Inequality and Britain’s oligarchs

In a recent post, I argued that the recent rise in the inequality of incomes and wealth in some major advanced capitalist economies, like the US and the UK, was not the cause of crises under capitalism, and in particular, the Great Recession.
https://thenextrecession.wordpress.com/2014/03/11/is-inequality-the-cause-of-capitalist-crises/

A correlation between rising inequality, slower growth and economic recession does not prove causation.  Indeed, I argued that rising inequality has been a consequence of capitalism trying to avoid slumps from declining profitability by trying to squeeze more out of the workforce in increased surplus value – during the neoliberal era.

The British think-tank Resolution Foundation published a study by Paolo Lucchino and Salvatore Morelli that looked at all the empirical evidence on this issue.  They concluded that “efforts to validate empirically the posited relationship between inequality and crisis have so far been inconclusive”.  Morelli had worked with the eminent ‘inequality economist’, Sir Anthony Atkinson (see my post, https://thenextrecession.wordpress.com/2013/07/14/the-story-of-inequality/) on a study of 25 countries over a long period and again they “did not find conclusive evidence supporting the hypothesis that a growing level of economic disparities leads to higher macroeconomic instability”.

But that does not mean the grotesque levels of inequality of wealth and income that have been reached can be ignored – on the contrary, these inequalities exhibit the rottenness of a mode of production that concentrates wealth in the hands of a very few while the billions globally are poor in every sense of the word. And being poor is bad for you.  The ever-increasing gulf between rich and poor in Britain is costing the economy more than £39bn a year, according to a report by the Equality Trust think tank.

The effects of inequality can be measured in financial terms through its impact on health, wellbeing and crime rates.  The report puts the annual cost of inequality to the UK at £622 for every man, woman and child, with a total of £12.5bn lost through reduced healthy life expectancy, £25bn lost through poorer mental health, £1bn lost through increased imprisonment figures and £678m lost through an increase in murders. But it points to the incalculable extra benefits of a higher level of community cohesion, trust and social mobility associated with less unequal countries.

The wider economic cost of mental illness in England alone is estimated to be £105.2bn each year, which includes direct costs of services, lost productivity at work and reduced quality of life. The cost of poor mental health to businesses is just over £1,000 per employee per year, or almost £26bn across the UK economy. In 2008-09, the NHS spent 10.8% of its annual secondary healthcare budget on mental health services, which amounted to £10.4bn. Service costs, which include the NHS, social costs, and informal care costs, mounted to £22.5bn in 2007 in England.  In a more equal UK, people could expect an extra eight and a half months of healthy life expectancy while rates of poor mental health could improve by 5%, valued at £24bn.

This sore in the side of humanity is getting worse, according to Thomas Piketty, one the world’s experts on global inequality (see his book, Capital in the 21st century at http://www.voxeu.org/article/capital-back and my post https://thenextrecession.wordpress.com/2014/01/13/americas-lost-generation-and-pikettys-rise-in-capitals-share/). Piketty recently commented: “According to Forbes’s global billionaires list, very top wealth holders have risen at 6 to 7 percent per year over the 1987-2013 period, i.e. more than three times faster than per capita wealth and income at the world level. Wealth concentration will probably stabilize at some point, but this can happen at a very high level.”

I already reported on the Oxfam report that found the wealth of 85 global billionaires is equivalent to that of half the world’s population – or 3.5 billion people. (see https://thenextrecession.wordpress.com/2014/01/23/more-on-global-wealth-inequality-davos-and-the-chinese-princelings/).  These figures came from the extensive analysis of the UN database by economists Anthony Shorrocks and Jim Davies, who found that the top 10% wealth holders had 86% of all household wealth globally while the bottom 41% had just 1% (https://thenextrecession.wordpress.com/2013/10/10/global-wealth-inequality-10-own-86-1-own-41-half-own-just-1/).

Now, as the UK government prepares to present an annual budget designed to cut welfare benefits further for the working poor and squeeze real incomes for the average earner, Oxfam reports the country’s five richest families now own more wealth than the poorest 20% of the population.  In its report, a Tale of Two Britains (mb-a-tale-of-two-britains-inequality-uk-170314-en-1), Oxfam said the poorest 20% in the UK had wealth totalling £28.1bn – an average of just £2,230 each. The latest rich list from Forbes magazine showed that the five top UK entries were the family of the Duke of Westminster, David and Simon Reuben, the Hinduja brothers, the Cadogan family, and Sports Direct retail boss Mike Ashley – between them had property, savings and other assets worth £28.2bn.  These are Britain’s own top oligarchs (aside from the Russian ones that live in London).

Indeed, the 100 wealthiest people in the UK have as much money as the poorest 18 million – 30% of all people.  The total wealth of these oligarchs rose £25bn last year to £257bn to surpass the £225bn held by the poorest 30% of British households.  And remember household wealth consists of the ownership of a house or flat, pension fund and other possessions like cars.  Total household wealth in the UK is £10trn, with the top 10% having £967bn and the bottom 10% just £13bn.  The bottom 10% really have no wealth at all except old cars and a few personal possessions.

Imagine a room with 100 hundred people.  90 people are so short they can hardly reach the door handle to get out.  Another nine people are only high enough to get a drink from the table. But one person is so huge that his or her head hits the ceiling and bursts through it.  Such is the scale of inequality and concentration of wealth.  Even the top 10% of wealth holders really own only their house that they live in along with maybe a reasonable pension. It’s the top 1% or even the top 0.1% who really have wealth in stocks, bonds and  commercial property and businesses etc.

