The failure of QE

Just a couple of months ago, mainstream economic analysts were lauding the record high stock market prices as an indicator that the global capitalist economy was well on the way to recovery, thanks to the efforts of central bankers like Ben Bernanke at the US Federal Reserve in applying ‘unconventional’ monetary policy called quantitative easing (QE) to boost liquidity and keep interest rates near zero.  In various posts, I have queried both the likelihood that the stock market boom would continue and that QE had been effective in restoring economic growth (see my post, https://thenextrecession.wordpress.com/2013/03/30/its-still-a-bear-market/).

Well, in the last month stock markets have turned.  In just 23 working days, the FTSE 100 lost 846 points, collapsing from 6,875 on 22 May to 6,029.10 23 June.  And bond markets have also tanked, with the yield on US 10-year Treasuries rising from 2.2% last week to 2.61%, a massive 0.41 percentage points rise in just four working days.  This reversal has been mirrored across the globe.  Chinese stocks sank to a four-year low, pulling most other Asian markets lower.  In Brazil, the price of 30-year dollar bonds is down by 26% since the start of last month.   The rise in UK 10-year gilts has now reversed the entire drop since the start of QE2 in October 2011.  The previous euphoria has given way to a degree of pessimism.

CS Risk Appetite Index

Some leading mainstream economists are perplexed.  Tyler Cowan, a leading neo-classical economists pointed out that Keynesian guru, Paul Krugman had said in 2011 that:  ” Like Bernanke, I don’t believe that the flow of Fed purchases has been an important factor holding bond rates down, and hence don’t believe that they will jump when the purchases end.”  Cowan goes on:  “I was of the same opinion.  It no longer seems this is true.  We’ve had a significant runup in rates fro mere talk about slowing down Fed purchases.”

It all turned pear-shaped last week after Ben Bernanke stated that QE was now over – or to be more accurate that the buying up of US government debt by the Fed through the ‘printing of money’ was to be gradually reduced (‘tapering’, it is called) by as early as September and ended completely next year.  The reaction of the financial markets confirms that the stock market boom since the trough of the Great Recession in mid-2009 has been driven, not by a sustained recovery in the main capitalist economies, but by the sharp rise in profits (at least in the US) while wages have been held down; and the blowing up of a new credit bubble by central banks (the Fed, the BoE and more recently, the Bank of Japan).  With the threat that the credit taps are to be turned down, financial markets melted.

The Keynesians are panicking.  For them, the Great Recession was caused by a ‘lack of effective demand’ and made worse by the policy of ‘austerity’ adopted by most governments.  So they argue that cutting off the liquidity tap when governments are continuing to apply ‘fiscal austerity’ will just push the main capitalist economies back into recession.  As Gavyn Davies, former chief economist at Goldman Sachs, advisor to the previous New Labour government in the UK and now a columnist for the FT put it:  “There are two risks with the Fed’s exit plan. The first, raised by Paul Krugman and other Keynesian economists, is that it sends a premature signal to the world economy that the central banks will tighten before the private sector recovery has achieved escape velocity. This has happened before: the Fed made this error in 1937-8 and the Bank of Japan in 2006. … The US recovery might peter out, taking the global economy down with it.  The second danger, in sharp contrast, is that the Fed has left it too late to bring market exposures under control, in which case the unwinding might take bond yields and credit spreads much higher than economic fundamentals seem to justify. In the famous phrase of Warren Buffett, the legendary investor, we only discover who is swimming naked when the tide goes out. Higher bond yields would spell danger for the financial system – and would mean rising mortgage rates at a time when the US housing market is only just starting to recover.”  So we are either going back into recession or heading for another financial bust.  Better to keep QE going, then.

In contrast, the Austerians argue that Bernanke has left it too late to ‘normalise’ monetary policy and may find that the credit bubble has got out of hand and now that he intends very gradually to ‘exit’ his QE measures, he will cause another slump anyway.  For them, the Great Recession was caused by ‘too much’ credit that had to reined in.  In its latest annual report (BIS annual report 2013), the central bankers association, the Bank for International Settlements (BIS) argues that quantitative easing and ultra-low rates have failed to restore economic growth and instead have stoked up new levels of debt that could eventually plunge the world economy into a new financial crisis.  The BIS points out that the debt of households, non-financial corporations and governments has increased as a share of GDP in most large advanced and emerging countries since the crisis. In a sample of 18 countries – including the US, UK, China, India, Japan and the big Eurozone nations – this debt surged by $33 trillion between 2007 and 2012, up 20% of GDP.  Central banks now own a chunk of this new debt, equivalent to about 25% in advanced economies and 40% in emerging economies – from $10.4 trillion in 2007 to $20.5 trillion now.   If the value of these assets start to plunge as they have done this month, the central banks and governments will start to make significant losses.

The Keynesians are really angry at the BIS.  Krugman called those at the BIS “Dead-enders in Dark Suits”.  Krugman railed: “The Bank for International Settlements is the central bankers’ central bank; accordingly, it tends to exhibit the prejudices of the tribe in especially concentrated form. In particular, it has been relentless in making the case for higher interest rates, on the grounds that … well, the logic keeps changing. For a while it was warning about inflation and commodity prices; when the inflation failed to materialize and commodity prices slumped again, it simply changed the argument to one against bubbles, plus the quite amazing argument that central bankers must not keep rates low because that would take the fiscal pressure off governments. Who, exactly, elected these people to run the world?”

Krugman attacks the BIS idea that large private and public sector debt will inhibit economic recovery in a capitalist economy.  He argues that the evidence for this has been trashed after the scandal of the Reinhart and Rogoff study apparently proving that high debt restricts growth as having been exposed as full of errors and misleading analysis.  Actually, it is not quite as cut and dried as Krugman and other Keynesians make out (see my post Revising the two RRs, https://thenextrecession.wordpress.com/2013/04/17/revising-the-two-rrs/).  And contrary to what Krugman says, the BIS report is well aware of the RR controversy and thus cites other reports to back its case, if somewhat disingenuously.  But Krugman’s main argument is the one that he has promoted for some time: that more debt is not a problem when a capitalist economy is in a slump engendered by a ‘liquidity trap’.  And anyway, the debt has risen because austerity has cut economic growth.  What is needed is more QE, not less until the economy recovers through  increased demand from consumers and businesses.

Our own British Keynesian guru, Simon Wren-Lewis, in his blog takes a similar line on the BIS, (The intellectual bankruptcy of the austerians).  “It is both amusing and tragic to watch the advocates of fiscal austerity try and deal with the fact that the thin intellectual foundations for their approach have crumbled away, while at the same time the empirical evidence of their folly accumulates. … The BIS says reducing government debt is good for long term growth. But because there are long run benefits to reducing government debt, must it be the case that the sooner we start the better? No. Exercise is good for you, but you don’t start when you are down with the flu”.

The Keynesians are right that QE has not caused inflation in economies that are on their knees.  But the Austerians are right that QE has not enabled the major economies to recover either.  Instead all QE has done is support a stock market boom and stimulate yet another credit bubble that now looks likely to burst if the drug of QE is withdrawn.  The Keynesians answer that by saying that QE is not enough and what the economy needs alongside easy money is more fiscal spending, financed preferably by more borrowing.  The Austerians say that such borrowing is also a hostage to fortune and it will hold back recovery.  The Marxists would say that the Keynesians are wrong if they think QE and fiscal spending will restore sustained economic growth if there is not a recovery in profitability.  And the Austerians are wrong if they think cutting government spending, particularly government investment is going to help.  Relying on the free market has been a hopeless failure too.
(see my posts, https://thenextrecession.wordpress.com/2012/06/13/keynes-the-profits-equation-and-the-marxist-multiplier/ and https://thenextrecession.wordpress.com/2013/01/13/multiplying-multipliers/ and https://thenextrecession.wordpress.com/2012/09/30/can-austerity-work/).

The reality is that, although the business sectors in many major capitalist economies are flush with cash, investment is not taking place, while consumers are saving or paying down debt rather than spending in the shops.   What is clear from the last month is that QE has failed.  As I have argued before, you can take horses to the water fount but you cannot make them drink (see my post, https://thenextrecession.wordpress.com/2013/03/04/you-cant-make-a-horse-drink-2/).

QE is based on the idea that if you throw money at banks they will lend. But banks only lend if the risk versus return profile is in their favour. At the moment, banks don’t want to lend, because their balance sheets are a mess.  QE is based on the idea that if you make borrowing ridiculously cheap for corporates (i.e. throw money at them) they will invest. But corporates only borrow to invest if the risk versus return profile is in their favour. At the moment they don’t want to invest, because the economic outlook is very uncertain and profitable investment opportunities look few. Instead, large companies prefer to speculate in the stock market or pay out dividends while borrowing is so cheap.  Small and medium-size businesses are much more dependent on bank lending, but they are living in a financial desert.

This is the problem with the plan of Japan’s government to introduce a massive QE programme of buying government and corporate debt with the aim of driving up inflation and getting the economy going
(see my posts, https://thenextrecession.wordpress.com/2013/04/05/kurodas-triple-whammy/
and https://thenextrecession.wordpress.com/2013/06/11/abenomics-a-keynesian-neoliberal/).

Ironically, those economists who support QE and easy money argue that it will not engender inflation as the BIS and the Austerians fear.  But if that is right, then Japan’s ‘Abenomics’ wont work!  As one economist put it: “Not one QE programme has ever generated significant inflation. Not one. In fact no central bank in history has ever succeeded in deliberately creating inflation. It’s magical thinking.  When banks aren’t lending and corporates aren’t borrowing to invest, QE does not affect the wider economy in any very helpful way: its effects if anything are contractionary, because of the hit to aggregate demand for some groups caused by the depression of interest rates on savings.”

Mainstream Keynesian, Brad de Long concluded: “that Bernanke’s monetary policy has failed to raise inflation demonstrates that Bernanke’s policies have failed.”  Yet de Long clings to the hope that this won’t be the case for Abenomics:  “I tend to say that they have failed because they were tried only half-heartedly, and confusedly. And if Abenomics succeeds, I will regard that as strongly confirmed.”

Some hope.

86 Responses to “The failure of QE”

  1. Mike Ballard Says:

    What QE does is cheapen the price of the national currency. Goods and services denominated in those currencies fall in price for buyers in foreign lands, if those buyers are buying in currencies which are not falling in price.

    Value, well, that’s another matter. Value can only be tweaked downward by increases in the productivity of labour which can only be achieved through the application of science and technology.

    Austerity for the working class can achieve downward pressure on the price of labour; but the value of labour power remains tied to the amount of socially necessary labour time it takes to produce skills. QE is smoke and mirrors. Starving the goose which lays the golden egg will save some money; but as the old wisdom goes, pennywise/pound foolish.

  2. Boffy Says:

    According to Marx, interest rates are a function of the demand for and supply of money-capital – note NOT Money as revenue. On that basis the low interest rates of the last 30 years are the consequence of an excess supply of money-capital over its demand. The supply of money-capital can only come from the production of surplus-value.

    In the early to mid-80’s, an explanation of that could be the slump, which caused a reduction in demand for capital. But, in the late 80’s, and after, it has clearly been caused by a massive rise in the amount of surplus value produced globally, and in the rate of profit. It has been manifest both in the rise of profits of global corporations, and the build up of huge money hoards on their balance sheets as well as the creation of large sovereign wealth funds in surplus producing economies.

    It clearly was not a result of a lack of demand for capital during the 90’s, when many of today’s surplus economies, like China were building up the productive capital that today enables them to be surplus economies. Nor was it the case during the first decade of this century. In that period global GDP doubled, and so did fixed capital formation. The global working-class increased in size by a third, with a 30% rise in the size of the global industrial working-class. One of the main causes of the rise in the rate of profit was a huge rise in productivity, brought about by the introduction of diverse new technologies developed as part of the previous Long Innovation Cycle. The same caused the value of capital to fall, and the rate of turnover of capital to rise.

    But, it also caused the value of this huge new mass of commodities to fall. To prevent the exchange value of those commodities also falling against money, central banks had to devalue money tokens, which they did through massive money printing. The combination of low interest rates caused by an excess supply of money-capital, and money printing, not all of which was absorbed by the huge increase in the production of goods and services – of all the goods and services produced in Man’s entire history, 25% were produced in the first ten years of this century, such has been the expansion of global capital – blew up asset price bubbles. Its not true as Keynesians have stated that the money printing did not cause inflation – it prevented massive deflation of the prices of goods and services, including means of production, and massively inflated the prices of property, bonds, shares, gold and other assets.

    It is the turn in the Long Wave Cycle from Spring to Summer around a year ago that explains the rise in interest rates, on which Central Banks actions only have ephemeral effects. That change of conjuncture means that the rate of profit will decline from here, as it has done in all previous cycles at this stage e.g. 1960’s. But, growth remains relatively robust during this stage, and that remains true globally. But, more capital has to be invested to produce a given return. We are seeing that in a range of companies and industries.

    The demand for capital rises to maintain growth, whilst the rate of profit falls. The supply of capital falls as the demand for capital rises, causing interest rates to rise. Central Banks can try to rig the market by setting whatever official rates they like and printing money. But, the effects can then only be short run, and they will under these conditions fuel inflation, causing bond markets to sell off further, and market rates to rise.

    What we have had over the last few years is typical of what Marx describes in Volume I of Capital as a financial crisis rather than an economic crisis. It has not been a crisis of profitability or overproduction. Monopolistic capitalist firms who plan their production have largely avoided a crisis of overproduction, precisely because they have turned their excess surplus value into money hoards rather than capital.

    In fact, a real financial crisis that cratered bubbled up prices of property, bonds, and shares would be a good thing. It would destroy fictitious capital, and enable real capital to flow more easily into productive activity. A massive falling property prices would certainly be good from that point, because for one thing it would reduce the Value of Valour-Power, and thereby facilitate a higher rate of profit. Actually, the same thing applies to Bonds and Shares, because, lower prices for these would mean that workers pensions contributions bought a larger quantity of them – pound cost averaging – whilst the lower prices would mean higher yields, and therefore higher annuity rates out of which to pay pensions.

    That means workers pension contributions could fall, again facilitating a rise in the rate of profit.

    On the back of the above, the crisis certainly in the UK and Europe has largely been one of a lack of demand rather than a crisis of overproduction, though its complicated by the relative decline of the west compared to the rise of Asia, Latin America and Africa. The lack of demand, was engineered by the austerity programmes introduced, which themselves were the consequence of bailing out the banks from collapse as a result of that financial crisis. The recent revelations of the discussions at Anglo-Irish Bank illustrate that. That is why the US has performed much better than the EU and UK.

  3. vallebaeza Says:

    Reblogueó esto en Econo Marx 21.

  4. S. Artesian Says:

    “What we have had over the last few years is typical of what Marx describes in Volume I of Capital as a financial crisis rather than an economic crisis. It has not been a crisis of profitability or overproduction. Monopolistic capitalist firms who plan their production have largely avoided a crisis of overproduction, precisely because they have turned their excess surplus value into money hoards rather than capital.”

    Really? All those auto plants closing, all those layoffs in steel, in the European Union that wasn’t due to the overproduction of capital? To declining profitability?

    GM’s, Chrysler’s bankruptcies….not overproduction? Not due to a a decline in profitability.

    The plunging of shipping rates, dry bulk, and particularly containers with laying up of 10% of tonnage, the adoption of slow steaming techniques, and the cancellation of orders which has done little to diminish the oversupply of tonnage– not overproduction?

    The lay-up of about 1/4 of US railroads’ freight car fleet at the trough of the recession– nothing to do with overproduction?

    Profitability has not yet returned to the 2007 level.

