Friday, 18 August 2017

Theories of Surplus Value, Part I, Chapter 7 - Part 20

The main reason for workers abandoning direct production, for employment in the manufactories was that the agricultural revolution had undermined direct production, in the countryside, which had always relied upon agricultural workers being able to combine both agricultural and industrial production.

For so long as production continued to be undertaken by skilled workers, and it was the skill that was the most significant factor, any of these workers retained the potential for being an independent producer, and even in terms of selling their labour-power, it is this specific concrete labour-power, they are selling.

The worker, at this stage, as Marx says, still confronts the capitalist as an individual supplier of their commodity. But, the more the worker becomes merely one part of the collective, co-operative labour, in the factory, the less this is the case. First, the worker becomes a detail worker, as a result of the division of labour, each one becoming a specialist in one single aspect of the productive process.

Where a worker might previously have been a wheelwright, making all sorts of wheels, in their entirety, they may now spend all their time making only the spokes of a certain type of wheel. But, when capitalism becomes industrial capitalism proper, with the introduction of machines, these machines themselves take over the skilled aspects of the work. A lathe, for example, takes over the skilled task of turning a wooden spoke. The worker then becomes a lathe operator, or operator of a variety of other machines.

Not only then is this kind of labour a specific kind of labour, so that, for example, a lathe operator cannot simply sell items turned on a lathe, but, in order to work at all, the worker must work as a factory labourer, because they are increasingly unable, as an individual worker, to acquire the means of production required. In other words, at this stage workers can only sell their labour-power as factory labour.

The organisation of production, therefore, appears as an act of capital, and not labour, from which springs the idea that production is not possible at all without capital, and by extension the personification of capital – the capitalist.

“Capital itself has a double character, since it consists of commodities:” (p 392)

It is the same dual character as the commodity. It is exchange-value, and yet it is a self-expanding value.

“This [growth] resolves itself into the exchange of a given quantity of materialised labour for a greater quantity of living labour.” (p 392)

Capital buys labour-power at its value. The value of labour-power is equal to a quantity of labour materialised in those commodities required for its reproduction. Capital either buys these commodities and pays them as wages in kind, or else it pays the money equivalent of these commodities, as money wages. But, having done so, this buys for it a greater quantity of labour than is contained in these commodities. This capital also possesses a use value that derives from the fact that it not only absorbs labour, but that it organises labour in such a way as to obtain all of the benefits of its social organisation, as well as all of the potential to develop scientific and technological labour, based upon it.

“Capitalist production first develops on a large scale—tearing them away from the individual independent labourer—both the objective and subjective conditions of the labour-process, but it develops them as powers dominating the individual labourer and extraneous to him.” (p 392)

Capital is productive in the sense that it compels the production of surplus value, via the undertaking of surplus labour, and because it absorbs, appropriates and thereby encourages the power of social labour, for example, by the development and utilisation of science.

Thursday, 17 August 2017

Theories of Surplus Value, Part I, Chapter 7 - Part 19

The peasant produces a surplus product over and above what is required for their own reproduction, because tradition and the social rank of the feudal lord entitles them to demand, as tribute, the surplus labour-time. But the surplus labour-time that the worker gives gratis to capital is the price the worker has to pay to be able to work at all.

And yet the basis of the surplus value remains essentially the same in both cases. It is that the value of the labour-power is less than the value the labour itself creates.

As the owner of these means of production that now confront the worker as capital, it appears to be that it is this relation between the capitalist and the worker that is determinant, whereas these are only the personification of the real relation, which is that between capital and labour. In fact, as Marx analyses in Capital III, by the late 19th century, the individual private capitalist was beginning to disappear from this relation. Engels, in his Critique of the Erfurt Programme, was able to state that private capitalist production was by then the exception.

Private capitalist property and production had been replaced by socialised capital, in the shape of the joint stock company and co-operative. The role of the private capitalist had been taken over by the professional manager, employed as a form of skilled labour, and in the case of the worker-owned co-operatives, employed by the workers themselves.

Yet, even in the case of the co-operative, the role of these managers was to act as the personification of this socialised capital, and to act as its representative, to fulfil the task of pumping surplus value out of labour, so that this capital could expand and subsequently accumulate.

