The global search for value

In my view, we are now in a Long Depression, centred in the advanced capitalist economies but also affecting the emerging capitalist economies.  The latter do better because they still have ample supplies of cheap labour available to exploit (well, at least some larger emerging economies do).   So absolute surplus value can be increased without Marx’s law of profitability applying too strongly.  What do I mean by that?

Well, capitalists are permanently engaged in the search for value, or more specifically, surplus value.  They can get that globally by drawing more of the population into capitalist production. The big issue is how much longer capitalism can continue to appropriate value from human labour power when the workforce globally can no longer expand sufficiently.

Ironically, the UK’s right-wing City paper City Am put it from the perspective of capital: “People, not commodities, land or even capital, are the ultimate resource of an economy, as the US academic Julian Simon famously put it. Without talented, motivated, skilled and educated individuals, nothing is possible; capital itself is a product of labour.  Human ingenuity is able to overcome everything. Malthusians who dream of a shrinking population and who reflexively believe that every country is over-populated are wrong. This is always a lesson that nations suffering from shrinking populations relearn at great cost: all the productivity growth in the world is rarely enough to compensate for the psychological and actual effect of a declining population.”

More important, more people means more potential value to be appropriated by capital.  But getting more value and surplus value through extending the size of the workforce is increasingly difficult or even impossible in many advanced capitalist economies.

ScreenHunter_18 Jul. 23 12.44

Instead, in these economies, capitalists must try and raise surplus value though the intensity of work and through more mechanisation and technology that saves labour i.e relative surplus value.  But that, as Marx explained, brings into operation the law of the tendency of the rate of profit to fall and the ultimate barrier to further accumulation and growth in value (see my post on https://thenextrecession.wordpress.com/2012/09/12/crisis-or-breakdown/).

Indeed the crisis in the south of the Eurozone is creating permanent damage to these economies: it is not just that their GDPs are shrinking, but there is an exodus of the workforce. The number of Greek and Spanish residents moving to other EU countries has doubled since 2007, reaching 39,000 and 72,000 respectively in 2011, according to new figures on immigration published by the OECD.  In contrast, Germany saw a 73% cent increase in Greek immigrants between 2011 and 2012, almost 50% for Spanish and Portuguese and 35% for Italians.

japan working age

Japan is also suffering from the lack of expansion of its workforce.  In the short term GDP per capita growth in Japan looks better than its GDP growth so that US GDP per capita growth in recent years is little better than Japan.  Indeed on a per capita basis, the US has been stagnant since 2008 and Japan has risen slightly.

US-JAP per cap growth

But longer term, this is bad news for Japan as its debt burden will mount and its working population to dependents will decline.  This is a growth and debt time bomb.  The move to crisis may be slow because Japan has huge reserves of FX reserves and foreign assets built up over decades so it has lots of funds to fall back on.  Japan’s net international investment position is 56% in the positive while the US is 19% in the negative.  Also its debt is mostly owned by its own citizens (only 7% by foreigners) while US government debt is 40% owned by foreigners.  However, the US dollar is still the world’s reserve currency, giving the US considerable leeway in funding its deficits and debt.  Japan’s banks and government are so intertwined that they will both go down together.  In the 1990s, the banks were bailed out by government; currently the banks are bailing out the government.  Next time, they both go down together.

George Magnus (Economic insights by George Magnus, 19 June, Demographics: from dividend to drag) recently pointed out that the support ratio in the US and Europe in the early 2000s was similar to that of Japan ten years earlier. It shows that from about  2016, the decline in China’s support ratio starts to speed up, so that by 2050, it will have fewer workers per older citizen than the US. It also includes India, by way of comparison, as the representative of the bulk of emerging markets and developing countries. India’s support ratio is predicted to grind lower but even by 2050, it will still be only the same as that in Western countries in the 1990s.  From the 1960s onwards – a little earlier in Japan – the total support ratio rose everywhere and more or less continuously, until about 1990 in Japan, and 2005-2010 in the US and Europe.  Japan’s support ratio is now approaching 1.5 workers per older citizen, and is predicted to carry on falling to parity in the middle of the century. The US and Europe are predicted to follow Japan, though support ratios are not expected to fall as far.

China and other emerging economies have not yet reached the point where the working population is no longer rising and the expansion of absolute surplus value is restricted – the so-called Lewis turning point (see my post, https://thenextrecession.wordpress.com/2012/11/16/chinas-transition-new-leaders-old-policies/).  But China is not far away.  In the meantime, China is pushing ahead with a sweeping plan to move 250 million rural residents into newly constructed towns and cities over the next dozen years — a massive of expansion of labour power into production.  The broad trend began decades ago. In the early 1980s, about 80% of Chinese lived in the countryside but only 47% today, plus an additional 17% that works in cities but is classified as rural.

