Wherein Lies The Current Problem For Economies? - Part 4 of 4

What, in fact, happened? Well, of course, in all countries that imposed them, the lock downs and lockouts were largely a sham for public consumption, and public relations purposes, having created the ridiculous narrative that such a lock down/lockout was necessary, or even possible. For the reason Marx describes, any such lockout is impossible, because it would destroy society in short order – which is one reason that some catastrophists were eager to have them, and now to continue them. The catastrophists proposing that are largely middle-class people. Someone has commented that what the lockouts really were was middle class people sitting at home, whilst working-class people continued to go to work, and produce the things they required, and deliver them to their door. Given that it was known that only 20% of the population, almost exclusively those over 60, and particularly those over 80, were at serious risk from the virus, such a strategy, but geared to enabling the 20%, rather than the middle-class to do so, would have been a far more rational, and achievable strategy than has been that of lockouts and lock downs. As Sweden, which had no lock downs, showed, the lockouts and lock downs, even in their own terms of preventing or reducing deaths and serious illness, were a complete failure.

So, in fact, rather than their being the 100% lock down and lockout that was the rational conclusion from the catastrophist narrative, the large majority of labour continued as before; workers continued to turn up to their factories to produce side by side with their fellow workers; they continued to go to work to drive buses, trains, and so on, and to travel to work on these things, side by side with others. In all of this continued social labour and social activity, required for production to continue, the vast majority of those involved - workers under 65 – suffered no serious ill effects. Many of them would have contracted the virus without even knowing it, because, for 80% of the population as a whole, and an even larger proportion of those under 60, the virus produces no symptoms, or only mild cold like symptoms. The vast majority of deaths (95%) and serious illness, was amongst not these workers, but amongst that 20% of the population actually at risk from it, and specifically the over 80's (60%+). The vast majority of deaths and serious illness came not from people exposed to general social interaction, but amongst the elderly in hospitals and care homes, in other words, the sections of the population who actually should have been locked down, isolated, and so protected from the risk of infection! Indeed, a large proportion of them only caught the virus as a result of going into hospital, or else as a result of being in a care home, where they were then exposed to it from people returning from hospital, as the NHS recklessly sent people back to care homes knowing they had the virus!!!

Something similar to this can be seen in every country across the globe, as they all followed the same flawed narrative.

All of those workers who continued to go to work as normal, and who the state required to continue to go to work, so as not to collapse society, were simultaneously told that they could not have social interaction, because of the danger of them contracting the virus. So, we were now to believe that the same people were not at risk from the virus when they travelled to work, or sat in the workplace with their colleagues, but were somehow at risk from it, if they went to the pub, the gym, a football match and so on, as all of these activities were then locked down. All of the workers employed in those particular activities, who generally tend to be lower paid, younger workers, many of whom are also migrant workers, were then laid off. The government established the furlough schemes to enable employers to continue to pay these workers. In fact, however, many of those workers it seems have actually left, either to find other employment in Britain, or else to go back to the EU. It will be interesting to find out how much of the money paid to employers via the furlough scheme was actually passed on to workers, and how much remained in employers' pockets, because the actual workers had gone, but the employers just forgot to pass on that information. There is currently a shortage of 180,000 workers in the hospitality sector, as a result of such workers having left.

Some of that lock down had other repercussions. Suppliers to those sectors, obviously saw the demand for their output collapse, and so that meant many of them had to cut back or close down. Car showrooms closed, and so orders for new cars collapsed, leading to car makers shutting down operations. In Britain, the fortunate consequence of this, for the Tories, was that the collapse in economic activity caused by Brexit, as exports to Europe fell by up to 90%, was hidden by blaming it all on the virus and the lockouts.

Overall, however, the amount of labour undertaken, and so of new value created fell by only 20%. In economies that have increasingly shifted online, the effect of the lockouts, and lock down was simply to accelerate this trend. The volume and proportion of online retail sales expanded at a fast rate, leading to a significant increase for the more far-sighted companies, like Tesco, in employment in online delivery capacity, the number of staff employed in providing its internet services and so on. And, of course, in an economy dominated by service industry rather than material production, the ability for workers to continue to work from home came into its own, although it highlighted the need for developed economies to invest far more intensively in upgrading their own broadband infrastructure to cope with it, and provide the speeds required.

States paid for the transfers made by borrowing. Marx explains the difference of this from a direct export of capital, in Capital Volume III. If capital itself is exported it does not act to produce surplus value in the exporting country, but now acts to produce surplus value in the recipient country. On the other hand, if the capital remains in the debtor country, and its debts are covered by borrowing, it only has to pay interest on the debt. The interest is less than the profit that the capital itself produces. Given that yields on government bonds are at 300 year lows, the attraction of such an option is obvious. But, those low yields are an illusion created by the action of central banks over the last 30 years, to print money tokens, and use them to buy up such bonds, as well as encouraging financial institutions, and owners of fictitious-capital to do so, in the expectation of more or less guaranteed capital gains from their speculation.

The problem that economies face, then, is not that huge amounts of capital was physically destroyed as a result of the government imposed lockouts and lock downs, which would have made it impossible to continue production on the same scale, would have required, as a result a large reduction in employment, small volumes of surplus value production, and so lower rates of capital accumulation and potential growth. Some capital was physically destroyed. Some small businesses went bust, and their premises and equipment becomes scrapped; some brewers had to pour away beer, and some other perishable commodity-capital has been destroyed. But, mostly, productive-capital remains physically intact, and available for resumed production. Some very large businesses have suffered severe damage to their balance sheets, as cash was drained from them. For large strategic industries, like aerospace, airlines, airports and so on, the state is likely to have to bail them out to one extent or another.

