Is an Underconsumptionist theory relative to today’s current crisis?

i received an interesting reply on my blog today in response to yesterdays post on Marx’s theory on the tendency for the rate of profit to fall. This is their reply. I’ll keep them nameless Justin case of any awkwardness. “No, it isn't. Firstly, Marx distinguishes between financial crises and economic crises. The former as he points out relates to crises that emanate from the circulation of money rather than capital. They emanate, therefore, in financial markets rather than in the real economy. A Stock Market, Bond market or Property Market crash would be an example. Marx points out those crises can remain within that sphere, or may spread out to affect the real economy i.e. through a Credit Crunch. But, such crises have nothing to do with the Tendency for the Rate of Profit to fall. But, the latter also has little or nothing to do with crises in the real economy either, crises that Marx describes as arising from an overproduction of capital. For one thing, Marx points out that although there is a minimum for wages, set by the Value of Labour Power, there is no minimum rate or amount of profit. Subjectively, of course, there may be some point at which capitalists decide to consume unproductively or speculate rather than invest, but such action Marx describes, in itself tends to cause accumulation to slow down, and the rate of profit to rise. A falling rate of profit is a long-term tendency, whereas crises are sharp ruptures. The former cannot be the cause of the latter. Marx sets out the very many counter tendencies to the Falling Rate of Profit, to an extent that it’s clear that in practice there is no reason why the Rate of Profit should fall. In fact, over the last 30 years its clear it has been rising sharply.” Let’s look at the whole Underconsumptionist theory if we will use my good comrade Bruce Wallace’s and his excellent blog at http://69.195.124.91/~brucieba/2013/03/18/does-the-cwi-have-an-underconsumptionist-position/ So here is an extract from a paper Bruce wrote to clarify his own thoughts on the issue: What is Over-Production? There has been an ongoing debate amongst Marxists since the death of the founder of scientific socialism in 1883 as to the meaning of his critique of capitalism. In terms of historical time, a not particularly lengthy period, of one hundred and twenty nine years, actually only some four to five generations, revolutionary socialists have tended towards two camps with various offshoots. One group has adhered to an interpretation of Marx’s critique of capitalism that the reason for capitalist crisis is that the working class does not receive the full fruits of their labour in wages. Surplus value, which equals profit, is the unpaid labour of the working class and therefore workers, the mass of the population, will have insufficient means to buy back all the commodities that capitalism produces. Therefore capitalist crisis is primarily caused by over-production of commodities for which there is an insufficient market i.e. in economic speak demand. Supporters of this view are called underconsumptionists. Other Marxists reject this view as simplistic and not based on a thorough understanding of Marx’s critique of capitalism and that the underconsumptionist position is, in fact, not a Marxist position at all, but a distortion of his ideas. Why should this be an important issue today? Does it really matter if one group of Marxists disagrees with another group over the interpretation of Marx’s critique of capitalism? Surely we are all opponents of capitalism and so what if we disagree over what causes capitalist crisis, surely the point is to overthrow the system? In fact this is probably one of the most important disputes in the history of the revolutionary movement. It not only deals with the fundamental meaning of Marxism but also has direct implications for theory, strategy, tactics and programme. It also impacts on how we view Marxist’s vision of the future socialist society. So this paper will hopefully attempt to address some of these issues in plain language without recourse to mathematics. The Manifesto Apparent support for the under-consumptionist position has been sought in the Communist Manifesto of 1848 by Karl Marx and Fredrik Engel’s where they state: ‘It is enough to mention the commercial crises that, by their periodical return, put the existence of the entire bourgeois society on its trial, each time more threateningly. In these crises, a great part not only of the existing products, but also of the previously created productive forces, is periodically destroyed. In these crises, there breaks out an epidemic that, in all earlier epochs, would have seemed an absurdity — the epidemic of over-production. Society suddenly finds itself put back into a state of momentary barbarism; it appears as if a famine, a universal war of devastation, had cut off the supply of every means of subsistence; industry and commerce are destroyed. And why? Because there is too much civilization, too much means of subsistence, too much industry, too much commerce’. The Socialist Party of England and Wales Website has a commentary on the Manifesto which explains: ‘The Manifesto outlines how destructive periods of recession are inherent in capitalism. It appears that “too much” is produced, but the working class receives far less in wages than the value of the goods they produce. The “consumers” of today can no longer buy the products which they themselves, as workers, produced only yesterday’! Unfortunately this is reading something into the Manifesto which isn’t actually there. This is all that the Manifesto states: ‘Previously created productive forces, are periodically destroyed. In these crises, there breaks out an epidemic that, in all earlier epochs, would have seemed an absurdity — the epidemic of over-production’. There is no mention at all that the destruction of productive forces is because, ‘The “consumers” of today can no longer buy the products which they themselves, as workers, produced only yesterday’! This is the classic underconsumptionist ‘common sense’ explanation of capitalist crisis projected onto the description of crisis by Marx and Engel’s in 1848. The founders of scientific socialism never stated, anywhere, that capitalist crisis is caused by the under-consumption of the ‘products’ of capitalism. And the reason that there isn’t an explanation in the Manifesto as to how crises of over-production occur, not one jot, is because in 1848 neither Marx nor Engel’s knew what the causes of over-production actually were. Their referral to over-production is purely a description of the form of capitalist crisis exhibited at the time, not an analysis of causation. What’s in a word? The word ‘product’ is not a description that Marx went on to use in his critique of capitalism in Capital. The word ‘product’ appears in the Manifesto in 1848 but that was before Marx’s intellectual labours uncovered the way that capitalism actually worked, but he only reached this conclusion in 1858 when he was compiling his Grundrisse notebooks. He discovered that capitalism produces commodities which can be bought and sold for a profit. A ‘product’ is a completely different thing and could be the outcome of the labour of a prehistoric caveman, which certainly wasn’t ever produced to make a profit. Marx dedicated the first chapter of volume one of Capital to ‘Commodities’. The reason for this is that Marx had discovered that commodities are the ‘cell form’ of capitalist production and any analysis of the system needed to start from there. What characterises the capitalist mode of production, unlike all other pre-existing modes of production, is the presentation of ‘an immense accumulation of commodities’ (Capital Vol I on the very first page!). This ‘minor’ terminological and historical blip being cleared up, what actually was Marx’s view of over-production? References http://69.195.124.91/~brucieba/2013/03/18/does-the-cwi-have-an-underconsumptionist-position/

