtained significant promises from him.  Well anyone watching Trump's first 100 days, knows just how much those promises are worth.  It was only a matter of a few weeks before Trump announced that he would be putting the EU ahead of Britain in any trade negotiations, and when it came to his strike on Syria, Britain came behind Russia in being even notified about it.

Now, Bojo, wanting to seem like he and Britain still has a role to play, has offered again to play second fiddle to the US in any foreign wars it wants to start, so as to hope to curry favour.  Its like the new boy at Eton, who offers to fag for the school bully in order to try to gain some credibility and protection from other bullies.  For most of us, that's only something we learn about from reading Tom Brown's Schooldays, but for Boris and the other Tory members of the establishment its part of their actual upbringing.  No wonder they are such an arrogant bunch of snobs, who think they have a god given right to rule and lead the rest of us free from any criticism or opposition; no wonder they hate anti-establishment figures like Corbyn with a venality they could never show for people like Blair.

The Brexiters like Bojo sold the idea largely to that group of older voters who grew up when the world was a very different place, but who have not come to terms with the fact that times have changed.  They grew up at a time when their school books showed large areas of the world coloured pink, where the British Empire still ruled.  On a Sunday morning, they got up to listen to "Two-Way Family Favourites" on the radio that broadcast messages and music from families in Britain to their spouses, and children serving in the armed forces, in these far flung outposts of the Empire, even if by then it was called the Commonwealth.  And many, like many of the Tories themselves are still under the delusion that Britain still has that importance, when, in fact, it is merely a second rate power on the global stage, whose importance is decreasing by the day.

Even before Britain has Brexited, not only did May scuttle off to try to curry favours from Trump, but having embarrassed  herself there, she scuttled off to visit the medieval butchers of Saudi Arabia and other Gulf monarchies, pleading with them to buy more British weapons to use on their peoples, so as to prop up the British economy for a while longer.  Then she went to visit the dictator in Turkey, Erdogan, perhaps to learn some lessons on how to prevent criticism and opposition, and also to try to sell him more weapons.  Then in the last week we have had International Trade Minister, Liam Fox, going off to visit the butcherous dictator, Duterte, in the Phillippines, and  speaking of their shared values!

Even before Brexit has happened, it has been turned into a vassal state of the US, and a creature of any rogue or dictator across the globe who might be the source of a few silver coins.  And, its no wonder, therefore, that May and the Tory government are trying to prevent any criticism or opposition at home, and why Bojo is now even talking about sending British troops to fight US wars, without parliamentary approval.  The only approval that counts now for British Tory politicians is the approval of Trump.

As members of the EU, Britain at least had Ministers who sat on the Council of Ministers, Commissioners appointed to the EU Commission, and MEP's directly elected to the  European Parliament.  Now British voters will have no votes in the decisions taken by the US president and Congress, but Britain will be automatically signed up to those decisions by May and Bojo.  That is why they are trying to establish May as a dictatorial strong leader now, in the fashion of Erdogan.

And who can wonder that they attempt that.  If Britons are to have no say in their future, having signed away any hope of sovereignty they may have exercised through the EU, by voting for Brexit, the Tories will only be able to press ahead with being the servants of Trump, if they can ride roughshod over any criticism or opposition in Parliament, or by the British electorate.  And, after all that is what the Tory media continually tell us the British public want.  In vox pop after vox pop, newspaper editorial after newspaper editorial, press preview after press preview what we are told is that the British public want a strong leader, an Il Duce, a Mussolini in a skirt.

They should be careful what they wish for.

UK GDP Data Shows The Economy Is Starting to Stagflate

The GDP data for the first quarter, for the UK, has come in at just 0.3%, as against forecasts, which themselves anticipated a sharp slow down, to just 0.4%.  The figure represents a drop of more than 50%, on the quarterly growth figure of 0.7% at the end of last year.  At the same time, the fall in the pound, resulting from Brexit, has caused imported inflation to start to surge, at a time when stronger economic growth in the EU, and globally is causing global inflation itself to rise, putting additional cost pressures in a fragile UK economy.  Nearly all of the growth in the UK economy over the last year or so has been down to credit financed consumer spending, whilst UK household debt levels are back to those last seen ahead of the 2008 financial meltdown.  As I wrote, last year Britain is headed for stagflation.