And, it is in this that the problems facing economies really reside. During the lockouts and lock downs, the amount of new value created by labour was reduced by 20%, yet workers were paid, more or less as though they were working as normally. Looked at from the perspective of the total social capital, this is the equivalent of reducing the amount of surplus value produced by society. And, given what was described, at the beginning, about workers actually producing their own wages each week, via their production, which the capitalist then simply hands back to them, the consequence of 20% of workers not doing so for a year, can be seen to be far greater than first appearance would suggest. The difference has been made up with borrowing, but this same situation has been repeated across the globe. Across the globe, a similar reduction in physical production can then be seen, and yet borrowing and the printing of excess money tokens, has created the conditions for monetary demand for this reduced output to be maintained. At company levels, cash drained from balance sheets, makes them less able to self-finance even restarting their operations, when restrictions are lifted, let alone expanding, as economies across the globe, now re-open, and economic activity expands by 10% plus. The vast levels of borrowing over the last year, and now compounded by the need for even greater levels of borrowing to finance re-opening, and expansion, as rapidly growing demand forces businesses to respond rather than lose market share, and potential profits. And states also have to borrow more, on top of their phenomenal borrowing over the last year, because they need to bail-out large strategic industries, and repair the creaking and crumbling infrastructure that those economies depend upon.

As rising inflation causes the costs to rise, so the borrowing by businesses and states rises in monetary terms alongside it. As rising borrowing relative to the supply of money-capital from realised profits and saving, and causes interest rates to rise, the fiction of the historically low yields on fictitious-capital is exposed. The borrowing costs of states not only rise, but that also means that they must either tax or borrow even more, or else print even more money tokens, in order to finance those debt costs. Tax is simply a deduction from surplus value, but surplus value has been destroyed as a result of the lockouts, and it would simply reduce the potential for future growth from productive investment to cover current costs of unproductive consumption. Printing even more money tokens, which is what central banks are currently doing, will simply stoke even larger levels of inflation, and a more severe response later. So, higher interest rates are the only viable option, especially given the current absolute low levels.

If a company faces a doubling of interest on any new borrowing, say from 2% to 4%, or from £2,000 to £4,000 on a £100,000 loan, it is unlikely to deter it, in conditions where strong economic growth means it expects its profits to rise from say £1 million to £1.1 million. But, as I set out recently, what it will do is to crater the asset prices which are a function of these interest rates. It is that, which is the main concern of states and central banks that continue to be primarily concerned with the private wealth of the top 0.01%, whose wealth now entirely consists of such fictitious-capital.

The lockouts and lock downs, much as with Trump's Trade War and Brexit, and as with the measures of austerity, after 2010, acted to drastically slow economic growth, and with it the demand for money-capital, which helped to hold down interest rates. Slower economic growth held back the demand for labour, and consequent rise in wages, which would have increased demand for wage goods, whilst squeezing profits, required to finance any capital accumulation. At the same time, the printing of money tokens, and their use for QE, alongside the measures of governments to encourage speculation in property and assets, drained money out of the real economy, and into the realm of fictitious-capital. No wonder in the last year that financial markets soared to ever new astronomical levels, and property prices also rose fuelled by easy money, and Stamp Duty and other incentives.

But, that short-term fix for those asset markets, by encouraging even more reckless gambling on those prices, will now force those financial markets to go cold turkey.

Back To Part 3

Afghanistan, Imperialism and Petty-Bourgeois Moralism

Troops from the US, UK and other imperialist states are withdrawing from Afghanistan. How should Marxists react?

When imperialist forces went into Afghanistan, much as when they went into Iraq, Syria, Libya and elsewhere, there were those that supported such “liberal intervention”, seeing it as similar to the action of “democratic imperialism”, in the 1930's, in undertaking an imperialist war against the forces of totalitarian imperialism, in the shape of Nazi Germany and Mussolini's Italy. On the other hand, there were those that opposed such intervention, on the basis of their “anti-imperialism”, and support for the principle of “self-determination”. There were also those, like the AWL, who claimed that whilst they were not calling for such intervention, nor would they oppose it, or call for it to end, because they saw it as supporting an end which they supported, i.e. the overthrow of undemocratic, vile regimes. Those holding these views ranged from neo-cons at one extreme on the right, through various strands of liberal and social democrat, to supposed Trotskyists at the other extreme.

What all of these responses had in common is that they were based upon petty-bourgeois moralism and idealism, rather than materialism. Its no surprise that the various conservatives and liberals, in their response, had no concern for what was in the interests of the working-class, but that should have been the starting point for any socialist response to events. It wasn't. In the end, all of these responses, be they support for or opposition to intervention, from the conservative right to the “Trotskyist” left, all amounted to some form of liberalism. That is they all amounted to calls for some kind of capitalist solution. The only question was whether it was a bourgeois-liberal solution based upon the interests of large-scale capital, or a petty-bourgeois liberal solution, based upon the interests of small producers. The response to the withdrawal of imperialist forces from Afghanistan now results in the same divisions, but all of which amount to the same petty-bourgeois moralism, subjectivism and idealism on the part of the Left.

On the one hand, we have the “anti-imperialists” who welcome the withdrawal of imperialist forces, irrespective of the fact that the immediate consequence is that the mediaevalist forces of the Taliban are set to reinstall themselves. That is not surprising, because, as in the case of Iraq, in order to oppose imperialism, they were prepared to side with the reactionary forces of political Islam, just as in Lebanon, the SWP proclaimed, “We are all Hezbollah Now!” On the other hand we have those, like the AWL, along with assorted liberals and social democrats, who wring their hands at the fact that the imperialist forces are leaving, and denounce them for doing so, having failed to establish a viable state, and bourgeois democracy, and who, now, in leaving are handing the Afghan people up into the hands of the Taliban barbarians. As I have pointed out before, these are simply two sides of the same petty-bourgeois moralist coin. Both the AWL and the SWP claim adherence to the tradition of the petty-bourgeois Third Camp of Burnham and Shachtman, though the AWL was late in adopting that tradition as the consequences of its gradual petty-bourgeois degeneration played out.

