Uncertain Futures: An Assessment Of The Conditions Of The Present
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Uncertain Futures: An Assessment Of The Conditions Of The Present
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| ISBN-13: | 9781785355011 |
|---|---|
| Publisher: | Hunt, John Publishing |
| Publication date: | 02/24/2017 |
| Sold by: | Barnes & Noble |
| Format: | eBook |
| Pages: | 168 |
| File size: | 2 MB |
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Uncertain Futures
An Assessment of the Conditions of the Present
By Edmund Berger
John Hunt Publishing Ltd.
Copyright © 2016 Edmund BergerAll rights reserved.
ISBN: 978-1-78535-501-1
CHAPTER 1
From Then to Now
The Falling Rate of Profit
Marx's analysis of capitalism – and its tendency towards crisis – hinges on an analysis of what capitalism truly is. Indeed, innumerable tomes have been written by bourgeois economists to answer this very question. Certain schools of thought focus on the centrality of exchange, and the subsequent circulation of goods, in the construct that is referred to as "the market." Others look at capitalism from a moral perspective, arguing that it is the sign of free individuals interacting with one another in order to increase their own self-interests. Others still, taking cues from these, see it as a motor for development, the like of which has never been seen before in human history. Behind each of these approaches is one fundamental aspect, upon which Marx builds his own economic theory: capitalism, in its most recognizable form, is the private ownership over the means of production – that is, the ownership of the tools (in the broadest sense possible) to create the goods (or commodities) that circulate on the market. If one owns a given means of production, they are by default a capitalist. If you are employed by a capitalist, you are simply a worker. If we aggregate the owners of the means of production to encompass the economy of a whole, we reach the capitalist class – the bourgeoisie. Likewise, if we aggregate the workers employed by the bourgeoisie in a similar way, we reach the underclass – the proletariat.
What does the bourgeoisie do? As owners of the means of production, their role is to produce. This role, however, is not production for the sake of production. The goal of the individual capitalist is to sell the output of production on the market in exchange for money, the ultimate goal of which is to realize a profit. A portion of this profit goes back into production in order to allow production to continue. Another portion goes to the capitalist his or herself, increasing their own personal wealth. Because each capitalist looks to increase his or her personal wealth, the members of the bourgeoisie find themselves in a profound struggle with one another. Profit, then, must be realized and increased against the ebbs and flows of competition.
Due to competition, this rate of profit must always rise if the capitalist economy is to sustain itself. For the bourgeois economists, this is precisely what capitalism has done: continually increasing the rate of profit, constantly growing the economy (despite the occasional "misstep" or accident that results in recession or depression), and by extension, raising the standard of living for all. Even the poor, our economist says, are better off under capitalism than they would be in its void. Indeed, it was Marx and Engels who wrote in The Communist Manifesto that the "bourgeoisie, historically, has played a most revolutionary part" in development, "constantly revolutionizing the instruments of production" by creating "more massive and more colossal productions than have all preceding generations together."
Yet can this rising rate of profit sustain itself? For early classical economists like Adam Smith and David Ricardo, the answer is no, even if they offered different and somewhat contradictory reasons. Marx, likewise, held that in the longest term possible, capitalism would exhibit a falling rate of profit. Marx finds in capitalism something akin to a thermodynamic system, always increasing in energy, but still tapered by the forces of entropy that lock it into a decline that will ultimately bring about its collapse. This is not to say, of course, that capitalism's profit rates will exhibit a downward momentum if plotted on a historical graph. Capitalism, in order to realize profits, must always expand: new markets open up, new innovations enter into the markets, new consumers enter into the system, so on and so forth. Each of these, Marxian economists argue, can offset profit's fall, and set off again a rising rate of profit. Thus the proposed falling rate of profit would be a tendency of the rate of profit to fall (TRPF).
Does the TRPF exist? The massive wealth accumulation of the last hundred years would state otherwise, though as we will shortly see, some Marxian and non-Marxian economists suggest that there is a secular downward trend. The question then isn't simply whether or not the TRFP exists – but if it exists, does it help explain the events of the Great Recession, and by extension help us understand what comes next? In order to answer both of these questions, we have to look at why Marx believed the TRFP would take place. Before doing this, we must first review a thumbnail sketch of the basic tenets of Marxist economic theory, starting first with labor under capitalist conditions and its expression as surplus value.