“The social forms of their own labour or the forms of their own social labour are relations that have been formed quite independently of the individual labourers; the labourers, as subsumed under capital, become elements of these social formations —but these social formations do not belong to them. They therefore confront them as forms of capital itself, as combinations belonging to capital, as distinct from their individual labour-power, arising from capital and incorporated in it. And this takes on a form that is all the more real the more on the one hand their labour-power itself becomes so modified by these forms that it is powerless as an independent force, that is to say, outside this capitalist relationship, and that its independent capacity to produce is destroyed. And on the other hand, with the development of machinery the conditions of labour seem to dominate Labour also technologically while at the same time they replace labour, oppress it, and make it superfluous in its independent forms.” (p 391)

In Capital I, Marx described this historical process. The worker begins as a skilled worker. What they produce and sell as an independent producer, is not their labour-power, but the product of that labour-power. That is still apparently the case with the putting out system, for example, where what the worker appears to sell back to the merchant is a quantity of finished product. It is still in view when these handicraft workers are brought together within the manufactory. That is what lies behind the discussion earlier, about the proportion of the total product that the workers could be considered to be selling to the capitalist, and the reason this leads to the need to justify the capitalist's profit out of this exchange by various means.

But, the reality is that already here the worker is no longer selling a commodity produced by their labour to the capitalist, but is selling their labour-power itself as a commodity. Yet, the potential still exists here for such a skilled handicraft producer to still be an independent producer of commodities. The reason that such producers were absorbed into the putting out system was usually having run up debts, which prevented them buying their own raw materials. But, the number of hand-loom weavers, even after the initial introduction of the power-loom, remained high for some time.

Wednesday, 16 August 2017

Theories of Surplus Value, Part I, Chapter 7 - Part 18

The direct producers, engaged in the production of products to meet their needs or which could be exchanged for other products which met their needs, but capital produces only to create surplus value, and competition between capitals means that it must strive to produce more surplus value, so as to accumulate and be more competitive.

The very nature of this capitalist production, by replacing individual production with co-operative production, acts to increase the surplus value, and so a greater portion of the workers' output is appropriated by capital.

“Since living labour—through the exchange between capital and labourer—is incorporated in capital, and appears as an activity belonging to capital from the moment that the labour-process begins, all the productive powers of social labour appear as the productive powers of capital, just as the general social form of labour appears in money as the property of a thing. Thus the productive power of social labour and its special forms now appear as productive powers and forms of capital, of materialised labour, of the material conditions of labour—which, having assumed this independent form, are personified by the capitalist in relation to living labour. Here we have once more the perversion of the relationship, which we have already, in dealing with money, called fetishism.” (p 389)

In other words, it is here the fact that labour is more productive, when it is employed co-operatively, that explains the additional surplus value it produces, but this appears now rather as the productive power of capital, which employs all of these individual labourers under one roof. It is just the same as the way this capital appropriates the gains provided by science, even though, as with capital, those gains are themselves attributable to labour. For example, it is human labour, as scientific labour, that conceived the idea of the steam engine, and it is human labour that produces the steam engine, and its component parts, and the fuel to run it. Yet, when this steam engine enhances the productivity of the labour that uses it, for a variety of functions, it is not the labour that is credited with bringing about this increase in productivity, but capital.

“The productivity of capital consists in the first instance—even if one only considers the formal subsumption of labour under capital—in the compulsion to perform surplus-labour, labour beyond the immediate need; a compulsion which the capitalist mode of production shares with earlier modes of production, but which it exercises and carries into effect in a manner more favourable to production. 

Even from the standpoint of this purely formal relation—the general form of capitalist production, which is common both to its less developed stage and to its more developed stage—the means of production, the material conditions of labour—material of labour, instruments of labour (and means of subsistence)—do not appear as subsumed to the labourer, but the labourer appears as subsumed to them.” (p 389-90) 

The labour employed by capital preserves the value of the means of production, and creates additional new value, which is absorbed by the means of production.