None of the ideas being presented by these organisations are new, the series I posted some time ago on Trotsky's writings on the Balkan Wars, covers all of the ground in detail, but also the current series on Lenin on Economic Romanticism, provides all of the history and analysis of the Marxist response to such petty-bourgeois moralism, as an ideological strand in the workers movement, going back to Marx's analysis of Sismondi. I haven't been posting that series accidentally, just as an example of the practical application of Marx's theory of historical materialism, in relation to the development of capitalism in Russia, though it is important for that too, but precisely to polemicise against that strand of petty-bourgeois moralism that runs through the labour movement today.

In Lenin's polemics against the Narodniks and Legal Marxists, he attacks the idealist and subjectivist philosophy that underpins their politics. That idealist philosophy asserts that nothing is inevitable, and that whatever the human mind can conceive can be converted into reality. This is a version of the Hegelian idealist dialectic, by which history is created by the evolution of the idea within Men's heads, and its subsequent realisation. It is supplemented by Kantian Moralism, in which these ideas develop on the basis of a moral law founded upon universalisable principles, which create a Categorical Imperative. Marx, Engels, Lenin and others explain what is wrong with this. Firstly, a process of development of ideas in human minds undoubtedly does take place, but any such abstract process must have a starting point, and that starting point is what exists in the real world. Secondly, any such abstract process of development remains purely abstract unless conditions exist, or can be created in the real world that enables the resulting ideas to be realised.

Humans had the idea of flight from early on, but were unable to realise it. Leonardo, even drew up the plans for such manned flight, but the machine could not be constructed in a way that would work, given the reality of the machines and materials, and level of engineering available at the time. The Greeks developed the concept of democracy, but the reality of it was that it was only possible for a small minority of free citizens, who themselves rested upon the existence of a large number of slaves.

Thirdly, the reality that presents itself is not the same for everyone in society, so that the idea of universalisability falls down. The reality faced by the Greek slave is not the same as that of the Greek slaveholder, that of the serf not that of the landlord, that of the wage labourer not that of the capitalist. Each of these different classes can form principles that are logically derived from their position in society, but each of which are antagonistic to the logically derived principles of other classes.

So, its true that, taken in the abstract, nothing is inevitable, but the truth is always concrete, and so when Marxists talk about inevitability they do so only in relation to reality as it exists, and not as someone might want it to be in order to assuage their moral sensibilities. There was no point daydreaming about manned flight in the Middle Ages, and constructing schemas based upon it, when, in reality the technological development required for it was still several centuries in the future; there was no point constructing schemas of bourgeois-democracy when society was still dominated by feudalism, and required several centuries of capitalist development before the principles of bourgeois-democracy could be realised. And, that is of particular relevance when considering the reality of Afghanistan, today, a society, which not only is precapitalist, but indeed, is barely even feudal!

One of my uncles was born in Afghanistan, near the start of the last century. His father had gone there as one of the first pilots in the British Royal Flying Corps. But, long before then, the British Army had operated in Afghanistan, a country that has been constantly invaded and occupied by foreign powers, and which has been characterised by its backwardness and division into regions and districts ruled by competing warlords. Only a quarter of the population lives in urban areas, the large majority are engaged in peasant agriculture. Afghanistan has never presented for colonialism or for imperialism, even the kind of incentives that India provided. Its main function has been strategic given its global location. It played that role through history from the time of Alexander the Great, through the Persians, to the British and more recently the Russians, and then the US.

Colonialism was based upon the symbiotic alliance between the landed aristocracy and merchant capital. One the one hand, the landed aristocracy obtained huge swathes of land, from which they obtained additional rents. Their family involvement in the financial oligarchy also provided them with large revenues from the financial of foreign ventures and trade. On the other hand, the merchant capitalists obtained protected foreign markets into which they could sell manufactured commodities, and from which they could obtain cheap raw materials and foodstuffs. But, large colonial administrations and armed encampments were costly deductions from the revenues they obtained from such activities.

Imperialism, on the other hand, is based upon industrial capital, and instead of obtaining its revenues from unequal exchange, it obtains it directly from the appropriation of surplus value in production. But, that presents several limitations. In order to obtain such profits, industrial capital needs to be able to operate on a large scale. That requires also adequate infrastructure in the area in which it is to start production; it requires a large enough workforce educated, trained and prepared to sell its labour-power as a commodity; it often requires the supply of locally produced components and other small industry, etc. Without all of these other requirements, production cannot be undertaken in a way that is more profitable than investment in other more developed economies. Indeed, that is why most direct investment from imperialist economies goes to other imperialist economies, and not to newly industrialising economies, let alone backward states such as Afghanistan.

Imperialism also still requires provision of raw and auxiliary materials, and to the extent that many of these reside in countries such as Saudi Arabia, it relies on an accommodation with the feudal ruling class in those countries. Its true that Afghanistan is also reported to have large reserves of oil and gas, as well as large deposits of other minerals, whose value is estimated to run into at least $1 trillion. But, the geography of Afghanistan makes development of these resources problematic. In any event, even large scale development of these mineral resources would not solve the problem of Afghan economic development, such as to create a modern industrial economy, as the material basis even for the establishment of a functioning bourgeois-democracy. Even the economic development that has occurred in Egypt, Syria and so on, let alone Saudi Arabia and the other Gulf States, has not been sufficient for that. Oil and other mineral extraction, today, is a highly capital intensive industry that requires few workers. Those workers that are required to operate the advanced technology involved have to be highly educated and skilled, many of them being foreign rather than domestic workers, when employed in these less developed economies.

