Wage-labour and Capital, Section II - Part 4 of 6

The argument that inflation – a rise in the general level of prices – is a result of aggregate demand exceeding aggregate supply, or what is the same thing, a result of cost-push, or demand-pull, is false, because the rise in the price of some commodities means a corresponding fall in the price of other commodities, relative to it. There can only be a rise in the price of all commodities if it is relative to the one commodity – the money commodity – which acts as the indirect measure of their value.

In other words, the value of money must fall, for there to be inflation. As I have set out, elsewhere, in the era of fiat currencies that act as the standard of price, the basis of this devaluation of the currency/standard of price, is it being thrown into circulation in excess quantities, as seen with QE, helicopter money during lockdowns, and liquidity injections over the last 40 years.

So, if supply is a function of value, and the price of the commodity is its cost of production plus profit, what, then, determines the amount of this profit? The answer lies in two definitions of cost of production, as Marx sets out in Theories of Surplus Value. Basically, there is cost of production for society, and cost of production for the capitalist. These two costs of production can be measured in labour-time.

This was described earlier. If we take the production of yarn, it comprises the value of cotton, the wear and tear of machinery and so on. All of this value is equal to a given amount of labour-time, required for the production of these inputs. Let us say it is equal to 100 hours of labour. But, then, to produce 100 kilos of yarn, workers must set in motion the machines, and process the cotton. Let us say that this requires a further 100 hours of labour. So, now, the cost of production, to society, of 100 kilos of yarn, is, in total, 200 hours of labour. The unit value of a kilo of yarn is 2 hours of labour. This determines its exchange-value/price, relative to other commodities.

However, what is the cost of production to the capitalist? They have advanced the equivalent of 100 hours of labour for the purchase of cotton, and to cover the wear and tear of machinery, buildings etc., but they do not advance the equivalent of 100 hours of labour as wages. They only advance, as wages, an amount equal to the value of labour-power, i.e. sufficient to reproduce that labour-power. This is, again, a function of value, because the workers require a given physical quantity of use values – food, clothing, shelter, education and so on – to reproduce their labour-power, and all of these commodities have their own value.

What the capitalist pays for, then, is 100 hours for constant capital (cotton, wear and tear) plus, say, 50 hours for wages, the equivalent of the value of labour-power, consumed. This is their cost of production, which is 50 hours less than the cost of production to society, and the value at which they sell the yarn. The difference of 50 hours labour constitutes, for them, but not society, a surplus value, a something for nothing, which makes up their profit. Of course, the capitalists and their economists see, also, this profit as a cost of production, a cost that must be covered to get the capitalist to advance their capital.

So, the cost of production of a commodity, to society, i.e. the total labour-time required to produce it, determines its value, whilst the difference between that and the cost of production to the capitalist determines the amount of profit. Where commodities sell at prices equal to their values, this profit will be equal to the surplus value produced, i.e. the difference between the new value created by labour, in the production of the commodity, and the value of the labour-power/wages consumed in that production. Taking all commodities in total, it will also equal the surplus value.

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Bourgeois Democracy Crumbles As It Defends Its Genocide - Part 3

The line that it was okay to criticise the actions of Israeli governments was always a lie, as every such criticism led to the same claims of them really being a cover for anti-Semitism, but if its not possible to criticise the actions of the Zionist state, a Bonapartist state, headed by Netanyahu, but governed by its Zionist ideology, as it visibly and undeniably commits genocide in Gaza and, increasingly the West Bank, when would such criticism be valid, and not characterised as “anti-Semitic”?! 

The contradictions have fully matured, and erupt violently, as appearance and reality collide. It has been erupting on the streets of the world's major cities, every weekend for months, and, now, it is erupting on college campuses in the US, Australia and elsewhere, reminiscent of the student protests against the Vietnam War in the 1960's. For regular readers of this blog, that should come as no surprise, as it is what has been analysed for years, on the basis that we are in an equivalent phase of the long wave cycle as that of the early 1960's.