“Already in its simple form this relation is an inversion— personification of the thing and materialisation of the person; for what distinguishes this form from all previous forms is that the capitalist does not rule over the labourer through any personal qualities he may have, but only in so far as he is “capital”; his domination is only that of materialised labour over living labour, of the labourer’s product over the labourer himself.” (p 390)

Tuesday, 15 August 2017

Theories of Surplus Value, Part I, Chapter 7 - Part 17

[11. Apologist Conception of the Productivity of All Professions]


Marx sets out a scathing and satirical attack on the idea that all activity is productive, as described by Mandeville in The Fable of the Bees. Marx chooses as the vehicle for his satire, the activity of the criminal. Without criminals there would be no police, magistrates, gaolers, lecturers in law, and so on; there would have been no development of ever more effective locks. Torture has given rise to numerous new mechanical devices; the adulteration of food to the everyday use of the microscope and chemical analysis.

An equivalent can today be seen in the Keynesian notion, adopted by some Marxists that the physical destruction of means of production, by war or other disaster, is in some sense beneficial for capital, because it enables production to then take place to replace what was destroyed!!

[12.] Productivity of Capital. Productive and Unproductive Labour


[(A) Productivity of Capital as the Capitalist Expression of the Productive Power of Social Labour]


“We have seen not only how capital produces, but how it itself is produced, and how, as an essentially altered relation, it emerges from the process of production and how it is developed in it. On the one hand capital transforms the mode of production; on the other hand this changed form of the mode of production and a particular stage in the development of the material forces of production are the basis and precondition—the premise for its own formation.” (p 389)

Marx is discussing here the formal and real subordination of labour to capital, a process he also discusses in Capital I. In previous modes of production, the means of production are nothing more than a means for the producer to undertake production. The means of production are employed by the worker for that purpose.

On the one hand, the historical development of those means of production creates the need for production to be undertaken on a different basis. Even capitalist production, on the basis of handicraft production, changes this relation. Whether it is via the putting out system, whereby merchants provide peasant producers with material to be spun, or woven, or the manufactories where handicraft workers are brought together, working in the same old manner, it is now capital that employs labour, and this labour only has employment so long as capital requires it, rather than vice versa.

And here the capitalist is only the personification of this capital. The capitalist is the person who obtains the profit, but it is the relation between capital and labour which is the source of this profit, just as it is the basis of the accumulation of this profit as capital.

The pre-capitalist producer created a surplus product and surplus value, which took the form of rent, although some of the more favoured producers were able to accumulate some of this surplus themselves as capital. But, as soon as capital arises on this basis, the labour employed by capital of necessity must hand over this surplus product and surplus value to capital, as the price for being employed.

Monday, 14 August 2017

Theories of Surplus Value, Part I, Chapter 7 - Part 16

[9. Glorification of the Landed Aristocracy by Buat, an Epigone of the Physiocrats] 

Marx writes of Buat

“This feeble and diffuse writer, who takes the outward form of Physiocracy for its essence and glorifies the landed aristocracy— and in fact accepts it [Physiocracy] only in so far as it serves this purpose—would not have to be mentioned at all, but for the fact that the brutal characteristics of the bourgeois emerge so sharply in his work; quite as sharply, perhaps, as in Ricardo’s writings later. His error in restricting the net product to rent makes no difference to this.” (p 321) 

This concept that it is only the net product, or surplus value that is the object of production is set out both by Buat and Ricardo, and for both, therefore, the productive workers, who produce this surplus are seen as an incidental expense. 

“The free labourer’s lot is conceived as only a changed form of slavery; but this is necessary so that the higher strata may form “society”.” (p 381) 

This was referred to previously by Marx in relation to Ricardo's difference with Smith over the gross and net product, and Ricardo's view that because the position of labourer was an unfortunate one, who produces a surplus for someone else, the number of people placed in that unfortunate position, should be kept to a minimum. 

[10. Polemics Against the Landed Aristocracy from the Standpoint of the Physiocrats (An Anonymous English Author)] 


Marx examines the work The Essential Principles of the Wealth of Nations, illustrated, in Opposition to some False Doctrines of Dr. Adam Smith, and others, London, 1797, which, he says, is the only important work supporting the Physiocratic Theory. Marx did not know the author of the work, but it has been subsequently identified as John Gray, of whom little is known, and not to be confused with John Gray the socialist pamphleteer. 