As well as the skilled workers being imported, the technology is also imported, rather than being manufactured domestically, a difference with say the introduction of railways in India, which led to the development of Indian steel and engineering production, as well as the creation of a skilled Indian working-class employed on the railways and these attendant industries. But, for industrial development in an economy, it is precisely these ripple effects, and market expansion that are required. For industrial development to take hold in Afghanistan, and so to create the sizeable working and middle class required for a viable and functioning bourgeois democracy, let alone socialism, what is required is not the exploitation of its natural mineral resources, but the development of large-scale industrial production itself, yet, there is no material basis for any such development. If we take say motor cars, there is no large domestic market for them, without first a development of a sizeable working and middle class. Nor does Afghanistan offer any benefits of locating such production there for export. Car production itself nowadays uses mostly robots, and requires just a small number of highly educated workers to monitor and programme the robots, and these are more readily had in other newly industrialising economies where the problems of civil unrest, ever present in Afghanistan, do not exist.

So, there is no material basis for imperialism to invest in Afghanistan, and it hasn't. Even in terms of the licences for mineral extraction of the now very valuable lithium and rare earth resources, the developed economies have shown little interest, most of them being taken up by the neighbouring regional powers. Imperialism only involves itself for one of two reasons, either there are significant profits to be made, or else a strategic interest is involved. It was only for the latter reason, following 9/11, that imperialism involved itself in Afghanistan in the first place. The wailing from various liberals about imperialism now leaving Afghanistan, simply emphasises their petty-bourgeois politics, based upon moralism, rather than any scientific analysis based upon materialism, and class interest.

The reality is that, given the lack of any strategic or financial interest in Afghanistan, it was inevitable that imperialism would withdraw at some point. The only surprise is that it has taken this long. For US and European imperialism, there is a distinct advantage. It throws the burden on to Russia and China. When the civil unrest erupted, in 2011, in the Middle East and North Africa, it placed the burden on the EU, and the same was true about the unrest that erupted in Central and Eastern Europe. It strengthened US imperialism, at a time when EU imperialism was being strengthened. Similarly, instability in Afghanistan, a policy that the US previously encouraged when it used its proxy in Pakistan as a channel to its protégé Osama Bin Laden and the Mujaheddin, places the burden on Russia and China. China, in particular, tied up dealing with any potential insurgency from Afghan based rebels, will be less able to expand its influence in the South China Sea, and Pacific, the area to which the US has now directed its global economic and strategic attention.

The actions of imperialism in withdrawing from Afghanistan are not then somehow irrational, but rather, given the material conditions that exist, were inevitable, and a logical expression of its class interest. For any Marxist to try to argue that this was not inevitable, that somehow, imperialism could change its spots, and act as some kind of moral saviour of the world, acting against its own class interest, is simply to illustrate the such a “Marxist” has abandoned the basic teachings of Marxism and of historical materialism, as the scientific study of sociology and social development. It is to illustrate that they have become simply a petty-bourgeois moralist, whose ideas and politics are driven by a moralistic idealism, in which everything is possible if only we wish for it hard enough! It is a moralistic politics of schema mongering based upon what could be, rather than what is. And, for all the reasons that Marx set out against Sismondi and Proudhon, that he and Engels set out against Durhing, and that Lenin set out against the Narodniks and Legal Marxists, such moralism and idealism is necessarily reactionary.

On the one hand, the followers of this Third Camp moralism and idealism amongst the “anti-imperialists” want to construct a schema in which, like Sismondi and the Narodniks, some alternative path to development for economies exists that avoids the involvement of large scale imperialist capital, in the form of direct investment from multinational companies. For all their socialistic verbiage, and “anti-capitalist” rhetoric, this too amounts merely to liberalism. As Lenin points out, in relation to the Narodniks, it does not, in reality amount to a “non-capitalist” path of development, but merely a capitalist path of development that is stunted and deformed, by holding it back, attempting to confine it within limits.

On the other hand, the followers of this Third Camp moralism and idealism amongst those like the AWL, who want to construct a schema in which imperialism acts as the vehicle of development for these newly industrialising economies, still more so the backward economies such as Afghanistan, are like Proudhon. They want all of the “good” elements of such development, but none of the “bad” elements that necessarily goes along with it. In The Poverty of Philosophy, Marx describes this approach of Proudhon. For Proudhon, Marx says, the dialectic is understood as every phenomenon having a good side and a bad side, the problem being therefore, to preserve the good and discard the bad.

“Slavery is an economic category like any other. Thus it also has its two sides. Let us leave alone the bad side and talk about the good side of slavery. Needless to say, we are dealing only with direct slavery, with Negro slavery in Surinam, in Brazil, in the Southern States of North America.

Direct slavery is just as much the pivot of bourgeois industry as machinery, credits, etc. Without slavery you have no cotton; without cotton you have no modern industry. It is slavery that gave the colonies their value; it is the colonies that created world trade, and it is world trade that is the precondition of large-scale industry. Thus slavery is an economic category of the greatest importance.

Without slavery North America, the most progressive of countries, would be transformed into a patriarchal country. Wipe North America off the map of the world, and you will have anarchy – the complete decay of modern commerce and civilization. Cause slavery to disappear and you will have wiped America off the map of nations...

What would M. Proudhon do to save slavery? He would formulate the problem thus: preserve the good side of this economic category, eliminate the bad.”

In other words, to put this in the context of Afghanistan, today, its theoretically possible that imperialism could intervene in Afghanistan in such a way as to develop its economy, and turn it into a modern, 21st century industrial economy. To do so, it would have to direct large scale multinational companies to invest in production in the country. In order to make that viable, it would have to spend billions of dollars modernising the infrastructure of the country in terms of roads, railways, telecommunications and so on. It would have to pour money into education and a welfare state on a level that it has no even done in the US itself, to bring the population up to an adequate level to work in these multinational companies, and modern production. Having done all that, then, in several generations time, it would have created the sizeable working-class, and middle class upon which a modern, bourgeois, social-democratic state can be built. In the meantime, it would have to install a vicious and oppressive colonial state apparatus that would resort to any means necessary to appropriate the absolute and relative surplus value required for the accumulation of capital, required for such a transition, it would have to deny all basic individual and civil rights to inhabitants in order to operate unconstrained in such a project.

