Mainstream economics has been seriously puzzled by the failure of the major economies to restore the previous growth rate in the productivity of labour since the end of the Great Recession. There has been an intense debate over the issue.
Some argue that productivity growth has been restored but is just not being measured properly, now that much new productivity comes from data, intellectual ideas, software etc and not from the production of things. But recent research has thrown cold water on this explanation.
Others argue that productivity growth may be lower, but that is simply the result of the aftermath of the Great Recession, leaving companies unwilling to invest in capital equipment and preferring to speculate in financial markets or just hold cash. There is some truth in this argument, as I shall explain below. After all, after a major slump, capitalist companies are going to hoard cash rather than possibly waste it on investment and extra production that may not find a buyer. And a past OECD study found support for what it called the ‘pro-cyclical’ element in post global crash productivity. “Firms may respond to short-run fluctuations in demand by varying the rates at which their existing capital and labour are utilized, for example by hoarding labour at the time of a crisis waiting for the recovery or underutilising the existing capital stock without shedding it
Others reckon productivity growth had already slowed down before the Great Recession and would not recover because we are now in an era of low growth as all the hi-tech innovations have been exhausted and robots and AI will have little impact on the wider economy. This view has been strongly contended by mainstream economist, Robert J Gordon, and by more radical observers. It suggests that capitalism may have passed its use-by date. Again, this argument has some merit but, as I have explained in previous posts, it still does not identify the reason for the investment and productivity growth slowdowns since the end of the Great Recession.
Now some new research brings stronger light onto the debate. The European Central Bank, the Bank of England and the OECD have recently produced reports that hone in one key feature of the ‘productivity puzzle’. It seems that productivity growth is not stuttering everywhere in capitalist economies. In the major economies, the so-called ‘frontier’ companies are increasing their productivity as fast as before the financial crisis. The disappointing economy-wide productivity figures are to be blamed on the companies that are ‘behind the frontier’.
The OECD finds that the ‘diffusion’ of innovation and productivity growth from leading to lagging companies has slowed down. The ECB also finds the same thing in its study of Eurozone productivity (where it is worse for services than for manufacturing) and the Bank of England finds the same for the UK and that its effect is substantial. What is most significant is that the new OECD study found that the cause was the large number of ‘zombie’ companies (companies whose regular revenues at most cover their interest expenses (if that) — companies that, to paraphrase BoE governor Carney, “depend on the kindness of their creditors”.
The OECD researchers find that such zombies take up a frighteningly large part of the economy. Across the nine European countries they studied, the share of the total private capital stock ‘sunk’ in zombie companies ranges from 5 to 20 per cent. The suggestion is that such businesses hog capital and crowd the market for newcomers, make it harder for more promising companies to expand and hold back the reallocation of labour and capital to more productive and faster-growing companies. The paper concludes that “the prevalence of, and resources sunk in, zombie firms have risen since the mid-2000s, which is significant given that recessions typically provide opportunities for restructuring and productivity-enhancing allocation” and that “a higher share of industry capital sunk in zombie firms tends to crowd out the growth—measured in terms of investment and employment—of the typical non-zombie firm.” All in all “a 3.5% rise in the share of zombie firms—roughly equivalent to that observed between 2005 and 2013 on average across the nine OECD countries in the sample—is associated with a 1.2% decline in the level of labour productivity across industries.”
This confirms what I argued in a recent debate on the role of profitability. The huge profits gained since the end of the Great Recession have been mostly confined to the large companies: “just a few mega companies hold most of the cash while thousands of small and medium enterprises (SMEs) hold little cash and much more debt. Indeed, a minority are really ‘zombie’ firms just raising enough profit to service their debt.”
It is easy to see why there are so many zombies. Despite the relative recovery of headline profitability in many economies in the credit-fuelled boom from 2002 to 2006, many small to medium-sized companies did not see an improvement in profitability. Instead they racked up higher debt through bank loans. The Great Recession caused a collapse in profits and even after 2009, profitability improved little for these companies while debt remained high. But the zombie companies have struggled on because interest rates were so low and banks would not foreclose. This scenario has been found in the extreme in Italy where ‘non-performing’ bank loans have reached 20% of GDP.
As the ECB explains in its report (ecb-zombie-credit-acharya-et-al-whatever-it-takes ),“While banks that benefited from the announcement increased their overall loan supply, this supply was mostly targeted towards low-quality firms with pre-existing lending relationships with these banks. As a result, there was no positive impact on real economic activity like employment or investment. Instead, these firms mainly used the newly acquired funds to build up cash reserves. Finally, we document that creditworthy firms in industries with a prevalence of zombie firms suffered significantly from the credit misallocation, which slowed down the economic recovery.”