We might see inflation tick down slightly for the next month, because following the announcement of the General Election, the Pound has strengthened against the dollar by around 5%.  But, at $1.29, it is still considerably down from its rate prior to the Brexit vote, and down even more from its rate in 2015, when it stood at around $1.70, and rising.  The stronger pound seems to be a delusion in markets that the announcement of the election will be a means of May, orchestrating a soft Brexit, by having more room to face down her backbenches.  It won't.  Tories at a local level are likely to select even more hard right, Brexiteers as candidates.  Moreover, May has already said she doesn't even want to be in the Customs Union or Single Market, so what negotiations are there to have?  Merkel has quite rightly reinforced what Juncker said some time ago.  there is a chance between hard Brexit and no Brexit.  Far from the election being about room to negotiate a soft Brexit, it is about May knowing that today's GDP data is just the start of the bad news; it is about May preparing to just pull out of negotiations in a couple of months time, and announce that they are going to just repeal the 1972 European Communities Act, taking Britain out of Europe at a stroke.

Inflation is already above 2.3%, and rising.  As the Pound continues to drop, and as global prices for things like materials, energy, and food prices, all of which Britain imports in large quantities, that inflation rate is likely to rise sharply.  At the same time, wages in the UK are falling causing a squeeze on real wages, which is feeding through to consumer spending figures.  Given that the UK GDP figure has been reliant on consumer spending, with investment at low levels, that spells further problems for the UK economy, in the near future.

UK households have maxed out their credit cards to finance their spending, and only that spending has kept the UK economy going.  As wages fall, and consumers are unable to finance further spending by yet more debt, and as inflation rises, spending will get increasingly squeezed, also squeezing UK profits.  The hit to consumers has already been seen in the drop in house prices for a second consecutive month by Nationwide.  That is just for asking prices, which as readers of this blog for some years will know are pretty meaningless, especially as aggregate figures.  As I pointed out several years ago these house price figures are largely a fiction.  Anyone who has been looking for a house in a specific area, as I have, for the last few years, will have seen how actual houses they have viewed or identified, have continued to fall in price, and actual selling prices, as opposed to asking prices are often 20% below the initial asking price.

That is despite the fact that government policy for the last 10 years, at least, has been geared to keeping both property prices and stock and bond prices high by what ever means, including giving government money away to the shareholders and bond holders in banks, and to house buyers in the various Help To Buy and Buy To Let Scams, and via hundreds of billions in money printing.  All that has been done to keep those asset prices inflated, even at the cost of the real economy, as it helped to such further resources into such speculation, and away from investment in real productive capital.  It caused the hyperinflation of asset prices to be protected at the cost of a deflation of consumer prices, and stagnation of the real economy.

Moreover, the rise in rents in recent years to record levels, which is a consequence of house prices being driven to ridiculously, and unsustainably high levels, and the pricing out of increasing numbers of people from the housing market, has only been sustained by yet more subsidies to landlords, in the form of a ballooning bill for Housing Benefit.  And, where does the money for that Housing Benefit come from?  It comes from taxes, which means out of profits, which means less money available for real investment in productive-capacity, fewer jobs, and less real wealth as the cost of protecting fictitious wealth.  Adam Smith and David Ricardo understood these principles more than 200 years ago, but the Tories in order to keep these paper prices inflated are prepared to destroy all real wealth and ignore those basic economic laws.  It is also why Theresa may wants to set herself up as an authoritarian strongman, knowing that as the economic reality bites, the only way they can continue to try to defy the laws of economics is by imposing increasing pain on the ordinary citizen.

They know that they had tied themselves in over tax in the previous Tory Manifesto, and that their commitments on pensions were not going to be sustainable after Brexit, as the economy stagnates.  So, they have gone for an election now, so as to be able to inflict all that pain on ordinary families over the next five years, slashing real wages further, raising taxes and national insurance, scrapping the triple lock on pensions, willing to see unemployment rise "as a price worth paying", as they put it in Thatcher's time, and seeing increasing numbers of people put on zero hours contracts, and other forms of unstable working conditions.

We need to get rid of the Tories before its too late, and the only party that can offer an alternative government is Labour.

Theories of Surplus Value, Part I, Chapter 4 - Part 53

Marx's error here flows from his failure to take into account the fact that the surplus labour-time only accounts for a portion of the whole working day. So, a doubling of surplus labour labour-time, in either case, does not result in a doubling of the working-day. If the working day itself does not double, but the number of workers is halved, then the length of the social working-day (working day x number of workers) must fall. Consequently, in either case, the total product must be reduced, and less material is processed, so the value of constant capital must fall.