Bourgeois-democracy is a sham, and a fraud. It was most easily seen to be so, in the early 19th century, when it took the form of liberal-democracy that only gave the vote to the owners of property. That led to an inevitable demand for a widening of the franchise by workers, and other sections of the masses, the petty-bourgeoisie and peasantry. The means of engaging in the struggle for the extension of those bourgeois-democratic rights, by workers, however, were inevitably proletarian, not bourgeois.

The Chartists, in Britain, for example, pursued their aims by the organisation of General Strikes, and mass mobilisations, and, for some, the mobilisation of independent, proletarian, armed struggle. It was precisely those methods that Marx and Engels advocated, as they warned the workers against being suckered in by the claims of their erstwhile allies amongst the bourgeoisie and petty-bourgeoisie. It was the same approach taken by the Bolsheviks, in 1905 and 1917, when, in pursuit of the demand for a bourgeois-democratic, republic and convening of a Constituent Assembly, they argued for the creation of soviets/workers' councils, as independent organs of workers self-government.

But, capitalism, as it entered its imperialist stage, towards the end of the 19th century, dominated by large-scale, socialised, industrial capital, was not only able to accommodate the demands of workers for higher real wages, as productivity rose sharply, but it actively encouraged it. It needed ever larger markets, and workers formed the largest section of society. Moreover, these higher real wages helped to reinforce the idea, promoted by social-democracy, that labour and capital had the same common interests that could be advanced, more or less harmoniously, given the occasional falling out, and need for diplomacy and compromise, mediated by a growing, social-democratic, professional middle-class, whose job was to manage such relations, on behalf of the good of “society”.

Liberal bourgeois democracy, had become a fetter on the free and rational development of bourgeois-democracy, just as the monopoly of private capital had become a fetter on the rational development of capital itself. The latter fetter was “burst asunder”, as Marx puts it, in Capital I, by the development of socialised capital in the form of the cooperatives, and more extensively in the form of the joint stock companies/corporations. Alongside this development, liberal democracy gave way to social-democracy, based upon the delusion of universal suffrage, and the idea that power resides in elected parliaments, rather than in the hands of the permanent state, its civil service, bodies of armed men, judiciary, and its ideological apparatus operating through the schools and universities, the media, and religious and cultural organisations.

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The Chinese Revolution After The Sixth Congress, 5. Appendix – A Remarkable Document - Part 4 of 10

In China, neither imperialism nor the Chinese capitalist state was defending workers' interests. Imperialism was clearly tied to the Chinese militarists, as well as having its own bodies of armed men, in the country, to oppress the workers, and to defend its own interest. As Trotsky points out, the KMT was the party of the bourgeoisie, which, itself, was intimately tied to imperialism. The KMT's claim to be “anti-imperialist” was bogus, because of that, and amounted only to playing off one imperialist power against another. Trotsky made the same point about Ukraine, where, again, different sections of society looked to different imperialists to further their specific interests.

“Only hopeless pacifist blockheads are capable of thinking that the emancipation and unification of the Ukraine can be achieved by peaceful diplomatic means, by referendums, by decisions of the League of Nations, etc. In no way superior to them of course are those “nationalists” who propose to solve the Ukrainian question by entering the service of one imperialism against another. Hitler gave an invaluable lesson to those adventurers by tossing (for how long?) Carpatho-Ukraine to the Hungarians who immediately slaughtered not a few trusting Ukrainians. Insofar as the issue depends upon the military strength of the imperialist states, the victory of one grouping or another can signify only a new dismemberment and a still more brutal subjugation of the Ukrainian people, The program of independence for the Ukraine in the epoch of imperialism is directly and indissolubly bound up with the program of the proletarian revolution. It would be criminal to entertain any illusions on this score...

The worker and peasant masses in the Western Ukraine, in Bukovina, in the Carpatho-Ukraine are in a state of confusion: Where to turn? What to demand? This situation naturally shifts the leadership to the most reactionary Ukrainian cliques who express their “nationalism” by seeking to sell the Ukrainian people to one imperialism or another in return for a promise of fictitious independence.”