Of course, that is not what the liberals who propose that imperialism transform Afghanistan have in mind. More significantly, its not what imperialism is going to do, because it has no immediate obvious interest in undertaking such a course of action. It has no categorical imperative to industrially develop Afghanistan, and it has plenty of other more attractive locations across the globe into which it can plough investment, and obtain a return, without any of the costs and trouble involved in such a colonial project in Afghanistan.

And, for liberals, in any case, such a project is a strange application even of the bourgeois-democratic concept of national self-determination. That concept, at a time when the creation of nation states was still, in some parts of the world, a progressive development, was founded upon the idea that each nation should be able to rule itself free from outside control. As Trotsky wrote, in relation to the Balkan Wars, it means that the peoples of that nation, or federation of nations, should be able to determine their own future. It does not mean that some outside power should undertake that function for them. That was why Trotsky opposed the Russian liberal interventionists, like Miliukov, who wanted Russia to intervene in the Balkans against the Ottomans.

“The Balkans for the Balkan peoples! It is necessary to vindicate the possibility for these peoples themselves to settle their own affairs, not only as they wish and see fit but also by their own strength, in the land where they are established. This means that European democracy has to combat every attempt to subject the fate of the Balkans to the ambitions of the Great Powers. Whether these ambitions be presented in the naked form of colonial policy or whether they be concealed behind phrases about racial kinship, they all alike menace the independence of the Balkan peoples. The Great Powers should be allowed to seek places for themselves in the Balkan Peninsula in one way only, that of free commercial rivalry and cultural influence...

Democracy has no right, political or moral, to entrust the organisation of the Balkan peoples to forces that are outside its control – for it is not known when and where these forces will stop, and democracy, having once granted them the mandate of its political confidence, will be unable to check them...

Bismark once said that the whole Balkan Peninsula was not worth the bones of a single Pomeranian grenadier. We too can say today: If the leading parties of the Balkans, after all their sad experience of European intervention, can see no other way of settling the fate of the Balkans but a fresh European intervention, the results of which no one can foreordain, then their political plans are indeed not worth the bones of a single infantryman from Kursk. That may sound harsh, but it is the only way that this tragic question can be seen by any honest democratic politician who thinks not only of today but also of tomorrow.”

Afghanistan is a country of 40 million people. Its economic, social and political development, is way behind that, even of the Balkans more than a century ago.  If the liberal principle of self-determination is to mean anything then it is that they should be left to determine their own future. If the consequence of that is again that they determine to have the Taliban run the country, then that is equally the consequence of self-determination. If 40 million Afghans cannot determine their future in a way that prevents the Taliban from coming to power, then how can it be expected that several thousand foreign troops could, or even should do so?

After all, we have a recent example. In 2011, about ten thousand Libyan rebels, many being jihadists recently back from Iraq, rose up against Gaddafi. Without the support of massive bombing by imperialist air forces, and the backing of thousands of special forces troops from the Gulf and elsewhere, these rebels would have had no possibility of victory. When that imperialist intervention did overthrow Gaddafi, what was the consequence? The reality imposed itself. The rebels were shown to be insignificant, there was no social base for any alternative regime to that of Gaddafi. The country descended in civil war and warlordism between these various reactionary factions. Economic and social chaos ensued, leaving the Libyan people in a far worse position than they had been in under Gaddafi!

But, the liberals and moralists of right and left never learn. They are like the definition of idiocy described by Einstein, they keep repeating the same experiment over and over again, each time thinking that the result will be different.

A Characterisation of Economic Romanticism, Chapter 1 - Part 36

The argument that the foreign market is required, in order to resolve the problem of realisation is, in any case, facile, as Lenin says, because the exported commodities are not given away gratis. In exchange for the exported commodities, other commodities are imported, which then poses the problem of how they can be sold? The mercantilists answered this by seeing the export of commodities exceeding the imports so that the difference is paid in gold, resulting in the accumulation of such reserves. The arguments of today's “anti-imperialists”, based upon ideas of “super-exploitation”, unequal exchange, and so on are just modern-day equivalents of those mercantilist theories, and of the economic romanticism of the Sismondists. 

The issue is resolved by Malthus by the idea that the surplus should indeed be given away gratis, though he doesn't openly say that. Malthus says that the landed aristocracy, and its lackeys in the state fulfil a useful role, because, whilst they do not produce anything, they can consume a large part of the surplus, thereby, enabling the capitalist to realise the surplus value. However, Malthus does not explain how, precisely because the aristocracy and the state do not produce anything, and so have nothing to exchange for all of those commodities they consume, they would be able to buy them. The answer is, of course, that the landed aristocracy extracts rent, and the state extracts taxes, and both of these are deductions from surplus value. Malthus solution is then that the capitalist hand over rent and taxes with no equivalent value being given to them. The landlords and state then use these revenues to buy commodities from the capitalists, which amounts to the same thing as the capitalists simply handing over part of the surplus product to them, gratis in the first place! But, the same effect could then have been achieved by the capitalists themselves consuming that part of the surplus product unproductively. 

Malthus solution is the same one proposed by Keynes a century later. Today it is dressed up in post-Keynesian garb, and in the form of MMT etc. It has also appeared in the form of the Permanent Arms Economy thesis, whereby this supposedly unrealisable surplus value has to be used for unproductive consumption by the state in the form of a huge production of weapons and means of destruction. 

“The romanticist says: the capitalists cannot consume surplus-value and therefore must dispose of it abroad. The question is: do the capitalists supply foreigners with products gratis, or do they throw them into the sea? They sell them—hence, they receive an equivalent; they export certain kinds of products—hence, they import other kinds.” (p 162) 

Modern day romanticists, amongst the “anti-imperialists” adopt the same stance as the Mercantilists and the Narodniks. They posit the relation in terms of unequal exchange, and “super-exploitation”, whereby, this surplus product is exported and the “neocolonial” country that provides the required market simply provides payment in money, which can accumulate in the imperialist economies. But, Lenin, also spells out the rejection of this argument too. 