“He is right in tracing the origin of this view to Locke and Vanderlint, and he describes the Physiocrats as those who “very systematically, though not correctly, illustrated” the doctrine (p. 4).” (p 382) 

Marx says that the Physiocrats, by explaining industrial profits on the basis of Mercantilism, thereby create the basis for the explanation of the formation of capital as resulting from abstinence. That conception, put forward by Smith, Senior and apologists for capital, explains the origins of capital not by the appropriators of surplus value, but by the abstinence from consumption of the capitalist. 

As Marx describes in Capital I, although some industrial capitalists may initially have been workers, who acquired their original capital in that way, it does not explain the vast amount of capital formation. Primary capital accumulation arose from a variety of sources from piracy to colonial exploitation, to usury, and the creation of large national debts. Even where individual capitalists did accumulate their initial capital from saving, its further accumulation arose from the appropriation of surplus value. 

However, if the Physiocratic Theory is adopted, no profit is created in the industrial sector, and so if capital is accumulated there, it cannot be from an accumulation of profit, but only as a result of abstinence by industrial capitalists. 

““ The expence laid out in employing and maintaining them” [handicraftsmen, manufacturers and merchants] “does no more than continue the existence of its own value, and is therefore unproductive” (because unproductive of surplus-value) “The wealth of society can never in the smallest degree he augmented by artificers, manufacturers, or merchants, otherwise than by their saving and accumulating part of what is intended for their daily subsistence; consequently it is by privation or parsimony alone, that they can add any thing to the general stock” (Senior’s theory of abstinence, Adam Smith’s theory of savings). “Cultivators, on the contrary, may live up to the whole of their income, and yet at the same time […] enrich the State; for their industry affords a surplus-produce called rent” (p. 6).” (p 383) 

But, says Marx, this is the great merit of Physiocracy, because it does not begin by asking how this capital can be augmented by increased surplus-value, but rather asks first what is the origin of the surplus value. The argument of the Physiocrats that surplus value is created in production and not in exchange, is then echoed by Gray. 

““When the question is about the production of revenue, it is altogether illogical to substitute for that the transfer of […] revenue, which all commercial dealings are […] resolvable into” (p. 22). “What does the word commerce imply but commutatio mercium sometimes more beneficial to the one than the other; but still what the one gains the other loses, and their traffic really produces no increase” (p. 23). “Should a Jew sell a crown-piece for ten shillings, or a Queen Anne’s farthing for a guinea, he would augment his own income, no doubt, but he would not thereby augment the quantity of the precious metals; and the nature of the traffic would be the same, whether his virtuoso customer resided in the same street with himself, or in France, or in China” (p. 23).” (p 383)

But, as described earlier, this leads to a Mercantilist explanation of the profit obtained by industry. And that leads Gray into a Mercantilist conclusion too.

““No man, as a manufacturer, however he may gain himself, adds any thing to the national revenue, if his commodity is sold and consumed at home; for the buyer precisely loses…what the manufacturer gains… There is an interchange between the seller and the buyer, but no increase” (p. 26). “To supply the want of a surplus…the master-employer takes a profit of 50 per cent upon what he expends in wages, or sixpence in the shilling on each manufacturer’s pay; … and if the manufacture is sold abroad … [this] would be the national profit” (p. 27) of so and so many “artificers ”.” (p 383-4)

The Physiocratic view that manufacturers only modify the form of what is produced in agriculture is also echoed by Gray.

““Manufacturers are […] a necessary classbut not a productive class” (p. 35). They “occasion a commutation or transfer of the revenue previously provided by the cultivator, by giving a permanency to that revenue under a new form” (p. 38).” (p 384)

According to Gray there are four essential classes – The Productive Class or cultivators, Manufacturers, Defenders, and Instructors. The latter take the place of the Physiocrats priests. The basis is that “every civil society must be fed, […] clothed, defended and instructed” (pp. 50-51).” (p 384) 

Gray also discusses the role of the landlords in taxing improvements on the land, as described by Marx in his analysis of rent. On this basis, he is in favour of long leases.