You see what really matters is not personal wealth but the ownership of the means of production. That gives you power as well as wealth – this is what oligarchs have. What is decisive for capitalism is surplus value (profit, interest and rent), not wage income or spending.  Control of that surplus is key.  The main feature of the last 100 years of capitalism has not been growing inequality of income.  The main feature has been a growing concentration and centralisation of wealth, not income.  And it has been in the wealth held in means of production and not just household wealth.

I have mentioned this before but it is worth repeating. Three systems theorists at the Swiss Federal Institute of Technology in Zurich have taken a database listing 37 million companies and investors worldwide and analyzed all 43,060 transnational corporations and share ownerships linking them (see http://www.forbes.com/sites/bruceupbin/2011/10/22/the-147-companies-that-control-everything/). They have a built a model of who owns what and what their revenues are, mapping out the whole edifice of economic power.  They discovered that a dominant core of 147 firms through interlocking stakes in others together control 40% of the wealth in the network.  A total of 737 companies control 80% of it all.   This is the inequality that matters for the functioning of capitalism – the concentrated power of capital.

Britain’s oligarchs are part of this nexus.

42 Responses to “Inequality and Britain’s oligarchs”

  1. billjefferies Says:

    “Indeed, I argued that rising inequality has been a consequence of capitalism trying to avoid slumps from declining profitability by trying to squeeze more out of the workforce in increased surplus value – during the neoliberal era”.
    As if “capitalism” could *choose* to avoid slumps by raising inequality.
    Actually its much more straightforward, profits have been rising and so has inequality – which is an indirect indicator of the rise in profits.

    • Boffy Says:

      Quite. In Theories of Surplus Value III, Marx quotes Ricardo.

      “… the very meaning of an increased demand by them” (the labourers) “is a disposition to take less themselves, and leave a larger share for their employers; and if it be said that this, by diminishing consumption, increases glut, I can only answer, that glut […] is synonymous with high profits…” (op. cit., p. 59).

      Marx then comments.

      This is indeed the secret basis of glut.”

    • sartesian Says:

      Nope, capital-ism can’t “choose” to avoid slumps, just as it can’t choose to recover from them. What capital-ISTS can do is attack “v” the variable component, the wage-component of their costs.

      What capital-ISTS can do is attack living standards, transfer wealth up the social ladder, maintain and increase their share of total available national income above and beyond that attributable to increased profits.

      And you know what? That’s exactly what capitalist do do. How about that? It’s called class struggle.

      For all those who love quoting Marx so much , let me point to the statement by Marx where says that there comes a point in every crisis where the capitalist do attempt to drive the cost of labor-power below its value; i.e. drive the wage down below the level necessary for the reproduction of the class.

      Nice to see though somebody quoting Marx quoting Ricardo to the point that overproduction is the basis of profit; and overproduction is not underconsumption.

      • billjefferies Says:

        You seem to be suffering from the illusion that capitalists are only horrible during crises. News flash! Capitalists try and maximise profits all the time!
        Even then the fall in wages as a proportion of national income refutes your schema – no need for quotes. There has been a downward trend for the last thirty years starting in the early 1980s. During this recession, wages rose as a proportion of national income from 2008-9 during the crisis, but have fallen since then…during the recovery, or if you prefer, the period of rising profits, output and employment.

      • sartesian Says:

        I’m suffering from no such illusion. Capitalists like capitalism are “cyclical” in their actions. Sometimes they “accommodate” or pretend to accommodate “labor,” even mouthing an end to “bad old days” and hailing a new era as the US industrial capitalists did after WW2 (you can look it up); and at other times going on an offensive so to speak, attacking wages, attacking labor unions, seeking to decertify union, “running away” to more “capital favorable” locations– like the US South or the Guangdong..

        Exactly right, there has been a downward trend in wages since the 19 actually 70s, which correlates pretty well with the decline of the rate of profit from its 1969-1970.

        I never said that the bourgeoisie only “attack” during a crisis. But there is a difference between the relations of US capitalists to unions in the 1950s and 1960s, and the relations beginning in 1974 and certainly since 1981.

        And I never said wages will rise as a percentage of national income during a “recovery.” I only said that the bourgeoisie will attack wages, and other “social compensation” when profit generation becomes problematic.

        I said there are times when the class struggle becomes more intense, severe, confrontational– and that includes the actions of the bourgeoisie– although maybe you don’t think the increase in severity since 1980, on the part of the capitalists has anything to do with the rate of profit in the US not once exceeding its 1969-70 level.

        Maybe you’re right, maybe all this growing inequality in US capitalism takes place in periods overall slower growth, declines in industrial labor force, in unionized workers is just coincidence, and has nothing to do with long term measures of profitability.

      • sartesian Says:

        BTW, if you go to the BEA website and access table 1.10 which details the makeup of gross domestic income– you get these percentages for the share of GDI attributable to wages and salaries:
        2003= 44.7%
        2007= 44.3%
        2009= 43.6%
        2012= 42.6%

        (figures rounded)– I think I did the math right, but please chec,.

        I don’t know where Bill gets his numbers, maybe the same place Boffy gets his

      • billjefferies Says:

        Actually there is no such correlation simply because profit rates have been rising (generally speaking) from the early 1980s onwards. As your premise is wrong, so the rest of your argument falls.

      • sartesian Says:

        I never argued for a correlation; you argued that the wage and salary share of national income rose post 2008-9, it is not.

        Moreover as Kliman and others have so capably demonstrated, profit rates have not consistently risen, but have trended downward, experienced a structural decline, and even during recoveries– say 1994-1999, or 2004-2007 have not exceed the mark of 1969-1970.

        But keep on keepin’ on Bill, I expect nothing less, nor more, from someone who has referred to the 2008-2009 contraction as nothing more than a “blip.”

        Don’t let the real world get in your way.