And there are still huge reserves of labour as yet untapped, particularly in Africa.  The latest UN population projections for the world’s economies show that Africa is expected to dominate population growth over the next 90 years as populations in many of the world’s developed economies and China shrink.  Africa’s population is expected to more than quadruple over just 90 years,  while Asia will continue to grow, but peak about 50 years from now then start declining.  Europe will continue to shrink. South America’s population will rise until about 2050, at which point it will begin its own gradual population decline. North America will continue to grow at a slow, sustainable rate, surpassing South America’s overall population around 2070. 

ScreenHunter_15 Jul. 23 12.23

China’s population is soon expected to go into decline , whereas India’s is expected to grow strongly for another 50 years, and the US’ and Indonesia’s populations are projected to grow steadily. Nigeria’s population is expected to explode eight-fold this century.

ScreenHunter_16 Jul. 23 12.28

PEOPLE, not commodities, land or even capital, are the ultimate resource of an economy, as the US academic Julian Simon famously put it. Without talented, motivated, skilled and educated individuals, nothing is possible; capital itself is a product of labour.

Human ingenuity is able to overcome everything. Malthusians who dream of a shrinking population and who reflexively believe that every country is over-populated are wrong.

This is always a lesson that nations suffering from shrinking populations relearn at great cost: all the productivity growth in the world is rarely enough to compensate for the psychological and actual effect of a declining population, perhaps because there are hidden economies of scale in denser populations. The problems that go with increasing numbers of residents – the need for greater infrastructure and more homes – can always be fixed; but a shrinking population with a declining workforce and fewer consumers is a nightmare, and usually leads to relentless, debilitating, economic and cultural decline.

That is one of the reasons why the crisis in the south of the Eurozone is hurting so many countries so badly: it is not just that the economy is shrinking, but that it is triggering an exodus of the most ambitious, hardest working people. The number of Greek and Spanish residents moving to other EU countries has doubled since 2007, reaching 39,000 and 72,000 respectively in 2011, according to new figures on immigration published by the OECD yesterday. Germany saw a 73 per cent increase in Greek immigrants between 2011 and 2012, almost 50 per cent for Spanish and Portuguese and 35 per cent for Italians. Italy saw a fall in the number of immigrants of 11 per cent and immigration levels there are now 44 per cent lower than in 2007.

On average, 13.2 per cent of the OECD’s population is foreign born, peaking at 40 per cent in Luxembourg. In Britain, it’s now 12 per cent, in France 11.6 per cent, in the US 13 per cent and in Germany 13.1 per cent. Inflows into the UK were worth 0.52 per cent of the population, quite a lot higher than the US, France or Germany but less than the OECD average, the Netherlands, Denmark, Ireland or Spain, among others. The fiscal impact of immigration is negative for a few countries – but positive for the UK, both including and excluding pensions. Foreign-born men are more likely to be in work than UK-born men. The Malthusians have been proved wrong, once again.

– See more at: http://www.cityam.com/article/imagine-if-price-food-had-gone-fast-homes#sthash.F8CLK7ul.dpuf

AGAINST MALTHUS
PEOPLE, not commodities, land or even capital, are the ultimate resource of an economy, as the US academic Julian Simon famously put it. Without talented, motivated, skilled and educated individuals, nothing is possible; capital itself is a product of labour.

Human ingenuity is able to overcome everything. Malthusians who dream of a shrinking population and who reflexively believe that every country is over-populated are wrong.

This is always a lesson that nations suffering from shrinking populations relearn at great cost: all the productivity growth in the world is rarely enough to compensate for the psychological and actual effect of a declining population, perhaps because there are hidden economies of scale in denser populations. The problems that go with increasing numbers of residents – the need for greater infrastructure and more homes – can always be fixed; but a shrinking population with a declining workforce and fewer consumers is a nightmare, and usually leads to relentless, debilitating, economic and cultural decline.

That is one of the reasons why the crisis in the south of the Eurozone is hurting so many countries so badly: it is not just that the economy is shrinking, but that it is triggering an exodus of the most ambitious, hardest working people. The number of Greek and Spanish residents moving to other EU countries has doubled since 2007, reaching 39,000 and 72,000 respectively in 2011, according to new figures on immigration published by the OECD yesterday. Germany saw a 73 per cent increase in Greek immigrants between 2011 and 2012, almost 50 per cent for Spanish and Portuguese and 35 per cent for Italians. Italy saw a fall in the number of immigrants of 11 per cent and immigration levels there are now 44 per cent lower than in 2007.

On average, 13.2 per cent of the OECD’s population is foreign born, peaking at 40 per cent in Luxembourg. In Britain, it’s now 12 per cent, in France 11.6 per cent, in the US 13 per cent and in Germany 13.1 per cent. Inflows into the UK were worth 0.52 per cent of the population, quite a lot higher than the US, France or Germany but less than the OECD average, the Netherlands, Denmark, Ireland or Spain, among others. The fiscal impact of immigration is negative for a few countries – but positive for the UK, both including and excluding pensions. Foreign-born men are more likely to be in work than UK-born men. The Malthusians have been proved wrong, once again.