(Problem of the Ukraine)

The same is true in Ukraine, today, with the Ukrainian capitalist state oppressing Ukrainian workers in the interests of the Ukrainian oligarchs, who are intimately tied to US and Western imperialism. The claims of Zelensky's corrupt capitalist government, as with the claims of the KMT, to be “anti-imperialist”, as it opposes Putin's invasion, is wholly bogus for the reasons Trotsky described, in relation to China and Ukraine, in the 1930's. He made exactly the same analysis in relation to Czechoslovakia.

“Even irrespective of its international ties Czechoslovakia constitutes a thoroughly imperialist state. Economically, monopoly capitalism reigns there. Politically, the Czech bourgeoisie dominates (perhaps soon we will have to say, dominated!) several oppressed nationalities. Such a war, even on the part of isolated Czechoslovakia would thus have been carried on not for national independence but for the maintenance and if possible the extension of the borders of imperialist exploitation.”

Those examples, as with the position of the social-patriots and social-imperialists, today, in relation to Ukraine, are simply a repetition of the deception carried out by them, in WWI, as described by Lenin in the Theses On The National and Colonial Questions, in which they dress up defence of the fatherland in the clothes of national independence and national self-determination. The most blatant example of that is the defence of Zionist imperialism, in Israel/Palestine, on grounds of a bourgeois-defencist position of “a right of self-defence” for capitalist states.

“Recognition of internationalism in word, and its replacement in deed by petty-bourgeois nationalism and pacifism, in all propaganda, agitation and practical work, is very common, not only among the parties of the Second International, but also among those which have withdrawn from it, and often even among parties which now call themselves communist...

The age-old oppression of colonial and weak nationalities by the imperialist powers has not only filled the working masses of the oppressed countries with animosity towards the oppressor nations, but has also aroused distrust in these nations in general, even in their proletariat. The despicable betrayal of socialism by the majority of the official leaders of this proletariat in 1914-19, when “defence of country” was used as a social-chauvinist cloak to conceal the defence of the “right” of their “own” bourgeoisie to oppress colonies and fleece financially dependent countries, was certain to enhance this perfectly legitimate distrust.”

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Bourgeois-Democracy Crumbles As It Defends Its Genocide - Part 2

The chaos caused in Libya spread into Mali and other parts of North Africa, and, again, it has opened the door for rivals to fill the void, most notably the role of the Russian Wagner Group, as China, also, continues to expand its economic reach. Similarly, US imperialism promotes the Zionist genocide against the Palestinians, because, much as with Sherman's genocide against the Native Americans, and the European Colonialists' genocides against indigenous peoples in Australia, New Zealand and elsewhere, it is necessary to establish its unchallenged position, as a Zionist state “from the river to the sea”, as its doctrine commits it, and as the laws of capital, in the age of imperialism requires it to do. Only then can it begin to create that wider politico-economic bloc with the other US clients in Egypt, Jordan and the Gulf states, free from the repeated rebellions of the Palestinians, and the support for them amongst the Arab masses that obstructs the actions of their rulers.

Such a development is also in the interests of EU imperialism. Indeed, it is more so than for US imperialism, in the longer run, because a stabilisation of the region, and its economic growth, will mean far greater trade, and investment opportunities for EU imperialism, as its closer neighbour. So, it is no wonder that the political representatives of US, UK and EU “democratic imperialism” have been prepared to move heaven and earth to support the genocide undertaken by Zionism in Palestine, and to claim that black is white, as they try to deny it is happening. For years, they have equated anti-Zionism with anti-Semitism, a strategy used even more intensively and fraudulently, in recent years, as they sought to attack the Left, for example, against Corbyn and his supporters.

In the 1930's, when that same “democratic imperialism” was seeking to dupe the masses into support for its imperialist wars against Germany and Japan, it did so by claiming that it was engaged in a war for “democracy”, all the while holding millions of colonial slaves in chains! As Trotsky noted,

"Three hundred fifty million Indians must reconcile themselves to their slavery in order to support British democracy, the rulers of which at this very time, together with the slaveholders of “democratic” France, are delivering the Spanish people into Franco’s bondage. People of Latin America must tolerate with gratitude the foot of Anglo-Saxon imperialism on their neck only because this foot is dressed in a suede democratic boot. Disgrace, shame, cynicism – without end!"