    • Boffy Says:

      Bill,

      The other point that Marx makes is that particularly the bigger capitalists, because capital sees its profits coming from all of its capital not just from the exploitation of labour-power, tend to see the way of dealing with crises and lower profits, as being to reduce the price of the constant capital rather than by reducing wages.

      In Capital III, Chapter 6, Marx sets out that when the price of materials rise sharply this can hit profits, because the increased price cannot be passed on to their own final prices. A part of the increased cost has to be absorbed out of their surplus value. The reason it can’t be passed on could be because its a boom period, which has simply pushed up those material prices so sharply, or it could be simply that the elasticity of demand for the final product is such that the market will not stand any rise in final product prices, without a significant reduction in demand for them.

      In Capital III, Chapter 11, he sets out the different effect of wage rises on prices of production and profits. For, capital of the average composition, a general wage rise leaves its price of production unchanged; for capital of above average composition, it causes its price of production to fall; and for capital of below average composition it causes its price of production to rise.

      However, as Marx points out, these prices can only come about as a result of competition and a movement of capital from one sphere to another. The rise in price for the latter can only come about if capital leaves that sphere, causing supply to contract. It can only fall in the former if capital moves towards it, so that supply expands.

      In other words, big capital with higher than average composition can gain from a general wage rise, whereas the small capital with lower than average composition will lose and shrink. In fact, as Marx points out for big capital it is not the rate, but the mass of profit that counts. Even if the general rate of profit falls as a result of a wage rise, therefore, big capital can still gain, because its mass of profit may rise. For example, if the rate of profit falls from 10% to 8%, but the mass of capital employed in the above average composition sphere rises from £1 billion to £1.5 billion, its mass of profit will rise from £100 million to £120 million.

      Big capital always, therefore has more incentive to look towards reducing the cost of constant capital rather than wages as a means of boosting its profits. Moreover, for the reasons Marx sets out in his quote from Ricardo, any reduction in wages of the type described, would thereby reduce aggregate demand for consumption in the economy, and thereby make more difficult the realisation of its profits.

      As Marx says, the key here is to understand that the conditions for producing surplus value are not the same as those for realising it. The contradiction between these two requirements are, Marx says one of the causes of crisis.

      • sartesian Says:

        Well, then, let’s look at some big capitalists and how they’ve responded. Can we look at the auto industry? How has it responded? Did it look to reducing the costs of constant capital RATHER than the wage and benefit structure. No, of course not, because since capital is capital, is the relationship between wage labor and the means of production as value extracting– the bourgeoisie do both.

        In the auto industry they actually increased their fixed asset values through more extensive automation at the same time as they closed factories, reducing employment, changing work rules, spinning off the health care obligations to VEBA which was they funded with……..company stock.

        How about railroads–big enough capitalists for you. What was accomplished in the 1980s and 1990s through deregulation? All those secondary railroads, consolidations, spin-offs, abandonment of track– what accompanied all that reduction in constant capital costs– uhh…..let’s think. Oh yeah, US railroads went from employing 250,000 to employing today app 165,000. Work rules were changed, tiered wage structures were introduced.

        Certainly capitalists attempt to reduce their fixed capital burdens by spinning off sub-divisions, sections– utilizing sub-contractors etc–but here’s a couple of things in mind

        1.It’s the cost of production, and the cost of unit production, that the capitalists want to reduce.
        2.Replacing living labor by machinery is the way it does that.
        3.The accumulation of capital, which is the point of what capitalist do, means quite simply that the mass, the volume, of capital values embodied in machinery grows disproportionately to the value embedded in the wage component
        4. The “incentive to cut capital costs” rather than attack wage costs that Boffy opines about is nothing other than the thinking that says GE can afford $12/hr wages better than Sam’s Standard Light Bulb factory, employing only 50 people with a turnover of less than a million a year can.
        5. That’s wonderful, but exactly what has the real GE in the real world done? Has it or has it not attacked wages as an integral part of its strategy– has it not touted the “flexibility” that allows it to move its capital anywhere in the world to exploit cheaper labor?

        Of course, it’s the real world where all this gets sorted, so I really can’t expect any consideration of that world from a person who argues that Europe was growing at a rapid pace after 2009 and up until 2013, or that the EU runs a trade surplus with China.

      • Boffy Says:

        I’ve never said that Europe was growing at a rapid pace up until 2013!!! In fact, I’ve written lots of posts about why the introduction of austerity in 2010 undermined growth in Europe.

        I have written that Europe was growing strongly, as was the UK and US in the rebound after 2008/9, and a look at the charts showing a “V” shaped recovery for all those economies up to 2010 illustrates it. After 2010, the UK and EU recovery stalled, because of the introduction of austerity measures.

        US growth continued much stronger as the charts show. US growth would have been even stronger had it not been for the success of the Tea Party in frustrating some of the measures of fiscal stimulus at a local and state level, and their impact on the republicans at a Federal level, that limited further fiscal stimulus.

      • Boffy Says:

        “The “incentive to cut capital costs” rather than attack wage costs that Boffy opines about is nothing other than the thinking that says GE can afford $12/hr wages better than Sam’s Standard Light Bulb factory, employing only 50 people with a turnover of less than a million a year can.”

        No it isn’t, nor did I say so. Its based on what Marx says in Capital III, Chapter 11, which either you haven’t read or like most of your other arguments you haven’t understood. That is that a general rise in wages results in a fall in the price of production of capitals with a higher than average organic composition, and a rise in the price of production of capitals with a lower organic composition of capital.

        That implies that capital flows to the former and away from the latter. As Marx sets out the corollary of a falling rate of profit due to a higher organic composition of capital is a rise in the mass of capital, and the mass of profits. The bigger capital with a higher organic composition grows in size, and the smaller shrinks as a consequence of a general rise in wages.