“If we speak of the realisation of the social product, we thereby exclude the circulation of money and assume only the exchange of products for products, since the problem of realisation consists in analysing the replacement of all parts of the social product in terms of value and in terms of material form. Hence, to commence the argument about realisation and to end it by saying that they “will market the product for money” is as ridiculous as answering the question about realising constant capital in the shape of articles of consumption by saying: “they will sell.” This is simply a gross logical blunder:” (p 162-3)

Back To Part 35

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Wherein Lies The Current Problem For Economies? - Part 3 of 4

As Marx explains in Capital II, the circulating constant capital – raw and auxiliary materials – is essentially advanced alongside the variable-capital, and so turns over at the same pace. It is this that determines the rate of turnover upon which the annual rate of surplus value, and annual rate of profit is based. But, fixed capital, must also be advanced in its entirety, in order for production to take place. So, as Engels sets out in Capital III, Chapter 4, in calculating the annual rate of profit, the whole current value of fixed capital, i.e. its current reproduction cost, minus wear and tear, must be used, plus the value of the circulating capital advanced for one turnover period, e.g. a week. As Marx describes in Theories of Surplus Value, Chapter 23, the role of depreciation and wear and tear is significant, here, because, as each year passes, the value of the fixed capital stock is, thereby, reduced, by wear and tear, and, on its own, results in a higher rate of profit.

Marx takes the example of a coal producer to illustrate this. He assumes that there is £50 of fixed capital, £50 of variable capital, and £50 of surplus value. The fixed capital loses £5 per year as a result of wear and tear. As an annual rate of profit, this represents 50%.

“In the second year, the fixed capital of the coal producer would amount to 45, variable capital to 50 and surplus-value to 50, that is, the capital advanced would be 95 and the profit would be 50. The rate of profit would have risen, because the value of the fixed capital would have declined by one tenth as a result of wear and tear during the first year. Thus there can be no doubt that in the case of all capitals employing a great deal of fixed capital—provided the scale of production remains unchanged—the rate of profit must rise in proportion as the value of the machinery, the fixed capital, declines annually, because wear and tear has already been taken into account. If the coal producer sells his coal at the same price throughout the ten years, then his rate of profit must be higher in the second year than it was in the first and so forth.”

As Marx says later, this is significant for large firms with lots of fixed capital, because its reduced value, due to wear and tear, over several years, is one means by which these firms can compete with firms that undertake production with newer, more productive fixed capital. It also shows the difference between wear and tear and depreciation. The coal producer got the £5 of wear and tear back in the value of the coal they sell. But, if a new machine is introduced, or the value of the machine falls causing it to be morally depreciated by 50%, they do not get this back. Its not transferred to the value of their output. It constitutes a capital loss. But, now, calculating the rate of profit, it is still this £250 value of the machine that is determinate not the £500 historic cost. When the coal producer replaces the machine, they only need to pay this new value of £250, not the £500 historic cost, and it is only this £250, they need to reproduce in the value of their output. Moreover, at £250, rather than £500 per machine, any amount of surplus value will now by twice as much fixed capital as before. The rate of profit will have risen, as a result of the fall in the value of the fixed capital.

Its impossible to know from the national accounts, the actual amount of circulating constant capital contained in the value of national output, because it is not included. The only figure that can be ascertained is the figure for “intermediate production”, but, as Marx describes, that figure – which is presented in Marx's schemas of reproduction as Department II (c), actually contains not a penny of value of constant capital, but is entirely comprised of the value of Department I labour, divided into Department I v + s. The problem can be simply seen if we look at say the value of a car. Suppose the value of a car is comprised of £10,000 of steel, £5,000 wages, and £20,000 profit = £35,000. The steel, is imported. The GDP data will show only £25,000, the incomes going to UK workers and capitalists, i.e. revenues.

But, a similar thing applies if the steel was produced in the UK. If we look at the £10,000 of steel used, this is equal to the value created by steel workers, and divided into their wages, and the profits of steel producing capitalists. With this £10,000 they could buy a portion of the cars produced, i.e. if 1,000 cars are produced, steel workers and capitalists could buy 350, of them, the other 650 being bought by car workers and capitalists. But, to produce the steel, the steel workers require more than just their labour. They also require steel in the form of equipment, furnaces and so on. But, none of this value of the constant capital consumed in their own production of steel is represented in the value of the constant capital used in car production. It provides a revenue for no one, and so does not appear in the GDP or National Income data. Yes, the steel also requires coal and so on, which produces revenues for coal miners and capitalists, but as Marx describes, the coal production also requires coal to power steam engines, as well as steel for pit props, rails for coal trucks and so on, so that, within Department I, all of the consumed constant capital is mutually reproduced as though it represented just one single capital, reproducing its own consumed constant capital, without it producing revenues for anyone.

In a future post, I will set out how Marx's schemas of reproduction might be used to provide a rough calculation of what the actual figure for consumed constant capital might be, and so what the actual figure for national output, as against GDP might be. Using that figure, and an estimate of the rate of turnover of circulating capital to get a figure for the advanced capital, a rough estimate of the annual rate of profit can be calculated. What is clear, is that, because economies are now 80% based upon service industry rather than manufacturing industry, this rate of profit is bound to rise over time, because a smaller and smaller value of total output consists of the reproduction of processed materials, which, as Marx describes in Capital III, and Theories of Surplus Value, Chapter 23, is the basis of the law of the tendency for the rate of profit to fall. For, now, however, a calculation of the consumed constant capital is not required for this exposition, and, indeed, we can, as Marx does, in Capital I, set it to zero, in order to better understand this more significant question of the amount and rate of surplus value, for the question at hand.