The Birth of the Proletariat
In contemporary neoclassical economics, as in their predecessors, the marginalists, the issue of the relationship between labor and production is treated simply. Reaching its highest expression in the neo-marginalists associated with the Austrian School (the birthplace, as we see next chapter, of what constitutes political and economic "neoliberalism"), the worker agrees to labor for the capitalist in exchange for a monetary reimbursement – the wage. The nature of this binding agreement is, in the eyes of the neoclassical economists, a reflection of how they treat the capitalist system as a whole: a network of exchanges based on the buying and selling behaviors of free, rational agents. Like the buyer who purchases a commodity from the capitalist out of need or want, the worker similarly enters into a productive relationship with the capitalist in order to fulfil his or her own needs or wants.
This is not, Marx asserts, necessarily the case. The marginalists, the neo-marginalists and the neoclassicists as a whole treat capitalism as a sort of abstract principle: it appears as something detached from the world, a sort of idealized state of affairs. Marx's interpretation, by contrast, stresses capitalism as a mode of civilizational development that must be contextualized in its historical conditions. This means that the relationships between labor and production and the workers and the capitalist must too be historically situated, with particular attention paid to the development of the proletariat as a class. For Marx, it is only through the proletariat's development that one can properly understand what it is that the proletariat does.
Capitalism emerged from and supplanted feudalism, the dominant political and economic system in Europe between the 9 and 15 centuries. Under feudal relations, a large peasant class developed that served as the bottom-rung of the class ladder. Attaining a standard of living was contingent on the feudal lords, who would legally grant the peasants large tracts of land on which they could live and work. With this land, which might be collectively shared by entire peasant societies, the peasants owned their own means of production, which they utilized to create and sell goods. In exchange for the granting of this land, the lords and the Church would levy a heavy tax against the peasant classes – despite that, in perhaps the majority of cases, the land was in fact the peasants' ancestral land, having been seized by the lords through military conquest. Peasant revolts arose periodically through the Middle Ages, made possible by the vast amounts of land the class maintained. By the 1400s, both the Church and the wealthy classes began processes of expropriation and enclosure – the seizure of peasant land and its redistribution to the nobles, and the barring of the peasants from access to the commons. This process of dispossession would be repeated again with the advent of industrialization in the 18 century, this time with the aid of the state and the growing industrial classes. In this new dispossession, land became translated into private property, a commodity which could be then sold on the free market.
By taking the land from the peasants, the peasants were effectively pauperized, shut off from their means of subsistence. Thus the former peasantry became transformed into the proletariat: robbed of their means of production and agricultural basis (and by extension, their ability to live), they would have to turn to the new industrial bourgeoisie, who had effectively subsumed and surpassed the former feudal nobility. By extension, the historical transformation of land into property via a process of commodification directly entailed the transformation of labor (as the ability to produce) into a commodity capable of being sold and bought in its own right. Far from being the freedom of exchange by free individuals (as neoclassicism poses), capitalism, by nature of its origins, maintained within itself the very relations of feudalism, effectively obscuring them in the dynamics of the market.
Surplus Value
What does the individual worker sell to the capitalist? Looking specifically at how the wage functions, Marx notes that it is not his or her labor that is being sold, but labor-power. Labor-power is different from labor in that it is not the act itself that is being sold, but the capacity or possibility to do labor and to produce. Once purchased by the capitalist, this labor-power is then directed into a relationship with the means of production (raw materials, factory equipment, tools, etc.) in order to produce production. The capitalist, effectively owning this product, can then sell it on the market. Part of the money exchanged (profit) goes back to the worker (wage); part goes into the means of production, and part goes to the capitalist. This obscures, however, another vital element in the process. The means of production impart a value, but significant value is added when the human laborer enters into the relation with the means of production. For example, wood, nails, lacquer, and metals have a value of their own, but it takes the force of labor-power to transform these elements into a table, which will then take on a value that is greater than the sum of its parts. It is the efforts of the laborer – and taken at aggregate, the proletariat as whole – that produce the value of the commodity form.
Critics of this labor theory of value have sometimes made the mistake of thinking that what Marx was arguing was the direct way in which the market value of a commodity is formed. This, however is an incorrect interpretation. In order to realize profit, the capitalist must sell the commodity at a higher price than the amount of value produced in the laboring process. If the commodity is sold, the capitalist accomplishes what Marxist theory maintains is a realization of surplus value. Realizing surplus value – which can only occur if and when the products of production are actively exchanged on the market for money – means that the capitalist has received more from production (that is, the creation and preserving of value by the worker) than he or she had initially put into production. In the case of the worker, on the other hand, all that has been received has been a wage which is ultimately lower than the value he or she imparted in the production process.