  5. duvinrouge Says:

    Boffy,

    Your explanation appears to me to be muddled due to a misunderstanding of the nature of money – commodity, token & credit.

    Let’s leave to one-side for the moment the argument about financialisation being a reaction to falling profit rates. I want to concentrate on the overproduction v lack of demand debate.

    Your argument appears to be that it’s the hoarding of money by large corporations that is the cause of a lack of effective demand & so the cause of the crisis. The solution then is for governments to step in & make up the shortfall. Presumably ‘animal spirits’ will then perk-up & the private sector will start investing again & the govts can then safely reverse their pump-priming.

    This is to forget that credit money isn’t realised value. Since the beginnings of fiat money & so financialisation, credit money, & so debt, has increased dramatically. (Perhaps someone can provide a chart showing the increase in debt in recent decades?) It is this increase in debt (credit money) that has resulted in people, corporations & govts, paying for things on credit, that is with credit money that doesn’t represent realised labour values. As a result aggregate prices exceed aggregate values. It is this that permits overproduction, the apprearance of excess supply of money-capital & inflates recorded profit rates.

    The current crisis is an attempt by the law of value to bring prices in line with values, hence the massive deleveraging. But because this means huge losses for the rich & finance-capital in particular, govts & central banks have created more money than has been deleveraged & moved some of the private debt onto the govt/central bank books. Overall debt has still been increasing, eventhough the economy is more or less flat-lining.

    Either QE has to stop & the law of value allowed to do it’s job, i.e. massive depression, or QE will eventually debase the world’s currencies.

    There’s little for capitalists to be optimistic about, as as class-consciousness slowly catches up with the material conditions, a lot for socialists to get excited about.

  6. GrahamB Says:

    “Just a couple of months ago, mainstream economic analysts were lauding the record high stock market prices as an indicator that the global capitalist economy was well on the way to recovery, thanks to the efforts of central bankers like Ben Bernanke at the US Federal Reserve in applying ‘unconventional’ monetary policy called quantitative easing (QE) to boost liquidity and keep interest rates near zero.”

    Not sure that was the consensus, excepting those that make money out of the stock market. I think most believed the markets were overpriced based on historic P/E ratio. The issue for most was how fall does it need to fall.

    China is quite different, a state capitalist government with the ability to clamp down on the shadow banking sector.

  7. Boffy Says:

    @Artesian.

    I didn’t say that there had not been overproduction at all, I said that the current crisis (i.e. the situation that exists now) in the US and Europe is more like the kind of financial crisis that Marx describes than a crisis of overproduction.

    I began by saying that one reason the supply of capital exceeded the demand back in the 1980’s was precisely the slump! Firms like GM, Ford, Delphi etc. for a long time lived off their balance sheet, as well as diversifying into financial capital themselves. But, there is a difference between the problems faced by individual firms such as these, in an economy that is itself relatively uncompetitive compared with say China, and a generalised crisis of overproduction, or lack of profitability!

    In fact, most of those closures etc. are things that should have happened back in the 1980’s or 90’s, but were able to be deferred. But, the fact remains looking at capital as a whole, profitability has risen, and so has the accumulation of capital.

    Another reason I should have mention for why the supply of capital has exceeded the demand is also that the nature of production has changed. A far greater proportion of value now arises from the contribution of complex labour relative to constant capital than previously. In other words, a tendency towards a lowering of the organic composition of capital. A good example is Apple. Relatively little of the value of Apple products stems from the constant capital used in their production. A large part stems from the value of the complex labour of the designers, computer programmers and so on who create them, and the components used in their production.

  8. S. Artesian Says:

    Boffy,

    IMO, the overproduction and the decline in profitability both precedes and determines the financial crisis.

    In fact, overproduction and declining profitability always precede and determine a financial crisis. If we’re going to site Marx, then we should consider what he says in his Grundrisse and in volume 3.

    Overproduction and the decline in the rate of profit preceded the dotcom bubble and the bursting of that bubble; overproduction and the decline in the rate of profit preceded the collapse in asset backed securities.

    I don’t even know what it means to talk about a “supply of capital” exceeding “the demand for capital” if that doesn’t mean overproduction.

    “Overproduction of capital never signifies anything other than the overproduction of the means of production as capital…” vol 3. (from memory, but I think I have it right)

    • GrahamB Says:

      Yes, US profitability started to fall in 2006, before the onset of the financial crisis. Similarly for the dotcom crisis.

      But there is a big difference if you compare long-term trends in the rate of profit: Falling from the mid-60s to 1982 (a crisis of profitability) but on an upward path since then.

      • Boffy Says:

        Graham,

        That’s quite right, and I’m not even sure that even US profitability necessarily fell after 2006. It depends how you calculate it, and most calculations of the Rate of profit are wrong, because most calculations of Output are wrong.

        Reading Volume II of Capital again recently demonstrated Marx’s disdain for Adam Smith’s equation of National Output with National Income, because as Marx points out, National Income comprises V+S, whereas national Output comprises C+V+S i.e. it includes all of the materials, wear and tear of fixed capital and so on, which amounts to a huge amount, but which is not shown in National Income data, which only shows incomes received from wages, taxes, rent, and interest.

        Most calculations of National Output accept Smith’s “Trinity Theory”, and Keynes’ General Theory is fundamentally based on the identity of National Output and National Income.

        Consequently, if you calculate the rate of profit based on National Income as opposed to National Output data, you miss the constant capital. What you end up with by deducting wages from National Income to arrive at the amount of profit or “property income”, and then dividing one by the other is not the rate of profit, but only the rate of surplus value.

        Moreover, most of these estimates take no account of changes in the rate of turnover of capital. I recently charted Doug Henwood’s data, and adjusted it for a cumulative increase in the rate of turnover of capital of 2% a year, in line with the long run average rise in productivity. The consequence is that compared with 1950, the real rate of profit so adjusted would today be 3 times what current estimates would have it as.

  9. Boffy Says:

    @ duvinrouge.

    Sorry, but its your understanding that is muddled. I said nothing about money hoarding being the cause of lack of demand! I said money hoarding arose because there was an excess supply of capital over the demand for capital.

    Given that Marx says that interest rates are determined by the interaction of that demand and supply those that argue that rates and volumes of profit haven’t risen have a problem. Apart from primary accumulation, which today could only account for small amounts of new capital, capital can only be produced by the accumulation of surplus value.

    Given that interest rates have continuously fallen for the last 30 years, it is clear then that the supply of capital has considerably exceeded the demand. Yet, its also a fact that in the first decade of this century there was considerable demand for capital, manifest in the doubling of GDP and of Fixed Capital Formation, and the fact that the global working class increased by about a third.

    If the demand for capital rose on this cale, and yet interest rates went to near zero, the supply of capital must have increased by even more, and the only source of that increased supply is higher levels of surplus value.

    Nor most certainly did I say anything about “falling profit rates”. I said the exact opposite! I only said that profit rates would be likely to fall from here.

    My argument was not that Governments should step in to make up a shortfall in aggregate demand, it was that Governments had created the current lack of demand, by stepping in with austerity programmes!

    The comment “As a result aggregate prices exceed aggregate values.” makes no sense in Marxist terms, because in the aggregate, values and prices are tautologically the same.

    As Marx sets out in Volume II of Capital the existence of bank money, fiat money and credit does not change the underlying relations and mass social exchange of commodities and capital, it only obscures it, and complicates it. You seem to not understand the difference between money-capital and money-revenue that Marx sets out in Volume II.

    The printing of money or creation of credit that you describe cannot create the “appearance of excess supply of money-capital” because it cannot create capital! Only, surplus value can create capital, and only a large increase in surplus value can create an excess supply of money-capital! If what you claim were true, the increased profits (in fact what you are describing is inflated money profits) would have had to be accompanied by generalised inflation i.e. companies would show inflated money profits because their commodities would sell at inflated money prices compared to the prices of the capital used to produce them. But, we have seen the exact opposite!

    The massive rise in productivity brought a huge increase in the volume of use values produced, and with it a reduction in the value of those use values. That is why around the globe, despite massive money printing to reduce the value of money tokens, the prices of commodities have risen very little! In fact, the main price rises have been in the cost of constant capital i.e. the rise in oil prices, metal prices and so on, thereby increasing the costs of industrial producers. Yet consumer goods prices have changed little. The very opposite of what would be required by your thesis.

    The stuff about the Law of Value is equally confused, and makes it sound like the Law of Value is itself some conscious actor. In fact, as I said, if QE stops, and financial markets crash, there is every reason why that will not have any long term deleterious effect on the real economy. The one thing you get right is that its main use over the last few years has been to protect one section of the capitalist class – money capital – at the expense of productive capital.

    Ending QE and a financial crash that ends the period where simply gambling on financial assets seemed an efficient way of making money, will open the door for money-revenue sloshing around in the circuit of money to be transformed into money-capital and employed in productive activity.

    Finally, if on the contrary, things turn pear shaped and there really is some kind of large scale economic catastrophe, far from that being something workers or socialists should get excited about it is something thy should fear, because, as in the past the most likely result is a large rise in the forces of reaction.

    • S. Artesian Says:

      Just saw this:”In fact, as I said, if QE stops, and financial markets crash, there is every reason why that will not have any long term deleterious effect on the real economy.”

      Almost hilarious. That was the argument made in 2007, 2008….until Lehman Bros. was allowed to croak and then all those saying “who cares? won’t have any impact on the real economy” stopped laughing…. because… because behind the Lehman Bros. collapse was the collapse in profitability in major industries, the slowing in world trade (which preceded the collapse).

      If QE2 ends, and if the financial markets collapse it will be BECAUSE of the real economy, because the recovery in profitability has stalled and is in the process of turning down again.

      • Boffy Says:

        Obviously I disagree. I have no doubt as happened with the Financial Meltdown in 2008, such a serious financial crisis would have an effect on the real economy. As Marx puts it,

        ““The monetary crisis referred to in the text, being a phase of every crisis, must be clearly distinguished from that particular form of crisis, which also is called a monetary crisis, but which may be produced by itself as an independent phenomenon in such a way as to react only indirectly on industry and commerce. The pivot of these crises is to be found in moneyed capital, and their sphere of direct action is therefore the sphere of that capital, viz., banking, the stock exchange, and finance.” (Capital I, Chapter 3, note 1 p 137)

        It will have a consequence because it will damage confidence, cause consumers to draw back, and businesses to hold back on investments. But, look at Iceland, which let the banks go bust rather than bail them out. In fact, its economy recovered much more quickly than have those economies that continued to bail out the banks.

        Look at what happened with the Asian economies that suffered in the late 90’s from a similar financial crisis. It did not stop their actual economies powering ahead in the following years. As I said, no “long-term” deleterious effect on the real economy. On the contrary, there is every reason to believe that such a financial crisis will benefit the real economy and productive capital in the longer term.

      • S. Artesian Says:

        Uh… yeah, the Asian crisis did have a profound impact on the economies of South Korea, Taiwan, Indonesia. Perhaps you forgot about the riots and the attacks on the Chinese in Indonesia, the massive layoffs in South Korea, the disappearance of rice in many markets, the exacerbation of poverty in the Philippines. Did the “countries” recover? Wrong question. Did capital recover? Sure did. Have wage rates, and increases in wage rates recovered; has improvement in social conditions of the workers and poor improved? You tell me.

        Your argument can be, and is made, every time the capitalist economy gets into one of its “predicaments.” You might as well argue that 1929 had a salutary impact on capitalism, a “cleansing” a “cathartic effect.” Hey, wasn’t exactly that argument made by somebody at the Fed in 1929?

        In essence all you are arguing is the old bourgeois adage about how the business cycle creates the basis for future advances of…..capital.

        If that’s your goal……..well good for you, but please do us the favor and quit citing Marx who acknowledges the possibility of a “separate” financial crisis in the abstract as the authority for what is definitely NOT a separate financial crisis in the concrete.

        The pivot of the current situation is not in the stock-exchange and in the banks. It’s in the reproduction of capital.

      • Boffy Says:

        @ Artesian 7.11

        I think you need to make your mind up whether you are claiming that it is capitalism in crisis because it can’t make profits or the working-class that is in crisis, because Capital can!!!

        If CAPITAL recovered in those economies that undermines your claim that a financial crisis is bad for capital. Much of Capitalism’s dynamic period of growth in Britain in the 19th Century was accompanied by mass unemployment and low, even falling wages for workers. It doesn’t make it a crisis for Capitalism, and certainly not one resulting from falling profitability.

        But, actually my understanding is that today real wages in general in most of those economies are rising. Certainly that is the case in China, which is one reason Capital from these economies is migrating to Vietnam, and Africa in search of lower paid labour-power.

        “In essence all you are arguing is the old bourgeois adage about how the business cycle creates the basis for future advances of…..capital.”

        Actually, one of the first people to make that argument was Marx! But, I have not made that argument, because my argument is that the current levels of fictititious capital and speculation are diverting resources from being invested in productive activity. I am not at all arguing that real productive capital needs to be destroyed. Quite the opposite, I am arguing that resources currently going into speculation need to be freed up to move into a restructuring of western economies, into areas where they can have some hope of being globally competitive i.e. an expansion of knowledge based, and other high value production.

        An obstacle to that is also actually the austerity measures being undertaken in Europe that create a climate of fear and instability, and the threat of such policies in the US emanating from the Tea Party and its acolytes.

        You also really need to make your mind up as to whether you think the flow of crises is from the real economy to the financial markets or vice versa. So far, you have mostly argued the former, but your argument in relation to 1929 involves you in making the opposite case. The 1929 Wall Street Crash did not cause the Depression but was indeed a reflection of an actual economic crisis – one that had been going on in Europe from before WWI and throughout the 1920’s.

        So, whether outside those conditions the Crash would have been cathartic is moot. In fact, the 2000 Tech Wreck probably was cathartic, in the same way that the 19th Century Railway mania in Britain was cathartic, in that they cleared out a lot of dead wood and set the stage for the healthy businesses to develop.

        As for Marx quoting a financial crisis in the Abstract, that is not at all the case. He was making the point precisely for the reason of pointing out the difference between very real crises he had analysed. In fact, what he was referring to was the effects of the 1844 Bank Act in causing a credit crunch.

        If the pivot is in the reproduction of capital then we would have to say there is no crisis, because Capital globally seems to be reproducing, and even expanding itself just fine.

      • S. Artesian Says:

        I’m not a crisis theoretician.

        What you offer– with this notion that “fictitious capital” is thwarting the good healthy productive capital is nothing but the same old same old we’ve heard from social democrats, populists, reformers etc. etc for a hundred years.

        We get this periodically in the form of the “speculators are the problem,” or “bankers are not providing credit to ‘productive enterprises’ thereby choking off the real economy.”

        Wasn’t accurate then, and isn’t accurate now.

        My argument such that is is that the accumulation of capital, the accumulation of the means of production as capital requires continues reduction in the proportion of labor that is expropriated in production. The more capital exchanges of itself with wage labor, the proportionately less it exchanges of itself. This is the real overproduction of capital, as opposed to those explanations of overproduction that confuse it, obscure it with underconsumption.

        Profitability declines. There is, in and of itself, no decline or shrinkage in the rate of profit that signifies the “end” the “ultimate crisis” of capital. So as was the case with the Asian tigers, of course capital recovers. At the same time, there is no decline in the rate of profit that does not require the bourgeoisie to take some actions to offset that decline– i.e layoffs, plant closings, or even more overproduction to glom a drib more of profit by throwing another ton of surplus value into the market.

        What I am arguing is that the distinction between the “financial economy” and the “real economy” is a specious one, just as the distinction between “fictitious capital” and “productive capital” is a false distinction, one designed to preserve the myth of a “good capital.” It’s not that “fictitious capital” does not exist; it’s that all capital becomes fictitious when it can realize enough profit quickly enough.