Marx’s theory of the tendency of the rate of profit to fall

This is Karl Marx’s basic ideas of financial crisis. It’s not something which is easily understood and many on the left today fail to grasp Marx’s teachings sadly. But here I will point readers in the right direction. Marx described his idea of how crisis’s come about and how they can be counters acted and how they will eventually be overcome. This is basic Marxism which all comrades must try and grasp if we are to understand the current economic crisis and produce a well rounded Marxist analysis and a alternative to the crisis which as Marxist’s must be nothing less than the over throw of the current order the removal of the capitalist system in place of a socialist planned democratic economy based on the needs of the many. The tendancy for the rate of profit is basically summed up in the notion thatcapitalits as technology advances naturally uses’s more machinery to help produce comodites and as Labour is the source of profit the capitalist use’s less of labour power variable capital if you like the tendancy for the rate of profit to fall is thus. One blog I would point you in the direction of is my comrade from Scotland Bruce Wallace http://69.195.124.91/~brucieba/ Bruce is a highly developed comrade in terms of political economy and Marxist economics that the CWI should treasure and look to. Bruce’s blog is excellent in expressing and educating other socialists on the ideas of Marx and Marx’s ideas of crisis. Bruce like others remains true to the ideas of Marx and Marx’s ides in volume 3 which I’d advice all comrades to read closely the ideas of crisis and how Marx understands crisis’s to develop. To quote from Bruce’s excellent blog below. “We must clarify exactly what is meant by the rate of profit in capitalism because the term profits can be quite misleading. The rate of profit is determined by the rate of return on the amount of capital invested (advanced in Marx’s terminology). If a capitalist advances a capital of £100 and the rate of profit is 20% they will get their original investment back plus £20 in profit. The rate of profit is therefore a percentage rate of return on investment. The £20 the capitalist reaps as profit at the end of the production process is what is regarded as the mass of profit. From this it is easy to see that if the rate of profit falls to say 10% but the capitalist advances £1000 that the mass of profit will be £100. So even with a lower rate of profit the capitalist can recoup a greater mass of profit. This is an important point to remember as we proceed with Marx’s theory. What is clear is that the rate of profit is what the capitalist expects to make on the investment of their capital based on the existing rate of profit. So caution is required when reading economic literature that refers to the abstract term ‘profits’ as the rate and mass of profit are two distinctly different things. The rate is the expectation and the mass is the result. Capital is attracted to the areas of industry which are making the highest rate of profit. This is not based on the independent decision making of individual capitalists. In modern capitalism there is a free flow of capital to the most profitable sectors and this process is automatically governed by the stock market. Through the coercive force of competition the rate of profit tends to equalize and to fall across the economy as a whole. This applies to the world economy and not just within national economies. The less productive, and hence less profitable, industries go out of business or are absorbed by rivals. So it is the rate of profit which is the motive force of competition and for a greater and greater concentration and centralisation of capital. There is a growth of larger corporations and monopolies with their integration into banking and finance. This is what Marx means by an increase in the mass of accumulated capital although a fall in the rate of profit means a decline in the rate of accumulation. In other words economic growth slows but the concentration of capital (its mass) increases. This is very much like the evolution of a black hole in physics. How the LTRPF, in tandem with accumulation, works out in practice to produce crisis is explained by Marx in a chapter in Capital Volume III titled “Development of the Law’s Internal Contradictions”. Let’s look at how it works? How it Works in Practice The continuous downward pressure on the rate of profit brings forth what Marx called counteracting influences or tendencies and these are the main ones. • More intense exploitation of labour (increasing productivity) • Reduction of wages below their value (wage cuts) • Cheapening of the elements of constant capital (reducing the cost of machinery) • The relative surplus population (using unemployment to force down wages and conditions)) • Foreign trade (the expansion of global capitalism) • The increase in share capital (the growth of banking and finance/debt” All these points above are crucial to understanding how the tendency for the rate of profit LTRPF, can be delayed and held up. But as we know this can only delay the v LTRPF to fall. The