In the first case, where surplus labour-time is increased by a lengthening of the working day, this gives a much more extended working-day, because the rate of surplus value was already taken as high. A much lower rate of surplus value would have given a different result. For example,

v 8 + s 2 x 10 workers = 80 v + 20 s = 100 hours.

To double s,

v 8 + s 4 x 5 workers = 40 v + 20 s = 60 hours.

The total social working day falls much more here, because the working day only needs to be extended by a small amount, to double the surplus labour, and compensate for the reduced workforce.

So, Marx is wrong on several counts. He is wrong that the total quantity of products would remain unchanged, if the total surplus value remains the same. He is wrong that the total expended on wages falls in half, if surplus value rises, because of a rise in relative surplus value. Wages may fall much more than that, i.e. by 80%, in the example above (Part 52). He is also wrong that the quantity of raw material processed remains the same, because in both cases, the length of the social working day is reduced, so that less is produced and less material is thereby needed.

In order to obtain this final conclusion, Marx assumes that the length of working day remains constant, but half the workers produce the same level of output as before, as a result of the introduction of additional fixed capital. On this basis, total output remains constant, and workers are paid the same wage, but with half the workers, this amounts to half the total wage bill. But, unless we take it that this is just one firm taking advantage of introducing this fixed capital, its not at all clear that this would result in the additional surplus value per worker that Marx seeks, for the reasons he has set out elsewhere. Moreover, the additional fixed capital employed so as to obtain this result, itself requires an increase in the value of constant capital.

The fact that 5 workers working a 10 hour day now produce the same 1000 units of output that previously 10 workers, working a 10 hour day, produced, previously, means that the previous value of these 1000 units (100 hours) has fallen to 50 hours, as a result of the rise in productivity. Suppose that the workers are producing linen. They work a 10 hour day, of which 4 hours is necessary labour and six hours surplus labour. Say the product of an hour's labour is equal to £1, so the workers are paid £4 in wages and produce £6 of surplus value. If there are 10 workers that is a total product value of £100, which we will say is represented by 1000 metres of linen.

In that case, 400 metres of linen are required to cover wages and 600 metres constitute surplus value. If then the number of workers falls to 5, but they continue to produce the same quantity of linen, its value must fall, because it now represents only 50 hours of labour, whereas previously it represented 100 hours of labour. Each worker still requires £4 as wages, but with only 5 workers to pay rather than 10, wages fall to £20. But, £20 now represents more linen.

Previously, 1000 metres of linen represented 100 hours, equals £100, but now represents only £50. To cover the £20 of wages, for the 5 workers, now requires 400 metres of linen to be sold, leaving a surplus product of 600 metres, with a value of £30. In fact, therefore, the rate of surplus value here remains unchanged at 150%, because s' remains constant, whilst v is halved, therefore, s falls from £60 to £30. Marx seems to have fallen into the trap he had initially criticised, of confusing the value of labour-power with the value of the product of that labour-power.

Marx's conclusion from his example, that the rate of profit would rise, is also false, because his assumption that the surplus value remains constant is itself false. In fact, because the surplus value would halve, in line with v, the rate of profit would fall, because c would remain constant so s/c+v would fall.

Thursday, 27 April 2017

Social-Democracy, Bonapartism and Permanent Revolution, Chapter 11 – Results and Prospects (2)

Chapter 11 – Results and Prospects 

Part 2

Industrial capital, via its natural process of concentration and centralisation, becomes socialised capital, which, as Marx describes, is the transitional form of property, and upon which the material basis for social-democratic ideas are developed, which bear within them the roots of socialist consciousness.

The value of these great social experiments cannot be overrated. By deed instead of by argument, they have shown that production on a large scale, and in accord with the behests of modern science, may be carried on without the existence of a class of masters employing a class of hands; that to bear fruit, the means of labour need not be monopolized as a means of dominion over, and of extortion against, the labouring man himself; and that, like slave labour, like serf labour, hired labour is but a transitory and inferior form, destined to disappear before associated labour plying its toil with a willing hand, a ready mind, and a joyous heart. In England, the seeds of the co-operative system were sown by Robert Owen; the workingmen’s experiments tried on the Continent were, in fact, the practical upshot of the theories, not invented, but loudly proclaimed, in 1848.”

Marx – Inaugural Address to the First International

In the 1970's, social-democracy pulled back from confronting and overthrowing the power of the owners of fictitious capital, because, as was the case with the liberal bourgeoisie, in 1848, they required the mass of the working-class behind them to accomplish their aims, and took fright. The consequence was a conservative reaction, most notably in the shape of Thatcher and Reagan, in the UK and US, Both rested upon that social base of millions of small business owners; both sought to undermine the social base of social-democracy within the organised working-class. Neither could escape the objective reality that modern capitalism is dominated by socialised capital, and that the interest and rents paid to rentier capitalists, and the taxes paid to the state, depend on the profits produced by that socialised capital.

