Saturday, August 1, 2015

Paul Mason on “Is Capitalism Dead?”

The English journalist Paul Mason speaks below on neoliberalism and his belief that capitalism has had its day. He is the author of the new book Postcapitalism: A Guide to Our Future (2015).

Frankly, I think the debate is very confused and misses important points. Also, Mason’s book appears to base its analysis on the idea of the Kondratieff wave and Marxism (Chapter 3 of the book is even called “Was Marx Right?”). Unfortunately, I think these theories are nonsense.

In my opinion, the whole debate cannot proceed until one has defined “capitalism” carefully. What is the essence of capitalism?

I think these are the core and essential attributes of capitalism:
(1) where there are strong (if often limited or circumscribed) private property rights;

(2) where most capital goods are privately owned and where most investment decisions are made privately.
Defined in this sense, it is obvious that capitalism can come in many forms.

Here is just a small set of possible capitalist systems:
(1) a Rothbardian capitalist system where no government exists and where everything is privatised including justice;

(2) a Misesian or Hayekian Classical liberal capitalist system, where there is a minimal night-watchman state with basic public infrastructure (under Hayek’s system it might have some minimal social and economic interventions);

(3) a neoliberal capitalist system where governments attempt to control macroeconomics by monetary policy and varying degrees of government intervention (such as public infrastructure spending, regulation, social security, basic social services, and welfare), but where labour markets are deregulated, governments try to balance budgets, and involuntary unemployment is often a serious problem;

(4) a capitalist system where a Keynesian state maintains full employment by fiscal policy, strongly regulates businesses, and provides extensive social services (such as health care, education, and unemployment benefits) and welfare, strong public infrastructure spending, but where nationalisation of certain industries/services is minimal or non-existent;

(5) a capitalist system where a Keynesian state maintains full employment by fiscal policy, strongly regulates businesses, has strong public infrastructure, provides generous social services (such as health care, education, and unemployment benefits) and generous welfare, and where some industries are nationalised (e.g., the commanding heights of the economy).
I do not see any substantive problem with capitalism when it comes in form (4) or (5). (4) and (5) are what we would call the social democratic mixed economies of the post-WWII era.

The problem with capitalism is when it comes in forms (1), (2), or (3) (or anything in between).

Just because neoliberalism is badly flawed, it does not follow that the left should totally reject capitalism in the sense I have defined it above. We can still have a social democratic mixed capitalist economy, and all the evidence suggests that this is the best and most successful economic system modern industrialised economies can have.

Friday, July 31, 2015

Marx’s Capital, Volume 1, Chapter 7: A Critical Summary

Chapter 7 of volume 1 of Capital is called “The Labour Process and the Valorization Process” (Marx 1990: 283), and it discusses the process of labour and surplus value.

It is divided into two sections:
(1) The Labour-Process or the Production of Use-Values.

(2) The Production of Surplus-Value (also called “The Valorization Process” in Marx 1990: 293).
A critical summary of these two sections follows.

(1) The Labour-Process or the Production of Use-Values
Capitalists buy labour-power from workers and “consume” labour-power by making workers produce commodities as use values (Marx 1990: 283). In this sense, labour-power is a commodity. Human labour has a purposeful nature and aims at certain ends which human beings plan and realise through labour (Marx 1990: 284; Brewer 1984: 40).

The elements of the process of labour are as follows:
(1) purposeful activity;

(2) objects on which work is performed, and

(3) instruments by which work is done (Marx 1990: 284).
For Marx, (2) and (3) are means of production (Brewer 1984: 40).

Instruments of labour include fixed or durable capital goods (Marx 1990: 286). But Marx’s category (3) refers to much more than capital goods and includes the earth and its elements and produce used in production.

The aim of the process of labour is a use-value (Marx 1990: 287, 290), and is explained by Marx in these terms:
“In the labour-process, therefore, man’s activity, with the help of the instruments of labour, effects an alteration, designed from the commencement, in the material worked upon. The process disappears in the product; the latter is a use-value, Nature’s material adapted by a change of form to the wants of man. Labour has incorporated itself with its subject: the former is materialised, the latter transformed. That which in the labourer appeared as movement, now appears in the product as a fixed quality without motion. The blacksmith forges and the product is a forging.