general tendency is for this to eventually fall. The addition of credit in the capitalist system in the last 10- 20 years extending this process was a method adapted to the capitalist system only to stem the crisis and put it off for another day. Bruce in his superb blog goes on to explain what this means in practice “The LTRPF is primarily a historical law whose influence is felt over a protracted period of time resulting in major periodic crisis but it also is the underlying reason for ‘normal’ periodic recessions. In this sense the law has two aspects. Marx analysed the impact of the counter tendencies on the long term operation of the law. As he explains in relation to increasing the exploitation of the working class either through improving productivity or lengthening the working day: ‘This factor does not abolish the general law. But it causes that law to act rather as a tendency, i.e., as a law whose absolute action is checked, retarded, and weakened, by counteracting circumstances’. (Capital Vol III ) Earlier, in relation to the reduction of surplus value embodied in commodities due to accumulation offsetting a fall in the rate of profit by cheapening the cost of both productive and consumer goods he wrote: ‘But in reality, as we have seen, the rate of profit will fall in the long run. In no case does the fall in the price of any individual commodity by itself give a clue to the rate of profit. Everything depends on the magnitude of the total capital expended in its production’. (Capital Vol III ) And: Thus the law acts only as a tendency. And it is only under certain circumstances and only after long periods that its effects become strikingly pronounced’ Recourse to credit and finance was a particular feature of the neo-liberal boom. There was a huge growth in both consumer and government debt which extended the period of the boom but it did not negate the general law. Thus recourse to what Marx called fictitious capital laid the basis for a sovereign debt and fiscal crisis. This is fictitious i.e. imaginary value, because it is based purely on paper assets, promissory notes on future profits, yet the root of the crisis lay in production and the long term decline in the rate of profit. The law appears to operate cyclically and governs the onset of recessions. This has been proven in excellent research by José Granados (2012): ‘‘Data on 251 quarters of the U.S. economy show that recessions are preceded by declines in profits. Profits stop growing and start falling four or five quarters before a recession. They strongly recover immediately after the recession. Since investment is to a large extent determined by profitability and investment is a major component of demand, the fall in profits leading to a fall in investment, in turn to a fall in demand, seems to be a basic mechanism in the causation of recessions.’ Thus we have periodic booms and slumps. Normally there are recessions approximately every eight years or so that are quickly overcome but the process is also cumulative. As accumulation proceeds the historical operation of the law builds up pressure for major generalised crises over a longer timescale. We have seen this in the history of capitalism where there have been four major generalised crises; the Long Depression of the 1870’s, the Great Depression of the 1930’s, the crisis of the 1970’s and todays Long Depression. The falling rate of profit is the underlying and indirect force driving these crises all of which have specific and unique features. In some ways this is akin to the movement of the earth’s tectonic plates that build up pressure at fault lines in the earth’s crust eventually causing earthquakes. The LTRPF is exactly like this; an indirect force acting on the dynamics of capitalist development that causes economic earthquakes! “ Bruce finnish’s with this section “The crisis is far from over as more sober economic commentators have pointed out in a world loaded with geopolitical and economic risk. It is just as Karl Marx predicted for capitalism: ‘Its historical mission is unconstrained development in geometrical progression of the productivity of human labour. It goes back on its mission whenever, as here, it checks the development of productivity. It thus demonstrates again that it is becoming senile and that it is more and more outlived’. (Capital Vol III ) Capitalism is senile and outlived because its motive force, the rate of profit, is weak. In order to restore it and usher in a renewed period of dynamic growth there must be the mass destruction of capital value and intensified exploitation of the working class, a renewed major global economic slump is therefore inevitable at some point. Even a major recovery will sow the seeds for a renewed downturn and these are becoming ever more violent and catastrophic in their effect. Only One Alternative Marxists are in favour of revolution not because capitalism is an unjust or unequal form of society. Of course capitalism is just that but there is another more pressing reason. Marx showed that capitalism leads to ever more destructive economic crises. Capitalism’s lust to expand endlessly inevitably hits