The labor theory of value can be unstated in other ways that allow it to be unpacked further. As American anarchist Benjamin Tucker wrote, "the natural wage of labor is its product." This is the ultimate conclusion of the theory, and one can reason from his wording that what constitutes the modern wage would be, in fact, an unnatural wage. But why? The answer lies in the relationship between the value of labor-power, the wage, and the final outcome of labor-power put into action. Let us say that the value of the labor-power is the wage, for it is labor-power that is being sold to the capitalist in order to meet the minimal necessary requirement for survival (that is, the commodities that lend one a quality of life). In modern society, the wage is largely correlated to time spent laboring, that is, the laborer receives a wage that represents the activities done within a single span of time worked. Let's assume, in a given scenario, that the daily wage of the laborer is represented by the number 6, representing directly the value of the labor-power. To use our earlier example of the table, let's assume that it takes 8 hours of living labor to produce a table, with an additional 6 hours of embodied labor (labor that has been done in the past) to produce the raw materials necessary for the construction of the table.
In this scenario, the manufacturing of the table has combined the 8 hours of living labor with the 6 hours of past labor, giving us a final value of 14. The formula for this, if we are inclined towards using one, is EL + LL = W, the EL representing embodied labor, the LL representing living labor, and W being the final value – in this case, 14. The living labor, however, can be broken down into two parts. If we recall that the labor-power was 6, we can see that in the construction of the table (using 8 hours of living labor) this value was imparted with an addition value of 2 – the surplus value. This means that the laborer has carried out both paid labor and unpaid labor over the course of the table's construction. The formula, then, should be EL + LLp + LLu = W, with LLp and LLu being paid living labor and unpaid living labor, respectively. It follows, as the forces of competition wear at the capitalist, that he or she is compelled to eliminate portions from the labor pool and speed up the amount of production done with a given amount of labor-power. Thus, in the long run the capitalist firm subjects the worker to an increasing rate of exploitation, itself bound to the firm's rate of profit.
The ultimate purpose, as stated above, is that under the capitalist system the paid living labor can never close the gap with unpaid living labor, for the vanishing of surplus value would entail the elimination of the role of private ownership over the means of production – and with its passing, the entire edifice of class society would vanish too. Furthermore, the gap between paid and unpaid labor reveals another fundamental aspect of capitalist society, one rarely if ever mentioned: that the act ofmaterial labor is the true source of wealth, being that which produces the value of manufacturing's output. All other forms of wealth income – from the kind received in the form of profits, to the kind received in the form of rent, to the kind received in the form of stocks, interests, dividends, what have you – constitute a distribution arising from the accumulation of surplus value after it has been received in the form of money at the point of sale. These relations are ultimately mystified by the tendency towards universalization by bourgeois morality, traditions, and norms, divorcing this system's relationship to historical processes and making it an affair of voluntary contracts. To quote Andrew Kliman, "From within the standpoint of present-day society, there is nothing to criticize. The exploitation of the worker can only be criticized from the standpoint of the possible non-exploitative, classless society of the future."
The Organic Composition of Capital and the Rate of Profit
We can now turn our attention to two other elements in Marxist theory: the organic composition of capital (OCC) and the rate of profit (ROP). The relationship between the OCC and the ROP, and between each of these with the rate of surplus value, are among the central aspects of Marxist political economy, as they stand as his framework for determining and measuring the dynamics of the capitalist system when taken as a whole. Furthermore, each element is required to approach Marx's theory of the TRPF.
When considering the production process in singular, we find two different forms of capital at work. The first of these is what Marx calls constant capital, by which he means the capital outlays associated with fixed assets (machines and tools), the raw materials needed for production, incidental expenses, etc. This corresponds in many respects to what neoclassical economists call the "factors of production," which is the total number of inputs that go into the production process. Marxist economictheory differs in that it breaks these inputs down into different types of capital. Besides constant capital, Marx identifies what he calls "variable capital," which is the costs associated with buying labor-power from the worker. The total cost of constant and variable capital would be total costs associated with production, which must then be measured against the realization of surplus value in order to determine the ROP. Marx represents the ROP with the following formula: P = S / C + V wherein P represents the ROP, S represents the amount of surplus value realized, C represents constant capital, and V represent variable capital.
(Continues...)
Excerpted from Uncertain Futures by Edmund Berger. Copyright © 2016 Edmund Berger. Excerpted by permission of John Hunt Publishing Ltd..
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Table of Contents
Contents
Introduction,Chapter 1: From Then to Now,
Chapter 2: The Rise and Breakdown of the Neoliberal Establishment,
Chapter 3: Looking Forward,
Notes,