If we examine the whole process from the point of view of its result, the product, it is plain that both the instruments and the subject of labour, are means of production, and that the labour itself is productive labour.” (Marx 1906: 201).
Marx specifies two aspects of the labour process, as follows:
“The labour-process, turned into the process by which the capitalist consumes labour-power, exhibits two characteristic phenomena. First, the labourer works under the control of the capitalist to whom his labour belongs; the capitalist taking good care that the work is done in a proper manner, and that the means of production are used with intelligence, so that there is no unnecessary waste of raw material, and no wear and tear of the implements beyond what is necessarily caused by the work.

Secondly, the product is the property of the capitalist and not that of the labourer, its immediate producer. Suppose that a capitalist pays for a day’s labour-power at its value; then the right to use that power for a day belongs to him, just as much as the right to use any other commodity, such as a horse that he has hired for the day. To the purchaser of a commodity belongs its use, and the seller of labour-power, by giving his labour, does no more, in reality, than part with the use-value that he has sold. From the instant he steps into the workshop, the use-value of his labour-power, and therefore also its use, which is labour, belongs to the capitalist. By the purchase of labour-power, the capitalist incorporates labour, as a living ferment, with the lifeless constituents of the product. From his point of view, the labour-process is nothing more than the consumption of the commodity purchased, i.e., of labour-power; but this consumption cannot be effected except by supplying the labour-power with the means of production. The labour-process is a process between things that the capitalist has purchased, things that have become his property. The product of this process also belongs, therefore, to him, just as much as does the wine which is the product of a process of fermentation completed in his cellar.” (Marx 1906: 206).
So in capitalism the process of production and process of labour are under the control of the capitalist, who owns the output commodity.

(2) The Production of Surplus-Value
Capitalists desire commodities not as use values but as exchange values to obtain more value (Marx 1990: 293).

A production process is a process of creating value (Marx 1990: 293). Socially-necessary non-labour factor inputs transfer their value to the output product, but socially-necessary labour adds new value to the output product (Marx 1990: 296–297).

If workers were paid the full value of their labour, then capitalists would receive no profit, so that capitalists must pay labourers for less than their total daily labour (Brewer 1984: 41).

This origin of capitalist profit through surplus value is explained by Marx as follows:
“The fact that half a day’s labour is necessary to keep the labourer alive during 24 hours, does not in any way prevent him from working a whole day. Therefore, the value of labour-power, and the value which that labour-power creates in the labour process, are two entirely different magnitudes; and this difference of the two values was what the capitalist had in view, when he was purchasing the labour-power. The useful qualities that labour-power possesses, and by virtue of which it makes yarn or boots, were to him nothing more than a conditio sine qua non; for in order to create value, labour must be expended in a useful manner. What really influenced him was the specific use-value which this commodity possesses of being a source not only of value, but of more value than it has itself. This is the special service that the capitalist expects from labour-power, and in this transaction he acts in accordance with the ‘eternal laws’ of the exchange of commodities. The seller of labour-power, like the seller of any other commodity, realises its exchange-value, and parts with its use-value. He cannot take the one without giving the other. The use-value of labour-power, or in other words, labour, belongs just as little to its seller, as the use-value of oil after it has been sold belongs to the dealer who has sold it. The owner of the money has paid the value of a day’s labour-power; his, therefore, is the use of it for a day; a day’s labour belongs to him. The circumstance, that on the one hand the daily sustenance of labour-power costs only half a day's labour, while on the other hand the very same labour-power can work during a whole day, that consequently the value which its use during one day creates, is double what he pays for that use, this circumstance is, without doubt, a piece of good luck for the buyer, but by no means an injury to the seller.” (Marx 1906: 215–216).
The value of labour-power is determined by the value needed to sustain and reproduce that labour, and Marx thinks that this is the anchor for the wages labourers receive. But the labourers tend to work for more time than the value of their subsistence wage, so that capitalists can extract surplus value and hence money profits.

For a capitalist, the use-value of labour-power is that it is the only commodity that creates surplus value (Harvey 2010: 124).

Finally, all skilled or complicated labour can be measured with the same homogeneous unit used to measure simple labour (Marx 1990: 305).

Brewer, Anthony. 1984. A Guide to Marx’s Capital. Cambridge University Press, Cambridge.

Harvey, David. 2010. A Companion to Marx’s Capital. Verso, London and New York.

Marx, Karl. 1906. Capital. A Critique of Political Economy (vol. 1; rev. trans. by Ernest Untermann from 4th German edn.). The Modern Library, New York.

Marx, Karl. 1990. Capital. A Critique of Political Economy. Volume One (trans. Ben Fowkes). Penguin Books, London.