ever more insurmountable barriers due to the crisis tendency that is inbuilt into the very logic of the system itself. As Marx stipulated the barrier to capital in these terms is capital itself. Unless capitalism is overthrown the prospects for humanity are grim including the exhaustion of the earth’s natural resources or destructive war but there is an alternative: ‘The contradiction between the general social power into which capital develops, on the one hand, and the private power of the individual capitalists over these social conditions of production, on the other, becomes ever more irreconcilable, and yet contains the solution of the problem, because it implies at the same time the transformation of the conditions of production into general, common, social, conditions. This transformation stems from the development of the productive forces under capitalist production, and from the ways and means by which this development takes place’. (Marx Capital Vol III) The only alternative to the deepening crisis of capitalism’s ‘creative destruction’ is its abolition as a social system and its replacement with a socialist plan of production on a global scale. Other solutions, such as limited nationalisation, state control of the banks and policies aimed at redistributing wealth for example are completely utopian. Provided capitalist production continues i.e. a system which aims at the production of value, of abstract wealth, in favour of a small minority of society and not to meet general human need more destructive crises are inevitable. Marxists do of course struggle for immediate reforms such as halting the austerity cuts, an increase in wages and a program of public works but only as part of a general strategy towards the overthrow of the capitalist system itself. To argue otherwise, as some on the left have done, that capitalism has somehow solved its problems in the advanced countries negating the need for revolution is flying in the face of reality. The epicentre of the current capitalist crisis is precisely in the advanced capitalist countries where there is such a historic accumulation of the mass of capital. In the advance countries the prospect for the working class is increasing misery and exploitation and the historic decline of the economy. The Greek and Spanish crises show the more advanced European countries an image of their own future as the crisis begins to grip France who’s unemployment has hit 10%. Across Europe more that 20 million workers are jobless and the depression is deepening. Neither will the rise of capitalism in the emerging markets offer a way out as this will lead to exactly the same working out of Marx’s law. China, the world’s second biggest economy, is preparing a massive slump with its huge growth of constant capital. The interconnectedness of the global capitalist economy heralds further conflagrations of more intensity and depth on a world scale than ever before. The long term choice for the working class is stark, socialism or barbarism, and only in the works of Karl Marx can a thought out scientific answer to the way forward be found.” So we can see that the tendancy for the rate of profit to fall is a long term affect with several counter acting measues which can be taken but ultimately can only put off the crisis for another day. The ultimate choice is of a widespread destruction of capital resulting in huge redundancies, mass unemployment and therefore a driving down of labour power to a point where capital can feel confident enough to start to reinvest. Not when the ground is clear for reinvestment will this happen. It is clear that left Keynesian demands will only go so far that we have to take a much bigger look at the overall picture of production and the capitalist system as a whole to understand the long term trends within the system itself. For Marxist’s this should be Marxism 101 but not for an all sadly. A fear of theory and economics leads others to blindly follow others yet a examination of Marx’s works will show many experienced Marxists that the tendency of the rate of profit to fall is spot on and however had they try to disprove it Marx always comes back stronger and even more correct. Lastly I don’t fully understand this myself but am developing my understanding all the time I therefore encourage other comrades and beyond to educate themselves too in the teachings of Marx and Engel’s in economics as it’s crucial to understanding the period we are living through. With huge thanks to comrade Bruce Wallace and his excellent blog for extracts and help. Do check him out if you can. References Marx, K. (2013) Capital Volume I Marxist internet archive http://www.marxists.org/ Marx, K. (2013) Capital Volume II Marxist internet archive http://www.marxists.org/ Marx, K. (2013) Capital Volume III Marxist internet archive http://www.marxists.org/ Marx, K. (2013) Theories of surplus value Marxist internet archive http://www.marxists.org/ Marx , K. (2013) Grundrisse Marxist internet archive http://www.marxists.org/ And lastly comrade Bruce Wallace’s blog http://69.195.124.91/~brucieba/2013/06/11/the-basic-mechanism-of-capitalist-crisis-part-ii/