        Even with a smaller rate of profit, the bigger capital obtains a larger mass of profit, for the reasons Marx sets out.

      • Boffy Says:

        “The accumulation of capital, which is the point of what capitalist do, means quite simply that the mass, the volume, of capital values embodied in machinery grows disproportionately to the value embedded in the wage component.”

        That’s not necessarily true either. Marx says clearly that the volume and value of fixed capital falls relative to the circulating constant capital. That is because one new machine replaces several older machines, and continually rising productivity reduces the value of all machines.

        The rise in the technical composition, which may or may not result in a rise in the organic composition (because it depends upon changes in values of variable and constant capital) is not a function of a rise in fixed capital, but is, as Marx describes a consequence of an increase in the quantity of material processed by a given quantity of labour, i.e. a rise in productivity.

        The quantity and value of fixed capital may rise relative to the variable capital, but it may not. For example, a machine minder may represent a small amount of variable capital, and work with a number of expensive machines. But, as the composition of the social capital changes, that machine minder may become say a typesetter, working with a PC that continually falls in value. Yet, the typesetter may represent more variable capital than did the machine minder. Moreover, the value of their output may be greater too.

        As Marx describes, as machines became more technological, for example the envelope producing machine that replaced several separate machines, even if the number of minders required falls, the value of the labour-power may rise, because it will require more skilled workers to operate it, and to maintain it. The point is that the machine saves paid labour-time overall, because it increases output considerably, so both the quantity of materialised and living labour per unit of output falls.

      • Boffy Says:

        Marx on the effect of wage rises and falls.

        “Consequently, if wages are raised 25%:
        1) the price of production of the commodities of a capital of average social composition does not change;
        2) the price of production of the commodities of a capital of lower composition rises, but not in proportion to the fall in profit;
        3) the price of production of the commodities of a capital of higher composition falls, but also not in the same proportion as profit.”

        Capital III, Chapter 11

      • sartesian Says:

        Here’s what you said Boffy, in a comment you posted on Michael’s “Greece Cannot Escape” article:

        “Until the last year or so, most of the Eurozone was growing strongly. In fact, Germany and some countries like Sweden were growing at almost BRIC levels. Germany continues to be the second largest exporter behind China, the EU has a trade surplus with China etc”

        The Eurozone was not growing strongly in fact from 2009-2013; as for “BRIC rates” depends on the BRIC and depends on the countries in the Eurozone, and by the way Sweden still uses the krona as its currency, not the Euro.

        The eurozone has not run a trade surplus with China, etc. for years now.

        Other than that, Boffy, you got everything right.

        As for technical and value compositions of capital, Marx states that there is a strict correlation (I think those are the exact words he uses, but maybe not) between the two, and that correlation is what he designates the organic composition of capital. The organic composition represents the “moment of transition” so to speak of each into the other.

        If you read closely Marx’s Grundrisse and the Economic Manuscripts 1857-1864, you will read Marx devoting considerable time and effort on fixed capital, in that it expresses the “purest” form of the relationship between accumulation and production; between the need to engage wage-labor in order to extrude value, and the need to expel wage-labor from the production process. Fixed capital for Marx, and the necessary growing proportion of fixed capital, which technical and value relation is expressed as the organic composition of capital, is central to Marx’s notion that the barrier to capitalist accumulation is the already accumulated capital.

        When you say this:

        “As Marx describes, as machines became more technological, for example the envelope producing machine that replaced several separate machines, even if the number of minders required falls, the value of the labour-power may rise, because it will require more skilled workers to operate it, and to maintain it. The point is that the machine saves paid labour-time overall, because it increases output considerably, so both the quantity of materialised and living labour per unit of output falls.”

        You are missing the point; the value of the labor-power so employed might rise, but the proportion of the value of the labor power in proportion to the value of the constant capital– the fixed and circulating portions– declines. The value embodied in any unit of production declines, and while the increase in productivity of labor allows labor to reproduce value l equivalent to the wage more quickly– at the end of the day, the declining unit values of the new product means that the profitability for the most advanced production centers can only be maintained by a transfer of value from the other producers– through the prices of production which serve to even out the rate of profit– unless of course some radical breakthroughs dramatically reduce the cost of the means of production, which means, all the already accumulated capital in the means of production GETS DEVALUED.

        This, this transfer of value, means that for the more costly, less efficient producers, cannot realize the full measure of surplus value they extract; that in effect they cannot circulate, float, recoup the costs of their investments in their productive machinery. They are devalued and the machinery gets– scrapped.

        Does some of it get sold to “less developed” markets, or to niche producers who,by cutting wage rates or through other means, squeeze some profit out of production? Yes. But the very meaning of a less developed market, of the niche production is that they cannot absorb all the devalued capital; that cannot manage a sufficient self-expansion of capital to offset the forces driving the declining profitability in the more advanced production centers.

        Of course circulating capital values outrun the fixed capital values– that’s the whole point of capitalist production, no? To turn increasing masses and values of the means of production into even larger masses and values of commodities.

        In the real world, I’d simply ask you to look at an industry over the years– like electronics production; like food; like chemicals; like petroleum; like transportation; and see if the rate of increase of the value of the wage per hour of production exceeds the rate of increase of the value of the fixed capital so engaged.

      • Boffy Says:

        “Here’s what you said Boffy, in a comment you posted on Michael’s “Greece Cannot Escape” article:”

        Nowhere in the quote you have cited do I say that the EU was growing strongly until 2013. You have made that interpretation to suit your argument. As I said I’ve written extensively about the Eurozone debt crisis and political crisis running from 2010 onwards!

