I’ve just attended a one-day workshop on the rate of profit and crisis organised by Simon Mohun, Al Campbell and other Marxist economists as a prequel to the annual IIPPE conference taking place in Leeds over the next few days. And an excellent initiative it was too.
Simon Mohun, emeritus professor of economics at Queen Mary College, London, opened the first session with a presentation on Marx’s value theory and its relation to the capitalist accumulation process and Marx’s law of the tendency of the rate of profit to fall. Mohun started by making the key point that values equal prices in the aggregate. This is the ‘conservation principle’ that labour value equals prices in the whole economy, although at the level of individual commodities, price can vary from value. Indeed, the value of labour power (the socially necessary labour time taken to produce the commodities that workers consume in order to work) will not match the real wage (the price of labour). Prices of production of commodities vary from their value through competition among capitalists, leading to an equalisation of the rate of profit across an economy.
Under capitalism, the accumulation process is designed to increase the level of technique and the productivity of labour so that ‘relative’ surplus value rises (surplus value as a share of total new value). Increased productivity will lower the value of commodities as measured in labour time as the number produced rises in a fixed time period. So there are more use values and less exchange value – the great contradiction.
Mohun summed up Marx’s main assumptions or postulates as 1) capitalist accumulation leads to rising labour productivity; 2) real wages rise as the value of labour power cheapens; and 3) and there is usually a rising capital-labour composition. According to Mohun, these postulates may lead to a fall in the rate of profit but it is indeterminate (shades of Heinrich here).
Having previously pointed out that an explanation of a falling rate of profit based on rising wages was originally that of the classical economist David Ricardo and effectively refuted by Marx, Mohun seemed to accept that if real wages stay constant, then the rate of profit must rise. This latter point is the conclusion drawn from the so-called Okishio theorem that no capitalist would voluntarily introduce a new machine or technique unless it reduced the cost of production (labour costs) and raised profitability. So, according to Okishio, wages must rise before the rate of profit can fall. Mohun seemed to accept the theorem but argued that Okishio was refuted because, in reality, real wages have risen as the value of labour power has fallen, so Okishio is addressing the wrong issue.
Actually, Okishio is wrong anyway about the capitalist accumulation process, not Marx, as several authors, like G Carchedi (see Behind the Crisis p87-92 http://digamo.free.fr/carched11.pd), Andrew Kliman (see Reclaiming Capital, chapter 7) and others have shown. The Okishio theorem assumes a simultaneous change in prices of inputs to production and outputs – a physical impossibility in the reality of production over time. Investment is first, production second and realisation last. They can all be at different values or prices. Reality is temporal. In period one, capital is advanced for labour and means of production at a certain price or value. Then a new technique is introduced and the cost of production falls. Commodities are produced at a lower value or price BUT not the original investment. That was advanced at the older (higher) price. So the rate of profit can and will fall without a rise in real wages.
Moreover, using game theory and the ‘prisoners dilemma’, Mohun brilliantly showed why Okishio is wrong in practice. Marx’s argument was that, if one capitalist innovates to gain a higher rate of profit over others, eventually the others will be forced to innovate too, leading to an equalisation of the rate of profit at a lower level (as the organic composition of capital rises). Here is how I understood Mohun’s schema that shows why innovation under capitalism and competition can lead to fall in average rate of profit, contrary to Okishio.
There are two capitalists: A and B. Each starts with 3 in profit. If neither A and B innovate to reduce costs and boost profits, A stays at 3 and B stays at 3. But if A innovates and B does not; then A gets a higher profit (4) while B loses market share and gets only profit (1). Alternatively, if A does not innovate and B does, then A gets 1 and B gets 4. If both innovate, then A gets 2 and B gets 2. There is a drive to innovate because A or B can raise profit from 3 to 4. So there cannot be an agreement not to innovate, leaving A on 3 and B on 3. But if one innovates first to get 4, then the other must do so or its profit will fall to 1. But with both innovating, they both end up on 2 instead of 3 (if they had done nothing). So innovation boosts the individual profit of the leader but eventually when both innovate, the profit is lower. Again, this is over time. If A and B could simultaneously introduce the innovation (as Okishio assumes), then they may not do so, and stay at 3, rather than fall to 2. But that would not be reality. Reality is temporal.
Despite these arguments for Marx’s law of profitability, Mohun left us wondering whether Marx’s law is ‘indeterminate’ and so does not explain or show why the rate of profit will or must fall. Mohun also threw doubt on whether the rate of profit has actually fallen in reality. Mohun pointed out the huge difficulties in measuring the rate of profit a la Marx from official statistics and we don’t have much more than the US or the UK to work on. And Mohun left open the question of whether Marx’s law related in any way to crises.
Actually, Mohun himself has done excellent empirical work on the UK rate of profit in the inter-war period and more recently delivered a super paper on measuring the share of wages and profit in the US economy (ClassStructure1918to2011wmf.) Indeed, I’d like to think that some of us have made progress on the calculation issues and also in looking at profitability of capital globally beyond the US. In that latter regard, I have done work on a world rate of profit and even more recently a study of the UK rate of profit over the last 150 years (UK rate of profit August 2015). And don’t forget the sterling work done by Esteban Maito on a world rate of profit based on 14 countries. Next year, G Carchedi and I will publish a book containing the work of several young scholars who have measured the rate of profit in many countries globally. These analyses will give renewed support to the relevance of Marx’s law of profitability. Work is being done empirically.
John Weeks, eminent emeritus professor of economics at London’s SOAS university and author of many great books on Marxist economic theory took up the issue of the causal process between Marx’s law of profitability and crises. He presented a flow chart that showed various possible outcomes (John Weeks handouts-1 (1)). Weeks said we needed to define exactly what we meant by a crisis – which he reckoned was a significant sharp fall or contraction in output. This is a point he made in a recent paper and I agree with him there. If that is the definition of crisis, then Weeks reckoned there have been only three capitalist crises: the 1880s, 1930 and now. I prefer to call these depressions and have outlined before the difference between ‘normal slumps’ and depressions.
But be that as it may. As far as I could see, Weeks did not reach a conclusion about how Marx’s law could lead to crises, as he defined them. You see, for Weeks, just a small fall in profitability cannot cause a crisis. It needed to be big and long-lasting. So, according to Weeks, we don’t have any proof of a connection between profitability and capitalist crises. Well, actually, several authors have done just such work on the connection between profitability and growth in the post war period. And G Carchedi has recently published a new paper showing the close connection between a change in new value (a fall) and recessions. And I have raised the work of Tapia Granados on the causal connection between profits and investment in my blog on numerous occasions. Apparently, all this has passed Weeks by.
Professor Alfred Saad-Filho, also at SOAS , then presented the workshop with a comprehensive history of the various interpretations of Marx’s crisis theory: overproduction (Engels-Kautsky); underconsumption (Luxemburg, Sweezy) disproportion (Tugan-Baronovsky,Hilferding) and the tendency of the rate of profit to fall (proponents of which he called ‘fundamentalists’ of a somewhat sectarian nature!). For Saad-Filho, we needed to get away from adopting one interpretation of Marx’s incomplete crisis theory over another. They were all in Marx at some point. What we needed to do was integrate or synthesise them into one comprehensive theory to explain capitalist crises. This still needs to be done, according to Saad-Filho. But he did not provide any guide or show any progress on how to do this, except to present his own version of ‘financialisation’ as the cause of the current ‘neoliberal’ crisis.
Indeed, that appeared to be the conclusion I draw for the day as a whole. I learnt about Marx’s value theory and the law of profitability; I learnt about the need to show how it connected or led to crises; I learnt how Marxists before have adopted all sorts of explanations for crises that have proved to have significant faults. But if this workshop is any guide, Marxist economics has not reached any definitive conclusions on these issues. We don’t seem to have progressed much in delivering a coherent Marxist theory of capitalist crises since Marx died.
Actually I beg to differ: I’d like to think we have made progress, especially recently and even to the point of making predictions. Still the workshop was very good. We need more.
Michael Roberts Blog 
“Then a new technique is introduced and the cost of production falls. Commodities are produced at a lower value or price BUT not the original investment. That was advanced at the older (higher) price. So the rate of profit can and will fall without a rise in real wages.”
The problem here is that you are considering the rate of profit only on the very limited basis of money prices, but Marx is clear that the real essence of the rate of profit viewed as part of the process of social reproduction has nothing to do with those money prices, it is only the value of the material elements of social reproduction that he is concerned with, a fact he sets out at length in the concluding chapters of Capital III, and at even more length in Theories of Surplus Value, where he considers the schemas of reproduction set out by the Physiocrats.
Marx makes clear for example, in Capital III, and in TOSV that there are essentially three funds involved in this process of social reproduction the first reproduces the means of production, the second the means of consumption of the workers, and the third is the social product left over, the surplus product, which is the physical equivalent of the surplus value.
He also makes clear in those references that it is the physical product which must be reproduced in order for this process of social reproduction to occur.
In Chapter 49 he writes,
“This entire portion of constant capital consumed in production must be replaced in kind. Assuming all other circumstances, particularly the productive power of labour, to remain unchanged, this portion requires the same amount of labour for its replacement as before, i.e., it must be replaced by an equivalent value. If not, then reproduction itself cannot take place on the former scale.”
In other words, Marx deals here specifically with the question of the changed value of the means of production, just as he does earlier in capital, where he sets out clearly that its value must be based upon its current reproduction cost, not the money price paid for it in the past.
If productivity rises, then the same use values required to ensure that the means of production are replaced “in kind” requires less current social labour-time, i.e. the value of the means of production falls, and vice versa. The same is true in relation to the use values required to reproduce the labour-power consumed, on the same scale.
Consequently, viewed in terms of current social production, a smaller proportion goes to reproducing the means of production, and/or the means of consumption, whereas the amount left over as surplus product rises, and also the ratio of the value of this surplus product to the value of means of production, and means of consumption also rises, which is manifest in the fact that such a society is able to thereby accumulate at a faster rate.
It is viewing the situation from the perspective of the fetishisation of money prices that obscures this value relation, which Marx analyses at length following upon the methodology of the Physiocrats.
The way that Marx views the constantly changing capital-value (productive-capital, commodity-capital, money-capital) in the continuous process of production, which necessarily means that output prices from one stage of this continuous process are simultaneously the input prices of the next stage of that continuous process is shown by the statement from Marx in Volume II.
“In calculating the aggregate turnover of the advanced productive capital we therefore fix all its elements in the money-form, so that the return to that form concludes the turnover. We assume that value is always advanced in money, even in the continuous process of production, where this money-form of value is only that of money of account. Thus we can compute the average.” (Capital II, p 187)
In other words, as stated above, Marx in analysing this process, and determining the rate of profit has no interest in ephemeral historic prices from this perspective. Money prices here are only money equivalents of the constantly changing capital-value. In other words, as Marx says clearly here, the analysis is undertaken on the basis of these constantly changing values, with money merely acting as unit of account, in order to rationally make calculations in relation to those constantly changing values.
If only Marx meant was Boffy wishes he meant, and Okishio was arguing.
Of course purchase prices for inputs vary for each period, each partial turnover of capital. Just as the capitalists aggregate all those input prices when calculating their cost of production, and use that aggregation as the denominator when figuring the return (on sales, expenditures, whatever) so to is Marx. In fact, in performing this aggregation, the capitalist performs, or provides really, a FRACTAL representation of the equivalence of money prices and total value in sum, aggregate, and average.
Reblogged this on Ghostishynting.
“But if A innovates and B does not; then A gets a higher profit (4) while B loses market share and gets only profit (1). ”
This is not what Marx says in Capital I, describing this process, nor does it comply with his analysis of prices of production. In Capital I, Marx says the effect of one firm introducing a new machine or technique is to reduce their individual commodity value, but because the firm continues to sell the output at the market price, they make a surplus profit, and this has the effect of making the labour of their workers appear as though it were complex labour in relation to the labour of the other firm.
Marx points out that the first firm may reduce their price slightly to be able to sell all their output, but he does not suggest that this is at the expense of the mass of profit of the second firm. In relation to the prices of production, the mass of profit appropriated by each firm is determined by the price of production of each commodity unit multiplied by the volume of each firm’s output, minus their respective costs of production.
As the first firms output will be greater as a result of its higher productivity, it will acquire a greater mass of profit, but this does not not necessarily affect the mass of profit of firm 2. Firm 1’s profit will be greater, because its costs of production are lower than those of firm 2 and its level of output is greater. But, its not a zero sum game.
Firm A’s rate of profit will be higher, because its mass of profit is greater, but its cost of production lower, than for firm 2. That will encourage firm 2 to introduce the new technique. As each firm adopts the new technique, the advantage for each firm is equalised, and as Marx and Mohun describe the consequence is that the market value of the particular commodities falls.
But, its impossible to know from this whether the consequence will be a fall in the rate of profit in that industry or generally, for the reasons Marx sets out. In other words, the rise in productivity may cause the rate of surplus value to rise to an extent whereby the rise in the mass of surplus value rises, even as less labour is employed.
But, also from the perspective of social production, any consequent rise in productivity, may well as Marx sets out lead to an expansion of capital on a greater scale, because not only is the rate of surplus value increased, but capital is released. The released capital may then be employed in other industries where the rate of profit is high, so that the effect is to raise the average rate of profit.
Amazing how some can complicate the critique of capital by making Marx’s analysis an exercise in opaqueness.
Says Boffy:
“The problem here is that you are considering the rate of profit only on the very limited basis of money prices, but Marx is clear that the real essence of the rate of profit viewed as part of the process of social reproduction has nothing to do with those money prices, it is only the value of the material elements of social reproduction that he is concerned with….”
The issue isn’t how Marx looks at the rate of profit, or how Michael is “viewing” the rate of profit– the issue is how profit, and the rate of profit, is MADE MANIFEST in capitalism, to capitalists. And the only way that occurs is throw money prices, through the markets, through EXCHANGE. Money prices are exactly the medium, and the field, where profits get sorted, and distributed.
Value is made MANIFEST through the exchange of, and in the process of money prices. The bullet is the way of the gun. The prices are the way of capital.
Marx’s analysis of the role of money prices certainly does include the transfer, the redistribution among capitals. That redistribution is essential to the reproduction capital as a whole and the individual capitalists. Any capitalist might think he or she is “taking” from the market the “individual” profit he or she has thrown into it with his or her commodities, but Marx is very clear that any capitalist is, and can only, claim a portion of the total surplus value in the markets. Realization does not occur separate and apart from distribution, from the processes for establishing a general rate of profit.
Marx is very clear that advances in the productivity of labor– the accumulation of “dead labor” in the means of production, and the substitution of such accumulation, particularly in what Marx calls the most advanced form of capital– fixed capital– alters the relations of the components of capital and creates the TENDENCY for the rate of profit to fall.
Boffy says: “The released capital may then be employed in other industries where the rate of profit is high, so that the effect is to raise the average rate of profit.”
At the same time, and as a consequence, the average rate of profit in that sector declines, and once again we, or rather capitalists, confront the TENDENCY of the rate of profit to fall.
Boffy says– referring to the Okishio theorem: “Not according to Marx, and for several reasons. Firstly, Marx on many occasions refers specifically to such simultaneity, and rejects the idea that the reproduction process can only be seen as some kind of linear temporal phenomenon.
That is most clear in his analysis of the circulation of capital in Capital Volume II. There Marx states explicitly that at any one time, capital exists as money-capital, productive-capital and commodity-capital “simultaneously”. ”
Marx’s recognition that at every moment capital exists in different moments of its reproduction is not the simultaneous change to input and output prices of the Okishio theorem. On the contrary, these different moments are based on the distinction between production time, circulation time, and turnover time. In each of these aspects, there are prices changes to inputs and outputs, but the process is governed by the laws of value, and these changes are not “proportional” “equivalent” nor offsetting, particularly when we consider the accumulation of capital as fixed capital. Again it is the distributive property of the markets, of exchange, of prices that sorts this out.
This might become more clear if we recall that any and every fixed asset capital is a commodity that does not realize simply its own value, but realizes its value as a price which represents, claims, a portion of the socially necessary labor time for its reproduction. So… I spend 3 million dollars on a 4000 horsepower AC traction locomotive capable of hauling 6000 tons at a speed of 30 mph, consuming fuel at the rate of 3 gallons per mile, with the hourly rate for my train crew being $150 per hour. My profit is calculated “against” the sunk investment on the locomotive.
Changes in the price of diesel fuel, and labor, change my profit, but they do not impact the sunk capital in the locomotive.
Now a locomotive appears on the market that hauls 12000 tons at 30 mph consuming 3 gallons per mile, and due to technological improvements in traction control, the cost is now 2.5 million dollars.
My locomotive now appears on the market as not quite so valuable. It can no longer claim 3 million dollars. No problem as long as I’m not “selling” my locomotive? But that’s exactly what I am doing when I’m using the locomotive to haul goods. I’m “selling” the locomotive as a value……incrementally. No capitalist buys to buy. Every capitalist buys to sell. So what has happened to my sunk capital? The value that my old locomotive transfers incrementally to the product– the haul tonnage– is reduced because the socially necessary labor time for the reproduction of the value in the locomotive commodity has just taken a body slam.
I cannot pretend, as much as I would like to, that my profit, and profitability, is based on the “new” price input of the new locomotive, although I have to match the freight rates in accordance with that socially necessary rate determined by the more efficient locomotive. But my sunk capital is my sunk capital, and while accelerated depreciation might bring me tax benefits, my capital has been devalued below its cost-price .
Yes replacement of the constant capital depends upon the socially necessary labor time embodied in the components of production, and for just that reason the value transferred in the production process, and the expanded value created in that process is not necessarily realized or realizable.
Reblogged this on Reconstruction communiste Comité Québec and commented:
Because we ever study marxist economic theory enough, we propose text following from Michael Roberts.
“The Okishio theorem assumes a simultaneous change in prices of inputs to production and outputs – a physical impossibility in the reality of production over time. Investment is first, production second and realisation last. They can all be at different values or prices.”
Not according to Marx, and for several reasons. Firstly, Marx on many occasions refers specifically to such simultaneity, and rejects the idea that the reproduction process can only be seen as some kind of linear temporal phenomenon.
That is most clear in his analysis of the circulation of capital in Capital Volume II. There Marx states explicitly that at any one time, capital exists as money-capital, productive-capital and commodity-capital “simultaneously”.
Moreover, in Capital II, Marx also says specifically that the linear sequence you describe only applies to “newly invested money-capital”. It does not apply to the vast bulk of capital, including the money-capital just realised, and waiting to be metamorphosed once more into productive-capital, precisely because the nature of its existence is defined by its reproduction.
For the vast bulk of capital, Marx says, the circuit is not investment, production, realisation as you suggest, but rather production, realisation, reinvestment. The reality of capitalist production, as Marx states can only be grasped on the basis of this simultaneity, precisely because it never does begin with a blank sheet of paper, but presumes that capital already exists as productive-capital already engaged in production, as commodity-capital waiting to be converted into money-capital, and as money-capital that has been realised already and is waiting to be converted once more into productive-capital.
“The circuit of productive capital has the general formula P … C’ — M’ — C … P. It signifies the periodical renewal of the functioning of productive capital, hence its reproduction, or its process of production as a process of reproduction aiming at the self-expansion of value; not only production but a periodical reproduction of surplus-value; the function of industrial capital in its productive form, and this function performed not once but periodically repeated, so that the renewal is determined by the starting-point.” (Capital II, p 65)
As Marx also says the circuit M – C .. P.. C’ – M’, which is the circuit you describe is only the circuit of money-capital. Confusing it with the actual circuit of industrial capital derives from the fetishisation of money prices over values.
As Marx also sets out in this analysis, he uses monetary values, only because it is impossible to undertake a rational calculation without doing so, but the money values he makes clear here are only money equivalent of the actual capital-value of the productive-capital, and commodity capital within this circuit of industrial capital.
Marx begins essentially on the same basis as do the Physiocrats as outlined in the Tableau Economique. In other words, the process of reproduction does not begin with investment. It begins with production, and that production takes place using the output of the previous cycle, in the case of the Tableau, as marx sets out, the starting point is the previous year’s harvest.
The capitalist farmer, possesses a quantity of use values arising from that harvest, which form the basis of the constant capital (seeds etc) to be used in this year’s production, as well as the providing the food required as wages for the labourers. What the historic cost of that production was (the labour-time required for its production last year) has no bearing on its current value, or on the labour-time required this year to replace it in kind. Consequently, it can have no bearing either on the extent to which a surplus product is produced this year, or on the relation of any surplus product produced this year, to the proportion of labour-time required to reproduce the use values required to replace the constant and variable capital. In other words, it can have no bearing upon either the mass of surplus value, or the rate of profit, which can only be calculated rationally on the basis of current reproduction costs.
Suppose, we use grain as a proxy for all output, and last year’s harvest produced 5 million tonnes of grain, which had a value equal to 5 million hours of labour.
Of this output 1 million tonnes are used this year to replace seed, 3 million tonnes are required as wages for labourers, and 1 million tonnes is surplus product, consumed by capitalist farmers and landlords. Now suppose, that productivity rises by 10%.
Now, the 1 million tonnes required to reproduce the constant capital “in kind” requires only 0.9 million hours to produce. Similarly, the 3 million tonnes required to reproduce the labourers wages requires only 2.7 million hours to produce. So, irrespective of what the “historic cost” of that constant capital was, its current value, the amount of social labour-time required for its reproduction has fallen.
If productivity has risen by 10%, output is now 5.5 million tonnes, and the surplus product rises to 1.5 million tonnes. Consequently, the amount of surplus product has risen, whilst the requirement to reproduce capital on the same scale has been achieved, the use values required to reproduce the consumed constant capital “in kind”, and the use values required to pay the workers wages has been achieved. Moreover, the consequence of the rise in productivity is now that the proportion of social labour-time required to reproduce the constant and variable capital has fallen, whilst the social labour-time left over as surplus value has risen, and as a consequence the rate of profit has risen.
In this case, c accounts for 18.2% (20% previously) of total social labour-time, v accounts for 54.5% (60%) of social labour-time, whilst the surplus product now accounts for 27.3% (20%). On this basis the rate of profit has risen from 25% to 37.5%.
Moreover, Marx goes on to describe the fact that this is true also of the merchant capitalist. An existing merchant capitalist does not begin with money, but with an existing commodity-capital, which they seek to convert to money only in order to convert into an even larger commodity-capital. For neither the productive capitalist, nor the merchant capitalist is the end point of the circuit M, or even M’. For both, M fulfils only a transient function, a means of reproducing, and preferably expanding the existing capital value. Nor, therefore, is the commencement of their cycle M, but is either P or C’.
“Money-capital exists here from the outset as that form of capital-value which is neither its original nor its final one, since the phase M — C, which concludes the phase C — M, can only be performed by again discarding the money-form.” (Capital II, p 72)
“Thirdly, the function of money-capital, whether it is a mere circulating medium or a paying medium, effects only the replacement of C by L and MP, i.e., the replacement of the yarn, the commodity which represents the result of the productive capital (after deducting the surplus-value to be used as revenue), by its elements of production, in other words, the retransformation of capital-value from its form as a commodity into the elements that build this commodity. In the last analysis, the function of money-capital promotes only the retransformation of commodity-capital into productive capital.” (p 74)
Innovation is also about market share, so company A will invest in new technology to gain market share over company B and therefore grab more customers. So a profit realization issue.
Also, innovation is carried out by the state, so company A and B get innovation benefits (free goods?) from state expenditure, a kind of innovation fund that takes innovation out of the hands of capitalists. I guess if nation A is at war with nation B and nation A innovates but nation B doesn’t nation A will win the war!
Picking up on Boffy’s point about the extension of industry as a result of the increasing productivity of labor, historically this seems to have actually happened and the nature of that new industry seems to be not directly productive industry but unproductive and when it is productive it seems it is the sort of productive labor that cannot be easily replaced by machinery (though the advent of computerization is affecting this). Therefore we have a greater level of higher skilled labor requiring higher education levels.
If this is the case, won’t this make the rate of profit rise and not fall? I.e. hasn’t there been an historical trend where we could conclude the rate of profit should be rising and not falling. And if there has been a rate of profit fall this actually calls into question Marx’s theory, rather than confirming it!
This begs the final question, is the skill level of labor a relative factor or an absolute one? I couldn’t quite work that out when reading Marx.
Henry,
Most of what you say here is correct. In Capital I, for example, Marx discusses the role of machines in replacing labour. But it is followed almost immediately with a discussion about how this same process leads to a huge rise in the mass of capital employed, and within it, the mass of labour employed.
For example, Marx discusses all of the capital that was employed in the construction of railways, ports and so on. Where did the capital come from for all of this expansion? It came precisely from the fact that the introduction of all these machines, brought about a huge rise in social productivity, which released existing capital, increased the rate of surplus value, and increased the mass of produced surplus value. Not all that surplus value could be simply reinvested in existing industries, but it was thereby made available for investment in all of these new industries, which create new value, large amounts of surplus value and so on, and in the process also thereby create the demand for the output of existing industries, a point which marx specifically refers to, both in Capital, and in his section on the “Civilising Mission” in the Grundrisse.
Of course, not all the freed capital goes to such accumulation. Marx also refers to the fact that some of this potential capital is instead converted into revenue for the capitalists. So, there was a large expansion in the number of domestic servants employed from that revenue by the capitalists. The equivalent today is the large amounts of potential capital, resulting from the large rise in the rate and mass of profit, which has been converted to revenue by capitalists and rentiers, which is used for financial speculation.
Marx also refers to this situation in relation to the role of machines in Theories of Surplus Value, but his calculation is actually faulty, as I have demonstrated here. But, again, immediately after his argument here, Marx again goes on to demonstrate the point I have made, that in fact, employment rises rather than falls, because not only is capital released, but the rate and mass of surplus value available for additional accumulation rises.
Its for that reason that despite the massive rises in productivity seen since Marx’s time, rather than employment declining or unemployment rising, the opposite has been the case.
Another reason, is that there is confusion over the term “Rate of Profit”. When Marx uses this term in relation to the Law of the Tendency of The Rate of profit to Fall, what he really means is what we would call the profit margin. He says that clearly in Theories of Surplus Value, Chapter 16.
“{Incidentally, when speaking of the law of the falling rate of profit in the course of the development of capitalist production, we mean by profit, the total sum of surplus-value which is seized in the first place by the industrial capitalist, [irrespective of] how he may have to share this later with the money-lending capitalist (in the form of interest) and the landlord (in the form of rent). Thus here the rate of profit is equal to surplus-value divided by the capital outlay.”
In other words, it is s/c +v, or as expressed in relation to the price of the individual commodity p/k, where p is the amount of profit, and k is the cost of production. This is one reason this rate of profit falls whilst the mass of profit rises, because the profit margin falls, as a consequence of the rise in productivity, but that same rise in productivity brings about a massive rise in the number of commodity units. The proportional rise in output is greater than the proportional drop in the profit margin, so that the mass of profit rises.
What capital is concerned with when accumulating is not the profit margin, but the actual rate of profit or annual rate of profit, as Marx and Engels call it. The rise in social productivity brings about a dramatic rise in the annual rate of profit, and in the mass of profit because it releases capital not only as a result of reducing the value of capital, increasing the rate of surplus value, and bringing about the above release of capital, but also because it brings about a rise in the rate of turnover of capital, which increases the annual rate of profit.
This creates both an atmosphere of exuberance that encourages new capitals to be formed, but also provides the potential capital for accumulation. That is why crises of overproduction often arise as a result of these periods of very high profits that create this lemming like activity of expanding production without concern for whether the market can absorb all of the use values thrown on to it.
In fact, you could see the current overproduction of oil, as precisely arising for that reason due to the massive investment of capital that occurred after 1999, when the new long wave boom commenced, which massively pushed up the demand for oil, causing oil prices and profits to rocket, which then stimulated a bonanza of oil investment in fracking and so on.
I addressed the question of the level of skill in my blog post yesterday on Chapter 14, of Capital III. But, the point should really be addressed in terms of complex viz a viz simple labour. Marx never addressed this question properly for obvious reasons.
In Theories of Surplus Value in discussing Productive and Unproductive Labour he argues similar to Adam Smith that productive labour has become associated with the production of commodities, whereas unproductive labour has become associated with the provision of labour services. He does not accept Smith’s second faulty definition of productive on that basis, i.e. Marx argues that an actor or a teacher provides a labour service, but their labour is productive provided it exchanges with capital rather than revenue. In other words, a teacher who works as a private tutor is an unproductive labourer, because they are paid directly by the consumer (revenue), and the labour produces value but not surplus value. The same teacher who is employed by a school, and paid wages, is a productive labourer, because the difference between the value of their labour-power, and the value they create via their labour, represented by the income obtained by the school, constitutes a surplus value.
But, Marx concludes that the number of people employed as teachers or other such examples is very small, and so he doesn’t pay too much attention to it, in respect of his overall analysis of social reproduction. That was understandable then, but today, two-thirds of consumption spending goes on services of one form or another, and two thirds of the economy consists of service industry.
Sport, such football is a huge industry, entertainment in general is a huge industry. The sex industry is a multi billion dollar industry. Huge amounts of consumption spending today does not go on to the purchase of actual physical commodities. Besides all the above, a large amount of personal spending goes on things like mobile phone subscriptions and so on.
“These definitions are therefore not derived from the material characteristics of labour (neither from the nature of its product nor from the particular character of the labour as concrete labour), but from the definite social form, the social relations of production, within which the labour is realised. An actor, for example, or even a clown, according to this definition, is a productive labourer if he works in the service of a capitalist (an entrepreneur) to whom he returns more labour than he receives from him in the form of wages; while a jobbing tailor who comes to the capitalist’s house and patches his trousers for him, producing a mere use-value for him, is an unproductive labourer. The former’s labour is exchanged with capital, the latter’s with revenue. The former’s labour produces a surplus-value; in the latter’s, revenue is consumed.
Productive and unproductive labour is here throughout conceived from the standpoint of the possessor of money, from the standpoint of the capitalist, not from that of the workman; hence the nonsense written by Ganilh, etc., who have so little understanding of the matter that they raise the question whether the labour or service or function of the prostitute, flunkey, etc., brings in returns.
A writer is a productive labourer not in so far as he produces ideas, but in so far as he enriches the publisher who publishes his works, or if he is a wage-labourer for a capitalist.
The use-value of the commodity in which the labour of a productive worker is embodied may be of the most futile kind. The material characteristics are in no way linked with its nature which on the contrary is only the expression of a definite social relation of production. It is a definition of labour which is derived not from its content or its result, but from its particular social form…
The determinate material form of the labour, and therefore of its product, in itself has nothing to do with this distinction between productive and unproductive labour. For example, the cooks and waiters in a public hotel are productive labourers, in so far as their labour is transformed into capital for the proprietor of the hotel….”
Marx specifically rejects Smith’s second definition of unproductive labour, as that which does not produce material commodities, which flowed from Smith’s faulty concept of value and surplus value.
Marx writes,
“On the other hand: an entrepreneur of theatres, concerts, brothels, etc., buys the temporary disposal over the labour-power of the actors, musicians, prostitutes, etc.—in fact in a roundabout way that is only of formal economic interest; in its result the process is the same—he buys this so-called “unproductive labour”, whose “services perish in the very instant of their performance and do not fix or realise themselves “any permanent” (“particular” is also used) “subject or vendible commodity” (apart from themselves). The sale of these to the public provides him with wages and profit. And these services which he has thus bought enable him to buy them again; that is to say, they themselves renew the fund from which they are paid for. The same is true for example of the labour of clerks employed by a lawyer in his office—except for the fact that these services as a rule also embody themselves in very bulky “particular subjects” in the form of immense bundles of documents…
If therefore on the one hand a part of the so-called unproductive labour embodies itself in material use-values which might just as well be commodities (vendible commodities), so on the other hand a part of the services in the strict sense which assume no objective form—which do not receive an existence as things separate from those performing the services, and do not enter into a commodity as a component part of its value—may be bought with capital (by the immediate purchaser of the labour), may replace their own wages and yield a profit for him. In short, the production of these services can be in part subsumed under capital, just as a part of the labour which embodies itself in useful things is bought directly by revenue and is not subsumed under capitalist production.”
The prevailing view at the workshop was that “Marxist economics has not reached any definitive conclusions on these issues.” Or rather, the ensemble of persons who are Marxist economists has not agreed — because they divide into class outlooks and allegiances no less than everyone else. As the old wisecracks indicate, if class interests were at stake in the sum of 2 + 2, it would not be 4 for everyone.
Henry, surplus value is created only by commodity production. A service sector creates no surplus value although it may help in the realization of surplus value. Don’t let Boffy distract you with his talk of football and sex industries, they are not industries (except the parts that create dvds or t shirts etc). On the contrary they rely upon commodities, including the most important, the commodities that keep footballers and porn stars going.
To sum up, of course expanding productivity means less need for productive labourers but that ultimately rests on an increasing organic composition of capital and thus we get right back to falling profit rates.
There is a kind of exception to that. Stocking and transportation, just like the example given by Marx about people who merely collected pebbles for sale, add to the value. Making something available somewhere, like the transportation of spices in the early XVI century, is an activity that really requires abstract labor invested in time. It’s making something appear materially somewhere.
“Making something available somewhere, like the transportation of spices in the early XVI century, is an activity that really requires abstract labor invested in time.”
No production requires “abstract labour”, precisely because abstract labour is abstract, whereas any kind of production, including transport requires some form of concrete labour. All production is production of some kind of use value, and each type of use value is a function of the use value of the labour which produces it. For example it is the use value of tailoring labour that produces tailoring, rather than carpentry.
The concept of abstract labour is merely a means of stripping away all of the specific characteristics of each kind of concrete labour, so as to produce a general unit of measurement of the labour-time expended in any production, so as to determine its value.
As Marx makes clear, however, its not the concrete nature of the labour, which determines whether it is productive or unproductive, but the social relation under which the labour is performed. Smith stated that correctly in his first definition, as productive labour being that, which produces surplus value, i.e. which exchanges with capital rather than revenue, but because has a faulty and contradictory definition of value and surplus value – as Marx says sometimes slipping back into a Physiocratic view of value as being use value contained in some material product – he also put forward a second faulty definition of unproductive labour as being that which produced services, which are not embodied in some material product.
It was that contradictory position, which Marx shows allowed some of his detractors to use, by focussing on this second faulty definition, to demonstrate the contradiction with the first correct definition.
As Marx sets out, the labour of a teacher is not embodied in any material product, it is consumed in the instance of its production, but it is not this which determines whether the labour of the teacher is productive or unproductive, but the social context under which it is performed. So, marx says, the labour of a teacher, undertaken in an education factory is just as productive as that of a weaver in a textile factory, because both produce surplus value, the value of the product of their labour is greater than the value of their labour-power; the capitalist who buys their labour-power, is able to sell the product, and from the proceeds, once again employ that labour-power, as well as drawing a surplus value for themselves.
But, if I as an individual employ a private tutor to teach me or members of my family, the use value I obtain, is paid for from my revenue. There is nothing in this social relation that enables me to employ the tutor again, or for the tutor once more to sell their labour-power. Quite the contrary, in order for me to employ the tutor once more, I must obtain additional revenue from elsewhere, to be able to pay them.
“Don’t let Boffy distract you with his talk of football and sex industries, they are not industries (except the parts that create dvds or t shirts etc). On the contrary they rely upon commodities, including the most important, the commodities that keep footballers and porn stars going.”
A good summary of the position of Adam Smith’s in his second definition of productive labour as being only that which is embodied in material production, and which Marx demolished in his analysis of productive labour as being that which exchanges with capital, irrespective of whether it produces material commodities, or labour services!
SimonH,
We could take the Physiocrats view that only agriculture is productive, unless we can eat everything else is beside the point! I detect some of this approach in your comments. I think Marx attempted to make his definition specific to the economic system in question and also to time and place.
Boffy – what appears to be missing from your analysis is the need to expand markets as production increases and the whole messy history that results. I haven’t actually read Rosa Luxembourg but wasn’t this her objection to Marx’s analysis on volume 2?
I agree with Marx, who specifically refers to the labour of a teacher in an education factory, being a productive labourer, precisely because their labour exchanges with capital, and produces surplus value.
I also agree with Andrew Kliman, Marx, Engels, Kautsky and many others on this point that it does not matter whether the teacher’s labour exchanges with private capital or state capital in that regard. In both cases, the teacher’s labour-power is bought as a commodity, what the teacher provides is a commodity, and the teacher provides surplus value.
Henry,
You are quite right that SimonH’s position is that of the Physiocrats, and in fact, Marx in criticising that line of argument by Adam Smith, makes exactly that point that it is a relapse into Physiocracy by Smith. The same relapses can be seen in Smith’s concept of value and surplus value.
On the need for markets to expand, I’ve covered that in my book on Marx and Engels’ Theories of Crisis.
The problem with Luxembourg’s underconsumptionist position is that it is based upon a notion that the reason for crises is that workers living standards are depressed by capital, so as to raise surplus value, and that very act prevents the realisation of the surplus value.
There is, of course, an element of truth in that. Marx for example, quotes Ricardo’s statement that the cause of glut is high profits, and agrees. But, it is always the case that workers wages are less than the value of output. If that were not the case, not only would surplus value be impossible, but the reproduction of constant capital would also be impossible, because both of those values are included in the total output, alongside the value of variable capital.
The real issue in this regard, is Marx’s comment in Vol III, Chapter 15, that the nature of demand under capitalism is itself contradictory, because it is the demand of different classes, and different class fractions, each of whom has widely different revenues derived from their ownership of different forms of property, and so for a whole range of commodities – even if, as Marx says we leave out the paupers whose consumption is de minimus – there are a wide range of demands at different market prices.
The rich, for example, may already have satisfied their demand for motor cars, when they are originally introduced, and so buy no more, even as the vast majority of workers still do not have sufficient wages to buy one. The rich have the means to buy more, and choose not to, unless the price is massively reduced, for example.
On the other hand, workers wages may rise, so that their demand for certain basic commodities is satisfied, in the same way, and yet they still cannot afford to buy a car. So, as marx says, crises of overproduction often arise, not because of underconsumption due to workers consumption being too restricted, but because it has expanded, and that is all the more the case, because at such points it is the result of wages being high, so that surplus value is squeezed.
That is why Marx says the market has to be continually expanded, both in terms of the number of consumers, and the range of commodities to be consumed, and by its nature, capital does expand the market in both ways, as marx sets out in the Grundrisse. The introduction of capitalism itself indicates that process.
Direct peasant producers, become wage workers, and as such become consumers of commodities bought from the market, as well as the producers of commodities sent to that market. The rise in surplus value that results creates more capital, and that capital employs more workers, as well as providing revenues for non-productive classes, who use it for consumption. But capital also uses a portion of this surplus value for accumulation, not just in existing lines of production, but in new lines of production, so that an ever expanding range of commodities are placed on the market, so that as consumption of some commodities becomes sated, revenues in the form of wages, rents, interest, profits can be used to buy these additional types of commodity.
The issue is not that capital fails to achieve this expansion of the market – and Lenin in his polemics against the Narodniks (see all of the articles against economic romanticism) shows that the argument that this is only possible via an expansion of foreign trade is wrong – but that it achieves it in a typically contradictory, and crisis ridden manner.
That is part of the argument Marx makes about the fact that capital for long periods accumulates intensively, and at others extensively. It is captured in the concept of the Long Wave, and the relation to the Innovation Cycle, because, in order for a large enough range of new commodities to be available on the market, it is necessary for there to be a period of innovation of new base technologies that make these new commodities possible.
According to the work done by Mensch, there is an approximate 40 year gap between the peak of an innovation cycle (that is the peak of development of the base technologies, not of their introduction) and the peak of a long wave boom. So, for example, an innovation peak was identified in 1935, which coincides with the long wave peak of 1974. A similar innovation peak was identified in 1985, which produces all of the base technology for microchips and so on, which are then incorporated in a range of technologies, first for productive capital to provide labour saving technology, and then in a range of consumer products. That would coincide with a long wave peak coming around 2025.
A look at the plethora of consumer products that have arisen, and are still being developed, for example, increasingly now the extension of these technologies into healthcare provision, shows the way capital expands the market.
But, once again especially where the annual rate of profit is very high, this encourages a bonanza of productive investment, which leads to a massive expansion of production, which is thrown on to the market without concern for whether a market can be found for it, at the market value/price of production.
Inevitably, for some commodities, and some times for all, a market cannot be found at those market values, so market prices collapse, sometimes to prices below the cost of production, so that the consumed capital cannot be reproduces, and that is exactly what Marx and Engels define as overproduction.
Marx writes,
“For example, teachers in educational establishments may be mere wage-labourers for the entrepreneur of the establishment; many such educational factories exist in England. Although in relation to the pupils these teachers are not productive labourers, they are productive labourers in relation to their employer. He exchanges his capital for their labour-power, and enriches himself through this process. It is the same with enterprises such as theatres, places of entertainment, etc. In such cases the actor’s relation to the public is that of an artist, but in relation to his employer he is a productive labourer. All these manifestations of capitalist production in this sphere are so insignificant compared with the totality of production that they can be left entirely out of account.”
And, of course, Marx is quite right on both counts. These service industries such as education, entertainment and so on, are productive of surplus value, where the labour exchanges with capital, and on the count that at the time he was writing this sphere of capitalist production, was so insignificant as to be left entirely out of account.
But, of course, today those same service industries account for around 80% of GDP, and are a major source of surplus value, and capital formation.
Dear Michael,
I read your article in the Weekly Worker on China with interest. You are very very good. Spot on is another way of putting it. I think it has something to do with looking at things from a Marxist perspective. Therefore, I was looking forward to a report from Leeds and you have not disappointed. I have saved the above article to peruse later. I can’t believe I’m buying the Weekly Worker in order to read your work! I promise there will be economics instead of this … OK, say, the Chinese model of Capitalism is a hybrid between market and state, albeit single party controlled. And your response as a Marxist is spot on, growth, investment, democratic central planning, all point to the future as opposed to this … mess, that we’re in globally because of the ‘business cycle’ i.e. crises in capitalism because of the falling rate of profit, in small letters. But, how can one practise economics from below? Are you still not fixated on the model of economics from above? I have pondered on this issue for a long time and the best I could come up with was migration of the poor. People will go where wealth is being produced. Lots of comradeship, and love,
Mai Truong
So Boffy do you think teachers in a private school are productive labourers? Do you think the charter school revolution will lead to a major increase in surplus value? (some will be created because of new buildings, text books and so on). I say no, also I would say the history of countries that have de-industrialised and embraced the service sector show it. Growth is down, the rate of profit is down. Did you read about Australia by the way? its done quite well, of course that’s been based on a mining boom that supplied China.
“Mohun started by making the key point that values equal prices in the aggregate. This is the ‘conservation principle’ that labour value equals prices in the whole economy, although at the level of individual commodities, price can vary from value.”
Off on the wrong foot from the very beginning. Prices *do not* generally equal values in the aggregate, if price is defined, as Marx does, as the exchange value of non-monetary commodities with the money commodity, now gold. Rather prices fluctuate above and below values in aggregate, as explained repeatedly in the Critique of Crisis Theory blog and which is key to understanding the crucial role of crises in keeping the system going.
I think there is a confusion of “prices” here. Marx is making the undeniable point that the total of values equals the total of prices of production. It is, of course, true that market prices fluctuate above and below the price of production.
That is true whether values and prices are measured in labour-time, or some money-commodity such as gold which represents merely a physical manifestation of that labour-time. Both prices of production and values express the objective reality that an objectively determined quantum of labour-time has been expended, and is represented by the totality of commodities produced. To deny that is to deny the LTV itself.
It is true that Marx made the point that the total of values equals the total of prices of production. It is also true that individual prices of commodities fluctuate above and below the individual prices of production (in money terms). This is also true whether values and prices are measured in labour-time or some money-commodity such as gold.
But Boffy obfuscates the issue at hand in his last sentence by claiming that I am denying the Labour Theory of Value and in effect denying the above truisms by stating that “prices fluctuate above and below values in aggregate” if “price is defined … as the exchange value of non-monetary commodities with the money commodity, now gold.” With this statement I think you are missing my point entirely.
Strictly speaking, it would of course be more accurate to say that commodity prices in aggregate fluctuate above and below direct prices in aggregate (with direct price defined as equal exchange of labour time between the commodity in question and gold).
Maybe with that clarifiation we will be closer to agreement.
I’m a physiocrat? (to be fare Henry just made a link but boffy went the whole hog). Okay then, Marx is just a Hegelian, Christianity is just Judaism with a few extra options etc etc. Really are we truly engaging in this crude reductionism? Well yes Boffy is because he’s the guy who calls people Malthusians at the drop of a hat, he doesn’t even understand what Malthusianism is.
I am not a physiocrat but let’s not play this game of absolute right and wrong. Isaac Newton is still very useful today despite the flaws in his theories. The physiocrats were part of an era of economic research in which people were genuinely trying to figure things out rather then just defend inequality and exploitation. In fact in the time of the physiocrats agriculture was the most important sector.
Let’s not get fooled by all the post-industrial nonsense. Just because industry has been moved from the first world doesn’t mean it’s not very important. Look at Uber, the darling of Silicon Valley worshipping new economy types, without a smart phone or some other device, without a car, without petrol for the car and all the infrastructure of the road system the wondrous Uber app is useless.
I didn’t say you were a Physiocrat, any more than Marx said Adam Smith was a Physiocrat, I simply agreed with Henry that the argument you put forward was that of the Physiocrats, which is a simple statement of fact, just as was Marx’s statement that Smith’s second definition was Physiocratic.
But, then you seem to specialise in taking such offence, and distorting what others have said, rather than deal with the actual issues. But, then, as your argument in this case and others demonstrates, you seem to have a very uncertain grasp of those ideas that your reluctance to deal with them is understandable.
“The physiocrats were part of an era of economic research in which people were genuinely trying to figure things out rather then just defend inequality and exploitation. In fact in the time of the physiocrats agriculture was the most important sector.”
This is a case in point. Firstly, what is most important here is not whether agriculture was the most important sector, but what kind of agriculture, i.e. capitalist agriculture, feudal agriculture, what?
Its true that the Physiocrats were part of such an era, but as Marx points out they had a foot in both camps feudal and bourgeois. Agriculture was by then predominantly capitalist, and yet the dominant form of surplus value discussed by the Physiocrats was rent not profit, and the Physiocrats defended rent on the basis that the surplus value was produced by nature, i.e. by the land, not by labour, and the landlord was thereby entitled to the surplus value, as the owner of the land.
You then once again distort grotesquely what others have said in order to set up a straw man to knock down. No one has said the industry producing material commodities is “unimportant”. Rather it was you who wrongly claimed that immaterial production does not create surplus value. Rather than defend that position in the face of the overwhelming evidence against you, you use the usual tactic of a troll to shift the basis of the argument.
The argument you then put is again classic Physiocracy of the type demolished by Marx. You may as well say, all of the fancy tableware produced by pottery manufacturers, and all the knives and forks made by cutlery manufacturers is all well and good, but absolutely useless without food to eat. Or all of the fancy factories with all their fancy machines and computers are all well and good, but absolutely useless without the teachers to educate people in how to read and write, and calculate, so that they can use those machines!
Yet I’m not the one who declared me a heretic just because I disagreed with you that we were experiencing an expansionary long wave! Then maybe that was just a case of doctrinal purity on your part!
If I’m making a physiocrat argument then so does Ernest Mandel in Late Capitalism he specifically states there that the service sector doesn’t create surplus value. Don’t tell me I’m misinterpreting him like you did last time, I just reread it!
By the way in what way have you proven that immaterial production creates surplus value? You never answered about how de-industrialised countries have experienced weaker growth, no because you can’t deal with all of that. I’m baffled as to why you come here since Michael Roberts is constantly debunking your Summer of capitalism thesis. Let’s face it your the troll here!
Im still astounded that you don’t see the qualitative difference between focusing on agriculture and acknowledging the role of all material production. Teachers, doctors etc are important to society but they don’t produce surplus value, this may be far too nuanced for you! By the way you can have material production without schools and hospitals, in fact there are countries out there where factory workers get little in the way of health care or education, it’s a bad way to do things in the long run but many capitalists don’t focus on that.