According to research by the ‘free market’ Adam Smith Institute, 108,000 so-called zombie businesses in the UK are only able to service the interest on their debt, preventing them from restructuring. In other words, they slow the ‘creative destruction’ of capital by the liquidation of the weak for the strong.
This confirms previous studies such as that in the Journal of Finance (2009), Why firms have so much cash, which found that in order to compete, companies increasingly must invest in new and untried technology rather than just increase investment in existing equipment. That’s riskier: “the greater importance of R&D relative to capital expenditures also has a permanent effect on the cash ratio. Because of lower asset tangibility, R&D investment opportunities are costlier to finance than capital using external capital expenditures. Consequently, greater R&D intensity relative to capital expenditures requires firms to hold a greater cash buffer against future shocks to internally generated cash flow.” So companies have to build up cash reserves as sinking fund to cover likely losses on research and development.
Similarly, in a recent paper, Ben Broadbent from the Bank of England noted that UK companies were now setting very high hurdles for profitability before they would invest as they perceived that new investment was too risky. “Even if the crisis originated in the banking system there is now a higher hurdle for risky investment – a rise in the perceived probability of an extremely bad economic outcome….In reality, many investments involve sunk costs. Big FDI projects, in-firm training, R&D, the adoption of new technologies, even simple managerial reorganisations – these are all things that can improve productivity but have risky returns and cannot be easily reversed after the event.” So the profitability of capital has got to be high enough both to justify riskier hi-tech investment and to cover a much higher debt burden (even if current servicing costs are low). Firms are not going to borrow more to invest even if banks are willing to lend.
Marx’s theory of crisis rests on the idea that after a slump capital will only start to invest to raise the productivity of labour if profitability is rising and at a sufficient level. Indeed, slumps in production should provide the basis for a recovery in profitability and a reduction in the debt burden (credit) built up to the point of the crisis. But right now there are thousands of heavily indebted SMEs which are barely keeping their heads above water despite low interest rates. They are keeping profitability too low and debt too high. They are clogging up the system.
Profitability in the major economies did recover from the trough reached at the depth of the Great Recession in 2009. According the European Commission’s AMECO database, the net return on capital stock is up between 8-30% since 2009 in the major economies. But even that recovery has not meant that profitability has returned to its previous peak (2005-7) before the great crash, varying from flat to down near 14%. And in the UK and the US profitability is now falling, according to AMECO.
At the same time, corporate debt levels are still high and rising.
The most extreme strategists of capital recognise the ‘proper’ solution. Back at the beginning of the Great Depression of the 1930s, the then US Treasury Secretary, Andrew Mellon, warned against keeping ‘dead’ capital going ‘zombie like’ as a ‘moral hazard’. “Liquidate labour, liquidate stocks, liquidate farmers, liquidate real estate … it will purge the rottenness out of the system. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less enterprising people”.
The ‘solution’ for capital of ‘creative destruction’ in a slump or depression has not altered. “The fundamental tenet of capitalism, which holds that some bad companies need to fail to make way for new and better ones, is being rewritten,” says Alan Bloom, global head of ‘restructuring’ at Ernst & Young management consultants. “Many European companies are just declining slowly and have an urgent need for new management, a revised capital structure or at worst to be allowed to fail,” he adds.
With corporate debt levels higher than before the global crash and profitability in most economies lower than before and now peaking again, ‘zombie’ companies are going to have to be removed in a new deluge before improved profitability and productivity can be achieved.
Michael Roberts Blog 
Some Questions:
As a Marxian economist, how do you define “productivity?” Are the definitions and concepts of productivity in “mainstream economics,” any of them, compatible with the Marxian concept? What is the difference between the concepts of “gross productivity” and “net productivity” for an economy? does any “mainstream” approach to economics understand the difference? Do any of the statistics cited in this article reflect it?
Defining productivity in Marxist terms (and rescuing contemporary Marxism from contamination with bourgeois notions of productivity) is a prime aim of my book Imperialism in the Twenty-First Century. On pp176-7, I say:
Marx counted among the greatest of his discoveries “the two-fold character of labor, according to whether it is expressed in use-value or exchange-value” (Marx to Engels, 24 August 1867). To the two-fold character of labor there corresponds the two-fold character of the productivity of labor… The universal definition of labor productivity, true for human society in all its stages of development, is the quantity of use-values that can be produced by a day or a week of living labor. But capitalists are not interested in pencils, or even in how long it takes to produce one; they are only interested in how much money these pencils can be exchanged for. From this flows an entirely different concept and measure of productivity: how much the firm’s value added (the market value of the firm’s output minus the market value of all inputs) is increased by one hour, day, or week, etc., of labor.