The limitations of Physiocracy show, Marx says, in Gray's discussion of a producer of clocks or calico, who cannot sell their commodities. They only make profits to the extent they can sell, Gray says, but a farmer can live off their product without the need to sell. But, as Marx says, a farmer who is a commodity producer makes no profit either if they cannot sell, and whilst they can consume their own product without needing to sell it, they can only do so if they also then become a producer of manufactured goods, because they can only buy the latter by selling their own commodities.

Sunday, 13 August 2017

Theories of Surplus Value, Part I, Chapter 7 - Part 15

[8. Addendum to the Chapters on the Physiocrats]


Marx returns to the examination of the Tableau Economique, and the false assumptions made by Quesnay, as well as the fall back into Mercantilist conceptions which flowed from them. For the Physiocrats, it is only agriculture that is productive of new value, and so of surplus value. The landlords appropriate the surplus value, in the form of rent, as it is conceived as flowing from the free gifts of nature, i.e. the land. The landlords are then entitled to the rent because they are the owners of the land, which is the source of the surplus value.

The manufacturers are seen only as labourers. The value of their product is comprised only of the value of the products of agriculture. So, it comprises only the value of the means of subsistence, consumed by industrial workers, provided by agriculture, and also the value of the means of production, also provided by agriculture.



Marx points out that Quesnay's assumption that the value of annual output is only ₣5 billion is then false, because it comprises ₣5 billion produced in agriculture and ₣2 billion of industrial production. This ₣2 billion produced in manufacture, replaces ₣2 billion produced by industry in the previous year, and exchanged with agriculture for the ₣2 billion of agricultural products used in this year's production.

But, Marx also points to another false assumption that flows from this. If the value of industrial production is ₣2 billion and this is not only equal to the value of agricultural inputs, but is wholly exchanged for it, this means that there is no profit, interest etc. produced in the industrial sector, from which the industrial capitalists could draw revenue. Moreover, if all industrial production is exchanged with the agricultural sector, this leaves no manufactured goods left over to be consumed by industrial workers and capitalists.

This had been noticed by Baudeau, Marx says, and led to the explanation that the industrial sector must sell its output above its value. This would mean that the actual value of industrial commodities was say ₣1.8 billion, they sell these to the farmers for ₣2 billion, and the other ₣0.2 billion of commodities thereby both comprise the industrial profits and the value of industrial commodities consumed by workers and capitalists in that sector.

But, Marx points out that this means a return to the Mercantilist conception of profit on alienation as the explanation for the source of profit, as opposed to the Physiocratic discovery that profit is created in production, not exchange. This is then one reason for the Physiocrats support for free competition. Such competition, they argue, limits the ability of industrial capitalists to overcharge for their commodities. At the same time, given that France was an exporter of agricultural products, free competition was seen as a means of exporting agricultural products at prices that exceeded their value.

Marx quotes, by contrast, the original arguments, given by Quesnay, as to why profit is impossible in exchange.

““Every purchase is a sale, and every sale a purchase” (Quesnay, Dialogues sur le commerce et sur les travaux des artisans, etc., éd. Daire, p. 170). “To buy is to sell, and to sell is to buy” (Quesnay in Dupont de Nemours, Origine, etc., 1767, p. 392). 

“Price always precedes purchases and sales. If the competition of sellers and buyers brings about no change in it, it exists as it is through other causes independent of trade” (l.c., p. 148). 

“It is always to be presumed that it” (exchange) “is profitable to both” (contracting parties), “since they mutually procure for themselves the enjoyment of wealth which they could only obtain through exchange. But always there is only exchange of wealth of a certain value for other wealth of equal value, and consequently no real increase of wealth” (this should be: no real increase of value) (l.c., p. 197).” (p 380)

Back To Part 14

Forward To Part 16

Saturday, 12 August 2017

Theories of Surplus Value, Part I, Chapter 7 - Part 14

[(C) Massie. Interest as Part of Profit. The Level of Interest Explained by the Rate of Profit]


Marx quotes Massie's attack on Locke and Petty's argument that the rate of interest is determined by the demand and supply for money.