        The notes that back up the purchase of equipment like locomotives, or the leases used to “float” aircraft are no more and no less fictitious capital when traded in secondary markets than the planes or locomotives themselves are when they are either plying their routes…. or sequestered in the desert, or in storage yards.

        What counts is how quickly the value of the capital can be preserved and transferred through the further expansion of value production.

        The issue isn’t if a “crash is cathartic.” The issue is if the crash represents the inherent, essential process of capitalist reproduction, and if the crash is or is not a manifestation of a conflict between the labor process and the valuation process? Is the obstacle to capitalist accumulation the accumulation of capital? And if so does this represent a conflict between the means of production and the relations of production; between the productivity of labor and specific condition of that labor; between social labor and private property?

        What you want or don’t want for “productive capital’ has nothing to do with what the bourgeoisie will and are forced to do to restore profitability.

        The current contraction is a bit more severe than its forerunners since WW2– Greece’s economy is worse off now than it was in the Great Depression. Youth unemployment is 25% in the EU; and the proportion of the population with full time employment in the US is at historic lows.

        This is not the result of “fictitious capital,” no more than the 1992-1998 upsurge was a result of fictitious capital. Capital’s solution will be what it always must be; which is forced liquidation of the productive assets underlying the burden of debt.

      • Boffy Says:

        As I said, one of the first people to argue that Capitalist crises are “cathartic” that it is the means by which the contradictions built up in the system are resolved, and the basis is created for the system to renew on an upward path was Marx. It was also Marx who coined the distinction between real capital and fictitious capital. He was also well aware that at times Capital can be sucked into this kind of speculative activity as opposed to productive investment.

        At the time bourgeois economists denied that such crises were inevitable or necessary. The Neo-Classical School continued to argue that left to its own devices there should be no such crises. The Austrians argue that there is a business cycle, but that crises are the result of external interference by the State. The only people I know who like you deny that crises are a means by which capital resolves its crises and are thereby cathartic, and who seek to avoid them, as you suggest are the Keynesians.

        But, the point is that I have not argued that investment in fictitious capital is choking off investment in productive activity. Firstly, if we take capital as a whole the picture you present is false. There has been no fall in the rate of profit over the last 30 years. It has been rising, even in the US. Globally, it has been rising even faster, and even in the US for those sectors of the economy that represent its future rather than its past, it has been growing faster too.

        Nor has capital had any problem using this vast amount of surplus value to reproduce and expand. In the first ten years of this century the global working class increased in size by 30%, around 500 million workers! Marx’s definition of capital is a social relation between capital and wage labour. His definition of an expansion of capital is an expansion of that relation. By any token during that period, it has expanded massively and continues to do so, as new workers are created in Africa and throughout the globe.

        But, that expansion of capital was reflected in the vast increase in the quantity of use values produced during that period, and the fall in the value of those use values as productivity increased massively. That massive rise in productivity also drove the increase in the rate of turnover of capital, the reduction in the value of capital, and the huge rise in the rate of profit.

        The problem in the US, UK and elsewhere was not that capital went into fictitious capital rather than productive investment, as such, but that it was increasingly uncompetitive against these new rising capitals, just as Britain became at the end of the 19th Century. It was that lack of competitiveness, not any over accumulation of capital overall that led to the closure of various plant and industries.

        The problem in the UK and UK was exacerbated by the fact that the governments in those countries were tied politically to the interests of the small capitalists, and pursued a strategy based on high debt and low wages. Compare that with the situation in Germany, where the government followed a social democratic strategy based on the historic compromise between the workers and big capital. It thereby restructured its economy towards high value production, and until recently was the world’s largest exporter. Even in the last few years Germany has achieved high rates of growth, reflecting the profitability and competitiveness of its capital.

        Its not true that the current contraction is worse than any since WWII. The global economy continues to grow! Even the US is growing, and probably would have grown faster had it not been for the actions of the Tea Party and Republicans. The economies that have fallen sharply and failed to recover are those where Governments have deliberately inflicted that on them by introducing austerity. And, as the “revelations” over Anglo Irish Bank reveal, that austerity has been driven not by any underlying problem or need to do so in the real economy, but directly as a result of bailing out the banks, i.e. of dealing with the problem of the build up of huge amounts of fictitious capital!

        Pointing to the crisis in Greece actually undermines your argument. Its the kind of thing people always do to try to prove that what amount to relatively small problems are in some way representative of capital as a whole. Greece’s problems most clearly arose as a result of the build up of fictitious capital fuelled by cheap and available credit. It is a crisis more over that was then forced upon the economy by political decisions in Europe, particularly by Germany, when other solutions were and are available to resolve it that would not have caused such a crisis to extend into the real economy. A worse example is Cyprus.

        But, Greece is an insignificant economy even within Europe. To put it in the proper perspective of how much this represents a crisis of capital in general, China is growing (i.e. capital in China is growing) at such a pace, that every three months it creates the equivalent of an extra Greek economy, just from its growth!!!

  10. duvinrouge Says:

    Boffy,

    You’re like one of those Christian fundamentalist who’s reciting from the bible but hasn’t captured the spirit or context of the quote.

    There’s short-run & long-run. In the long-run the pressure will be for aggregate prices to equal values. But in the short-run they can get out of line. This is overproduction as a result of excessive credit money.

    It is the excessive credit money that allows excessive capital to be accumulated & excessive commodities sold. But excessive credit is excessive debt & eventually leads to a credit crunch, financial panic & economic slump.

    And I haven’t even tackled the argument about the rise in financialisation being a reaction to the falling rate of profit.

    Try & grasp the simplyfying assumptions inherent in Capital.

  11. Boffy Says:

    @Artesian,

    There was certainly overproduction in the 1980’s. But, from the mid 1980’s the rate of profit began to rise as it has done in every other Long Wave at that stage.

    See, for example, The Chart here

    By the time the Financial meltdown occurred in 2008, profit rates and volumes were already higher not lower, and far from there being over production, demand was rising rapidly throughout the globe, as the global working class rose by around a third.

    I should more properly have said the supply of money-capital exceeds the demand for money-capital. Marx in Volume II demonstrates quite clearly how an excess of money-capital can arise without there being any over production of capital. Marx cites the absurd example, as he puts it, of a situation where all capitals have to exchange their output with a gold producer.

    Its absurd he says, but demonstrates the point that all capitals can simultaneously realise their surplus value in the form of a money hoard. The point is that capitals can realise their surplus value in such a money hoard rather than having to convert it into productive capital. In fact, it does not constitute an over supply of capital, because as Marx points out money capital only exists ephemerally. It is only money-capital if it is actually designated to buy productive-capital. If not, it becomes merely a hoard, merely potential capital, and consequently not an overproduction of capital at all.

    An overproduction of capital only arises if it is actually used to purchase productive capital, but does so under conditions whereby so much labour-power has been employed that no more can be employed so as to produce absolute or relative surplus value, or alternatively where it has produced commodity-capital that cannot be sold at prices that reproduce the capital consumed.

  12. Boffy Says:

    @Duvinrouge

    “And I haven’t even tackled the argument about the rise in financialisation being a reaction to the falling rate of profit.”

    Well that’s good then, especially as I’d pointed out that I never said anything about financialisation being caused by falling rates of profit!

    As when I’ve tried to discuss with you in the past most of what you say is very confused. For example the identity of prices and values, which you then jumble together with overproduction.

  13. S. Artesian Says:

    There is a small upturn in the rate of profit in 1986 which pretty much ends in 1988-89, giving way to the recession that ended in 1992. There is then a more substantial recovery in the rate of profit through 1997-1998 (in the US) which fades into the recession of 2001.

    At no point to either of these recoveries does the rate of profit exceed the post WW2 peak in the US achieved around 1970.

    As for 2006– I’m definitely sure the rate of profit declined. I did the numbers, as I believe Michael has also done, as Kliman has done, as many others have done. .

    Money can function as capital; as can every other commodity; as must every commodity when and if the system is about the accumulation of value.

    Of course capitalists’ realize their surplus value as money– that’s the whole point isn’t it? But surplus value has to realize itself as capital, as value expanding value.

    As for this: “I said money hoarding arose because there was an excess supply of capital over the demand for capital.”

    The question isn’t supply exceeding demand; the question is what determines the relation, proportions, or disproportions of supply and demand. And that is not money; credit-money; etc. etc.

    That is the profitability of production; the relation of profit, to the expropriated value to the already accumulated value. To say that US corporations have increased their cash, and cash type assets, by some 30-40% in the last 4 years because “there’s an excess of capital supply in relation to capital demand” doesn’t tell us anything about the social condition of capital and its ability to maintain or expand value production/accumulation. Does it?

    • michael roberts Says:

      Just a quick comment on this interesting debate. Yes, the US rate of profit turned down from end 2005 and indeed the mass of profit began to contract a year later. And the rate of profit on my measures in 2006 was still below the previous peak of 1997 – at least on my measures and those of several others. On each occasion that the rate of profit turns down, it is followed usually by a fall in the mass of profit and an economic recession. This sequence applies to the UK as well as the US.

      If we look at the UK economy, since 1963 there have been four major economic recessions or slumps: 1974-5, 1980-2, 1990-2 and 2008-9. In each recession, the rate of profit peaked and started to decline at least one year before the slump began. And each recession was accompanied by (or coincided with) a fall in the mass of profit in the following years.

      If we look at the US economy, there were five recessions or slumps after 1963: 1974-5, 1980-2, 1990-2, 2001 and 2008-9. In each case, the rate of profit peaked at least one year before, but on most occasions up to three years before. And on each occasion (with the exception of the very mild 2001 recession), a fall in the mass of profit coincided with the slump, with the biggest fall (over 7%) in the Great Recession.

      I’m publishing a paper on these data fairly soon.

      • Boffy Says:

        Michael,

        That’s interesting, but not that surprising. If we assume a business cycle, then we would presumably expect that a slow down in orders might cause a slow down in planned investment, which would result in the “accelerator effect” hitting the profits of Department 1 companies. I believe there is a short run 3 year cycle tied to technology, e.g. many large companies all renew their PC’s and software every three years to coincide with new releases of Windows, Office etc. and the availability of more powerful machines.

        You would expect that to have a significant effect on the profits of companies supplying the hardware and software, in the way Marx describes in Volume II of capital where he describes such under consumption by Department 2, during periods when fixed capital is not renewed on the same scale.

        But, there is a difference surely between these short run movements of the rate and volume of profit – given the masses of fixed capital any change in the rate of profit must affect the volume of profit – themselves reflecting the business cycle, and long run trends in the rate of profit related to structural changes in the organic composition.

    • Boffy Says:

      Between 1984 and the late 90’s the “rate of profit” is shown as rising from just over 4% to almost 8% or about a doubling in the rate of profit. It falls with the Asian Currency Crisis, and Rouble Crisis, and most notably the Tech Wreck, but that seems to confirm Marx’s view of a financial crisis emanating in the financial markets that then affects indirectly the real economy rather than vice versa.

      But, it then rises sharply again. However, you cut it this is a rising not a falling rate of profit. Whether it is higher or lower than any previous peak is irrelevant. It is rising from where it was in the 1980’s, so arguments that claim to explain current economic conditions on the basis of a falling rate of profit are based on a false assumption.

      There were once 2 million miners in Britain, and today its a few thousand. But, if new mines are opened and more miners employed, that will still represent an increase in the number of miners even if its never going to get anywhere near the old 2 million figure. Anyone who claimed that a current trend of falling levels of lung disease were then based upon a falling rather than rising number of miners would be looked at rather oddly!

      But, as I’ve said, I dispute most of these estimates of the rate of profit, because they are really estimates of the rate of surplus value. Consequently, they miss huge changes in the value of constant capital that have arisen in the last 20 years due to the introduction of new technology, and the change in the structure of production away from old heavy industry towards knowledge based service production, as well as into new forms of physical commodities that use much less material than in the past.

      Secondly, if we take Henwood’s estimate of the rate of profit (before tax) in 1950 its around 8%, and today slightly less than that. However, if you assume a 2% cumulative rise in the rate of turnover of capital since 1950, the real rate of profit would in fact be 3 times that figure, so that today’s rate of profit would be around 24%, well ahead of any of the figures for the previous peaks of profits!

      In fact, my guess is that given the tremendous shortening of the working period and the circulation period for capital resulting from the introduction of new technology in production, and the epochal transformation in communications brought about by the Internet, my guess is that the 2% cumulative figure for the increase in the rate of turnover of capital would be a significant understatement of the rise in the last 10-20 years, so that the real rate of profit today would be much higher still than that figure.

      “Of course capitalists’ realize their surplus value as money– that’s the whole point isn’t it? But surplus value has to realize itself as capital, as value expanding value.”

      But, surplus value does NOT have to realise itself as capital. Marx makes clear in Volume II of Capital discussing precisely this point that Capitalists have to live, and simple reproduction remains at the heart of expanded reproduction. Marx makes absolutely clear that simple reproduction, even as part of expanded reproduction means that M is continually converted into C, but what part of m is converted into money-capital or is used by capitalists as revenue is a completely different matter!

      Given that the rises in asset prices meant that large capital gains could be achieved in financial markets, it is no wonder that capitalists would be happy to utilise large amounts of surplus value as revenue rather than capital, and use it to speculate within those markets.

      Moreover, the US, as I said before is a relatively declining economy compared to China etc. referring to a falling level of profit for an uncompetitive GM as signifying a general fall in the rate of profit is rather like someone referring to the problems of buggy whip producers, whilst not noticing the massive growth of automobile production!

      As for the demand/supply of money-capital, of course its not just in the last few years that that accumulation of money hoards has occurred. And, of course, the place where the biggest money hoards have been accumulated is China, which has also had the greatest accumulation and expansion of capital too! But, if we want to look at things on that basis, in the US, we might want to look at those companies that have accumulated the largest money hoards there. They are companies like Apple with around $140 billion. It was until recently also the world’s most valuable company, and seems to have been accumulating capital on a significant scale too!

    • GrahamB Says:

      “At no point to either of these recoveries does the rate of profit exceed the post WW2 peak in the US achieved around 1970.”

      Even if one accepts that, so what? K2 is lower than Everest, it doesn’t mean K2’s summit is not high. The important point is the direction of movement in the rate of profit.

  14. S. Artesian Says:

    But, surplus value does NOT have to realise itself as capital.
    ___________

    Yes it does, that’s the whole point of expanded reproduction, of accumulation, of value reproduction. Of course, part of surplus value gets consumed by capitalists.

    Does capital require expansion? Everything I’ve ever read by Marx, and that includes vols 2 &3, his Grundrisse, and the Economic Manuscripts 1857-1864 are explicit in declaring this and in fact defining capital as “the self-expansion” of value.

    • Boffy Says:

      No it doesn’t as Marx makes clear, and as in fact you admit in your comment above. If surplus value is consumed as revenue by Capital then it is NOT turned into Capital. If Capitalists choose to use surplus value to speculate in financial markets in search of capital gain they use that surplus value not as capital but as money revenue. That portion of surplus value is also not turned into capital!

      Does Capital expand in value as a result of the process of production? Absolutely, as Marx sets out at length in Volume II of Capital, and does so even under conditions of simple reproduction i.e. even where all surplus value is consumed unproductively by the capitalist, and not one jot of it is reinvested productively! If it didn’t it would have been capital. Its not the addition of more capital that creates the increase in the value of the capital, any fool could achieve that. The self-expansion of value that constitutes capital is the production of the surplus value, which occurs in the production process long before any question arises about what will happen to that surplus value!