The utility, or use-value, of a pencil is the same today as two centuries ago (or higher, thanks to superior pencil lead and the like), yet the quantity of labor necessary to produce each one is now many magnitudes smaller. Measured in terms of use-values, there has been a colossal leap in productivity, but measured in terms of exchange-value, it is moot whether productivity has grown at all. The two definitions of labor productivity yield divergent and contradictory results. From the point of view of society as a whole, the use-value definition of productivity, that is, how many socially useful goods or services can be produced with a given amount of labor, is of supreme importance. But it is of supreme indifference to capitalists who are interested only in how much they can be sold for. The two definitions are incompatible, mutually contradictory, yet they are both true.
The economists’ utility functions attempt to convert use-values into numbers, but they are by definition incommensurable. Just as there is no objective way of comparing the utility of a pencil with that of a string quartet, neither can the productivity of a pencil-maker be measured against that of a musician. If, for example, one million hours of the living labor of shipbuilders is required to produce one ship, and the same amount of living labor of agricultural workers results in one million boxes of strawberries, which of these workers is the most productive? The shipbuilder, because ships are so much bigger than strawberries, or the strawberry picker, because there’s so many more strawberries than ships? The answer: it would be absurd to even attempt to make such comparison, since the exchange-value generated by their labor is determined by its quantity, not its particular form. As Marx pointed out, “Productivity … naturally ceases to have any bearing on that labor as soon as we abstract from its concrete useful form” (Capital, vol. 1, p137 Penguin edition). In other words, some shipbuilders may be more productive than other shipbuilders and some fruit-pickers fill boxes faster than others, but it cannot be said that shipbuilders are more or less productive than fruit-pickers.
It is exactly because “Productivity … naturally ceases to have any bearing on that labor as soon as we abstract from its concrete useful form” that concepts of *social* productivity “increasing” or “decreasing” over time are quite problematic: all such quantitative propositions depend on total abstraction from “concrete useful form” in order to be represented as a quantity of “use values” divided by a quantity of “abstract labor.” Which is why an entirely different concept of social productivity, one that allows incorporation of the environmental effects (entirely negative) of capitalist “progress,” is indispensable to any version of Marxian economics relevant to our current predicament.
Welcome back, John.
“If, for example, one million hours of the living labor of shipbuilders is required to produce one ship, and the same amount of living labor of agricultural workers results in one million boxes of strawberries, which of these workers is the most productive?”
And of course, John provides an answer that is correct… as far as it goes. Except that isn’t all to be said, or all Marx has to say on the subject.
We of course CAN compare the productivity between and among different sectors of an economy– as varied as say agriculture is from industry. John’s example uses labor-time as the measure of the productivity of labor. He is using exchange VALUE to establish the equivalence. In John’s example the labor times are equivalent and hence it appears that there is no sense to comparing equivalents when seeking to find a difference.
If we are going to use labor times, VALUE, to establish equivalents, we can use them to establish differences, distinctions.. The distinction of course depends upon the division of the labor time, into its necessary and surplus components. If it takes a million labor hours to produce a ship, and the ship workers producing the ship’s value reproduce the value equivalent to their own wage in 200,000 hours, then we have a surplus labor time of 800,000 hours and a 4:1 rate of surplus value.
If in the same million hours of production, the strawberry workers require 500,000 hours to reproduce the value equivalent to the wage, that is 500,000 hours to realize the necessary labor, then the s/v ratio is 1:1.
Does this identify a difference in productivity between the two expressions of the same abstract labor? I think so.
Marx in notebook 7 of the Grundrisse writes:
“The growth of the productive power of labour is identical in meaning with (a) the growth of relative surplus value or of the relative surplus labour time which the worker gives to capital; (b) the decline of the labour time necessary for the reproduction of living labour capacity; (c) the decline of the part of capital which exchanges at all for living labour relative to the parts of it which particpate in the production process as objectified labour and as presupposed value.”
Nevertheless value, as opposed to use-value, value as exchange value, as an expression of labor-time is not excluded from Marx’s notion of the productivity of labor.
Hi Sartesian
your numerical example illustrates nothing else than your utter confusion and your distance from Marx’s theory of value. According to your example, each hour of a shipbuilder’s labour generates five times more value than each hour of a strawberry-picker’s labour. Assuming that both of these workers endure average conditions in their respective branches of production (i.e. each of them work with the same skill and intensity, and leaving aside the special case where one or other capitalist is an innovator, capable of producing commodities with less than the average socially-necessary labour), we are left with this result: workers in industries with higher than average organic composition of capital (e.g. shipbuilding) generate more value and surplus value in a given period of time than workers in industries with lower than average organic composition.