How is the value of labour power set ?

Labour Power as a Commodity: In order that labor power is a commodity, the following conditions must be met:

[1] The individual whose labour-power it is... sells it as a commodity. In order that he may be able to do this, he must have it at his disposal, must be the untrammelled owner of his capacity for labour, i.e., of his person. He and the owner of money meet in the market, and deal with each other as on the basis of equal rights, with this difference alone, that one is buyer, the other seller; both, therefore, equal in the eyes of the law. The continuance of this relation demands that the owner of the labour-power should sell it only for a definite period, for if he were to sell it rump and stump, once for all, he would be selling himself, converting himself from a free man into a slave, from an owner of a commodity into a commodity.

The second essential condition to the owner of money finding labour-power in the market as a commodity is this — that the labourer instead of being in the position to sell commodities in which his labour is incorporated, must be obliged to offer for sale as a commodity that very labour-power, which exists only in his living self.

For the conversion of his money into capital, therefore, the owner of money must meet in the market with the free labourer, free in the double sense, that as a free man he can dispose of his labour-power as his own commodity, and that on the other hand he has no other commodity for sale, is short of everything necessary for the realisation of his labour-power.

How the Value of Labour Power is Determined:

The value of labour-power is the value of the means of subsistence necessary for the maintenance of the labourer.

The value of labour-power is determined, as in the case of every other commodity, by the labour-time necessary for the production, and consequently also the reproduction, of this special article. So far as it has value, it represents no more than a definite quantity of the average labour of society incorporated in it. Labour-power exists only as a capacity, or power of the living individual. Its production consequently pre-supposes his existence. Given the individual, the production of labour-power consists in his reproduction of himself or his maintenance. For his maintenance he requires a given quantity of the means of subsistence. Therefore the labour-time requisite for the production of labour-power reduces itself to that necessary for the production of those means of subsistence; in other words, the value of labour-power is the value of the means of subsistence necessary for the maintenance of the labourer....

In the US and the Uk certainly there is what is known as the povety line where every so often it is re examined to how much the minimum level of the cost of surviving for a worker. This varies country to country of course and is hard to work out an actual set figure but each country sets its own povety line which it can move up and down depending on how left or right the government are in power at the time who seak to manage capitalism the best they can by keeping wages low and production high.

The owner of labour-power is mortal. If then his appearance in the market is to be continuous, and the continuous conversion of money into capital assumes this, the seller of labour-power must perpetuate himself, "in the way that every living individual perpetuates himself, by procreation." The labour-power withdrawn from the market by wear and tear and death, must be continually replaced by, at the very least, an equal amount of fresh labour-power. Hence the sum of the means of subsistence necessary for the production of labour-power must include the means necessary for the labourer's substitutes, i.e., his children, in order that this race of peculiar commodity-owners may perpetuate its appearance in the market.