To put it simply Boffy, everyone needs material goods, not just to survive but to run a business of whatever kind. Not everyone produces commodities, there are only so many to go around. The dog walker or the palm reader can’t wish more in to being. Economics of any kind is ultimately about resource allocation, this is something I always focus on because I argue against Austrians who proclaim socialism can’t handle this task. Maybe if you spent some time focusing on the Economic Calculation question you wouldn’t go off tangent as you have, I don’t know, just trying to help believe it or not.
Anyway for the record you don’t fool anyone when you say stuff like ‘You’re making a physiocrat argument’. I wonder if you’d accuse me of making a Judaic argument if I said there was only one god (I don’t believe in any god btw just making a point).
No, its quite clear that its you who is the troll, by your method of argument, such as it is, which never addresses the point at hand, never defends the argument you have made when the evidence against it is overwhelming, and instead shifts on to some new line of attack, or harks back to some previous hobby horse, as you do here.
I haven’t said you are a heretic for disagreeing with me. Feel free to do so. What I have said is that the arguments you have put are not those of Marx, and as in this case, are in fact, the same arguments as those with which Marx directly polemicised. Its not because you disagrees with me that makes you a heretic, but that you disagree with fundamental tenets of Marx’s theory. In fact, you seem like most trolls to have a very limited grasp of that theory, and your repeated attempts to cover that, by unspecified references to Mandel’s “Late Capitalism” do nothing to dispel that impression.
Whatever, you claim Mandel may or may not have said, the fact remains that for Marx it is Smith’s first definition of the distinction between productive and unproductive labour that is correct, and the second definition that is incorrect, as the extensive quotes from marx above illustrate. That is that whether labour is productive or unproductive in the context of an analysis of the capitalist mode of production, has nothing to do with the concrete nature of that labour, whether as Marx puts it the product of that labour is “of the most futile kind”, whether it is involved in the production of material use values embodied in physical commodities, such as a coat, or in a labour service such as the labour of a singer, “whose “services perish in the very instant of their performance and do not fix or realise themselves “any permanent” (“particular” is also used) “subject or vendible commodity” (apart from themselves)”.
On the contrary, as Marx demonstrates in several places and at length in demolishing the arguments of the kind you have put, “If therefore on the one hand a part of the so-called unproductive labour embodies itself in material use-values which might just as well be commodities (vendible commodities), so on the other hand a part of the services in the strict sense which assume no objective form—which do not receive an existence as things separate from those performing the services, and do not enter into a commodity as a component part of its value—may be bought with capital (by the immediate purchaser of the labour), may replace their own wages and yield a profit for him. In short, the production of these services can be in part subsumed under capital, just as a part of the labour which embodies itself in useful things is bought directly by revenue and is not subsumed under capitalist production.”
It is why, Marx explains at length that the labour of a cook that a capitalist employs in their home to cook them meals, is unproductive, whilst the same cook producing the same meals, employed by the same capitalist in a restaurant, which then sells those meals to customers is productive. The reason is that the cook’s labour in the first instance exchanges with the capitalists revenue, whilst in the second case exchanges with the capitalists capital. In the first case, the cook produces no surplus value, and in the second case does create surplus value.
In the first case, the cook’s labour does not reproduce the conditions of its own reproduction. The product is not sold, and, therefore, does not reproduce for the capitalist the value of the constant and variable capital consumed in its production. On the contrary, the capitalist consumes a part of their own revenue, in order to consume it, and must engage in some other activity, to replace that revenue, so as to be able to consume it once more. In the second case, the product is sold, and the value of the commodity, once realised returns to the capitalist a sum of value that enables them to reproduce the constant capital, and the variable capital, as well as appropriating an amount of surplus value.
That is why your talk about agricultural production rather than industrial production is equally ahistorical, and unmarxist, because you clearly fail to understand that for Marx – who incidentally in dealing with precisely this point by others who failed to understand its relevance, says that industrial production, has always been a part of agricultural production, because the agricultural labourer always undertook such industrial production such as spinning and weaving alongside their agricultural production – the important disti8nction is the social relation under which this production takes place. In fact, that is the DEFINING characteristic of Marx’s theory based upon historical materialism.
It is not a question about whether production is agricultural or industrial, but about whether it is capitalist or not capitalist!
As for the argument about deindustrialised countries having weaker growth than countries that have industrialised. That is a spurious argument, when dealing with the theoretical question about whether service industries produce surplus value or not. But, let’s address it. In any country, which sector of the economy has grown most rapidly, i.e. produced and appropriated surplus value, and accumulated it as capital? In every case, the service sector.
That is equally true of the most notable newly industrialised economy, China, as it is of a declining economy such as the US. Services account for more than 48% of Chinese GDP, as opposed to 42% for material industrial production and 9% for agriculture, despite the fact that huge numbers continue to be employed in agriculture, in fact about a third still employed in agriculture.
Marx specifically states that teachers do produce surplus value where they are employed by capital, i.e. in an education factory, by a capitalist, because the value of the product of their labour exceeds the value of their labour-power, which is how come private schools, are able to make profits! Once again, as with your failure to understand that it is not the concrete nature of the labour, as agricultural labour or not, which is decisive, but whether it is capitalist agriculture or feudal agriculture, i.e. does the surplus value take the form of profit, appropriated by capital, or of feudal rent appropriated by a feudal landlord, so too you fail to distinguish here between whether the teacher is employed by capital, or by an individual out of revenue.
You say,
“To put it simply Boffy, everyone needs material goods, not just to survive but to run a business of whatever kind. Not everyone produces commodities, there are only so many to go around. The dog walker or the palm reader can’t wish more in to being.”
But, that is again precisely the Physiocratic argument, and the argument against, which both Marx and Smith polemicised, because it fetishes material production, and confuses use value with value, and so consequently confuses the surplus product with surplus value.
The Physiocratic argument was precisely that industrial production does not create surplus value, because it does not create any new value, it only takes the value, i.e. material use values, produced by agriculture, and modifies their form. So, the spinner takes the cotton produced by agriculture, and turns it into yarn. They have not created any new use value, they have only taken the use value produced in agriculture and modified its form. The spinner takes the food produced in agriculture, and consumes it, so as to produce their labour-power, so that again they have produce no new use value, but only transformed the use value produced in agriculture.
On this basis, the Physiocrats argue exactly as you do here, that the value of the yarn comprises only the value created in agriculture – the value of the cotton, plus the value of the food consumed by the spinner, which equal the value of their labour-power. So, they argued no new surplus value was thereby produced, because no new value was produced. Its why they had to explain the profit of the industrial capitalist as being nothing more than the wages of that capitalist.
“Maybe if you spent some time focusing on the Economic Calculation question you wouldn’t go off tangent as you have, I don’t know, just trying to help believe it or not.”
Really? And now introducing the totally irrelevant new issue of Economic Calculation isn’t going off at a tangent? Sorry, but you’re lack of understanding of basic Marxist concepts, and your method of arguing, doesn’t pass the sniff test. Its the usual language of the troll, and I don’t waste time with trolls. You’ll have to find yet another identity to use.