Nor could they escape the fact, as Marx described in Capital III, Chapter 15, that the extraction of surplus value, is only the first part of the story in the production of profits, and that the second part depends upon the realisation of those profits, via the sale of the finished products.

But this production of surplus-value completes but the first act of the capitalist process of production — the direct production process. Capital has absorbed so and so much unpaid labour. With the development of the process, which expresses itself in a drop in the rate of profit, the mass of surplus-value thus produced swells to immense dimensions. Now comes the second act of the process. The entire mass of commodities, i.e. , the total product, including the portion which replaces the constant and variable capital, and that representing surplus-value, must be sold. If this is not done, or done only in part, or only at prices below the prices of production, the labourer has been indeed exploited, but his exploitation is not realised as such for the capitalist, and this can be bound up with a total or partial failure to realise the surplus-value pressed out of him, indeed even with the partial or total loss of the capital. The conditions of direct exploitation, and those of realising it, are not identical. They diverge not only in place and time, but also logically. The first are only limited by the productive power of society, the latter by the proportional relation of the various branches of production and the consumer power of society. But this last-named is not determined either by the absolute productive power, or by the absolute consumer power, but by the consumer power based on antagonistic conditions of distribution, which reduce the consumption of the bulk of society to a minimum varying within more or less narrow limits. It is furthermore restricted by the tendency to accumulate, the drive to expand capital and produce surplus-value on an extended scale. This is law for capitalist production, imposed by incessant revolutions in the methods of production themselves, by the depreciation of existing capital always bound up with them, by the general competitive struggle and the need to improve production and expand its scale merely as a means of self-preservation and under penalty of ruin. The market must, therefore, be continually extended, so that its interrelations and the conditions regulating them assume more and more the form of a natural law working independently of the producer, and become ever more uncontrollable. This internal contradiction seeks to resolve itself through expansion of the outlying field of production. But the more productiveness develops, the more it finds itself at variance with the narrow basis on which the conditions of consumption rest.”

Capital III, Chapter 15

A necessary contradiction arises from attempting to raise the rate of profit by depressing wages, and so raising the rate of surplus value, and the ability then to realise that produced surplus value, as profits, when the workers whose wages have been cut, comprise a large component of aggregate demand.

As I described in my book, Marx and Engels Theories of Crisis, the answer that was found to this dilemma was debt. What workers could no longer consume from their stagnant or reduced wages, they were encouraged to buy instead on credit, as credit controls and other financial regulations were abolished in the 1980's. Many thereby mortgaged their future labour-power, to finance their current consumption, turning themselves into debt slaves, as well as wage slaves. Private debt soared into the period prior to the 2008 crash, and has soared again now to similar levels.

Households covered their consumption via this debt, whilst countries covered the import of the commodities consumed by those households, by borrowing from foreigners, particularly from Asia, as the trade deficit grew ever wider. But, as described in Chapter 9, consumption that is not financed from revenue can only be financed by a consumption of, and thereby destruction of, capital. As Joan Robinson said, a long time ago, there is a big difference between borrowing to invest in productive capacity, which increases wealth, and borrowing simply to finance consumption, which destroys wealth.

In examining the situation in any society, as I wrote recently, Marxists do not simply undertake a superficial, journalistic snapshot of the constitutional arrangements, and governmental powers, but examine the social relations upon which the different parties rest. The truth is always concrete.

A fundamental understanding, in this regard, as I have set out in the past, requires a recognition of the existence of three different powers – the economic and social power, the state power, and the governmental power or political regime.

The economic and social power can be thought of as civil society, As Marx says, in The Critique of the Gotha Programme, it is upon this civil society that the state itself ultimately rests. The civil society is never static, but is constantly developing in the direction of the new economic and social relations, under the pressure of the development of the productive forces. The bourgeoisie developed capitalist property within the pores of feudal society, and they developed their own forms of self-government alongside it, as alternative forms to those of the existing ruling class. And, the working-class develops co-operatives, trades unions, and other forms of collective organisation, such as Friendly Societies, and its own political party as an alternative power to that of the bourgeoisie.

The economic and social power itself derives from the dominant social relations arising from the dominant economic relations. Moreover, this has to be analysed concretely and dynamically, not superficially and statically.