      Moreover, although Capital is also led to accumulate that surplus value, modern monopoly Capital does not do so blindly. Furthermore, there is a difference in this modern form of Capital as Marx discusses compared with primitive capitalism. Today, the capitalists themselves are reduced to the role of money-capitalists, the function they once occupied in production now undertaken by professional managers. Capital may need to accumulate or die, but no such compulsion exists for the individual capitalist who can allocate their money either as productive capital, as speculative capital, or simply to meet their latest consumption needs.

  15. S. Artesian Says:

    Come on, Boffy, because some profit gets consumed by capitalists does not change the imperative for capital to expand.

    • Boffy Says:

      The necessity for capital to expand is the necessity for it to produce surplus value, not necessarily for it to accumulate that surplus value, when it has done so. There is its true for Capital the need, in its early stages to have to accumulate or die, which drives the process of concentration and centralisation, but if you check Volume I, of Capital, you will find that even in that process, Marx describes the way that surplus value so created, is often used not to accumulate the given Capital, but that bit becomes fragmented, and invested in alternative businesses and industries where the potential profit is greater.

      Marx there also talks about the way, once the capitalists have become more entrenched, they devote a greater part of the surplus value to unproductive consumption, to the chagrin of those like Malthus, who argued that they should leave the unproductive consumption to the aristocracy and other leisure classes.

      But, we are not talking now about early 19th century capitalism based on a myriad of small firms, but about 21st Century Monopoly Capitalism based upon the domination of huge firms that plan their production for years ahead. In fact, more than a hundred years ago, Engels pointed out in his Critique of the Erfurt Programme that the development of these large trusts had brought to an end that period of market dominated capitalism, and the “planlessness” that characterised it!

      Moreover, Marx and Engels talked about the conversion of the capitalists themselves into mere “coupon clippers”, who rather like malthus’ leisured classes were able to concern themselves with “total return” on their money, rather than the need to accumulate or die, which may or may not determine the actions of modern capital as opposed to modern capitalists.

      Check out what Marx says in Volume II of capital bout the build up of money hoards for things such as the replacement of fixed capital, or the accumulation of money-hoards from surplus value even by those early capitalist firms. Money hoards as depreciation funds can exist for years until the fixed capital has to be replaced. Money hoards of surplus value that is not yet sufficient in size to be productively invested can accumulate for much longer.

      Marx had no such mechanistic theory that surplus value had to be wholly or immediately invested as new capital!

      • GrahamB Says:

        “Marx had no such mechanistic theory that surplus value had to be wholly or immediately invested as new capital!”.

        I think that is right and an important point when we see how capitalists are behaving at the moment – money hoarding rather than investing. The raison-d’etre for capitalists is first and foremost the rate of profit. The need for capital to expand is the typical or long-run imperative when capitalists are competing to reduce the unit cost of output by increasing productivity through capital investment – the dominance of relative surplus value through productivity.

        But competition currently takes a different form – not to be the first and best to sink investment but to be the first and best at cost cutting. Incidentally, I think cutting real wages and speed-ups also increase relative surplus value, with absolute value only being increased by lengthening the working day.

        I don’t think it can continue indefinitely but it’s been a strong trend since 2008 and is perfectly legitimate for capitalism and it’s “well being”. To emphasis capitalism as the self-expansion of capital *at all times*, to accumulate (a vague term in it’s usage), is to too tightly bind profit and investment. Keynesians are wrong in the causality investment to profit, and so to are those who believe that profit must lead to investment (and that relatively low investment automatically implies that the rate of profit must be too low).

      • Boffy Says:

        Graham,

        Quite right. I used to run my own business many years ago, and there were lots of times when I was making large profits, but saw no compulsion whatsoever to reinvest it. On the contrary, and ironically, when you are have lots of work, and are making more profit, you often do not have time to be distracted with bringing about some new investment.

        Again, frequently, the time to consider additional investment is when you have the time to think about it and introduce it. Moreover, its at that time that some new investment might be seen as a means of reducing costs to boost profits, or be able to undertake work that currently can’t be taken on.

        I suspect that one reason the rate of profit will decline from here is precisely for that reason. More investment will be required to try to sustain revenue, as productivity falls, and other costs rise.

  16. S. Artesian Says:

    Let me put some things in order, maybe.

    First some point of historical accuracy. Boffo, argues that Marx has no “mechanistic” theory regarding a compulsion of capitalism to self-expand, to seek the self-expansion value. I would invite Boffo and any other so inclined to go to the Marxist Internet Archive, click on the image of Marx and when the search screen comes up, type in “self-expansion of value” in the field that says “all of these words.” In the 10+ pages of urls that follow note the number referring to the use of that term in Boffo’s favorite: Capital, volume 2. It’s not a mechanistic theory to be sure; capital is nothing if not contradictory, and cyclical, but the contradictions are driven by, all have the same source, in the need to expropriate wage-labor as value, and accumulate that value. Kind of why Marx says “Accumulate, accumulate! That is Moses and the prophets.” — volume 1.

    2. Boffo argues that generalized overproduction is not the cause of the most recent contraction, claiming:

    “The massive rise in productivity brought a huge increase in the volume of use values produced, and with it a reduction in the value of those use values. That is why around the globe, despite massive money printing to reduce the value of money tokens, the prices of commodities have risen very little! In fact, the main price rises have been in the cost of constant capital i.e. the rise in oil prices, metal prices and so on, thereby increasing the costs of industrial producers. ”

    Uh… not to put too fine a point on it, but THAT IS OVERPRODUCTION.

    3. I think Boffo misapprehends overproduction as underconsumption and then conflates both under an “effective demand” theory, as when he argues that he is for governments stepping in to stimulate demand, rather than impose austerity. That, the stimulation, is the “rational” thing to do from the viewpoint of productive capital.

    4. However, Boffo also argues that the real economy has not been seriously impacted by the financial meltdown. If so, then why the need for “demand stimulation.” Boffo gives us the answer in his discussion of crisis– the cathartic impact of crisis. “Confidence” as every political economist and carnival barker would be so restored.

    5. At the same time as he is arguing for restoring confidence through demand stimulation, Boffo argues that a “real financial crisis” would be cathartic and help clear the deadwood, which is most clearly represented by overvalued, but not performing real estate based assets. Well let’s look at that: such non-performing assets held by banks in the European Union have recently been estimated by Wolfgang Munchau in the Financial Times at about euro 2 trillion. So if that 2 trillion is allowed to meltdown in say a super Lehmans Bros event, cathartic you think? Helping confidence? Stimulating demand? Unleashing productive investment?

    6. Boffo argues,explicitly, that fictitious capital has diverted resources away from productive investment. How is it possible to claim that after arguing as he does in item 2 above? How is it possible to fault “fictitious capital” when Boffo acknowledges the cash hoards and the massive accumulations of productive capital across the globe?

    7. How is it possible to argue for “productive investment” is necessary when “the rate of profit” has “risen for the last 30 years?” Why is there a need for productive investment when capital, according to Boffo, has no compulsion to the expansion of value, and can quite happily realize itself in simple reproduction, and in the consumption of revenues by the capitalists? As an element for and of social welfare? If capital has no compulsion to accumulate value, it certainly has NO NEED to augment social welfare. That much certainly must be clear even to Boffo.

    8. Boffo then argues that the classic, orthodox Marxist argument are a bit outmoded by monopoly capital; that such monopolies have brought an end to “market-dominated” capitalism.

    9. At the same time, Boffo is wont to argue that the “West” has lost its competitiveness to the emerging capitalist countries. How is that possible, if the market does not dominate, if the era of competitiveness is over; if the mechanism that competition is for the realization, allocation [NOT PRODUCTION] of profits is not operative. Trying to have it both ways is NOT Marx’s dialectic, his exploration of the immanent critique of capital.

    10. Boffo says the most recent recession is not the most severe and protracted since WW2. He’s wrong. Simply wrong. That recession saw the first absolute drop in the value of world trade in 60 years.

    11. He then identifies Greece as an irrelevancy

    “But, Greece is an insignificant economy even within Europe. To put it in the proper perspective of how much this represents a crisis of capital in general, China is growing (i.e. capital in China is growing) at such a pace, that every three months it creates the equivalent of an extra Greek economy, just from its growth!!!”

    Except Greece isn’t insignificant. Notice how the bourgeoisie reacted. Notice what they’ve done over such trivialities as euro 140 billion in debt? Notice that Greece isn’t isolated but is part and parcel of the EU– like Spain (insignificant?) Italy (bigger than Spain, therefore more insignificant?) Portugal, Ireland, the UK, France, Belgium, Ukraine, Croatia.

    What’s significant about Greece is precisely what’s significant about capitalism– and that is class struggle.

    12. Finally, I’d like to conclude by referring once again to the salutary impacts financial meltdowns, completely divorced from the real economy somehow are able to infuse into the real economy. Boffo talks about the salutary effect of the 2001 recession on global capitalism, clearing the deadwood, allowing it to resume growth…. Uh…the basis for that growth was 1) draconian controls on both wage levels and capital investment, until 2005 when investment resumes, wages (in the advanced countries) start creep up, and surprise, surprise, the ROP turns down 2) that “growth” was accompanied by the massive securitization of assets, the debt, that Boffo denounces as “diverting resources” from productive investment 3) the insignificant irritation called the invasion of Iraq 4) the gutting, more and less, of various economies with concomitant declines in living standards (Argentina comes to mind) 5) and other various and sundry manifestations the happy, happy political economy.

    • Boffy Says:

      The fact that S. Artesian descends to calling me “Boffo” throughout his reply probably is an indication of the direction his comments are heading. I’ll ignore that and continue to respond to the arguments as presented.

      “Boffo, argues that Marx has no “mechanistic” theory regarding a compulsion of capitalism to self-expand, to seek the self-expansion value.”

      I said no such thing. Artesian confuses the self-expansion of value with accumulation, despite the fact I explained it to him/her. If I have £1,000 and use it to buy £800 of constant capital and £200 of variable capital, then with a 100% rate of surplus value, in the process M-C(MP+L)…P…C’-M’, the capital will have self-expanded, validating itself as capital. It has self-expanded as Marx points out at the stage C’. If I take the £200 of surplus value, the m part of M’, and blow it on the horses, but use the M part of M’ to reproduce the means of production and labour-power, then this productive-capital will once more act as capital, provided the conditions remain the same, and will once more produce £200 of surplus value. The result is that an amount of value of £1,000 will once again have self-expanded to £1200.

      Suppose, I have £1,000 and buy £800 of means of production and £200 of labour-power. But, at the end of the production process a commodity with a value of only £1,000 is produced. The original value has not self-expanded, the money expended was not money-capital, the means of production were not constant capital, and the labour-power was not variable capital, because capital is only capital if it validates itself in the production process by self-expanding.

      Suppose, I have a further £1,000, which I now use to buy additional means of production and labour-power, so that double the amount is now employed. Is this a self-expansion of value as S. Artesian seems to believe? Absolutely, not, as Marx makes clear. Nothing has “self-expanded” here. As Marx points out any fool can increase their “capital” if they simply throw more of it into the pot! If the same conditions apply, this £2,000 will expand no more than the £1,000!

      “Uh… not to put too fine a point on it, but THAT IS OVERPRODUCTION.”

      Er, not to put too fine a point on it, but no it clearly is not! It would only be overproduction if either a) commodity-capital were seen to be over produced by large quantities of sitting on global markets unable to be sold (there aren’t, in fact quite the opposite), or b) productive-capital was over-accumulated such that no further labour-power could be employed that would increase the amount of surplus value produced (it isn’t the amount of wage labour employed continues to increase throughout the globe)!

      The fact that large quantities of use values are produced is an indication of the vibrancy of capitalism, as is the fact that the rise in productivity reduced vastly the value of those commodities!

      “I think Boffo misapprehends overproduction as underconsumption and then conflates both under an “effective demand” theory, as when he argues that he is for governments stepping in to stimulate demand, rather than impose austerity. That, the stimulation, is the “rational” thing to do from the viewpoint of productive capital.”

      A rather odd comment to make from several angles. Firstly, yesterday Artesian was accusing me of wanting to bring about wanton destruction of the economy by opposing Government intervention. Now he wants to say the exact opposite! I have called nowhere for Government intervention Keynesian, Monetarist or other. It is Artesian that has opposed State intervention to stop QE, saying it would lead to a massive dislocation on the same basis as the 1930’s, and castigating those who say otherwise! Its Artesian that has been the one supporting Keynesian intervention and denying Marx’s argument about crises clearing the way for a reinvigorating capital!

      What I have argued is that the measures of austerity have been the cause of reduced demand and increased uncertainty, which have led to economic weakness. Given that in Britain alone, those measures have led to hundreds of thousands of state workers losing their jobs that seems rather difficult even for Artesian to deny!

      “However, Boffo also argues that the real economy has not been seriously impacted by the financial meltdown. If so, then why the need for “demand stimulation.” Boffo gives us the answer in his discussion of crisis– the cathartic impact of crisis. “Confidence” as every political economist and carnival barker would be so restored.”

      Again I said no such thing. I said the Financial Meltdown of 2008 caused an immediate effect on the real economy, because of the credit crunch, and because of the uncertainty it caused. But, Artesian needs again to decide what argument they are making. Either the current problems are caused by the effects of the Financial Meltdown, or they are as he previously argued the effects of weakness in the real economy. The current weakness is not due to the Financial Meltdown, but to the introduction of austerity measures to bail out the bankers.

      In answer to point 5. So, let’s turn that argument round. A further blowing up of fictitious asset bubbles to 3 or 4 Trillion would then on your estimate be a good thing, because it would create twice as much confidence! You seem to have the same economic philosophy as Ben Bernanke that confuses fictitious capital with real capital and believes you can stimulate the real economy by inflating the financial assets. Would such a financial meltdown immediately affect markets, undoubtedly, does it in any way affect the real productive capacity of the economy, and its ability to produce surplus value absolutely not. In fact, once the dust had settled quite the opposite. Hugely reduced property values would reduce the Value of Labour-Power by reducing massively housing costs for buyers and renters. So relative surplus value would rise. With massively reduced share prices and bond prices, and interest rates restored to normal levels yields on equities and bonds would rise. Workers pension contributions would buy significantly more of both, so in the longer term, their pension would rise, meaning that current contributions could fall, so again the value of labour-power falls, and relative surplus value rises.

      In response to points 6 and 7, I have not argued that fictitious capital has diverted capital from productive investment. Nor have I argued that capital could simply proceed on the basis of simple reproduction! I have argued that the volume of surplus value has been such that Capital has engaged in massive amounts of capital investment, and has also at the same time, built up huge money hoards! I even cited the example of Apple, a company that has accumulated on a large scale, and at the same time has $140 billion of cash on its balance sheet! On a larger scale we could take China which has accumulated on an unprecedented scale, and yet has astronomical money hoards! Artesian seems to operate in a very black and white world, where things are one thing or another A or not A, rather in the mould of the formalistic thinking of a James Burnham rather than the dialectics of a Marx.

      In relation to point 8, let me cite Engels.

      “I am familiar with capitalist production as a social form, or an economic phase; capitalist private production being a phenomenon which in one form or another is encountered in that phase. What is capitalist private production? Production by separate entrepreneurs, which is increasingly becoming an exception. Capitalist production by joint-stock companies is no longer private production but production on behalf of many associated people. And when we pass on from joint-stock companies to trusts, which dominate and monopolise whole branches of industry, this puts an end not only to private production but also to planlessness.”

      I never said anything about competition ending. But Graham is quite right that the nature of that competition has changed as many Marxist economists noted in the 1980’s and after. Reading Capital and Class would demonstrate that clearly. Once again, Artesian is guilty of mechanical, formalistic logic. In the USSR the market was abolished, but competition was not. The competition simply assumed non-market forms, for example bureaucratic competition between Ministries for resources.