““It appears from these several Extracts, that Mr. Locke attributes the Government of the natural Rate of interest to the Proportion which the Quantity of Money in a Country bears to the Debts of its Inhabitants one amongst another, and to the Trade of it; and that Sir William Petty makes it depend on the Quantity of Money alone; so they only differ in regard to Debts” (pp. 14-15).” (p 375)

Massie says that the rich, instead of using their money themselves, in business, lend it out to others, who use it, and thereby, make a profit. Massie recognises that it is this profit that makes the payment of interest possible, and that interest is, therefore, a deduction from profit. But, it is only a small minority who can do this, because a lot of money-capital must be loaned, in order that the interest earned should be sufficient to sustain a family.

Massie also warns those who confuse the official interest rates, set by the state, with the market rates of interest.

““All Reasoning about natural Interest from the Rate which the Government pays for Money, is, and unavoidably must be fallacious; Experience has shown us, they neither have a agreed nor preserved a Correspondence with each other; and Reason tells us never can; for the one has its Foundation in Profit, and the other in Necessity; the former of which has Bounds, but the latter none: The Gentleman who borrows Money to improve his Land, and the Merchant or Tradesman who borrow to carry on Trade, have Limits, beyond which they will not go; if they can get 10 per cent by Money, they may give 5 per cent for it; but they will not give 10; whereas he who borrows through Necessity, has nothing else to determine by, and this admits of no Rule at all” (pp. 31-32).” (p 375-6)

But, Massie fails to recognise the point made by Marx, in this connection, in Capital III, that, in times of crisis, the capitalist also borrows money out of necessity, the necessity to keep the business afloat, and is thereby led to pay almost any rate of interest.

Massie does, however, make the important point, set out by Marx, that the rate of interest does not depend on the money borrowed actually making a profit for the borrower, but upon the fact that, as potential capital it is capable of doing so. If I borrow £1,000 as capital, it may be capable of producing an average rate of profit of 10%, and so I am able to pay, say, 3% interest on the loan. But, it does not mean that I will make 10% profit. I may make no profit at all. Yet, the lender is not concerned with this. They are only concerned with the fact that they loaned out capital with the potential to make 10% profit, and so will want their 3% cut either way.

““The Equitableness of taking Interest, depends not upon a Man’s making or not making Profit by what be borrows, but upon its” (the money borrowed) “being capable of producing Profit if rightly employed” (p. 49). “If that which Men pay as Interest for what they borrow, be apart of the profits it is capable of producing, this Interest must always be govern’d by those Profits” (p. 49).” (p 376)

And, by this Massie only means that the average rate of profit sets a limit to the average rate of interest, as Marx describes in Capital III. In other words, if the average rate of profit is 10%, capitalists, in aggregate, will not be prepared to pay 10% as an average rate of interest, because that would eliminate their profit. At rates approaching 10%, capitalists demand for money-capital would disappear, preventing rates rising higher.

“What has been said of particular Men in the same Business is applicable to particular Sorts of Business” (p. 50). 

“The natural Rate of Interest is governed by the Profits of Trade to Particulars” (p. 51).” (p 376)

Massie attributes the 4% rate of interest in England at that time, compared to the 8% interest rate of earlier times, to a lower rate of profit then compared to the earlier period. The lower rate of profit he attributed to an expansion of capital, bringing with it increased competition and lower prices. He makes the same comment in relation to varying international rates of interest.

However, its clear this cannot be the explanation for the reason Marx sets out in Capital III. That is that the growth of capital also implies a growth in the demand for capital, which would tend to cause rates to rise. In reality, higher rates and masses of profit, on the one hand, lead to an increased demand for capital, but, at the same time, create an increased supply of loanable money-capital.

[(D) Conclusion]


“Massie, even more definitely than Hume, presents interest as a mere part of profit; both attribute the fall in interest to the accumulation of capitals (Massie [speaks] especially of competition) and the fall in profits resulting from this. Both [say] equally little about the origin of the Profit of trade itself.” (p 377)