– See more at: http://www.cityam.com/article/imagine-if-price-food-had-gone-fast-homes#sthash.p72yzPkB.dpuf

8 Responses to “The global search for value”

  1. H. A. Cox Says:

    Michael, you said:
    ‘Well, capitalists are permanently engaged in the search for value, or more specifically, surplus value. They can get that globally by drawing more of the population into capitalist production. The big issue is how much longer capitalism can continue to appropriate value from human labour power when the workforce globally can no longer expand sufficiently.’

    If there were only expanded reproduction (without technical change) then eventually the size of the world population and its rate of growth would be an important consideration. but Marx clearly argues that accumulation is the independent variable and the demand for labor is the dependent variable.

    ‘ It is these absolute movements of the accumulation of capital which are reflected as relative movements of the mass of exploitable labour power, and therefore seem produced by the latter’s own independent movement. To put it mathematically: the rate of accumulation is the independent, not the dependent, variable; the rate of wages, the dependent, not the independent, variable’.p770 vol1
    ‘The law by which a constantly increasing quantity of means of production, thanks to the advance in the productiveness of social labour, may be set in movement by a progressively diminishing expenditure of human power, this law, in a capitalist society — where the labourer does not employ the means of production, but the means of production employ the labourer — undergoes a complete inversion and is expressed thus: the higher the productiveness of labour, the greater is the pressure of the labourers on the means of employment, the more precarious, therefore, becomes their condition of existence, viz., the sale of their own labour power for the increasing of another’s wealth, or for the self-expansion of capital. The fact that the means of production, and the productiveness of labour, increase more rapidly than the productive population, expresses itself, therefore, capitalistically in the inverse form that the labouring population always increases more rapidly than the conditions under which capital can employ this increase for its own self-expansion. p798
    It is not the lack of labor that is threatening the life of capitalism, but the decreasing-relative and eventually absolute demand of labor due to the constantly rising OCC. This is the basis for the tendency for the ROP to fall both relatively and absolutely.

    Capitalism is not moving production to the South in order to take advantage of the larger population there, but because they could avoid a direct confrontation with their working class by seeking a more exploitable population.

    How could you be so ‘irresponsible’ as to argue the contrary. Just kidding.. Thanks for being so open to expressing your interpretation of Marxian economics and respectful of those who differ.

    • michael roberts Says:

      Horace

      I agree that the rate of accumulation is the independent variable and the rate of wages the dependent variable, so that population growth does not decide the rate of profit or the avoidance of crises. And as you say, it was the rising OCC in the advanced capitalist economies, leading to a strong tendency for a falling rate of profit, that drove them to look for better profitability from emerging economies. Those economies have higher rates because their organic compositions are lower. And they are lower because of cheap labour supplies and the use of the latest low cost technology (in some cases). The multinationals seek to milk this value partly by trade by increasingly by investment and repatriation of profit. My tentative argument was that eventually – and there is a long way to go – once the growth of the global working population falls behind the rate of accumulation of capital everywhere, then Marx’s law of profitability will be decisive globally. But that perspective is a very long view and capitalism’s attempts to raise relative surplus value continue.

      • H. A. Cox Says:

        Michael, thank you for your reply.
        one important difference remains however. There is not necessarily any decline in OCC from foreign investment because the technology TCC can remain the same or even increase. If they send the same lathe to China, and hire a worker at half the wage, sv will be greater. So this means that the value Composition c/v will be higher even though the technology is the same. If you add to this a greater working day and a more intense one, sv can significantly grow and that which is captured by Imperialism will significantly dampen the fall in the rate of profit in their economy. This is the effect John Smith so well described in his Thesis.
        It is also why you need to measure the world rate of profit in order to be able to analyze the state of the world economy and where it is going. This world rate of profit would be the amount of capital advanced world wide and the amount of labor needed to put it in motion. That the statistics are not available or reliable forces us to look for the symptoms of a decline in profitability: increased debt, slow growth, increase unemployment and underemployment and increased attacks on the working class.
        Instead of directly attacking their working class, the US, Japan and the European powers preserve their capital by moving it South. But this is a short term remedy for the old imperialist, as the South is acquiring the dominance in productive power and the old Imperialist will become subordinated to the new guys. The last time this happened, we got two world wars and the Great Depression. Hopefully, working people can organize themselves before this process advances too far.
        A millennial salute to all

  2. H. A. Cox Says:

    This is the basis for the tendency for the ROP to fall both relatively and absolutely.
    Sorry, this should read ‘This is the basis for the fall in the ROP. It is also why accumulation must accelerate to maintain or increase the mass of sv, which will fall relatively and absolutely with the rise in the OCC.

  3. allan harris Says:

    “capital itself is a product of labour.” And this statement is from a right wing London newspaper? Do they even have a clue what the implications of that statement are?

  4. syzygysue Says:

    We need to get back to use-value instead of surplus value .. but then that wouldn’t be capitalism…

  5. Boffy Says:

    So, how does today’s US GDP figure coming in at 1.7% for Q2, compared with forecasts of just 0.6% fit with that analysis then Michael?

  6. vallebaeza Says:

    Reblogueó esto en Econo Marx 21.

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