        It doesn’t say all of the EU or Eurozone, it says “most of the Eurozone”, as most of the Eurozone is Germany, its true isn’t it. But, look at the growth figures for Germany, France, Netherlands, Sweden etc up to 2011, for example, and they were growing strongly.

        Do you deny that Germany continues to have a trade surplus almost as large as that of China? Germany does have a trade surplus with China itself. (See here

      • Boffy Says:

        The technical Composition of Capital is not just the relation between the quantity of fixed capital and quantity of labour. In Capital I, Marx defines it as the relation between the quantity of constant capital, and the quantity of labour-power. In other words a major component is the physical quantity of material processed by a physical quantity of labour.

        That is the reason there is a correlation, why it forms the basis of the organic composition. In Capital III, he sets out why it is that both the quantity and value of the fixed capital declines relative to the material processed.

      • Boffy Says:

        “You are missing the point; the value of the labor-power so employed might rise, but the proportion of the value of the labor power in proportion to the value of the constant capital– the fixed and circulating portions– declines.”

        Its not missing the point at all, because its addressing a quite different point, which is the point you made about the relation of fixed capital to labour, as opposed to the relation between the constant capital and labour. The point it is making is that generally speaking, the quantity of fixed capital and its value will rise relative to labour, even as it falls relative to the quantity of material processed, but this is not at all necessarily the case.

        The issue of the relation between the material and labour, or between the total capital to labour is a different issue both to the one you had made, or, therefore, the one I was responding to. The reply also missed the point of the role of the division of surplus value into interest, rent and taxes on the same basis, i.e. it had nothing to do with the point being addressed!

        If we address the more general question of the relation of the value of the variable capital to the total capital, then Marx makes clear that it can rise, remain the same, or fall, and does each of these both simultaneously and sequentially! It is in any case only relevant within any particular industry and not to capital in general across the economy, for the reasons Marx sets out that new industries are constantly being established, using the relative surplus-population, and the growing mass of profits, and these new lines of production are inevitably characterised by low organic compositions, and very high profits. The effect of this as Marx puts it is,

        “In either case the variable capital makes up a considerable portion of the total capital and wages are below the average, so that both the rate and mass of surplus-value in these lines of production are unusually high. Since the general rate of profit is formed by levelling the rates of profit in the individual branches of production, however, the same factor which brings about the tendency in the rate of profit to fall, again produces a counterbalance to this tendency and more or less paralyses its effects.” (Capital III, p 237)

        Note that this one factor alone “paralyses the effects” of any tendency for the rate of profit to fall, and does so because of the very same processes that create that tendency.

        The fact is that the quantity of constant capital has been relatively reduced, because the composition of production and consumption has changed with the development of these “new lines” that Marx describes – look for example at the percentage of household spending now on things such as leisure and entertainment – because capital has found ways of replacing some materials with other more efficient materials, and as Marx describes continually finds ways of reducing the amount of waste in production, and because it has found more efficient means of using materials – e.g. the huge relative fall in oil consumption per amount of energy produced, because it has developed new technologies and forms of fixed capital that are both cheaper and more efficient, and because rises in social productivity have reduced the value both of the fixed capital, and the circulating capital.

      • Boffy Says:

        Here is the chart of German GDP growth, showing that in some quarters it was growing at an annualised basis of nearly 5%. Germany.

        Here is Sweden.

        Netherlands

        ,a href=http://www.tradingeconomics.com/france/gdp-growth>France

        The rest of the northern European economies performance can be found from the same source.

      • Boffy Says:

        “Of course circulating capital values outrun the fixed capital values– that’s the whole point of capitalist production, no? ”

        Over time maybe, but in any particular period, not necessarily. As Marx describes the value of fixed capital falls faster generally than the value of materials, because the former is the result of industrial processes, where productivity can be increased rapidly, whereas the latter are the subject of natural processes.

        But, Marx also sets out how capital revolutionised Agriculture via crop rotation, selective animal breeding – his example of Bakewell sheep for instance. But, its true as Marx sets out that these constraints prevent material prices falling rapidly. But, the consequence of that is that when investment does occur, for example, the surge in exploration and development of copper and other mines, of fracking and so on, or the opening up of vast new industrial farms in Africa, the consequence is that a previous period of high prices caused by under supply is followed by a period of low prices caused by over supply, as these new resources come on stream.

        During such times its quite likely that material prices may fall relative to the prices of fixed capital.

      • Boffy Says:

        Here is the chart of German growth which shows that in some quarters during the period on an annualised basis it was nearly 5%.

        Germany.

        The data for Sweden, France and other Northern European economies can be obtained from the same source. The figures for Sweden are even stronger.

      • sartesian Says:

        Boffy the comment you made that I quoted was posted by you in 2014. The comment states until LAST YEAR of so, most of the Eurozone was growing strongly. I don’t how you do the maths on planet Boffy, but on planet earth if this is 2014, last year would be 2013.

        In response to your off planet claims I provide the EUs own information from its Eurostat bureau.

        I want to thank you for providing the link to the figures on Germany, since they confirm exactly what I said and refute exactly what you claim.

        Do the math, Boffy. Take the last quarter of 2008 as the baseline as 100, then take a calculator and adjust that 100 for every quarter’s growth as provided your source. What do you get for your final figure? Wait, maybe you don’t have a calculator wherever you are, maybe the reduced gravity changes the way the gates open on the circuits. I’ll do it for you– the cumulative growth from 2008 to the very end of the period your source provides over the several years is……about 2.4%.

        Maybe on planet Boffy a 5% annual rate of growth can over several years produce a cumulative growth of 2.4%, but if so, you better send a message to Eurostat to move their headquarters to your planet as the atmosphere up there will considerably improve the results from the data generated down here.

        You don’t want to be bothered with Eurostat’s own calculations? That’s OK Boffy. Just don’t pretend you are even in the same solar system as the rest of us.