      All that I and Engels and others are arguing is that the market does not now dominate the day to day decision making of individual huge capitals, who rather organise their production according to long term plans. As Graham pointed out, and as I and others have pointed out competition adopts the form of winning market share on the basis of improvements in quality or perceived improvements enhanced by marketing and branding. It assumes the form of increasing profits by reducing costs through continual innovation.

      On Greece Artesian slides away from the argument they made, which was to put forward Greece as an example of the crisis of capitalism. And from that perspective it is irrelevant, because as I said before its like pointing to the problems of buggy whip producers whilst not recognising the development of automobile producers.

      The classic example of that is in his point 12, which confuses a crisis of capitalism with a financial crisis in the West caused by a long term build up of debt. The 2008 crisis is actually referred to in much of the world as the North Atlantic crisis, precisely because it was there that its real effects were felt. At the same time as his North Atlantic bias forces him into believing that this financial crisis is a crisis of capitalism, he is blind to the massive development of capitalism globally, the rescuing of 500 million addition wage workers, “from the idiocy of rural life” to use Marx’s phrase, and the huge rise in living standards for millions of people in Asia, Latin America and Africa.

  17. S. Artesian Says:

    “Boffo” was a mistake. My apologies. Sometimes dyslexia puts “o” where there should be a “y.” No insult was intended.

  18. S. Artesian Says:

    Yeah, well here’s my first stab at your quotes: Read it and weep.

    “I said no such thing. Artesian confuses the self-expansion of value with accumulation, despite the fact I explained it to him/her.”

    Yes, you did say such a thing. You asserted that capitalism has no compulsion to accumulate, has no compulsion to, in reality, capitalize surplus value.

    You stated: “The necessity for capital to expand is the necessity for it to produce surplus value, not necessarily for it to accumulate that surplus value, when it has done so.”

    Now not to put too fine a point on it— how can capital expand, as capital, if not converting the surplus value into….capital, which is of course the accumulation of surplus value? This is why Marx refers to capital as self-expanding value; and devotes pages to the recapitalization of surplus-value—the circuit in the reproduction of capital.

    It’s nonsense to say that the necessity is to produce the surplus value, not accumulate the surplus value, when the only way to obtain surplus value is through its accumulation, through the conversion of dead labor into the master of living labor?.

    The problem, IMO, is with Boffy’s notion of simple reproduction, and the simple explanation he gives of his time owning his business. As important as that may have been to him, it’s hardly important to capital as a social organization.

    Specifically, the capitalist does NOT obtain “his or her own portion” of surplus value. The capitalist obtains an aliquot portion of the totally socially available surplus value based on 1) the size of his/her capital and 2) the relative efficiency of his her capital vis a vis the socially necessary time of reproduction of the value contained in the commodities.

    Boffy’s claim is that because not ALL the surplus value is so directed for recapitalization, therefore the need does not exist. That not all the surplus value can be so directed is immaterial to the need itself, just as the fact that all the expropriated surplus value may or may not in fact be realized in the market, and that as a matter of fact, capital as a whole reproduces itself through disproportion, and devaluation of some capitals—through the necessary loss of some surplus value, does not change the fact that accumulation of surplus value and its reconversion into expanded capital is the internal necessity of the system.

    Now it is essential to Boffy’s little allegory of simple reproduction (blowing M’ on the horses), that it exist in a vacuum; that there be no competition; that his enterprise such as it is is isolated from the world in which capital exists.

    Marx’s analysis of capital does not stop or rest with the actions of any individual capitalist. Marx sees that the organization of capital is for expansion of the means of production as value extracting. Certainly an individual capitalist can and does blow his/her profit on the ponies. And then what? Well the individual capitalist will soon be out of business, while the capitalist who owns the race track, or the betting parlor will have expanded his/her portion of the surplus and will in turn use that surplus to expand his/her operation. The accumulation of capital is a social process, where the social existence of capital compels expansion of the means of production as values, and value extracting.

    Boffy next asserts: “Er, not to put too fine a point on it, but no it clearly is not! It would only be overproduction if either a) commodity-capital were seen to be over produced by large quantities of sitting on global markets unable to be sold (there aren’t, in fact quite the opposite), or b) productive-capital was over-accumulated such that no further labour-power could be employed that would increase the amount of surplus value produced (it isn’t the amount of wage labour employed continues to increase throughout the globe)!”

    I would urge Boffy to look indeed at the commodity capital sitting on the global markets, in warehouses, sitting in inventory—copper, aluminum, zinc, steel, container ships, locomotives, automobiles, semiconductors, flat screen TVs, coal, etc. —before being making that argument. And for the b part of his argument—no it is not the case that productive capital is only over-accumulated such that no further labor-power employed that would increase surplus value. We are not dealing with all or nothing scenarios. We are dealing with the point where a change in the relations between the technical (sometimes fixed) element of capital and the living element has been altered to the point where the “productive capital” does not and cannot exploit intensely enough living labor to offset the decline in profitability that follows the expansion itself. Hence layoffs, shuttering of factories, layup of the means of transportation, communication, circulation. It’s the rate, relation, the change the counts. We never see the absolute and total decline in capitalist reproduction, as the decline itself is one of the offsetting tendencies
    .
    Yes, the increase in the mass and rate of production of large quantities of use values measures, not the vibrancy of capitalism, but its intense exploitation of labor. And it is the very intense exploitation of labor that reduces the rate of expansion of new value to the whole of the capital already accumulated.

    Then there’s this:
    “A rather odd comment to make from several angles. Firstly, yesterday Artesian was accusing me of wanting to bring about wanton destruction of the economy by opposing Government intervention.”

    I said no such thing. I have no interest in “government in intervention” and I have never advocated government intervention.

    What I did say in response to his claim that another collapse of the financial markets will not have a long-term deleterious impact on the “real economy” is this:

    “If QE2 ends, and if the financial markets collapse it will be BECAUSE of the real economy, because the recovery in profitability has stalled and is in the process of turning down again.”

    And the claim that he, Boffy, has nowhere called for government intervention…he is correct.

    He did say “My argument was not that Governments should step in to make up a shortfall in aggregate demand, it was that Governments had created the current lack of demand, by stepping in with austerity programmes!”

    So again, we’re back to the “demand” issue. That somehow government actions have subverted the “vibrancy” of capitalism.

    However Boffy is dead wrong when he claims that I’m the one advocating Keynesian intervention and denying that crisis “clear the way” for “reinvigorating capital.” Perhaps Boffy would like to point out where I advocate Keynesian intervention, or where I think clearing the way or not clearing the way for the “reinvigoration of capital” is even a concern?

    The issue I’m concerned with is that this “clearing away” will not, is not, cannot be accomplished without driving down living standards, driving down wages, marginalizing greater masses of living labor.

    Boffy claims he never said that the financial crisis—which is how he describes, and ascribes the causes, of the 2008 contraction—didn’t seriously impact the real economy… ok, you be the judge:

    1. “What we have had over the last few years is typical of what Marx describes in Volume I of Capital as a financial crisis rather than an economic crisis. It has not been a crisis of profitability or overproduction. Monopolistic capitalist firms who plan their production have largely avoided a crisis of overproduction, precisely because they have turned their excess surplus value into money hoards rather than capital.

    In fact, a real financial crisis that cratered bubbled up prices of property, bonds, and shares would be a good thing. It would destroy fictitious capital, and enable real capital to flow more easily into productive activity.”

    2. “Look at what happened with the Asian economies that suffered in the late 90′s from a similar financial crisis. It did not stop their actual economies powering ahead in the following years. As I said, no “long-term” deleterious effect on the real economy. On the contrary, there is every reason to believe that such a financial crisis will benefit the real economy and productive capital in the longer term.”

    Comment: [so, the reason the events since 2008 have had a longer term negative impact is the fact that the meltdown wasn’t enough of a meltdown, which indicates of course, that wiping out $3 or $4 trillion in notional values will have a wonderful impact, stimulating businesses to move their money from money hoards into productive investment because “demand” won’t be impacted by this collapse? Because “demand” will be stimulated by the massive devaluation of all values?].

    Next Boffy gives us this in response to my point 5, questioning his argument that a massive collapse would be positively stimulating for the “vibrancy” of capital:

    “In answer to point 5. So, let’s turn that argument round. A further blowing up of fictitious asset bubbles to 3 or 4 Trillion would then on your estimate be a good thing, because it would create twice as much confidence!”

    Come, come Boffy, that’s a sophomoric way to argue. I said no such thing, and I have nowhere advocated expanding “fictitious asset bubbles.” Your argument is the argument in question—that the massive liquidation of such fictitious asset bubbles will be a good thing and will have no serious, long term impacts on your so-called “productive capital”—on capital values as a whole.

    If I say that the liquidation of inflated valuations will impact the reproduction of capital as a whole, I am not arguing for supporting inflated asset valuations—the reason being I oppose capitalism as an entirety. I’m not looking for “good capital” vs. “bad capital”—productive capital vs. unproductive capital. That’s your game.

    And then along comes this: “In response to points 6 and 7, I have not argued that fictitious capital has diverted capital from productive investment.” OK, once again you all be the judge:
    “But, I have not made that argument, because my argument is that the current levels of fictititious capital and speculation are diverting resources from being invested in productive activity. I am not at all arguing that real productive capital needs to be destroyed. Quite the opposite, I am arguing that resources currently going into speculation need to be freed up to move into a restructuring of western economies, into areas where they can have some hope of being globally competitive i.e. an expansion of knowledge based, and other high value production.”

    Which is followed by Boffy claiming that he has never said anything about competition ending. No, he’s only talked about this being the era of monopoly capital, monopoly capitalists, not subject to the vicissitudes of the market. Well, pardon me, in my experience those who rely on the term “monopoly capital” do so precisely to distinguish such capital from being beholden to competition as Marx outlined the impacts of such competition on capital and capitalists. My error, obviously. Boffy has a special sort of monopoly capitalism, that plans years ahead, as if somehow that in and of itself nullifies the internal compulsion of capital, its inherent limitations at each iteration of its circuit, etc. etc.

    I would say, from my knowledge of actual businesses—detailed knowledge being limited to the railroad industry—is that in fact day to day concerns re markets are in fact the largest components of long-range planning—and nobody, IMO, plans like railroads regarding fixed capital investments. Anybody who has experience with a business like railroads will tell you how every penny is watched, measured, rated, indexed, everyday; how there is in fact no long range planning that does not take into account the current condition of the market; the current levels of profitability; and the prospects for expanding, accumulating more profit in the near term as well as the long term.

    Boffy seems to have a notion that says, “market dependency” means day to day production quotas are set based on the number of customers you have on that particular day, and so today, capital knows what it will have tomorrow and plans accordingly. Well, you know what? Capital still does that. Yeah, really. “Like I normally require 3 full crews to make up the trains I have to dispatch in the next 8 hours, but today, volumes are down. I can make them up with only two crews. Let me call the crew dispatcher and annul the 3PM Pullout for one day.” Capital makes a calculus, and the calculus is always about profit today and profit tomorrow. Profit here and now, and profit tomorrow and there call the tunes, and they are often conflicting tunes.
    Now, as for declaring that the condition of capital in 2008 was in fact a “crisis of the North Atlantic or the Atlantic” or the US and Europe— without global implications…nonsense. Perhaps Boffy doesn’t recall that real volumes of world trade declined; that Brazil almost came to a standstill as bankers refused to guarantee export shipments—that the Fed had to open up currency swap lines not just with Europe, but with Brazil, Japan, etc.

    But that’s a minor point. The major point is in fact that the prelude, the cause of 2008, and subsequent to 2008 was exactly in that overproduction of the means of production as capital that Boffy thinks did not occur.

    So Boffy, that bit about claiming people said things that they really didn’t say…. any further comment?

    • GrahamB Says:

      It has been called the “North Atlantic” crisis. Obviously it had a major global impact but it is not a “minor point” that the emerging economies were growing much more strongly than the US/Europe/Japan *before, during and after 2008*. Don’t you see it? World trade and industrial production recovered.

      “It’s nonsense to say that the necessity is to produce the surplus value, not accumulate the surplus value, when the only way to obtain surplus value is through its accumulation, through the conversion of dead labor into the master of living labor?.”

      Boffy’s examples covered why this is not necessarily the case. I think it’s a mistake to privilege accumulation of surplus value over the production of surplus value. Of course Marx wrote reams on both, and everything else. Do you use the accumulation of mean of production as a criterion for what constitutes capitalism? Was the USSR then capitalist as it certainly couldn’t be faulted for it? Capitalism means two things: wage labour and a market.

      As I tried to explain, capital only exists as many capitals and although price competition normally leads to investment for productivity and the extraction of more relative surplus value – hence accumulation – that is not always the case. Take the period of severe crisis when we have devaluation of capital, the reverse of accumulation. The exploitation of wage labour and market forces don’t disappear anymore than capitalism does, quite the reverse.

      Post-2008, competition is taking the form of increasing relative surplus value by other means – wage cuts and speed-ups. One of the reasons for falling productivity (the “puzzle” as it’s called) is the substituting of labour for capital, dis-accumulation.

      This phase of high profitability with low growth cannot continue indefinitely, but it’s very real and isn’t based on the drive to accumulate the means of production.

      Caveat: I’m not saying that there is no investment, just a shift!

      • S. Artesian Says:

        What about those parts where you claim I claimed you said what you didn’t say?

        What about those parts where I showed that you claimed I said something I didn’t say?

        One more example– I never said that all the surplus value has to be recapitalized all the time and immediately. Perhaps you would care to go back and show us where I said all the surplus value must be recapitalized all the time. As a matter of fact I said not all the surplus value CAN be capitalized at any time. Nevertheless the determining element in the expansion of capital is the recapitalization of surplus value.

        What i did say was that the recapitalization of surplus value, leading to the expansion of the “constant”– particularly fixed– capital in order to increase the relative extraction, the proportion again, of surplus value, the rate of profitability, and that this is what stands behind the contraction of 2001-2003; 2008-2010; and exists as the real “overhang” in capitalist reproduction.

        So please, I took the time to answer your assertion that I said you said things you said you never said.

        Your turn to show me where I said the things you said I said.

        Clear?

      • S. Artesian Says:

        “As I tried to explain, capital only exists as many capitals and although price competition normally leads to investment for productivity and the extraction of more relative surplus value – hence accumulation – that is not always the case. Take the period of severe crisis when we have devaluation of capital, the reverse of accumulation. The exploitation of wage labour and market forces don’t disappear anymore than capitalism does, quite the reverse.

        Post-2008, competition is taking the form of increasing relative surplus value by other means – wage cuts and speed-ups. One of the reasons for falling productivity (the “puzzle” as it’s called) is the substituting of labour for capital, dis-accumulation.”

        I happen to agree with that. Yes the post 2008 period is one such example. But the post-2008 period is, by your own analysis, different from the pre-2008 period.

        The origin of the dispute is Boffy’s claim that 2008 itself is a financial crisis due to…….I’ll let him pick the word… since he thinks my interpretation is “misquoting” and is not a result of overproduction, of overproduction of the means of production as capital, of declining profitability.

        I say that 2008 is a result of such overproduction.

        And I agree that capitalism means…. wait a minute I disagree, capitalism means three things: wage-labor, market, and value production.

        Nowhere do I ascribe expansion of the means of production as capitalism in and of itself. I describe capital’s compulsion to expand the means of production, which it does by recapitalizing surplus value as being determined by the organization of the means of production as value-extracting.

        The self-expansion of value and the accumulation of capital are not always and immediately one and the same, but manifestations inherently, essentially, linked, each in the existence of the other.