(Phrases and Reality)

It does so, today, aided not only by the likes of imperialist politicians such as Biden and Starmer, but also, of social-imperialists of the type of the USC, and its components such as the AWL, who play the same role, today, in that regard, as did the Stalinists and centrists in the 1930's. They have been complicit in this narrative of imperialism, including in its use of anti-Semitism witch hunts in the labour movement. But, to do that, they also had to claim that it was okay to criticise the actions of Israeli governments, even though, in practice, nearly every such criticism was met with the same charges of anti-Semitism.

The line that it was okay to criticise Israeli governments, rather than the racist, colonialist ideology of Zionism, which underpins that state, was also meant to enable imperialism to pressure those Zionist governments, such as that of Netanyahu, which were seen as too maverick, uncontrollable, and representing the same kind of petty-bourgeois interests as those of Trump, Truss, and so on. It is the same motivation that leads to liberal Zionist newspapers such as Ha'aretz, to stand against Netanyahu, and to ridiculously claim that he has failed in his aims in Gaza. He has failed their aims, not his, and not the rationale of Zionism, as now manifest, in its requirement for a final solution against the Palestinians.

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Forward To Part 3

Wage-labour and Capital, Section II - Part 3 of 6

The determining factor of supply is value. If the producer can sell their commodity at a value that is greater than the value of the commodities consumed in its production, i.e. make a profit, they will engage in production. Of course, if they can make a higher rate of profit by engaging in some other production, they will move their capital to that sphere, and so, as described above, this will bring about changes in supply, prices and profits, in these different spheres. As Marx sets out in Capital III, this is why The Law of The Tendency for the Rate of Profit To Fall, in spheres where the organic composition of capital is higher, or rate of turnover of capital is lower, is a most important law for capitalism, both in determining prices of production, and the allocation of capital.

It is this, not the preferences of the consumer, that is the determinant of value/price. The consumer may, of course, decide that they do not obtain use-value/utility from any given commodity, at its market value, and so withdraw their demand for it. So be it. In that case, supply would contract also, may be even to zero! As Marx describes in Theories of Surplus Value, Chapter 20, and in The Grundrisse, demand is a function of use-value/utility. But, just because consumers decide they are only prepared to pay £0.50 for commodity A, rather than £1 that does not mean that the price of commodity A will fall to £0.50. It means demand would collapse, but, if no producers of A could produce it, and make average profit, at £0.50, supply would also disappear.

Marx, also, deals, here, with the false arguments of orthodox economics in relation to inflation. If we take the most basic condition of an economy, with just two commodities, A and B, both with a value of 10 hours per unit, then 1 unit of A will exchange for 1 unit of B. Put another way, the price of 1 unit of A is 1 unit of B. But, now, suppose demand for A doubles, but cannot be increased to meet this demand? As Marx described earlier, owners of B, who are buyers of A will increase competition between themselves to buy the available supplies of A. The same would be true if the supply of A fell.

As a result of this, the B price of A would rise, even though the value of A and B remains unchanged. The price of A might rise to 2B. But that is just another way of saying that the A price of B has fallen! Previously, the A price of 1 unit of B, was 1 unit, but, now, is just 0.5 units of A. The sum of all prices, therefore, remains the same. The price of A has doubled, the price of B halving, cancelling each other out.

“If the price of a commodity rises considerably because of inadequate supply or disproportionate increase of demand, the price of some other commodity must necessarily have fallen proportionately; for the price of a commodity only expresses in money the ratio in which other commodities are given in exchange for it. If, for example, the price of a yard of silk material rises from five marks to six marks, the price of silver in relation to the silk material has fallen, and likewise the prices of all other commodities that have remained at their old prices have fallen in relation to the silk.” (p 24)

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