If we take this point, set out by Marx in Capital III, Chapter 49, of the need to reproduce the capital, not in value terms, but in physical terms, so as to ensure reproduction, on at least the same scale, and we set constant capital to zero, then we can focus on the physical reproduction of the variable-capital, i.e. the wage goods consumed by workers. As Marx sets out, the source of surplus value is the fact that workers, by engaging in useful labour, be it in the production of physical commodities or services, create new value. Note that this useful labour that creates new value is not the same as productive labour, which is only that which produces surplus value, and exchanges with capital. As Marx describes, a prostitute who sells services to clients, be they workers or capitalists, creates new value by their labour, and the client pays them the equivalent of this value, but they pay it out of their revenue (wages, profit) not as an exchange with capital, so that the labour produces no surplus value, and is then not productive labour. The amount of new value is equal to the amount of average, abstract labour undertaken. Its immediate measure, as value, is given by a quantity of such labour, measured in hours. We saw that, prior to the lockouts, it amounted to approximately 1 billion hours per week, or 50 billion per year. The exchange value of this output, measured in Pounds, i.e. the quantity of pounds that it would exchange for, is given by the figure for GDP, which was £2.2 trillion. Deducting the labour that might be necessary, but not value creating, we obtained a figure of around £55, for the value created by an hour of average labour.

Surplus value is simply the consequence of the fact that the new value created by labour is greater than the value of the necessary labour required to reproduce the worker. As both Marx and Engels describe, in Capital, Anti-Duhring, and elsewhere, this is why class societies cannot arise until labour productivity reaches at least that minimum level at which the product of labour exceeds the necessary labour required for the labourer's reproduction. If a slave does not produce more in a day than is required to keep the slave alive, there is no point in slavery! To put it another way, in line with Marx's comment in Capital III, Chapter 49, if a farmer employs labourers, to whom he pays, as wages 1000 kilos of grain, then setting aside the grain required to reproduce his seed (constant capital), the labourers must produce more than 1000 kilos of grain by their labour. Otherwise, the farmer obtains no surplus product, no surplus value, and so no profit.

However, its possible that, in some given year, there may be a crop failure, and the actual production of grain falls drastically. Suppose, the labourers normally produce 2000 kilos of corn, and again ignoring the seed, then the farmer obtains a surplus product of 1000 kilos of grain. Now assume that the workers expend 1000 hours in this production. That is they create 1000 hours of new value. That is the value of the grain produced. Each kilo of grain has a value of 0.5 hours of labour. The value of the labour-power, is then 500 hours of labour, creating 500 hours of surplus value, appropriated by the farmer. If, then the crop failure reduces output to 500 kilos, the labourers have still undertaken the same 1000 hours of labour, creating the same 1000 hours of new value, but it is now represented in just 500 kilos rather than 2000 kilos. The value of each kilo of grain, therefore, is quadrupled. For social reproduction to occur, and Marx assumes that capitalism is an on going system, and does not simply stop at the end of each year, then the farmer must still provide the workers with the required 1000 kilos of grain, even though his output is only 500 kilos. He must suck up, what now amounts to a loss, the production of negative surplus value, even though, the workers have continued to produce 1000 hours of positive new value. He must provide 2000 hours of value for wages, even though the value of his output is only 1000 hours.

To put it in money terms, if 1 hour of labour creates £1 of value, the workers, by their labour, continue to produce £1,000 of new value, but the crop failure means that labour productivity has collapsed, causing the unit value of grain to rise fourfold. That means that the value of labour-power/wages also rises fourfold (assuming that the labourers only consume grain), so that instead of paying the labourers £500 in wages, they must now be paid £2,000. And, provided the capitalist – or some other who takes over their farm – can access the required capital, they will, indeed, suck up this 50% loss, and provide the additional £1,000, because, otherwise, they will have to reduce the scale of their operation. As Marx describes, because each capital is driven by competition to continually expand the scale of their production, so as to become more competitive, and to gain market share, they will not reduce the scale of their operations. Indeed, for firms that have huge amounts of fixed capital stock, any such reduction is not practicable, because it would mean that fixed capital not being used to the full, losing the benefit of its efficiency. With any given technical composition of capital, the firm is forced to, at least, employ the required number of workers, and to process the same quantity of materials.

Assume that the farmer, decided to halve the workforce. They would then have to set aside only 500 kilos of grain as wages. But, then this workforce would only produce half the output, and assuming no further crop failure, it would produce only half the previous surplus product, and surplus value, i.e. 500 kilos/£500. In fact, the situation would be worse than that, not just because any fixed capital, such as ploughs, tractors and so on would not be fully utilised, and so would depreciate, but also, because the reduced scale of production would mean that the economies of scale, gains from division of labour and so on would be reduced. In fact, many producers do have to look through such such short-term variations on a year to year basis, and make their plans on a calculation of longer-term averages that even out such fluctuations.  Futures markets were developed for that purpose.

So, what does this have to do with the economic consequences of the government imposed lockouts and lock down? Well, they represent the same thing as such a crop failure, but worse. With the crop failure, the workers continued to produce 1000 hours of new value, but now represented in a quarter of the physical output. The negative surplus value arose because the drop in productivity meant that the new value created, was now less than the value of necessary labour. But, with the lockouts and lock downs, the government actually reduced the amount of labour being undertaken, so that the amount of new value itself created also fell, by around 20%. If we put the state in the position of the farmer, it would be as though he not only obtained a smaller amount of physical output, but that the total value of that output itself was reduced, because of the forced reduction in labour.

Both less new value, and less physical product was created, meaning a double whammy, as it then had to try to maintain incomes. It did that by resorting to the delusions of the past of people like John Law and the Pereire Brothers, who thought that money is something that you can simply create by printing more of it. Of course, all the printing is doing is printing more money tokens, not creating more money, which itself requires the creation of additional new value in the economy, the money being merely the equivalent form of that value. As the amount of new value created was being contracted, not increased, the amount of money, as its equivalent form, was also, thereby, decreased. Printing more money tokens, then, simply devalued those tokens by an even greater extent, and, as it handed these additional money tokens to consumers as furlough payments, and so on, the inevitable consequence was to create an inflation of consumer prices, the beginnings of which are now beginning to be seen, as all this liquidity washes out into the economy.