      • Boffy Says:

        I have responded to your claim that I show where you claimed I had said something I hadn’t said – whether it is you “quoting” me or “interpreting” me seems to be the level of sophistry that your argument has now descended to.

        You claimed that I had said that Capital does not need to expand. I said no such thing. You clearly do not understand the difference between Capital as self-expanding value, described by Marx as occurring even under simple reproduction, and the accumulation of capital.

        Capital is self-expanding value even under simple reproduction, if it does not expand it is not capital. It does not have to accumulate – all the time – in whole or in part, to remain Capital.

        I am responding to the rest of your points in what is a very, very long comment, as I have time to do so.

    • Boffy Says:

      I explained this basic Marxist concept to you in terms of “Marxism for Beginners”, but even then you seem unable to grasp it.

      I’d suggest reading Marx himself, therefore, Here where he describes the process of the self expansion of capital UNDER SIMPLE REPRODUCTION, i.e. where no accumulation takes place

      • Boffy Says:

        To save readers time, the most clear statement of what Marx means by “self-expanding value” in the above Chapter is what he says here.

        “C’ — M’, the second stage of the circulation and the final stage of circuit I (M … M’), is the second stage in our circuit and the first in the circulation of commodities. So far as the circulation is concerned, it must be complemented by M’ — C’. But not only has C’ — M’ the process of self-expansion already behind it (in this case the function of P, the first stage), but its result, the commodity C’; has already been realised. The process of the self-expansion of capital and the realisation of the commodities representing the expanded capital-value are therefore completed in C’ — M’.”

    • Boffy Says:

      “The capitalist obtains an aliquot portion of the totally socially available surplus value based on 1) the size of his/her capital and 2) the relative efficiency of his her capital vis a vis the socially necessary time of reproduction of the value contained in the commodities.”

      This is simplistic in the extreme. Its yet again a repetition of misunderstood mantras. The profit of any individual firm calculated on the above basis would assume that at any one time there is actually some real average, general rate of profit, but such a rate only exists as an abstraction, and a moving one at that. It totally misses the point that a look at the facts shows that firms across the spectrum at any one time make different rates of profit, but also different industries have different rates of profit, for the simple reason that in the real world there are various frictions that prevent capital from moving freely from one area to another, and so on, in different industries there are different levels of monopoly, some industries are mature, whilst others are just emerging, high-value, high profit industries.

    • Boffy Says:

      “Boffy’s claim is that because not ALL the surplus value is so directed for recapitalization, therefore the need does not exist. That not all the surplus value can be so directed is immaterial to the need itself, just as the fact that all the expropriated surplus value may or may not in fact be realized in the market, and that as a matter of fact, capital as a whole reproduces itself through disproportion, and devaluation of some capitals—through the necessary loss of some surplus value, does not change the fact that accumulation of surplus value and its reconversion into expanded capital is the internal necessity of the system.”

      Once again a quote of something I never said, and a total distortion of the argument I put.

      There is a BIG, BIG difference from saying Capital has to accumulate – which I agree it does – with saying, Capital has to accumulate all, or even a large part, or even a minor part, of the surplus value it produces ALL THE TIME, irrespective of the conditions that each capital perceives to exist.

      There is a BIG, BIG difference between saying, Capital is making huge profits, and accumulating, large amounts of it – which I’ve pointed out companies like Apple, and economies like China have done – and yet, the amount of surplus value produced has been so large as to mean that even after this accumulation, large amounts have been transformed into money hoards, waiting to be accumulated at some future point, and saying, companies and economies are operating on the basis of simple reproduction!

    • Boffy Says:

      “Certainly an individual capitalist can and does blow his/her profit on the ponies. And then what? Well the individual capitalist will soon be out of business…”

      Once again based on syllogistic logic, and thoroughly mechanistic.

      Check out Volume II of Capital, where Marx discusses the long periods whereby individual capitals store up money hoards. In fact, his analysis of why the purchase of fixed capital – either for accumulation or for the replacement of worn out machines does not lead to a disproportion, because of Department 2 firms buying but not selling is premised on the fact that half of Department 2 firms are accumulating money hoards – selling but not buying i.e. not accumulating – whilst the other half are doing the opposite!!!!

    • Boffy Says:

      “And the claim that he, Boffy, has nowhere called for government intervention…he is correct.”

      Yet, that hasn’t stopped S. Artesian from basing his argument on such an accusation both in previous posts and in this one!

      • S. Artesian Says:

        I did not and do not base my argument on that. But I must say, I’m enjoying your sputtering and blustering. Keep at it old boy, clears the sinuses.

      • Boffy Says:

        You have said repeatedly that my argument calls for Keynesian intervention. You couldn’t back that up with an actual quote rather than one of your many “interpretations”. The only person it seems from the tone of your response, who is sputtering and blustering is you.

      • Boffy Says:

        An example from above in that regard.

        “If I say that the liquidation of inflated valuations will impact the reproduction of capital as a whole, I am not arguing for supporting inflated asset valuations—the reason being I oppose capitalism as an entirety. I’m not looking for “good capital” vs. “bad capital”—productive capital vs. unproductive capital. That’s your game.”

        In fact, a look at what I have argued for, is for bank workers to occupy and take over banks rather than them being bailed out. For those banks across Europe to be brought under the control of a European Federation Of Workers Co-operatives etc. and for that process to be extended to any workplaces that are threatened.

      • S. Artesian Says:

        Boffy says: An example from above in that regard.

        “If I say that the liquidation of inflated valuations will impact the reproduction of capital as a whole, I am not arguing for supporting inflated asset valuations—the reason being I oppose capitalism as an entirety. I’m not looking for “good capital” vs. “bad capital”—productive capital vs. unproductive capital. That’s your game.”

        The issue from above was your claim that a financial collapse, a collapse in overvalued real estate assets would essentially be “good” for the real productive economy. At the same time, in referring to the impact of 2008, you did claim that its impact on the real economy was due to a credit crunch and a loss of “confidence.”

        So when I challenge your notion that somehow devaluing “fictitious capital” can be “good” for the “real economy” as doing so will clearly impact credit availability and involve, necessarily a tremendous loss of “confidence” — loss of confidence generally following the loss of money– you try and flip the script and say: “OK let’s turn the argument around”– and you claim that I must be arguing that doubling the inflated asset values would be “good.”

        Did you or did you not claim that a real financial crisis would have a good result from “productive capital” and if so, how does that square with the impact on “confidence” which you think has been the major negative impact of a financial meltdown?

        Did I or did I not ever, at no place and at no time ever ever claim that inflating asset values would have a good result?

        You cite your stirring speech to the bank workers: “Seize the vaults!” as evidence that I am distorting your arguments……. but that’s not relevant to the issue.

        Regarding the curious relationship between metal prices and metal supplies, which Boffy claims have “gone through the roof”– I recommend everybody take a look at the Wall Street Journals from say around April 5 2013 to the current period where, almost daily, articles appear about metal gluts, the amassing and sequestering of metal inventories.

        I would think we would have all learned a lesson about not correlating metal prices with overproduction or demand and supply after the experience with oil prices over the last 40 years, where spikes are precipitated precisely by overproduction and the decline in the rate of profit of the oil majors.

        And the situation regarding the overproduction of aircraft, and maritime freight tonnage has been written about extensively, with the chairman of Maersk bemoaning the irrationality of his industry for continuing to add bigger ships despite the collapse in rates, while Maersk of course introduces the largest containerships ever, with a 18,000 (and more) TEU capacity.

        Steel? The prices of steel has declined by about 35% since its recent peak in 2011.

        Nickel? Looking for a bottom, I believe is how the WSJ put it.

        Anyway I would like Boffy to answer those nasty bits where he claims I said things about the economy that I claim I never said– just for scorekeeping’s sake.

        Meantime, this is boring to me, so I can only image how boring it must be to everyone else.

        The argument started with, and always returns to– did overproduction of the means of production as capital cause, precipitate, determine the events of 2008 and subsequent responses?

        That’s the concrete issue at hand. The abstract issue revolves around this from Boffy:

        “The necessity for capital to expand is the necessity for it to produce surplus value, not necessarily for it to accumulate that surplus value, when it has done so”

        That’s nonsense. Marx specifically and repeatedly analyzes the compulsion, the necessity to expand the means of production as value extracting, to capitalize surplus value. “Accumulate, accumulate. That is Moses and the prophets!” Ring a bell.

    • Boffy Says:

      “I would urge Boffy to look indeed at the commodity capital sitting on the global markets, in warehouses, sitting in inventory—copper, aluminum, zinc, steel, container ships, locomotives, automobiles, semiconductors, flat screen TVs, coal, etc. —before being making that argument.”

      Perhaps S. Artesian would like to provide the actual data to back up that argument rather than alluding to it. Perhaps he would like to explain why it is that since 1999, the prices of all primary products including the ones he quotes have gone through the roof because of the expansion of global output on a massive scale. perhaps he would like to compare it with the huge increase in demand for commodities that has been spurred by the rise in living standards of millions of workers globally that have been brought into the realm of wage labour for the first time.

      Of course, there will be stores of commodity-capital, especially as the Chines economy has slowed as part of the normal trade cycle, but slowing from 10% to 7.5% is hardly a confirmation of his claim of global capitalist crisis is it!!!

    • Boffy Says:

      “Yes, the increase in the mass and rate of production of large quantities of use values measures, not the vibrancy of capitalism, but its intense exploitation of labor. And it is the very intense exploitation of labor that reduces the rate of expansion of new value to the whole of the capital already accumulated.”

      No it doesn’t it measures the fact that Marx was right that Capitalism now expands production most effectively by harnessing science and technology to its needs. It measures the fact of the revolutionising role of the microchip, of robotics, of computers, and of the Internet on production. In other words, that the dominant means by which Capital extracts surplus value is via relative rather than absolute surplus value.

      Certainly, a contradictory process, because alongside the latest technology in China and elsewhere, you get back street firms, or absolute surplus value extraction as in Bangladesh, but the overriding force is the use of technology.

    • Boffy Says:

      “So again, we’re back to the “demand” issue. That somehow government actions have subverted the “vibrancy” of capitalism.”

      S. Artesian has not been able to deny that austerity in the UK alone caused the loss of hundreds of thousands of jobs! But, once again a distortion. I never argued that capitalism in the UK, US or Europe was particularly vibrant. On the contrary I said its problems were largely due to a lack of competitiveness with China and elsewhere.

    • Boffy Says:

      “The issue I’m concerned with is that this “clearing away” will not, is not, cannot be accomplished without driving down living standards, driving down wages, marginalizing greater masses of living labor.”

      Really? So, why has the greatest expansion been in places like China where living standards and wages have been rising rapidly? Are you not familiar with what Marx says in that regard in Volume I of Capital?

      He sets out there that in general where wages are high the price of labour is low and vice versa! That is because he says high wages encourage capital to modernise, to introduce more effective machines and techniques. He cites the example of the Stafordshire earthenware manufacturers who claimed they could not comply with the requirements of the Factory Acts in regard to working time. When they had to anyway, they revolutionised their production techniques, which resulted in far more efficient production, increased output and increased profits.

      Similalry, he gives the tables showing the reason that British textiles were cheaper than European textiles, and British textile profits were higher than those in Belgium etc. despite the fact that Belgian wages were 50% lower than in the UK, and working conditions also worse!

      It seems to me the argument you are putting forward is the old crude, Lassallean, Iron Law of Wages, that Marx demolished.

    • Boffy Says:

      “Boffy claims he never said that the financial crisis—which is how he describes, and ascribes the causes, of the 2008 contraction—didn’t seriously impact the real economy… ok, you be the judge:”

      Indeed, be the judge, because there is nothing in any of the quotes that follow where I deny that the financial meltdown had a serious impact on the real economy. In fact, about a month before it happened, I predicted it would,and what the consequences would be – Severe Financial Warning.

      The consequences were because of the credit crunch that ensued, and the immediate damage to confidence, due to massive uncertainty. The major longer term effects, however, have been due to the policy responses to it, in particular the bailing out of the banks. That resulted in austerity measures in Europe, and calls for similar measures, frustration of policy in the US by the Tea Party and Republicans.

      But, as I’ve pointed out before, S. Artesian needs to get their story straight. Either its the Financial meltdown that is to blame, or else the Financial meltdown was merely a manifestation of a crisis of capitalism based on falling profits etc. In fact, after 2008, economies like Germany, Sweden, and others in Northern Europe grew extremely strongly, which suggests there was no crisis of profitability there. Even the UK showed the hallmarks of a typical V shaped recovery up to 2010, when the Liberal-Tory Government began talking about Britain being like Greece, and giving dire warning about the austerity they were going to impose.

      The US itself at one point was growing at 5%, prior to the Tea Party and republicans acting to introduce similar measures of austerity. The profits being reported by the majority of US corporations have not only continued to rise, but in many cases have beaten expectations.

    • Boffy Says:

      As for the exceedingly long rambling comment about competition I don’t know what it was trying to say let alone prove. I’ll settle for the quote from Engels Critique of the Erfurt Programme about modern capitalism having overcome “planlessness”, and the idea I thought most Marxists economists had recognised from the 1980’s onwards that the nature of competition had shifted away from price competition to competition based on innovation, quality and so on and profit making driven by the same kind of innovation and development.

  19. Boffy Says:

    “It’s nonsense to say that the necessity is to produce the surplus value, not accumulate the surplus value, when the only way to obtain surplus value is through its accumulation, through the conversion of dead labor into the master of living labor?”

    Show me where Marx says that. The way to obtain surplus value is through the exploitation of labour-power. Surplus Value-arises because the the value of the labour-power bought is lower than the value created by that labour-power, and as Marx demonstrates many times in analysing simple reproduction, it does that over and over again without any need to accumulate in order to do so.

  20. S. Artesian Says:

    Oh and I love this: I say:”Boffy’s claim is that because not ALL the surplus value is so directed for recapitalization, therefore the need does not exist.”

    Boffy says: “Once again a quote of something I never said, and a total distortion of the argument I put.”

    First off Boffy, quit screwing around. I didn’t QUOTE you. I interpreted you. I said that’s your claim. You deny it, hilariously enough, by confirming my interpretation:

    “There is a BIG, BIG difference from saying Capital has to accumulate – which I agree it does – with saying, Capital has to accumulate all, or even a large part, or even a minor part, of the surplus value it produces ALL THE TIME, irrespective of the conditions that each capital perceives to exist.”

    ,

    • Boffy Says:

      You claimed that I had said that Capital does not need to “self-expand”. I have said no such thing, and have showed several times the difference between the self expansion of capital and the accumulation of capital, a basic concept of Marx’s analysis that you seem unable to grasp.

      Your latest argument seems to be not to respond to the fact that you were clearly wrong in your own understanding, let alone in the claim that you made, but instead to obfuscate over what the actual terms of the disagreement were. That seems to be the method in your present method of argument in increasingly long and rambling comments.

  21. S. Artesian Says:

    “No it doesn’t it measures the fact that Marx was right that Capitalism now expands production most effectively by harnessing science and technology to its needs. It measures the fact of the revolutionising role of the microchip, of robotics, of computers, and of the Internet on production. In other words, that the dominant means by which Capital extracts surplus value is via relative rather than absolute surplus value.”

    Am I the only one here who thinks that the intensification of the relative surplus value IS the increased, intensified exploitation of labor?

    That labor is more thoroughly exploited the more quickly it reproduces the value equivalent to its own wages?

    It’s nice to see Boffy refer to the microchip, semiconductor-fabrication industries here; industries that have been product and producer of overproduction cycles– boom/bust, price collapse, and overall dramatic unit price declines and increases in MIPS– based on higher rates of investment– recapitalization of surplus value– and exceedingly high rates of relative surplus value– that is to say intensified exploitation of labor.