        Where you get your 5% average annual rate of growth is anyone’s guess. As I said, I suspect you just make this stuff up.

        Now about that trade surplus you came the Eurozone’s been running with China– is that the China on earth, or the China you made up?

      • sartesian Says:

        Oh, and BTW, apparently your reading skills are no better than your math skills. The source you provide for German GDP growth states this in its narrative paragraph above the chart:

        “GDP Growth Rate in Germany averaged 0.29 Percent from 1991 until 2013….” If you annualized a .29% quarterly growth rate you get an annual rate of about 1.16 percent.

      • Boffy Says:

        “Boffy the comment you made that I quoted was posted by you in 2014. The comment states until LAST YEAR of so, most of the Eurozone was growing strongly. I don’t how you do the maths on planet Boffy, but on planet earth if this is 2014, last year would be 2013.”

        So, you agree then that nowhere does it say up to 2013. The operative words here being “or so” which means MORE THAN a year ago. You should not criticise other people’s reading skills when your own are so poor, and when you are so clearly hard of understanding. But, then as I’ve pointed out before, its not just that you do not udnerstand, its that you are a troll who is only interested in misunderstanding so as to provide yourself with a bone to gnaw at.

        That is true with your further apparently deliberate misrepresentation of what I said in relation to growth rates where I spoke of the rates in particular quarters being around 5% at an annualised rate, or is it that you don’t actually understand what that means?

        It is,of course, the case, that if you take figures starting from 2008, you will obtain a low annualised figure, precisely because it includes the huge drop in 2008/9!!!!

        You then deliberately distort the figures further by taking as your calculation period not up to the end of 2011, as I had suggested, but up to present!

        As I’ve said before, you are clearly a troll or have a troll like mentality. There is no point discussing with you.

      • Boffy Says:

        One final point.

        “In the real world, I’d simply ask you to look at an industry over the years– like electronics production; like food; like chemicals; like petroleum; like transportation; and see if the rate of increase of the value of the wage per hour of production exceeds the rate of increase of the value of the fixed capital so engaged.”

        The relevant analysis here would be not the relation between the increase in the rate of increase of the value of the fixed capital, and the rate of increase of wages, but the relation between the former and the rate of increase in value created by the latter.

      • Boffy Says:

        The following provides the quarter on quarter GDP growth figure for Germany on an annualised basis, which shows that it reached a peak of 5.2% in 2010.

        german annualised gdp q/q

      • Boffy Says:

        Correction 5.2% in Q1 2011, with strong growth on an annualised basis of more than 3% in the previous and succeeding quarters.

      • sartesian Says:

        Priceless, Boffy– with every sentence you demonstrate what a spectacular dissembler you are. To wit:

        B1. “So, you agree then that nowhere does it say up to 2013”.

        S1: I only repeat what you claimed and then show how your claims don’t have the slightest contact with reality.

        B2: “That is true with your further apparently deliberate misrepresentation of what I said in relation to growth rates where I spoke of the rates in particular quarters being around 5% at an annualised rate,”

        S2: That would be true if you ever spoke of quarterly rates of growth being annualized to 5% rates of growth in your original claims made in the “Greece Cannot Escape” comments. You did not. You said exactly what I said you said. You qualified it in this recent attempt to twist your way out the trick bag of your own nonsense. You said the Eurozone was growing “strongly” with some countries achieving “BRIC rates,” etc. etc. gabba-gabba-garbage. In the 23 quarters beginning with the recession, Germany has experience exactly 2 (TWO) quarters where the annualized growth would exceed 5%, and those 2 quarters were separated by a period of 6 months– 2 quarters separated by 6 months do not amount to an annualized rate of growth, nor even a trend.

        As for the rest of your bullshit, and bullshit is a euphemism– your original statement was made in 2014 about the period “up to about a year ago;” I have no intention of following your attempt to cherry pick data from 1 or 2 quarters that you then use to distort the overall trend, dynamic, and direction of a distinct period.

        Yes, I started I included the for quarters of the recesssion because it makes no sense to talk about “strong growth” without regard to the even stronger decline that preceded it– 10% growth after 20% decline leaves you 12% behind where you were. Every bourgeois twit knows that, but that’s because bourgeois twits actually exist here, on earth, not on Boffy’s planet of magical thinking.

        in any case, work the numbers Boffy– do the calculation for the months of recovery only. Wait, I’ll do it for you: in the 19 months of “recovery” from the recession, cumulative growth of Germany’s GDP has been 7.75%– So in 5 years (almost) of “recovery” the annual rate of GDP growth comes out to be about 1.45%. That’s some growth. You want to do the numbers for up to “about a year ago” ? Go right ahead.

        The point is– you make things up to suit your own fantasy.

      • sartesian Says:

        Just so we’re clear, I’ll reproduce Boffy’s original comment from the Greece thread; and my response to that comment from the same thread:

        Boffy: “Until the last year or so, most of the Eurozone was growing strongly. In fact, Germany and some countries like Sweden were growing at almost BRIC levels. Germany continues to be the second largest exporter behind China, the EU has a trade surplus with China etc”

        Response: “Boffy wrote:

        “Until the last year or so, most of the Eurozone was growing strongly”

        I don’t know where Boffy gets his information, and I’m beyond caring. Personally, I think he makes things up to suit whatever “let’s welcome capitalist growth” nonsense he happens to be flogging.

        However, the above claim by Mr. Boffy is so ridiculous that it represent, at best, cognitive dissonance.

        According to the EU’s official statistical agency, Eurostat,
        annual percentage “growth” in GDP in the Euro area since 2008 has been -4.4% (2009); +2% (2010); +1.6% (2011); -0.7% (2012). Summing up the “growing strongly” has left the Euro area GDP 1.67% BELOW its 2008 level. That’s some strong growth, aint’ it?