The minimum limit of the value of labour-power is determined by the value of the commodities, without the daily supply of which the labourer cannot renew his vital energy, consequently by the value of those means of subsistence that are physically indispensable. If the price of labour-power fall to this minimum, it falls below its value, since under such circumstances it can be maintained and developed only in a crippled state. But the value of every commodity is determined by the labour-time requisite to turn it out so as to be of normal quality.

Karl Marx
Capital, Vol. 1: The Buying And Selling Of Labour-Power

The battle of capitalism

Capitalism is a peculiar form of class society. Like previous class societies it involves a minority section of society grabbing the surplus created by the toil of the rest of society. But there are important differences. Previous ruling classes simply seized the surplus, while capitalists get it by buying people's capacity to work (what Marx called 'labour power'). And previous ruling classes used almost all the surplus on their own luxury consumption or on fighting each other. The use of any of the surplus to improve the means of production was spasmodic. Economic growth was usually slow, often non-existent, sometimes negative for centuries at a time. Capitalist ruling classes, however, are driven by economic competition within and between themselves to plough a sizeable portion of the surplus back into expansion of the means of production. There is not merely economic growth, but compulsive accumulation. It is this which has enabled capitalist ruling classes that two and a half centuries ago controlled only fringe areas of north western Europe to engulf the globe today.

Class societies began to emerge in various parts of the world from around 5,000 years ago onwards. Over a period of several centuries, what had once been communal production fell under the control of ruling minorities who ensured it provided them with an increasingly luxurious and leisurely lifestyle. At first they tended to exploit the rest of society collectively, as temple priests or royal households, rather than through private property. On this basis civilisations as diverse as those in the Nile Valley, ancient Iraq, northern China, the Indus Valley, central America, the Andes, Crete, Ethiopia and west Africa developed.25 Over time central control tended to weaken and a class of 'aristocrats', 'gentry' or 'lords' to emerge which exploited direct cultivators in each locality. At the same time, the polarisation of society into classes found its reflection in greater or lesser degrees of disintegration of the old communal forms of agricultural production and the emergence of peasant households as the main productive units. There would then be a continual tussle between the central state administration, with its corps of tax collectors, and the local rulers over who got the lion's share of the surplus which was taken from the peasants in the form of labour services, crops or, sometimes, cash. All these societies had one thing in common--the ruling class, whether made up of lords and aristocrats or of state administrators, took the surplus directly off the peasant producers, without any pretence of exchange of goods.

Such ruling classes increasingly felt the need for products that could not be obtained simply from the local cultivators. They needed materials for palace and temple building, for the making of armaments and for luxury consumption. Such things could often be obtained only by looting distant peoples, or through some sort of exchange with them.

There was some exchange long before the rise of classes. Archaeologists have found artefacts that must have been made many hundreds of miles away among the remains of hunter-gatherer settlements of southern France more than 20,000 years ago, and the circulation of the products of human labour was even more widespread in the agricultural societies that began to emerge ten millennia later. There was no other way, for instance, that the villagers of the river plain of southern Iraq could get metal ores and even wood (since the lower valley of the Tigris and Euphrates was virtually treeless). But the circulation of products in pre-class societies was not trade in the sense that we know the term today. It was not carried out according to strict calculations of profit or loss, but according to traditions of gift-giving and gift-taking, based on customary rites, much as continued to happen in pre-class societies in places like Polynesia right into the 20th century.26

The rise of the ruling classes of the new civilisations transformed this situation. They demanded distantly-obtained products on a scale that could not be satisfied by the old-established customary networks. At the same time, they were rarely prepared to face the hardship and risks involved in procuring such things themselves. People soon emerged who were--in return for a share of the surplus the ruling class had obtained through exploiting the cultivators. So specialised traders got a 'mark-up' by selling to the ruling class goods from a great distance away. Some were individuals from the exploited cultivator class, others from the nomadic peoples living between the centres of civilisation. But regardless of their origins, they began to crystallise into a privileged classes separate from the old ruling classes.