If we take the lockouts, if they had, in fact, been what they claimed, so that no labour was undertaken at all, so as to protect individuals from any possibility of contagion, then GDP would have fallen by 100% to zero. As Marx sets out in describing The Law of Value, in his letter to Kugelmann,

“Every child knows that any nation that stopped working, not for a year, but let us say, just for a few weeks, would perish.”

In Theories of Surplus Value, Marx also describes why such a society would not perish immediately. That is that, like a farmer, a society can eat its seed corn. In other words, a farmer who uses 100 kilos of grain as seed, can, at the end of the year, decide not to replace this seed from their output. They could decide to eat this 100 kilos, or to sell it, along with all of the rest of their output, and then consume what they buy with the proceeds. But, if they do so, they would cease being a farmer or a capitalist. They would have no capital to produce in the following year. They would have converted capital to revenue, in order to consume it.

A society that stopped producing, would have its own capital that it could consume in the same way. Most of this capital, however, does not take the form of consumable products. It consists of buildings, land, machines and so on. The society can always continue to consume by selling off its land to foreigners, exporting its items of fixed capital, selling factories and office blocks to foreign companies, selling its patents, brands and other such things. Indeed, in the days of the Gold Standard, countries made up the differences in what they produced and exported, as against what they imported, by a transfer of capital in the form of gold reserves. Nowadays it takes the form of transfers of currencies, and borrowing. Either way, when a country exports its capital in this way, in order to continue or expand its unproductive consumption, the result is that it reduces its own capacity for future production, and capital expansion.

If there had actually been a lockout of all labour, then the new value created would have been zero, rather than £2.2 trillion or even £1.8 trillion, reflecting a 20% reduction. But, the state would have to ensure that workers survived, because capital requires workers for when it does begin production again. Even assuming that the capitalists, landlords etc. were expected to live off their savings, the state would still have had to provide the £500 billion of wage goods required for the reproduction of labour-power. But, with new value at zero, and so also surplus value at zero, the £500 billion of wages would mean, not just a significant tie-up of variable-capital for the national capital, but an actual huge negative surplus value, of £500 billion. The state would have to provide this by converting capital to revenue, thereby, diminishing the national capital, and so drastically undermining its future productive capacity and capacity for producing surplus value, and so capital accumulation.

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Forward To Part 4

A Characterisation of Economic Romanticism, Chapter 1 - Part 35

The producers of means of production cannot consume the surplus value contained in their own surplus product. Part of this surplus value/product is consumed by them productively, as part of their own accumulation of capital. Part is consumed productively by exchanging it with the producers of consumer goods (indirectly, who provide the additional variable-capital by which the former are able to employ additional workers). Another part is consumed unproductively by exchange with the producers of consumer goods, who provide them with commodities for personal consumption, in exchange for the means of production required for their own accumulation of capital. This is illustrated in the following schema provided by Ken Tarbuck, in his analysis of Bukharin on The Economics of the Transition Period. 

He assumes a closed economy, rate of surplus value of 100%, rate of accumulation of 50%, and organic composition of capital of 5:1. Total output in each department is designated w, with the subscript 1 and 2 referring to the particular department. The starting position is: 

Department 1 

c 10834 + v 2166 + s 2166 = 15166 w 

Department II 

c 3166 + v 633 + s 633 = 4432 w 

Total social product is 15,166 (w1) + 4,432 (w2) = 19,598 

Looking at the process of social reproduction and accumulation, we then get the following division. 

Department I 

c 10834 + v 2166 + s 1083 + 902.5 cs + 180.5 vs 

In other words, 50% of produced surplus value is consumed unproductively, with the other half being accumulated into constant and variable capital in the ratio 5:1. 

Similarly, for 

Department II 

c 3166 + v 633 + s 316.5 + 263.5 cs + 53 vs (NB. should actually be (263.75 and 52.75) 

We can now see, how the schedules of supply and demand for means of production and consumption arise, and how an accumulation of capital in both Department I and II then occurs. 

Supply for Department I in Production Period 1 (PP1) is: 

10834 c + 2166 v + 2166 s = 15,166 

Demand for this output comes from 

10834 (c1) this is the replacement, in kind, of Department I means of production from its own output 

902.5 (c1), which represents the accumulation of constant capital by Department I from its surplus value/product. 

3166 (c2), which is the replacement of Department II means of production consumed in its own production. 

263.5 (c2), which is the additional means of production demanded by Department II, a a result of its own accumulation of capital, out of surplus value. 

Total demand is then also 15,166. 

and supply for Department II is: 

c 3166 + v 633 + s 633 = 4432 

Demand for this output comes from 

2,166 (v1) demand for consumer goods from Department I workers 

180.5 (v1) demand for consumer goods by the additional Department I workers employed as a result of capital accumulation. 

1,083 (s1) demand for consumer goods from Department I capitalists 

633 (v2) demand for consumer goods by Department II workers 

53 (v2) demand for consumer goods from the additional Department II workers resulting from capital accumulation. 

316.5 (s2) demand for consumer goods from Department II capitalists 

Again total demand amounts to 4432. 

Production Period 2 then begins with capital of 18,199, compared with 16,799 at the start of Period 1. Additional capital of 1400 has been accumulated. 

At the end of three cycles total capital would be 21,360, an increase of 4561. 

“Do we deny that capitalism needs a foreign market? Of course not. But the question of a foreign market has absolutely nothing to do with the question of realisation, and the attempt to link them into one whole merely expresses the romantic wish to “retard” capitalism, and the romantic inability to think logically.” (p 162)

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