        GDP isn’t a good measure? Want to try industrial production? Which for the euro area in 2013 was still about 10% below its previous “non-crisis/crisis” peak?

        Or investment rate of non-financial corporations in the euro area? OK, in 2012 that was about 16% below the rate of 2008.

        Or gross fixed capital formation? Down some 15%.

        With growth like that, who needs recession?

        And that bit about “trade surplus with China”?? That’s absolute nonsense. The EU has run a negate balance with China every year since 2003. The deficit has declined since 2008, but that’s because of the lack of growth, not because OF the growth.

        You can look all this stuff up on the Eurostat website. And it’s free.

        http://epp.eurostat.ec.europa.eu/portal/page/portal/statistics/themes. :

        I leave it to others to decide who’s distorting what and who’s the troll.

      • Boffy Says:

        Yes, its quite clear you are the troll. You take things that were said out of context, you take what is said in one place and then pretend it was said in another, in order to reply to it according to your argument, and so on.

        Nowhere does it say until 2013, that was your claim. It says “last year or so” ,i.e. more than a year, and given that I’ve written lots of posts about the debt crisis in the Eurozone AFTER 2010, its clear what period I was referring to, and it was not your insistence on again putting words in my mouth by claiming it was 2013.

        Germany does have a trade surplus with China, it is the second largest exporter behind China, its q/q annualised GDP growth in Q1 2011 was 5,2%, its annualised growth in the preceding and following quarters was more than 3%. Sweden’s growth was also very strong.hitting 7.7% annualised q/q growth at the end of 2010. I’d say that was pretty BRIC like for the period.

        But, as I said, there’s no point discussing with you, because you are clearly a troll, and not interested in an honest discussion.

      • Boffy Says:

        Just to make your distortion clearer, its useful to look at what I actually said, and what you have distorted it to say. You treat “last year or so” to mean last year, i.e. 2013, but it doesn’t say that does it.

        It doesn’t say last year, which would be 2013. Even leaving aside the addition of “or so”, which in that context would be meaningless. It says “THE Last year or so”. In other words a period of more than a year, by which the intention was to say until a few years ago.

        But, we’ve been down this road before, where no matter how much I state clearly what it is that was meant by a particular formulation of words, you continually interpret those words to suit the particular bone you want to gnaw away at.

        Totally pointless for anyone other than a troll. Better things to do. Bye bye.

      • sartesian Says:

        OK Boffy, you said something in 2014 about what happened up until about a year ago, but according to your luna-tic calendar that doesn’t mean up until about 2013.

        I haven’t put any words in your mouth. I’ve quoted you. You don’t like the sound, or the taste, of your own words? Too bad for you.

        Points of fact. Germany IS NOT the eurozone; nor is it the EU; neither the eurozone nor the EU have run trade surpluses with China in the last 10 years; Sweden is not a member of the Eurozone; growth for one quarter does not amount to “BRIC” like growth, since all the hoopla about the BRICS was/is about their record of SUSTAINED growth over long periods of time and the “great potential” for continued rapid growth over long periods of time.

        You might as well call the Philippines in the 1980s one of the “new Asian tigers” because it experienced a single quarter of “tiger like” growth.

        You make stuff up Boffy, and you’re structurally incapable of acknowledging your responsibility for what you yourself have written.

        “Out of context,” my ass.

        If integrity were dynamite, you wouldn’t have enough to blow your nose. You are not an honest person.

      • Boffy Says:

        Actually, just one further example of just how you both don’t have a clue about the measurement of growth rates, and how you misrepresent what has been said.

        Above you wrote,

        “Where you get your 5% average annual rate of growth is anyone’s guess. As I said, I suspect you just make this stuff up.”

        But, nowhere have I said any such thing!!! I spoke HERE about an annualised q/q figure of more than 5%, which is why I was dealing with that, and why your argument that I did not talk about such a q/q growth rate several months ago is totally meaningless, and an example of how you take what is said at one time, and then pretend it was said at some other time.

        The data I’ve provided show exactly what I said, an annualised q/q growth rate of 5.2%.

        Here is the similar data showing an annualised q/q growth rate of 7.7% for <a href=http://www.tradingeconomics.com/sweden/gdp-growth-annual.

        That really is the last word.

      • sartesian Says:

        Boffy, remember what Ripley said in Aliens?: “Did IQs drop sharply while I was away.” She was lost in deep space for 57 years. Still she managed to understand what was real and what was nonsense. I don’t know how long you’ve been in deep space, but apparently you cannot distinguish between the real and the nonsensical.

        You said that “up until about a year go” the Eurozone was experiencing strong growth– you produced quarterly data on the growth of one Eurozone country, Germany, and point to an annualized rate of growth based on those quarterly figures of 5%– annualized rate of growth based on quarterly figures is functionally, logically, and syntactically the equivalent of average annual rate of growth.

        That you now what to amend your claim to a single quarter is your problem with your original claim not mine.

        The “annualized rate of growth quarter to quarter” is meaningless if indeed that growth does not continue for the year. The economies grows at 5% annualized rate of growth in 1 quarter, and a 1% annualized rate of growth for 3 quarters– how much has it grown in the 4 quarters? The answer Boffy is about 1.7 -1.8 percent. That is NOT evidence of strong growth– but it is evidence of just what a boob you are. (No offense to boobs in general)

        Take your leave, Boffy. You already said Bye-bye. Climb back into your space shuttle, Challenger II, and take your major malfunctions somewhere else.