Such merchant classes emerge in similar ways in societies with little or no contact with each other: in second millennium BC Babylon and Egypt; in India, China, Greece and Rome by 300 BC; in Teotihuacan in the Valley of Mexico by AD 200; in the Arabian peninsular by AD 600; among the Mayas of the Yucatan Peninsula by AD 1000; on the northern coast of the Andean region by 1500 BC. Once in existence such a class usually left its mark ideologically and politically as well as economically. The spread of each of the great world religions--Buddhism, Hinduism, Christianity and Islam--was along trade routes travelled by the merchants. The world's major languages often developed out of the vernacular forms by which people communicated with each other along trade routes and in marketplaces. And sections of the established agrarian ruling classes repeatedly found the merchants useful allies in struggles with other sections for dominance: the rise of the Ch'in kingdom and then empire in northern China and of the Mauryan empire in India in the 4th and 3rd centuries BC depended on such manoeuvres, and the Arab dynasties that ruled the Middle East a millennium later owed their success to reliance on merchants as well as tribal armies and landed exploiting classes.

But in these alliances the merchants were always the junior partners to the rulers, and much mistrusted by them. Merchant wealth came from siphoning off some of the surplus under the control of the old ruling class, and this was resented. So the most powerful merchant could suddenly be thrown into prison, lose his head or be cut in half. He lacked the independent base in production and exploitation to do much more than kowtow to the old rulers.

Marx made a distinction between merchant capital (that profits from financing trade), usurers' capital (that makes profits from interests on lending) and productive capital (that profits from employing workers to operate its means of production). Merchant capital and usurers' capital existed under all the old empires, wherever there was large-scale trade or moneylending. But productive capital made only a rare and fleeting appearance. In ancient Rome, for instance, the most successful 'capitalists' were the 'tax farmers', whose wealth came from the contracting out of tax collecting by the state. In Ch'in and Han China (300 BC-AD 300) the merchants collaborated with the state in running the salt and iron monopolies. In the Arab empires of the Middle East the goods traded by the merchants were produced by peasants exploited by big landowners, by self employed artisans or, occasionally, by state enterprises--not by enterprises run by the merchants themselves.

The system as we know it today could only come into existence because at some point a capitalist class emerged that did directly control production and was therefore able to directly exploit people on its own account, rather than simply being an intermediary between other exploiters.

One precondition for the emergence of true capitalism, as Marx showed, was the separation of the immediate producers (those who did the work) from the means of production, which passed into the hands of the new exploiting class. The producers then had only one way to get a livelihood. They had to persuade the members of this exploiting class to make use of their capacity for labour (their 'labour power') in return for a remuneration sufficient to keep them alive and fit for work. But the level of that remuneration was substantially lower than the value of the goods produced by their work. The difference, the 'surplus', went straight into the pockets of the owners of the means of production. They gained the fruits of the exploitation of labour, even if it was legally 'free', just as much as the old ruling class that exploited unfree labour.

Marx described in Capital the forcible separation of the workforce in Britain from control over the means of production by the driving of people from the land with the enclosures of the 16th, 17th and 18th centuries and the 'clearances' of the 19th century. In many parts of the world the process continued right into the 20th century with the seizure of 'native' lands in places like southern Africa by white colonists--and also with the so called 'collectivisation' of agriculture under Stalinism.

Without such a separation of the workforce from the means of production the spread of production for the market could lead, not to capitalism, but to a new variant of serfdom, the so called 'second serfdom' of eastern and southern Europe, or to the encomienda system in Latin America. The output of production in these regions was directed towards world markets, but the internal dynamic was very different to that of capitalism, with its drive to competitive accumulation.

Productive capitalism was not possible before a certain point in human history. This was when there was a massive escalation of the use of the products of past labour to increase the productivity of present labour, when the use of relatively simple tools began to give way to the first mechanisation, in the broadest sense of the term.36

This could have a fourfold effect. It (1) increased the output--and therefore the potential surplus--to be obtained from a given quantity of labour. It (2) increased the cost of equipment and materials needed to undertake production--and therefore the likelihood that the individual producers would not be able to supply them themselves. It (3) increased the dependence of production on the initiative and commitment of the producer (if only because more care needed to be taken on the expensive equipment) and therefore the advantage of exploiting 'free' as opposed to serf or slave labour. And it (4) increased the importance of trading networks which could supply raw materials and dispose of the increased output.

Where 'mechanisation' had all four effects it separated immediate producers from control over the means of production on the one hand and encouraged the use of 'free' labour by the new class of controllers on the other. It also increased the integration of the whole production process with the market.