If this was true, it would mean that capitalists need not fear the tendency of the rate of profit (s/(c+v)) to fall, since ‘s’ would rise even though ‘v’ shrinks, and that Michael Roberts has been wasting all of our time. Furthermore, everything that Marx wrote about the redistribution of value from labour-intensive to capital-intensive capitals in order to an average rate of profit would be meaningless and pointless. Further still, the distinction between use-value and exchange-value would disappear, since both would rise as technology replaced living labour with dead labour – destroying the point I made, which you said you agreed with, concerning the contradiction between use-value measures of productivity and exchange-value measures of productivity. And finally, ‘Marxist’ economics would then coincide with, and parrot, bourgeois economics, agreeing with capitalism’s apologists that wages and productivity are directly related; the only difference between the two would be the terminology.
Dear fosforos,
I agree with your substantive point, which is an important one, that from thepoint of view of society as a whole, productivity must be conceived of holistically, and account for both the creation and the destruction of use-values, whereas the only definition of productivity the capitalists are interested in excludes ‘externalities’ like environmental destruction and also is blind to productive labour that does not produce commodities, e.g. domestic labour. But I think you introduce confusion by applying the category of abstract labour to the social definition of productivity. The process of abstraction of labour from its concrete useful form pertains only to the formation of exchange value; it is a specifically capitalist social relation which prevents the producers from rationally and holistically organising production. So, Marx’s theory of value already contains what you are calling for, even if many of its followers have got lost. I would recommend you read some of John Bellamy Foster’s marvellous articles on Marx’s ecology, in recent issues of Monthly Review and in his many books on the subject – you will be amazed and delighted.
Is productivity to be distinguished from productive or unproductive labour?
In that socially useful is a given in your scenario but is all Labour really socially useful when viewed from a class point of view. And so is Use Value, the use value for one can be a nuisance value for others!
I think Use value is something to be challenged!
No John, my numbers do not argue that the shipworkers produce 5 times more value in an hour than the strawberry workers.
The ship requires 1000000 worker hours and thus is equal in value to the strawberries produced in 1000000 worker hours. That tells us nothing about how quickly workers are reproducing their own value, the value of the wages, the value equivalent to their necessary labor.
My numbers suggest as do Marx’s writings that the value of an hour is always the value of an hour. But that the total number of working hours is divided into surplus labor time and necessary labor time, and that division is not singular, a single value, throughout all areas of capitalist economy; that there are in fact different rates of surplus value among capitalist industries.
The fact that historically, labor power in capitalist industries has been more productive than in capitalist agriculture is what accounts for the same historical movement of profit, of capital, value, of labor FROM the countryside to the cities, from agriculture to industry.
And in fact we can very well judge the relative productivity of an economy, and compare the relative productivities of multiple economies by comparing the percentage of the population tethered to agricultural production
Now to a truly critical issue:
As for your claim that my analysis means that there would be no tendency of the rate of profit to fall, and the fact that the capitalists would have nothing to fear because the rate of surplus value can differ and in fact can be raised– well let’s ask Karl himself.
We get this answer in Volume 3 (I think– this is from memory): “The tendency of the rate of profit to fall is bound up with the tendency of the rate of surplus-value to rise, hence with a tendency for the rate of labour exploitation to rise. Nothing is more absurd, for this reason, than to explain the fall in the rate of profit by a rise in the rate of wages, although this may be the case by way of an exception.”
[Put that in you pipe and smoke it, Boffy]
Get that, John? The tendency of the rate of profit to fall is bound up with the tendency of the rate of surplus value to rise. And prior to that Marx refers to the productivity of labor as being measured by the relative portions of surplus value contributed by that labor.
Sounds to me like I’m pretty close.
And earlier in the Grundrisse, Marx says “The profit rate is therefore inversely related to the growth of relative surplus value or the relative surplus labour, to the development of the powers of production, and to the magnitude of the capital employed as [constant] capital within production. In other words, the second law is the tendency of the profit rate to decline with the development of capital, both of its productive power and of the extent in which it has already posited itself as objectified value; of the extent within which labor as well as productive power is capitalized.
Damn, I’m ever closer. Actually I’m standing right on top of Karl who continues:
“What distinguishes surplus labour founded on machinery is the reduction of necessary labour time,…”
Well, I don’t how close you are to this, but from my spot on Marx’s shoulder, the reduction of necessary labour time means the increase in surplus labour time and that means an INCREASE in the rate of surplus value, something which your entire argument regards as more or less an impossibility.
So I honestly don’t think I’m confused– about this. About many other things, like the meaning of life, and “spooky action at a distance,” I freely admit to being, well confused. But here I think I’m standing on pretty solid ground, and it’s quite close to the point that Marx emphasized, although that point seems to be a bridge too far for you.