      • sartesian Says:

        And once again, Sweden is NOT a member of the eurozone. Claim otherwise as you might, repeat your mantra that it is a member of the eurozone every nigtht with your bedtime prayers– Sweden is not now and was not a member of the Eurozone.

  2. Edgar Says:

    Your data would suggest that, rather than having any problems of profitability/extracting surplus value, the global elite has been doing extremely well.

    Maybe the crisis is not profitability but monopolisation and all that brings.

    • Tony Says:

      The ruling certainly has big profits. Profitability is a different thing.
      Monopoly brings AND requires a rising organic composition of capital, and therefore a crisis of profitability

      • Boffy Says:

        No it doesn’t, because as Marx says, the rising composition of capital implies also a strongly rising mass of capital, which means a strongly rising mass of profits. The idea that capital must suffer at some point a falling mass of profit was the idea put forward by the Malthusians and Ricardians against which Marx argued.

        As Marx says, the tendency for the RATE of profit to fall is merely the other side of the coin to the fact that for it to happen the MASS of profit must rise. And, as Marx says in Capital III, for big Capital it is the mass of profit, not the rate of profit that counts. As he says, the rate of profit is only significant for that “plethora” of small capital, that which is encouraged into production by periods of boom and high profits, as he describes in Capital I, where former workers and managers are encouraged to set up on their own etc., the people who set up entirely with borrowed capital and so on, for whom the rise in the mass of profit does not compensate for its fall. Its the latter that end up in trouble, and their capital snapped up by their larger brethren on the cheap, who have been able to continue to expand, because their own mass of profit continues to rise.

        Given that today, Capitalism is characterised by the dominance of big capital, its the continual rise in the mass of profit, not changes in the rate of profit that have most significance.

  3. vallebaeza Says:

    Reblogged this on Alejandro Valle Baeza.

  4. Boffy Says:

    This comment by Marx in relation to how the rate of profit affects the rate of accumulation is interesting.

    “”All other things being equal, the power of a nation to save from its profits varies with the rate of profits: is great when they are high, less, when low; but as the rate of profits declines, all other things do not remain equal…. A low rate of profits is ordinarily accompanied by a rapid rate of accumulation, relatively to the numbers of the people, as in England … a high rate of profit by a slower rate of accumulation, relatively to the numbers of the people. Examples: Poland, Russia, India, etc.” (Richard Jones, An Introductory Lecture on Political Economy, London, 1833, p. 50 ff.)

    Jones emphasises correctly that in spite of the falling rate of profit the inducements and faculties to accumulate are augmented; first, on account of the growing relative overpopulation; second, because the growing productivity of labour is accompanied by an increase in the mass of use-values represented by the same exchange-value, hence in the material elements of capital; third, because the branches of production become more varied; fourth, due to the development of the credit system, the stock companies, etc., and the resultant case of converting money into capital without becoming an industrial capitalist; fifth, because the wants and the greed for wealth increase; and, sixth, because the mass of investments in fixed capital grows, etc.”

    So, according to Marx a lower rate of profit causes increased accumulation, because individual capitals seek to raise the rate of profit by investing in new technologies and techniques, so as to reduce the cost of constant capital. But, also Marx’s comments in relation to the “relative overpopulation” are also significant.

    The relative-overpopulation is combined with an increase in the mass of surplus value resulting from a rise in relative surplus value caused by rising productivity. This increased mass of surplus value, is then used to create new industries etc. which use this relative overpopulation. The nature of these new industries is such that they produce a high rate of profit. In fact, according to Marx,

    “In either case the variable capital makes up a considerable portion of the total capital and wages are below the average, so that both the rate and mass of surplus-value in these lines of production are unusually high. Since the general rate of profit is formed by levelling the rates of profit in the individual branches of production, however, the same factor which brings about the tendency in the rate of profit to fall, again produces a counterbalance to this tendency and more or less paralyses its effects.”

  5. Boffy Says:

    Bill,

    You are quite right that the rate of profit has been rising since the 1980’s. The data on wages and incomes do not prove that, however, they only demonstrate that the rate of surplus value was rising. In fact, all measures of the rate of profit I have seen are really measures of the rate of surplus value, not the rate of profit as Marx measures it, because they are based on NI data, which does not show c, it only shows v + s. In other words, it is the same mistake that Marx criticised Adam Smith for in the Trinity Formula.

    At best, some measures like Doug Henwood’s measure an approximation of surplus value against wages plus fixed capital, but that still leaves out all of the circulating constant capital. Given that as Marx says, the quantity and value of fixed capital falls relative to the circulating constant capital, that means the figures are seriously flawed.

    One reason the rate and mass of profit has been rising strongly is that with this rise in the rate of surplus value, there has also been a massive reduction in the value of fixed and circulating constant capital, as big capital has focussed on trying to reduce those costs.

    For example, the rise in GDP has been seven times the rise in the consumption of oil since the 1980’s, which reflects the fact that investment into more efficient means of using materials was introduced. Similar transformations have occurred in the use of materials across the economy.

    In addition, the nature of the economy has been changing so that many old industries like the car industry occupy a smaller portion of the total social capital, particularly where they have moved to low wage economies. Those industries that occupy an increasingly larger part of the social capital, often use much less fixed capital, and frequently very little in the way of circulating constant capital.

    As Marx sets out in Capital III, Chapter 11, for big capital a general rise in wages causes its price of production to fall, which entails a movement of capital away from small capital to this bigger capital, and frequently, therefore, a rise in its mass of profit. Each of these firms seeks to reduce its unit costs by reducing the costs of its fixed capital, and materials.

    As Marx points out, in this process, the quantity and value of fixed capital falls relative to materials, because one new machine replaces several older machines, and the rise in productivity and development of technology reduces the value of the new machines introduced. That in itself raises the rate of profit.

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