All four effects were not always present. Often in the early stages the individual producer still partially owned and controlled the means of production, although becoming increasingly dependent on merchants, landowners or moneylenders for funds and raw materials. In these cases transitional forms to fully capitalist production flourished--for instance, the putting-out system in the towns, share-cropping in the countryside. As we have seen, there were also many cases in which slave or serf labour was used in early forms of industrial production. And in some cases at least, mechanised forms of production were quite compatible with the denial of any initiative to some groups of labourers. This was true on the sugar plantations of the Caribbean in the 18th century and the cotton plantations of the American South through the first half of the 19th century.

Yet once 'mechanised' processes were under way the possibilities of a transition to capitalist forms of production were there. The development of productive capitalism depended on such developments in the forces of production. By contrast, where such developments did not occur, merchant and usurer capitalism were possible, but not productive capitalism.

This explains why capitalism did not develop in the ancient civilisations of the Middle East and the Mediterranean lands or in the pre-Hispanic civilisations of the Americas. In neither case were the forces of production sufficiently advanced for a new class of capitalist exploiters independent of the old ruling classes to emerge.


But back to Britain today we are currently living in a finance based capitalism based on merchant capital. This has been the more favoured system since the 1960's when Harold Wilson the labour prime minister decided to favour finance capital over industrial capital. This was due to various things really the fact that the workers were getting strong in the industrial field with mining strikes frequent and workers gaining confidence this had to be smashed and a turn to more finance capital where union uptake was sparse and fragmented. The battle for the more dominant form of capitalism was born out and today we survive on a service/finance capitalism system where little value is produced rather than money is transfered and borrowed and delt with. This as Marx tells us produces no long term value as it doesnt have much labour value embodied in what finance capital produced if at all.

In the coming period we may see another battle between finance and industrial capital as i've explained on another post the finance capitalists may be forced to take the wrap for getting the people striking and rioting. To quell this anger the financial sector may be tempered down a bit to relieve the anger but industrial capitalism which may come back into play in the future with an experiment in Greece taking place right now to see if Greek workers will accept very low wages if so they may become competitive with the likes of China in terms of wages.

I cant see this happening myself so a huge class struggle will braek out bigger than what we have at the moment. It is just the start of this crisis in capitalism and the ruling class's have very little answer to the problems they find themselves with.

The only way out of this crisis as we continue to say is a socialist answer a planning of the economy based on needs not greed of a few.

overtime, the quiet plan for profits for the boss's

Overtime is a idea which has become far more popular than ever. Some companies i know will have made staff redundant yet still get their existing staff to do overtime. Its maddness i tell you. But not as far as the capitalists are concerned. They rely on our surplus wage value to make their profits and overtime is no different. It is a way of adding value to a workers labour and getting away with paying them less than they should be. As Marx explained most workers who work a 8 hour day will have earned their wages within 4 hours. The rest of that is what the capitalist gets. Not only the profit from the product or service produced but also the wages that the worker does not get. There is a constant battle for that surplus value to be increased and this can come in the form of overtime, threats to work harder or incentives to work harder and faster.

But overtime which i'm focusing on here is something which has come to light in a recent TUC survey and research. I must say one of the better things teh TUC do some good solid sound research into the labour market and workers conditions. Its what they do next or not do i have the issue with. But there we go but in terms of overtime it has been found Last year workers gave bosses 2bn hrs of unpaid overtime-equivalent of 1m jobs-enough to eliminate youth unemployment in affect

This is staggering and not a mention of this by any of the major political capitalist parties. I wonder why ? maybe as they support this form of exploitation and gain by the rich ? But this sort of statistic when there is over 2.6 million people currently unemployed in Britain is a disgrace overtime shouldnt even being thought of when there are people desperate in many cases fora job at all.


The TUC says workers donated £29.2bn to economy thru 2bn hours unpaid overtime that is a huge amount. Where would those capitalists be without this sort of figure ? The fact that the boss's will use such tactics is further evidence that the ruling class will go to any lengths to get cheap labour power as a comodity as it is a comodity to keep their cost of production down to maximise their profits. Everything a capitalist does revolves around the motive for profit. I think we need to keep taht in mind when looking at the decisions the capitalists take and the polititians in westminster and Washington who support this rotten system.