Now maybe Marx never wrote these things, or never meant them. And maybe in some alternate universe, they mean what you think they mean: that the bourgeoisie don’t have to fear the falling rate of profit [when in this universe this growth in the rate of surplus value actually drives the falling rate of profit]; that they make the redistribution of value pointless [when in fact this is the motor for the redistribution of value in this universe]; but I’m no good at quantum theorizing, and I’ve never been concerned with whether the cat in the box is dead, alive, or both.
Dear Sartesian,
Since, in your numerical example, the value of labour power is identical for a ship-builder as for a strawberry picker (i.e. they are paid the same wage), while the former replaces this value in one fifth of the time than the latter, it is ridiculous for you to claim that “my numbers do not argue that the shipworkers produce 5 times more value in an hour than the strawberry workers.”
Where is the source of your confusion?
It is to be found in your next statement, in particular, the last three words of it – “the total number of working hours is divided into surplus labor time and necessary labor time, and that division is not singular, a single value, throughout all areas of capitalist economy; that there are in fact different rates of surplus value among capitalist industries”.
“Among capitalist industries” conflates two very different cases: on the one hand, different firms in the same branch of production producing similar goods; on the other, different branches of production. It is the latter case that we are considering here, yet your comment on my reply to fosforos’ question indicates your continuing inability to appreciate the importance of this distinction (‘continuing’, because we’ve been here before, and you continue to repeat the same errors). There are, in fact, three layers to your confusion: a) your misinterpretation of some of Marx’s statements concerning innovators’ extra profits captured at the expense of other, less-advanced capitals in the same branch, b) your extension of this error to the relations between entirely different branches of production; and, if this isn’t bad enough, it is now (in your reply to my criticism of you) compounded by c) your elementary errors in applying statements made by Marx that relate to capital as a whole to very different analytical levels, not only to that of the relation between different branches of production, but even to the level of relations between individual firms operating within a branch.
To get c) out of the way: when Marx, in the quotes you cite and elsewhere, talks of rising organic composition resulting in falling rate of profit, it is implicit here that he is talking of a falling average, economy wide rate of profit, and therefore, too, of an economy-wide, average organic composition. The tendency of the (average) rate of profit to fall only pertains to the economy as a whole, and is driven, all other things being equal, by a rise in the economy-wide average organic composition. This law absolutely cannot be established at the level of a single branch, still less at that of an individual firm. In either of these cases, an increase in their organic composition could be countered by a sufficiently large expansion of other, more labour-intensive branches of production. Indeed, this is one of many ways in which the expansion of labour-intensive production in oppressed nations since 1980 has countered the tendency of the rate of profit to fall (and, it should be noted, one reason why Michael Roberts’ failure to include this world-historic transformation in his ‘Long Depression’ severely reduces the cogency of his central argument).
Turning now to b). If we assume that competition has equalised the rate of profit (s/(c+v) between both sectors, say at 10%, then, assuming no transfers of value from agriculture to industry, the shipbuilder’s expenditure on constant capital must be 7,800,000 (800,000/(7,800,000 + 200,000), while the soft-fruit capitalist’s ‘c’ will be 4,500,000 (500,000/(4,500,000+500,000), and the composition of capital (c/v) would be 36 in the first case and 7 in the second (the relative differences between these two values varies according to the average rate of profit; 10% is chosen merely to illustrate the point). Thus, contradicting Capital vol 3 and accepted Marxist wisdom on this subject ever since, equalisation of the rate of profit between different sectors with divergent capital compositions does not require any redistribution of value between them, and everything Marx wrote about the formation of prices of production and the equalisation of the rate of profit is baloney. This, indeed, is implicit in your example, since you make no attempt to consider how these two industries are related within the single economy they are part of. Were the capital/labour ratio in the shipbuilding sector to be higher than 36, then, in order to establish an average 10% rate of profit, agriculture’s c/v would have to be lower than 7 and a redistribution of value from the latter to the former would be necessary. Maybe this is what you are arguing – for a radical modification of Marx’s law, not its complete overthrow.
Finally, to a), your misinterpretation of Marx on innovators’ extra profits. First, note that, even if it was correct, your argument that the exceptionally productive workers employed by a capitalist employing more advanced, labour-saving technology produce more value in a given time ONLY applies to competition between capitals within a branch of production; to stretch this to the case of interaction between shipbuilders and soft-fruit farmers is to stretch what Marx says well beyond breaking-point. Second, note that, in those passages where Marx appears to say that these exceptionally productive workers create more exchange value in a given time than those of normal productivity, he is explaining *how things appear to the individual capitalist*. In other words, to the capitalist whose employees produce a commodity in less than the average socially-necessary labour-time, it will appear that his workers, who produce a higher quantity of use-values in a working day, also create a concomitantly higher quantity of exchange values. But this is not the case – the extra exchange value (and therefore higher surplus value) captured by this capitalist represents a redistribution of value generated by workers employed by capitals in direct competition with him, and who are forced to accept a lower rate of surplus value. Once the new technology becomes adopted by his competitors, this extra surplus value disappears. (It should be pointed out that, in the above, I assume that all these workers are working with the same level of skill and intensity. Relaxing this assumption introduces a further level of complexity that I’ll leave to one side…). This is why Marx’s argument concerning the extra surplus value which ‘exceptionally productive’ labour allows its employer to capture does not contradict what he says, in many other places, that the quantity of value generated in a given hour of average (i.e. similarly intense and skilled) labour is the same, independent of its productivity. Since this is the bedrock on which all else stands, I will once again reproduce the key passage in the first chapter of volume one of Capital.
“By productivity, of course, we always mean the productivity of concrete useful labor. . . . Useful labor becomes . . . a more or less abundant source of products in direct proportion as its productivity rises or falls. As against this, however, variations in productivity have no impact whatever on the labor itself represented in value. As productivity is an attribute of labor in its concrete useful form, it naturally ceases to have any bearing on that labor as soon as we abstract from its concrete useful form. The same labor, therefore, performed for the same length of time, always yields the same amount of value, independently of any variations in productivity. But it provides different quantities of use-values during equal periods of time.”
In conclusion: you are not standing on Marx’s shoulder at all, you are parroting vulgar, bourgeois economics. And I have a request. If (most likely, when) you reply to this, please leave your patronising, smart-alecky mode of expression to one side – you come across as an adult patiently talking to a child with learning difficulties. This is especially annoying, because you are dispensing not wisdom but stupidity.
“Since, in your numerical example, the value of labour power is identical for a ship-builder as for a strawberry picker (i.e. they are paid the same wage), while the former replaces this value in one fifth of the time than the latter, it is ridiculous for you to claim that “my numbers do not argue that the shipworkers produce 5 times more value in an hour than the strawberry workers.””
It makes no difference, in Marx’s labor theory of value and in the concrete world of capital’s exchanges if we’re dealing with strawberries or container ships. Value “equalizes” all these particular objects, these expressions of concrete labor and makes them…………COMPARABLE. That’s the whole point. And if they can be exchanged as equals, or in proportions, then the labor-power embedded in each can be compared on the basis of its own expression as value, i.e. time, and time of reproduction. If we can’t do this on the basis of value among sectors, then there’s no reason to be able to do it within sectors.
So that if it takes 1 million hours for workers in agriculture to produce a million quarts of strawberries, and 1 million hours for workers in a shipyard to produce a container ship, the difference between strawberries and container ships is obliterated by their “equivalent existence” as values.
And because of this obliteration, capital itself, and capitalists themselves, make the comparison all the time, hence the migration of capital
Now to start with your (c): c) your elementary errors in applying statements made by Marx that relate to capital as a whole to very different analytical levels, not only to that of the relation between different branches of production, but even to the level of relations between individual firms operating within a branch.
To get your (c) out of the way:
“when Marx, in the quotes you cite and elsewhere, talks of rising organic composition resulting in falling rate of profit, it is implicit here that he is talking of a falling average, economy wide rate of profit, and therefore, too, of an economy-wide, average organic composition. The tendency of the (average) rate of profit to fall only pertains to the economy as a whole, and is driven, all other things being equal, by a rise in the economy-wide average organic composition. This law absolutely cannot be established at the level of a single branch, still less at that of an individual firm.”
This is absolute nonsense and rubbish. How exactly can a law apply to only the capitalist “economy” as a whole and have absolutely no application to the particular, specific, capitalist sectors of production that make up the whole? Osmosis? Magic? Or perhaps yours is a “quantum Marxism” where spooky action at a distance reconciles the micro and macro forces, the micro and macro laws of capitalism.
The general tendency of the rate of profit to decline applies in the immediate, concrete circumstances of every capitalist enterprise, which is precisely how and why, and the only way, it becomes the tendency of the capitalist economy as a whole.
Now maybe your version is essential to your “theory” of super-exploitation, and your argue that workers in advanced countries materially benefit from this super-exploitation, but that isn’t Marx’s version.
I am not arguing that the workers are producing more exchange value based on a higher “productivity” of labor. I am stating that Marx saw capital as able to raise rates of relative surplus value, which both created, and offset, the tendency of the rate of profit to decline. And this raising of the rate of surplus value could not occur “in general” or “as a whole” without it existing, and being practiced in and by the individual capitals. The general laws of accumulation apply specifically, and are demonstrated in specific capitals.
Marx indeed explains raising the rate relative surplus value, through lowering the value of the variable capital, yielding greater surplus labor-time. How does that mechanism work? By reducing the time necessary for the workers to reproduce the value equivalent to the wage, NOT by producing “more value” per hour.
Now I personally think there is a great “tension” in Marx’s analysis between the “productivity= more physical output per unit of labor-time” and Marx’s discussions of the impact of machinery, the real domination of capital, on rates of surplus value, but that tension is within Marx, not “brought in” from the outside through the “contamination” or “pollution” of Marx by “bourgeois political economists”– which doesn’t mean that some Marxists don’t easily confuse and introduce bourgeois notions re value, value transfer etc. into Marx’s work– kind of like the way I think you introduce bourgeois notions with your claims that workers in advanced countries benefit from the super-exploitation of workers in less advanced countries.
In the past, you have declined to attempt calculations of rates of surplus value, arguing if I recall correctly, that it’s almost impossible to make such calculations accurately. In your book, I believe you don’t even calculate the rate of surplus value extracted from the shirt-making workers in Bangladesh. That’s a pity, because in fact, performing that calculation would should a rate of surplus value far greater than any rate achieved in advanced countries.
I think those calculations can be made for sectors of the capitalist economy, and the economy as a whole. And I think those calculations demonstrate a distinct correlation of: the value of the “technical component” animated per worker-hour, and the rate of surplus value so achieved, AND a lower rate of profit.
The working out of these difference, these variations, and the struggle of different sectors to offset the correlations is what constitutes the “general laws,” particularly the migration of capital to low-wage areas where higher rates of exploitation, of extracting surplus-value based on lowering “v” can be more easily achieved.
Marx allows that the “productivity of labor” means not only the greater physical output per hours, but the ability to reproduce the value equivalent to the necessary labor-time more quickly, in a reduced portion of the working day
Per your request: “And I have a request. If (most likely, when) you reply to this, please leave your patronising, smart-alecky mode of expression to one side – you come across as an adult patiently talking to a child with learning difficulties. This is especially annoying, because you are dispensing not wisdom but stupidity.”
Priceless, coming from a person who starts a reply with:
“your numerical example illustrates nothing else than your utter confusion and your distance from Marx’s theory of value.”
Don’t dish it out, if you can’t take it.
Request denied.
I began my last post by saying:
“Since, in your numerical example, the value of labour power is identical for a ship-builder as for a strawberry picker (i.e. they are paid the same wage), while the former replaces this value in one fifth of the time than the latter, it is ridiculous for you to claim that “my numbers do not argue that the shipworkers produce 5 times more value in an hour than the strawberry workers.””
You offer no defence to this, yet you don’t withdraw, either. Instead, later in your comment, you repeat your claim: “I am not arguing that the workers are producing more exchange value based on a higher “productivity” of labor.” A few paragraphs on you argue the exact opposite: “The “productivity of labor” means … the ability to reproduce the value equivalent to the necessary labor-time more quickly, in a reduced portion of the working day.”
You began your reply to my accusation with this:
“It makes no difference, in Marx’s labor theory of value and in the concrete world of capital’s exchanges if we’re dealing with strawberries or container ships. Value “equalizes” all these particular objects, these expressions of concrete labor and makes them…………COMPARABLE.”
Exactly! It is for this very reason that, assuming average intensity and skill, one hour’s labour of a strawberry-picker is equalised with one hour’s labour of a shipwright, that both make an equal contribution to total value… and that, if the composition of capital, c/v, is higher in the ship-building industry, equalisation of profit rates between the two requires the prices of these commodities to move away from their individual values; with the result that part of price of a ship represents value generated by the labour of strawberry-pickers.
You then repeat yourself (you indulge in a great deal of repetition and of going around in circles; maybe you should do some editing before you fire off your comments): “And if they can be exchanged as equals, or in proportions, then the labor-power embedded in each can be compared on the basis of its own expression as value, i.e. time, and time of reproduction”… But, what’s the point of the last four words, “and time of reproduction”?? They are completely unnecessary, and their meaning is obscure… but their purpose, or at least their effect, is not so obscure. It is to obfuscate, to confuse, to muddy the waters.
You then say “If we can’t do this on the basis of value among sectors…” – falsely implying that I argue such a thing – “…then there’s no reason to be able to do it within sectors.”
But this, too, is false – there IS a reason why the process of equalisation of different concrete labours within a sector differs from the process of equalisation between sectors. In the latter case, the relative price of a ship or a punnet of strawberries is determined by the average socially-necessary labour time required to produce each commodity (plus whatever transfer of value between sectors is required to create an average rate of profit between the two); whereas, when considering two different firms producing the same commodity, what’s crucial is precisely what is absent in the inter-sectorial case just considered: namely, the difference between the individual value of the commodity and its social value.
It is as if you have put the distinct categories and concepts that comprise Marx’s theory of value into a blender and pulverised them until what comes out is drivel.
I could go on, examining each of your increasingly obtuse statements, trying to make some sense out of them, but it’s incredibly tedious, and I only do so for the sake of anyone else who is reading this. I have long ago given up on you. If there’s someone else out there who thinks you’ve made a valid point that I have not answered, speak up and I will attempt to address it.
The issue you refuse to address is to actually perform, or even attempt to perform a calculation of rates of surplus value anywhere, in any sector, in the capitalist economy to provide evidence for your assertions.
If you did you wouldn’t be able to reconcile the contradictions in your own work that allow you to claim at one and the same time that globalization benefits the workers in the advanced countries at the expense of the “Global South,” and then write that “in other words the lowest 90 percent of wage earners [in the US]….. earned 42 percent of the total payroll in 1980 and just 28 percent in 2011– Thus the share of national income received by the bottom 90 percent of US employees has declined not by 3.9 percent but by a staggering 33 percent.” And further quote, and with approval the IMF’s report that “a clear decline [in real wages and labor’s share] since the early 1980s across the advanced economies…a reversal of the rise in labor shares that took place in the 1970s, especially in Europe and Japan.”
Just to put the record straight, and perhaps prevent you from picking up the brush and attempting to paint me as a “Euro-marxist”– whatever that is– it is not my claim, not has it been my claim, the wages in the advanced capitalist countries are higher than wages in the global south because of greater productivity of workers in advanced countries. The establishment of wages in any specific country has much much more to do with the historical levels of wages, the specifics of the development of capitalism in a particular country, the level of development– the “evenness” or unevenness of capitalism, and most importantly, the ability of the working class to organize itself and win struggles for higher wages.
And I’ll state this one more time- I think there is definite ambiguity in Marx’s original explanation of relative surplus value in Chapter 12 (?) of volume 1 — and his subsequent (and earlier– in the Grundrisse) examinations of the role of machinery, where he moves, and without a second thought, from restricting the increase in relative surplus value to those moments, processes, that result in the absolute, not relative decline in “v” based on reduced values of the means of subsistence, to the condition of “modern capitalism” defined by the increased rates of surplus value, and by definition, relative surplus value, due to the introduction of machinery into the production process.
However, to argue as you do, that while that’s the “general law” of capitalist accumulation, it has no specific applications, is absurd.
Thanks for not whining anymore about my sarcastic attitude.
i have a doubt
What matters when we decide the size of one company:
The Market Cap
The profits
The revenues
?
Tnks
And just for curiosity:
Half of americans have the same per capita GDP PPP of Latin America: 17 thousand dollars (year)
The top 20% who owns the financial wealth of the country have a per capita GDP PPP of 240 thousand dollars (year)
The Latin America is INSIDE the USA
Why a Wall?
“extreme strategists of capital recognise the ‘proper’ solution. Back at the beginning of the Great Depression of the 1930s, the then US Treasury Secretary, Andrew Mellon, warned against keeping ‘dead’ capital going ‘zombie like’ as a ‘moral hazard’. “Liquidate labour, liquidate stocks, liquidate farmers, liquidate real estate … it will purge the rottenness out of the system. People will harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less enterprising people” ”
But that’s all hogwash. “Liquidate” purges rottennes like arson purges oxygen. War is what it took to remedy the Great Depression, not “more moral living” not “adjusting values” and not “more enterprising people,” but the slaughter of 50 million.
Now maybe some call Dresden, Auschwitz, Hiroshima, Leningrad, Nanking “liquidation” of “real estate.” But we should call this “purging” of and by capitalism what it really is: the mass incineration of human beings.
Adding war related disease and famine, probably closer to 80 million.
zombie Capital is the reason why in my opinion, there is a possibility of political cooperation between the working class and parts of the capitalist class that are affected by Capitalism.
From an economic point of view, the less capital you have, the worse position you are in relation to others. There is no magical economic barrier between capitalists and workers apart from the fact that one has zero capital.
The barrier is political , since all capitalists would not consider removing property rights as a solution. But there are alternative tactical methods, in which the removal of property rights is not pointed in advance but after some of the benefits of an equitable society are present.
I see ryaki.org as such a political tactical method.
You raise an important question. Mao Zedong had already stated that, in the periphery os capitalism (aka the Third World), even in order to make reforms that are considered as “developmentist capitalism” you had to be socialist, because one of the main features of capitalism in the imperialist phase is the exhaustion of capitalism, the impulse of capitalism to merely survive, at any cost.
That’s why one of the smaller stars on the Chinese flag represents the nationalist bourgeoisie.
How many corporations will survive in the next 10 years?
Is a list of these Zombie Companies available anywhere online?
The data comes from a Morgan Stanley research paper. I shall see if I can find it.