    • GrahamB Says:

      “Am I the only one here who thinks that the intensification of the relative surplus value IS the increased, intensified exploitation of labor?”

      Er, that’s what I said. The point is that it isn’t always, all the time, achieved by greater accumulation in the means of production.

      • S. Artesian Says:

        Not always; I never said always. As a trend? I think the answer is mos’ def. There can be speed up, but of course speed involves utilization of more of the materials of production, and will involve greater/faster consumption of the use value of the means of production, so as this is also part of the trend, we can expect increased investment in the means of prediction during a period of speed-up, or shortly thereafter.

        As a matter of fact IMO the “speed-up” “intensification” might best characterize the the recovery from the 2001 recession. For several years, capital replacement rates for manufacturing in the US were below 1– meaning capex were below the amount required to replace the means of production consumed.

        The necessity to expand the means of production as capital is inherent in the wage-labor/surplus value/capital relation. That does not mean that relationship is not mediated; that the necessity cannot be suppressed for a period of time; that every penny must immediately and always be reinvested in the……valorization process.

        But valorization IS what capital is all about. It must re-valorize the expanded value that it expropriates in any cycle of production. It must expand the surplus value it can claim from the working day. If and when and because it does that through the “real domination” — through extraction of relative surplus value— this involves the displacement of the proportion of living labor by “dead labor,” by machinery, by fixed capital. This requires the recapitalization of surplus value.

        I think it’s Chapter 24 where Marx explores capitalist production on a progressively increasing scale, and he says something to the effect:

        The annual production must in the first place furnish all those objects (use values) from which the material components of capital, used up in the course of the year, have to be replaced. Deducting these there remains the net or surplus-product, in which the surplus-value lies. And of what does this surplus-product consist? Only of things destined to satisfy the wants and desires of the capitalist class, things which, consequently, enter into the consumption fund of the capitalists? Were that the case, the cup of surplus-value would be drained to the very dregs, and nothing but simple reproduction would ever take place.

        To accumulate it is necessary to convert a portion of the surplus-product into capital. But we cannot, except by a miracle, convert into capital anything but such articles as can be employed in the labour process (i.e., means of production), and such further articles as are suitable for the sustenance of the labourer (i.e., means of subsistence). Consequently, a part of the annual surplus-labour must have been applied to the production of additional means of production and subsistence, over and above the quantity of these things required to replace the capital advanced. In one word, surplus-value is convertible into capital solely because the surplus-product, whose value it is, already comprises the material elements of new capital.

        Now in order to allow of these elements actually functioning as capital, the capitalist class requires additional labour. If the exploitation of the labourers already employed do not increase, either extensively or intensively, then additional labour-power must be found. For this the mechanism of capitalist production provides beforehand, by converting the working class into a class dependent on wages, a class whose ordinary wages suffice, not only for its maintenance, but for its increase. It is only necessary for capital to incorporate this additional labour-power, annually supplied by the working class in the shape of labourers of all ages, with the surplus means of production comprised in the annual produce, and the conversion of surplus-value into capital is complete. From a concrete point of view, accumulation resolves itself into the reproduction of capital on a progressively increasing scale. The circle in which simple reproduction moves, alters its form, and, to use Sismondi’s expression, changes into a spiral”

        Think I got that right…

        OK– first we get simply expanding value through employment of more laborers. Except no such expanded employment can occur without expansion of the means and materials of production.

        When we get to the application of fixed capital, we come to the point where the extraction of relative surplus value is in a foot race with the value sunk into the fixed capital and we, consequently, are back to the argument we had a while ago about the rate of profit; the profitability of production.

        Now IMO a decline in the rate of profitability did occur… and moreover– a decline in the rate of profit is precisely the real meaning of overproduction– or rather the real meaning of each and both is that, as Marx puts it, more or less in vol 3. the overproduction of capital never signifies anything other than the overproduction of the means of production AS capital.

        That means, again in my estimation, capital is overproduced to the point where the intensified exploitation of labor through the expropriation of relative surplus value is no longer sufficient to offset the decline triggered by the increase of already accumulated value transferred in production.

        So once again, we’re back to… either the rate of profit falls and falls because of capital’s attempts, needs, to expropriate greater relative surplus value which it does by capitalizing surplus value, or there is no tendency for the rate of profit to fall, and we’re left, IMO, with explanations that are based on “confidence,” “excess exuberance,” “fictitious capital,” “government interference,” “blunders” etc.

        That is what we have to come to grips with in considering the events up to, including, and post 2008, and indeed the events of previous economic contractions of capital–like 2001. Was that the result of a “dotcom bubble” or was the bubble simply a manifestation of the overproduction that had swamped the system?

      • Boffy Says:

        “Except no such expanded employment can occur without expansion of the means and materials of production.”

        Actually, Marx demonstrates that more labour-power can be employed without any increase in the instruments of labour. That is, shift working etc. can utilise existing factories, machines and so on. He even sets out that although it requires an increase in the materials consumed, it may not be proportionate, because efficiencies in their use can be found.

        Equating a fall in the rate of profit, even if it had occurred, with overproduction makes no sense. Provided, capital can produce commodities that embody surplus value, and realise that surplus value, it increases its reservoir of available surplus value. How on Earth can the ability to keep increasing the amount of surplus value you are extracting amount to overproduction?

        “there is no tendency for the rate of profit to fall,”

        but, there is no absolute tendency for the rate of profit to fall, which is why Marx went to the trouble of setting out all of the countervailing forces! If there were, then by now it should have reduced it to near zero, and Capital should be unable to exist!

        Moreover, there is a fundamental flaw in the logic that there is a limit to the amount of labour that can be exploited from a diminishing number of workers being exploited, as I’ve shown elsewhere.

        The argument goes, 24 workers being exploited 2 hour per day, produce more surplus value than 2 workers working 23 hours per day. There is a limit because there is only 24 hours in a day.

        The logical flaw is that it confuses concrete labour with abstract labour. There are only 24 hours of any concrete labour in a day, but the number of hours of abstract labour in day is effectively limitless. If David Beckham’s concrete labour is the equivalent to say 1000 times that of some simple labour, then there are 24,000 hours of abstract labour in Beckham’s day! So, 1 Beckham could be exploited for 1 hour per day, and still produce far more surplus value than 100 unskilled workers.

        If production moves increasingly towards industries that employ highly skilled complex labour, then fewer such workers utilising relatively little constant capital can produce huge amounts of value and surplus value. Instead of a falling rate of profit you get a tendency for the rate of profit to rise. What do you know production and consumption has moved increasingly to such places.

  22. S. Artesian Says:

    In order to save time, and reduce the amount up paging up and paging down people have to do, I’ll take the liberty to reproduce from an earlier post what, IMO, the issue is– in its concrete and abstract iterations:

    The argument started with, and always returns to– did overproduction of the means of production as capital cause, precipitate, determine the events of 2008 and subsequent responses?

    That’s the concrete issue at hand. The abstract issue revolves around this from Boffy:

    “The necessity for capital to expand is the necessity for it to produce surplus value, not necessarily for it to accumulate that surplus value, when it has done so”

    That’s nonsense. Marx specifically and repeatedly analyzes the compulsion, the necessity to expand the means of production as value extracting, to capitalize surplus value. “Accumulate, accumulate. That is Moses and the prophets!” Ring a bell.

    • GrahamB Says:

      It was a huge financial crisis, driven by the enormous profitability of China, etc. Despite a high rate of accumulation in China, the world was still awash with money capital, mediated via the more mature financial system in the OECD.

      The US rate of profit fell in 2006 but not as part of a longer term downward path that would reflect a crisis of profitability. It was not the 1970s.

      • S. Artesian Says:

        1. How does the “world awash with money capital” create a financial crisis in say 2008, as opposed to say 2007, or 2006? Is there some sort of tipping point we can point to?

        2. If 2008 is not part of a longer-term downward path (in the US and elsewhere) in profitability– if profitability was/is not impaired– why the layoffs? Why the mass layoffs? Why the plant closings? Confidence? Banks failure to lend? How can that failure to lend impair accumulation, when corporations have enough cash on hand to meet all their debt payments due for the next 5 years?

        3. Boffy argues (and it’s not your argument, I recognize) that the plant closings and layoffs that took place should have occurred earlier as, in my interpretation of what he says (can’t be too careful here), he argues that US manufacturing a la GM and Chrysler were uncompetitive. How can plants be uncompetitive but their uncompetitiveness not be a manifestation of a longer term downward path in profitability?

        4. If there is not a longer term downward path manifest here, then why in the US has this been the slowest recovery from a contraction since WW2? Is it because of a lack of confidence? Government blunders (a la the Tea Party and austerity or…. “failure to stimulate”)?

      • Boffy Says:

        “How can plants be uncompetitive but their uncompetitiveness not be a manifestation of a longer term downward path in profitability?”

        I seem to recall that all the time GM was struggling to sell cars, even the US production from Toyota and other Japanese car companies was continuing to increase. It is as logical to then say, how can the success of Toyota not be an indication of a rising rate of profit in the US economy. The two statements are equally facile.

        Companies, yes, even large companies become uncompetitive, and go bust. That is especially true when they are based in an economy that is itself increasingly losing its competitive edge against rising economies. At the end of the 19th Century there were lots of even large British companies that went bust, even as the world experienced an economic boom, and economies like the US and Germany were on the rise.

        As for why 2008, you could ask the same question about every such bubble when it bursts, be it the Tech Wreck, the Railway mania, South Sea Bubble Tulipomania or whatever. The classic answer is when there are no more bigger fools left to buy.

        As to why the US is having a slower recovery, its partly some of all the things you cited, partly the continued hang over of debt (student debt, credit card debt etc – incidentally one are of growth has been housing where the collapse has made houses affordable again) the fact that austerity measures are crippling EU economies, and the fact that the US is in relative decline.

      • GrahamB Says:

        “If there is not a longer term downward path manifest here, then why in the US has this been the slowest recovery from a contraction since WW2?”.

        I agree that there is a difference between pre and post 2008 in the the financial centres of the OECD – the long aftermath of the financial crisis, accentuated by austerity policy that is an overtly political decision.

        You’re confusing a recovery in terms of GDP growth, falling unemployment etc. with the rate of profit. As I said, we are in an extended period where profitability has been maintained in an environment of lower accumulation and growth. This cannot continue indefinitely and the accumulated money capital will have to be converted to accumulated means of production.

        Tipping points are irrelevant here as it could just as easily apply to “how much overproduction”.

        The plight of the US car industry goes back many years before the turn of the century. Yes, profitability was falling as other manufacturers in the sector took their place. It’s how capitalism works, and the weaker go to the wall in a crisis.

      • Boffy Says:

        Graham,

        That is quite right, in the main, but what is also interesting is what is happening currently in the US. It plays in to the argument I have been making about the turn in the Long Wave cycle from Spring to Summer. It is what is happening as a result of the development of shale.

        Shale has reduced US energy prices considerably, and one consequence seems to be that significant numbers of US companies are “reshoring”. That is faced with lower production costs they are bringing back production from overseas.

        But, the other point is that the investment in shale is exactly the point about at this stage of the cycle Capital begins to use up some of those money hoards to invest in various forms of productive activity rather than in fictitious capital. But, the advantages that existed in the Spring Phase of higher levels of productivity driving higher rates and volumes of profits begin to wane. Large amounts of investment in shale will be required, but the profit produced will be relatively smaller than in the past.

      • GrahamB Says:

        Boffy, I think there is much to be said for that. It is also true in China where growth rates in the coming years are likely to be only (!) 6-8% rather than 10-12% – for various reasons.

    • Boffy Says:

      The answer as Graham says is no the crash of 2008 was not precipitated by an overproduction of capital, nor did it determine the subsequent responses. The Crash of 2008 was a financial crisis centred primarily upon the US, but dragging in financial capital around the globe because of its integrated nature.

      There could only have been an overproduction of capital if that was reflected in an overproduction of commodity-capital, or an over-accumulation of productive capital such that at the very least the rate of profit was falling. Neither condition applied.

      S. Artesian has made great play of recent metals prices, but fails to mention that those prices are still at very high levels given the run up in them since 1999. He might remember that at the time he is discussing not only were there not unsold stocks of commodities, but their was a global food shortage, driving food prices up because of the huge rise in demand spurred by the creation of hundreds of millions of new wage workers. It is a time when the same processes have seen China surpass the US as the world’s largest car market!

      The US certainly had problems with some of its old industries that were uncompetitive as against these rising new powers, and like the UK, part of the reason for that is to be found in the policies adopted by Reagan and Thatcher in the 1980’s, which focussed on creating a low wage high debt economy, as opposed to say Germany which restructured towards high value production and niche markets.

      But, to point to the problems of particular US firms or even industries in that context as being synonymous with some generalised crisis of capitalism, of a crisis in general of profitability, or overproduction is like pointing to the demise of buggy whip production as being such a crisis whilst ignoring the creation of a vast new motor car industry! Capitalist enterprises go bust all the time, it is not an indication of a generalised crisis!

      The low wage, high debt model pursued in the US and UK is what led to the crash, because it encouraged the build up of that fictitious capital, which ultimately, though only partially collapsed. In the case of some of those uncompetitive US firms like GM, it washed out what had been kept propped up by that debt.

      But, in terms of the healthy parts even of the US economy, it did not have any longer-term ill-effects. It has not stopped the growth of firms like Apple, for instance. More importantly, looking at capital globally, it has continued to grow, continued to accumulate continued to make profits, and indeed continued to accumulate money hoards out of those large profits.

      The main ill-effects of 2008 in the longer term, have in fact been nothing to do with the crash itself, which were resolved by a large injection of liquidity to cut short the credit crunch, but have arisen from the implementation of austerity policies, and the truth of that can be seen from the experience of the recoveries that were occurring prior to the implementation of such policies around 2010, and the relative out-performance of the US compared to say the UK.

      On the last point its been done to death now. As Marx makes clear in the quote I provided, the self expansion of capital is NOT the same as the accumulation of capital, but is the production of surplus value, whether it is accumulated or not. To say that Capital has to accumulate in the abstract is meaningless. As Lenin said frequently, “The truth is always concrete”.

      Capital has made huge profits over the last 30 years, whilst the rate of profit has been rising. Capital “in general” has to accumulate, but every individual capital does NOT have to accumulate in whole or in part all the time, and Capital as a whole only has to accumulate in part at any one time, so that at any one time, huge amounts of produced surplus value can be simply turned into huge money hoards rather than accumulated. Not only can they, but they have.

      • S. Artesian Says:

        Boffy– if you don’t care to respond to the specific challenges I raised where you say I said things I never said, well…

        But anyway, I love the part where I cite containerships, locomotives, semiconductors, etc. as examples of overproduction and that, according to you is:

        “But, to point to the problems of particular US firms or even industries in that context as being synonymous with some generalised crisis of capitalism, of a crisis in general of profitability, or overproduction is like pointing to the demise of buggy whip production as being such a crisis whilst ignoring the creation of a vast new motor car industry!”

        While your citing of Apple is…. comprehensive analysis.

        Look, you said I said things I never said. I challenged you to show where I said them.

        I responded to your challenge, and showed where you claimed fictitious capital was hampering productive capital; showed how your claim about a financial meltdown being good for capital runs directly counter to your assertion that the negative impact on productive capital of the 2008 meltdown was due to “confidence” and…..government austerity programs.

        You don’t want to return the courtesy? Good-bye to you.

      • Boffy Says:

        You posted the comment above because you said you wanted to avoid people paging up and down. I have responded to that, because I assumed like me from your comment you felt the previous dialogue was going nowhere.

        In fact, I have responded to where you said I said things that I haven’t, so its disingenuous for you to say otherwise. But, in any case I have also asked you to show where I have said things you claimed I said, that either you have been unable to do, or else your response has not shown what you claimed.

        If you want me to go through all the things you claimed I said, but didn’t I am happy to do that, but its pointless, and in any case, the main things were your claim that I had said that Capital does not need to self-expand, which I have now shown several times you claimed I had said, but which I didn’t, and your several claims that I argued for state intervention, which I have never said.

        Another example is the following,

        “At the same time as he is arguing for restoring confidence through demand stimulation,”
        Or there is this one,

        “I think Boffo misapprehends overproduction as underconsumption and then conflates both under an “effective demand” theory, as when he argues that he is for governments stepping in to stimulate demand, rather than impose austerity. That, the stimulation, is the “rational” thing to do from the viewpoint of productive capital.”

        Are you sure you really want me to keep listing all the things you claimed I’ve said that I never did???

      • Boffy Says:

        @S.Artesian.

        Your method of debate is increasingly dishonest. I didn’t connect your comments about stocks of semi-conductors, locomotives, and metals to GM, and counterpoise to it Apple.

        I pointed out that current falls in metals prices etc. have to be set in the context of what metal prices have done since 1999.

        In 1999 copper stood at $0.75 per lb. today it stands at $3.04 per lb. Do the maths! In fact, today’s price during a period when the Chinese government has been deliberaltely colling its economy its only $1.50 below the peak it reached, wait for it, not in the 1950’s or 60’s, not even prior to the Financial Meltdown, but in 2010! Go figure, given the amount of overproduction Artesian claims exists!

        I never claimed that citing Apple was representative. On the contrary, my point in citing Toyota also back to you was to show that citing individual companies in this way as indicative of some generalised crisis, or otherwise is meaningless!

  23. S. Artesian Says:

    Boffy….

    well there’s dishonesty and then there’s dishonesty:

    Here’s a list of what I challenged you on:

    1. (Boffy) “A rather odd comment to make from several angles. Firstly, yesterday Artesian was accusing me of wanting to bring about wanton destruction of the economy by opposing Government intervention.”

    Where did I ever say that?

    2. (SA)However Boffy is dead wrong when he claims that I’m the one advocating Keynesian intervention and denying that crisis “clear the way” for “reinvigorating capital.” Perhaps Boffy would like to point out where I advocate Keynesian intervention, or where I think clearing the way or not clearing the way for the “reinvigoration of capital” is even a concern?

    3. (SA) Next Boffy gives us this in response to my point 5, questioning his argument that a massive collapse would be positively stimulating for the “vibrancy” of capital:

    (B)“In answer to point 5. So, let’s turn that argument round. A further blowing up of fictitious asset bubbles to 3 or 4 Trillion would then on your estimate be a good thing, because it would create twice as much confidence!”

    (SA)Come, come Boffy, that’s a sophomoric way to argue. I said no such thing, and I have nowhere advocated expanding “fictitious asset bubbles.” Your argument is the argument in question—that the massive liquidation of such fictitious asset bubbles will be a good thing and will have no serious, long term impacts on your so-called “productive capital”—on capital values as a whole.

    4. (B) “In response to points 6 and 7, I have not argued that fictitious capital has diverted capital from productive investment.” (SA) OK, once again you all be the judge:
    (B) “But, I have not made that argument, because my argument is that the current levels of fictititious capital and speculation are diverting resources from being invested in productive activity. I am not at all arguing that real productive capital needs to be destroyed. Quite the opposite, I am arguing that resources currently going into speculation need to be freed up to move into a restructuring of western economies, into areas where they can have some hope of being globally competitive i.e. an expansion of knowledge based, and other high value production.”

    So I’d like to clear these off the scorecard, Boffy, any comment?

    I mean there are other minor things, like you claiming that I’m arguing for some sort of global crisis of capitalism, which I don’t believe I’ve ever even mentioned…. but that’s for later.

    Let’s clear up the above, and then we can 1) argue about Germany’s supposed different approach than the US and UK– i.e. NOT pushing for a low, or lower-waged “v” component; 2) the nature of the overproduction that afflicted capital in 2001 3) Marx’s “overcoming” of simple reproduction and his notion of expanded reproduction in relation to fixed capital 4) is capital expansion possible, is the transition from the formal domination of capital to the real domination of capital possible, is expanded reproduction possible without recapitalization of surplus value 5) does capital really exist in a “simple mode” of reproduction today 6) and anything else that comes into your head.

    Until you do, clean this other stuff up, no dice.

    If that’s me being dishonest, well, so be it. I’ve been called worse things by better people.

    • Boffy Says:

      There are so many instances to go through that I’ll detail them separately. I’ve already detailed at length your charge that I said that capital does not need to expand, which simply reflects your lack of understanding of what that means, as I illustrated with the quote from Marx, which I note you have not responded to.

      I have also detailed the instances of you claiming that I’d called for intervention, which you claimed you hadn’t made. Agina you haven’t responded to that ether.

      So, in response to your point 1, these were the instances I could remember quickly.

      (a) “Just saw this:”In fact, as I said, if QE stops, and financial markets crash, there is every reason why that will not have any long term deleterious effect on the real economy.”

      Almost hilarious. That was the argument made in 2007, 2008….until Lehman Bros. was allowed to croak and then all those saying “who cares? won’t have any impact on the real economy” stopped laughing…”

      (b) “Your argument can be, and is made, every time the capitalist economy gets into one of its “predicaments.” You might as well argue that 1929 had a salutary impact on capitalism, a “cleansing” a “cathartic effect.” Hey, wasn’t exactly that argument made by somebody at the Fed in 1929?”

      (c) “What you offer– with this notion that “fictitious capital” is thwarting the good healthy productive capital is nothing but the same old same old we’ve heard from social democrats, populists, reformers etc. etc for a hundred years.

      We get this periodically in the form of the “speculators are the problem,” or “bankers are not providing credit to ‘productive enterprises’ thereby choking off the real economy.””

      (d) “Boffo argues that a “real financial crisis” would be cathartic and help clear the deadwood, which is most clearly represented by overvalued, but not performing real estate based assets. Well let’s look at that: such non-performing assets held by banks in the European Union have recently been estimated by Wolfgang Munchau in the Financial Times at about euro 2 trillion. So if that 2 trillion is allowed to meltdown in say a super Lehmans Bros event, cathartic you think? Helping confidence? Stimulating demand? Unleashing productive investment?”

      (e) “Comment: [so, the reason the events since 2008 have had a longer term negative impact is the fact that the meltdown wasn’t enough of a meltdown, which indicates of course, that wiping out $3 or $4 trillion in notional values will have a wonderful impact, stimulating businesses to move their money from money hoards into productive investment because “demand” won’t be impacted by this collapse? Because “demand” will be stimulated by the massive devaluation of all values?].”

      (f) “Your argument is the argument in question—that the massive liquidation of such fictitious asset bubbles will be a good thing and will have no serious, long term impacts on your so-called “productive capital”—on capital values as a whole.”

      (g) “The issue from above was your claim that a financial collapse, a collapse in overvalued real estate assets would essentially be “good” for the real productive economy. At the same time, in referring to the impact of 2008, you did claim that its impact on the real economy was due to a credit crunch and a loss of “confidence.” “

      Are you really sure you want me to keep listing these instances of where you have claimed I’ve said something I haven;t, and where you now claim you never said it???

    • Boffy Says:

      2) Here is what you said about the idea that crises clear the way for renewed capitalist growth.

      “In essence all you are arguing is the old bourgeois adage about how the business cycle creates the basis for future advances of…..capital. “

      As for the other point raised there about you being the one calling for state intervention, how on earth are we then to understand your repeated comments attacking my statements about QE??? No rational person can read all of your comments above about the dire consequences you claim would result from its withdrawal, without concluding that what you are arguing for, thereby is for it to continue!!! In fact, my argument is not even about QE. My argument is that interest rates will rise whether QE continues or not, because the balance of demand and supply for money-capital is tipping the other way. QE might affect short rates temporarily, but only at the expense increasingly of higher inflation.

      But, the substantive point of my original comment in that regard is that one minute you were attacking me for saying that a removal of state intervention would not have the devastating effects you claim, and the next you were accusing me of demanding state intervention. Either way, an unsustainable position for you to hold old chap wouldn’t you say?

    • Boffy Says:

      3) Nowhere in the point I made does it even suggest that you had argued for an inflation of asset prices! It was simply an argument AGAINST your claim that a fall in asset prices would be a bad thing!

      The argument remains valid, you can’t on the one hand claim that a fall in the value of fictitious capital is a bad thing without by implication believing that an inflation of asset prices must by contrast be a good thing. Either you believe fictititious capital is somehow real, or you don’t.

    • Boffy Says:

      4) The argument here is purely semantic. My argument is not that investment in fictitious capital has literally diverted resources that otherwise would have gone to productive-activity. On the contrary, there has been sufficient money hoards that both could and have occurred. The point is that if the current levels of fictitious capital are reduced, the current tendency to see capital gains as an easy route to profit will disappear. The reason your statement was wrong is because it snatches a comment out of context of everything else I have said concerning the real reason why capital in the US, and UK did not go into high value production, and that was to do with government policies based on developing a low wage-high debt economy.

      • S. Artesian Says:

        Semantic? That really is hilarious. “My argument is that I didn’t really say what I said.”– That’s a bit different from your previous argument where you claimed you didn’t say what I said you said.

        And this: “As for the other point raised there about you being the one calling for state intervention, how on earth are we then to understand your repeated comments attacking my statements about QE??? No rational person can read all of your comments above about the dire consequences you claim would result from its withdrawal, without concluding that what you are arguing for, thereby is for it to continue!!!”

        Well, first i love the use of punctuation, triple exclamations points!!!! That’s like getting a “10” on the parallel bars in my book.

        What you say might hold water IF I HAD MADE A SINGLE STATEMENT ATTACKING YOUR STATEMENTS REGARDING QE!!!!!

        Care to show me where I made a single statement attacking your statements on QE? Care to show me a single statement where I predict dire consequences from its withdrawal???????

        I did not attack QE, nor did I advocate for QE. As a matter of fact I don’t even recall you attacking QE. The discussion began with your disavowal that 2008 was a result of overproduction.

        In response to your claim: “”In fact, as I said, if QE stops, and financial markets crash, there is every reason why that will not have any long term deleterious effect on the real economy.”

        I wrote:

        “Almost hilarious. That was the argument made in 2007, 2008….until Lehman Bros. was allowed to croak and then all those saying “who cares? won’t have any impact on the real economy” stopped laughing…. because… because behind the Lehman Bros. collapse was the collapse in profitability in major industries, the slowing in world trade (which preceded the collapse).

        If QE2 ends, and if the financial markets collapse it will be BECAUSE of the real economy, because the recovery in profitability has stalled and is in the process of turning down again.”

        Now just for the record, I opposed all the TARPS, capital injections, special investment vehicles, Maiden Lanes, etc etc. in 2008. It’s in writing, you can look it up. I was laughing because I remember clearly right before Lehman Bros. went under, everbody was being so blase about the financial economy, and how really, really, really, well the really really real economy was performing…and who cared if an investment bank or two went under?

        That’s way different than what you claim I said. And you have the audacity to accuse me of taking things out of context?

        Notice I said IF QE 2 ENDS, and if the financial markets collapse, it will because the recovery in the “real economy” has stalled out. Not vice-versa.

        Anyway, just a couple of points before I bid you good night,

        1. I disagree with your notion that Germany in contrast to the US is enjoying the fruits of its “different direction”– opting for “high value” as opposed to the US, UK model of “low wage, high debt” economies. Perhaps you’re too young, or to old to remember, but there was this period under this guy called Gerhard Schroeder (also known as Mr. Audi, and Lord of the Rings. You get to figure out why) who had this Agenda 2010, which basically reduced the welfare, and unemployment benefits available to laid off workers; raised the retirement age; made it possible for hiring workers at lower wages, without benefits (‘mini-jobs’) etc. etc. etc…. one of the results of which Agenda 2010 is that Germany has, I believe, the largest low paid/temp work “mini-job” sector in the EU.

        2) Marx in his Economic Manuscripts 1857-1864 is very clear about the relationship between accumulation and the recapitalization of surplus value: On page 207, vol 34 of the Collected Works, he writes. “Production considered a continually self-renewing act, or considered in the context of its constant renewal is reproduction. Accumulation is nothing but reproduction on an extended scale.”

        If capital is to accumulate, and I don’t think Marx was kidding about that Moses and the prophets bit, surplus value must be recapitalized and in sufficient quantities, which can, of course, be mediated by any number of incidents, temporal events, moments– most of which are of capital’s own creation and are the obstacle of itself to itself.

        So let me know when you come up with those statements condemning your remarks on QE2, and predicting dire consequences if it is withdrawn. I’ll be waiting, but I won’t be holding my breath.

  24. Boffy Says:

    Incidentally, Copper is sometimes called Doctor Copper, the metal with a PhD. in Economics, because its such a good measure of the level of economic activity.

    There is a graph of its price over the last 24 years here.

    Doctor Copper seems to be telling a rather different story to the one S. Artesian wants us to believe.

  25. S. Artesian Says:

    Uh…. actually I showed where you said those things. You did say a financial crisis would be “good for the economy” for the “real economy.” You did claim that fictitious capital is obstructing, impairing, etc. whatever real productive capital.

    I asked you back up your claims that I accused you of wanting to wreck the economy by opposing government intervention; your claim that I support government intervention– etc. etc. I’ve spelled out clearly enough.

    That you can’t, or won’t answer is clear also.

    You did claim the problem with the financial crisis was its impact on confidence, the credit crunch. At the same time you claim a financial crisis will be good for the economy, getting rid of the fictitious capital that you say impairs capitalist reproduction.

    So you think liquidating euro2 trillion in non-performing assets will have a salutary affect on confidence? On austerity programs? You think that will be accomplished without devastating the “real economy” of….even Germany, whose banks hold a bit more than just a bit of those non-performing assets?

    I don’t care one way or the other what happens to those non-performing assets, because it don’t matter what I “want” to happen. The issue is what capital must do to NOT SIMPLY restore its profitability, but to protect its power, its property.

    I quoted you in those matters. I never said you were advocating destruction of “real productive assets,” but I do say no way capital can liquidate the supposedly fictitious values without also destroying the supposed “real values” of capital.

    Get it Boffy?– you asserted that I said certain things about the economy– not just what you said– and I say your assertions are false, and given your apparent refusal to respond– deliberately so.

    • Boffy Says:

      So you admit then that you WERE and DID accuse me of wanting to crater the economy. It was that you claimed you had never said!!!!

    • Boffy Says:

      Here is what you asked me to show in your comment above.

      “Firstly, yesterday Artesian was accusing me of wanting to bring about wanton destruction of the economy by opposing Government intervention.”

      Where did I ever say that?”

      I’ve shown where you said it, then you compound your embarrassment by admitting you said, but further embarass yourslef by then trying to claim that the question or issue was something different to what you had asked.

      As I said, its symptomatic of your dishonest method of arguing, which also puts into context what your claim was a mistake in calling me “Boffo”.

      You’ve lost the argument on the substantive points, and now you’re just trying to obfuscate on to a ridiculous semantic argument about who said what, that you have also lost.

      I’ve much better things to do, and would prefer to discuss with people who have at least a decent understanding of what Marx actually said.

  26. S. Artesian Says:

    You’re a liar Boffy, plain and simple. A dissembler. That’s all there is to it. I refer you to your own dishonest iterations.

  27. michael roberts Says:

    Enough everybody. No more discussion (!) on this for a while. Let’s take a breather all round.

    Michael

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s


%d bloggers like this: