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December 27, 2010 - No. 223 Discussion on Nation-Building The Necessity to Restrict Monopoly Right
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Monopolies constantly
scheme to reverse the tendency of a falling rate of profit. These
attempts cause serious harm to the socialized economy and public good.
Government must uphold its social responsibility and restrict
monopolies from using their power to reverse a falling rate of profit
in their particular sectors
or enterprises. Government can take a step in this battle by exercising
control over the setting of prices of production and establishing
public control of the wholesale sector. The price of production of
commodities is the core around which wholesale and retail market prices
oscillate. A progressive feature of taking
decisive action in defence of public right on the front of prices of
production and the wholesale sector is that it opens a door to
progress. Conscious public control of prices of production and the
wholesale sector would immediately pose the problem of what to do about
the contradiction between supply and demand.
How in practice does a modern society introduce social consciousness
into dealing with the issue of supply and demand, which the ruling
elite want to keep mysterious and beyond human capacity to resolve in a
manner that favours the people. People exercising conscious control
over the market rather than being
manipulated by monopoly forces that dominate the market is part of the
solution to ridding the economy of the scourge of the business cycle.
Price while representing value in
an exchange is influenced by the time and place and more specifically
the prevailing relations of production. This is none more apparent than
today under monopoly capitalism where price is routinely manipulated by
the monopolies. In contradiction with the law of value, owners
of monopoly capital have the power to disrupt the general approximation
between value and price within sectors, enterprises and even entire
economies they dominate. In those situations, the law of value
reasserts its authority causing economic crises. File photo: Protest against bank bailouts, New York City, September 25, 2008. |
Disequilibrium between value and price in one sector
caused by monopoly manipulation will be corrected somewhere else within
the interconnected economy causing crises in other sectors, and when
the case is severe, within the economy as a whole. This was the case
with the severe disruption between value
and price in the U.S. real estate and financial sectors, which by 2008
had spread globally through the reckless issuing of asset-backed
commercial paper and other derivatives in the form of bonds of bundled
mortgages, car loans and credit card debt. The exchange-value of those
derivatives, the amount paid for them
by mutual and pension funds, enterprises and others, was grossly
inflated above the use-value of the assets. The law of value forced an
inevitable correction resulting in unconscionable losses for the
savings of workers and middle strata in their pension and mutual
funds. The correction also engulfed many of the largest
U.S. and British financial enterprises with the threat of bankruptcy
but this aspect of the correction was ambushed by the pay-the-rich
bailout schemes of most of those same financial enterprises throughout
the Anglo-U.S. Empire including Canada. The correction was deliberately
turned into an attack on the working
class and middle strata in the form of losses of their savings and
pensions funds, mass unemployment, wrecking of manufacturing, downward
pressure on living and working conditions including wages and pensions,
increased individual taxation combined with lower corporate taxation, a
growing gap between rich
and poor, and a reduction in social programs and public services under
the hoax of "austerity to reduce the public deficit and debt," which of
course have been greatly increased through the various pay-the-rich
schemes and lower corporate taxes.
To combat these attacks of the anti-social offensive, the Workers' Opposition has raised the slogans, "Stop paying the rich!", "Increase investments in social programs!" "Manufacturing Yes! Nation-Wrecking No!" Within this general program, it is necessary to restrict monopoly right on the front of prices, to assert the rights of the working class within the social relation prices to maintain, in an increasingly conscious manner, an equilibrium between value and prices in particular enterprises, sectors and on a social scale within the economy as a whole. This assertion of the rights of the working class within the social relation prices is an important aspect of a pro-social alternative and nation-building.
Additional Comment on Use-Value and Exchange-Value
A commodity possesses a value in work-time and is given a price in money. These two qualities have two distinct forms: value in work-time is a social product, a use-value with a particular quality; price in money, measured in dollars, is an exchange-value with no particular quality, only a general measurement in money. These two forms, use-value and exchange-value, exist in contradiction and unity with one another within Canada's particular monopoly capitalist system of commodity production for exchange.
Use-value, measured by socially necessary work-time, assumes the form of a commodity's materiality as social product, its tangible form of existence such as flat-rolled steel, a television or potato, which could be called its natural form. Use-value does not pertain to a particular social or economic organization and does not acquire its value in relation to other products but through the work-time socially necessary at a certain level of productivity to produce its natural form.
Humans know instinctively that a social product that takes more work-time to produce has a higher use-value than another product that takes less work-time to produce. In Canada under the monopoly capitalist system of commodity production for exchange, the use-value of social product cannot be used until it has first been negated by its exchange-value and turned into money, and secondly has had its exchange-value negated and transformed back into use-value.
This necessity first to negate social product and its use-value, which means in practical terms to find a buyer, lies at the heart of the business cycle of recurring economic crises. Under the transient capitalist system controlled by an egocentric minority, society cannot fully utilize the actual and potential social product of industrial mass production. First, the absolute increase in social product constantly comes up against the reality of relatively fewer buyers. Secondly, although mitigating the first contradiction somewhat, the absolute increase in social product due to higher productivity from ever greater capital investment (in a ratio with fewer workers) comes up against the reality that the larger mass of social product has a lower use-value because of less socially necessary work-time contained in it and consequently a corresponding lower exchange-value. The ever greater capital investment (in a ratio with fewer workers) results in a constantly lower exchange-value in relation to the total mass of invested capital, which necessarily means a constantly falling rate of profit even if all social product is successfully exchanged.
Aggravating the basic problem of exchange-value negating use-value is the current reality of monopoly manipulation and control of this process for the narrow interests of a few. Each individual monopoly, sector or imperialist power attempts to overcome the law of a falling rate of profit in its individual circumstance only to cause disruption and crisis for other monopolies, sectors, the economy as a whole, and even the entire imperialist system of states especially when a powerful imperialist nation such as the U.S. or group of nations such as the European Union is behind the egocentric attempt.
The negation of use-value by exchange-value and its subsequent reaffirmation as use-value have fallen under the manipulation and control of monopolies and imperialist powers and their egocentric narrow interests. The process of finding a social equilibrium or unity between exchange-value and use-value in particular cases and on a social scale has become more and more disrupted through monopoly manipulation and control of the market and prices, including international terms of trade and the problem of U.S. dollar hegemony. The disruption from monopoly manipulation necessarily spreads out in damaging ways throughout all the sectors and even globally, such as huge imbalances between supply and demand, increased unemployment, wrecking of manufacturing, debt and deficits and subsequent calls for austerity, which only exacerbates the dislocation and crisis. The law of value acts spontaneously and inexorably to find a social equilibrium between use-value and exchange-value, between value and price. This happened recently with monopoly manipulation and control of real estate prices in the United States to serve the narrow interests of the financial oligarchy and property magnates. The monopoly-controlled exchange-value of real estate became out of synch with its use-value and generated a cascading crisis that spread throughout the globe.
Necessity for an Organized and Conscious Workers' Opposition
Canadians are confronted with a very real problem within the economy. Monopolies are using their dominant positions within their respective sectors to manipulate and control markets and prices to their narrow advantage. This has disastrous consequences for other sectors, the economy as a whole and the workers and communities directly affected such as Hamilton and Nanticoke with the U.S. Steel shutdowns. The Workers' Opposition must take up this problem and find a solution. Workers have a right to restrict monopoly right to manipulate the market and prices, as part of defending their interests and the general interests of society.
Within the social relation prices, monopoly right must be restricted by enforcing a modern formula for prices of production and through public control of the wholesale sector. The Workers' Opposition must introduce social consciousness into the process of negation of use-value by exchange-value and its retransformation back into use-value, of which wholesale markets and prices are integral parts. Otherwise, economic crises are going to become ever more acute, damaging and long-lasting.
A problem posed by the monopoly capitalist system is to transform average socially necessary work-time existing as use-value into a price of production that conforms to the law of value and most importantly is not destructive to the overall economy. A pro-social conscious process is required in opposition to the narrow egocentric conscious control of the monopolies.
Monopoly right interferes with the spontaneous process of capitalism to establish prices of production through competition on a broad scale. A Workers' Opposition, through a conscious and enforced process to determine prices of production, would demand that monopoly capitalists accept no more than a general rate of profit for their enterprises and investments in conformity with the level of productivity in the sector. This could be an arrangement where the mass of capital employed in each enterprise receives a fractional part of the total national profit proportionate to its portion of the total social capital.
This goes against the aim of monopoly capital to reverse the trend of a falling rate of profit for their particular enterprises, investments and mass of capital, but their narrow aim is destructive to the whole and must be curbed. This would also stop the mania of pay-the-rich schemes using public monies for private purposes in opposition to the public good and general interests of society. Using the public treasury for pay-the-rich schemes to strengthen private enterprise and investments is a destructive corrupt practice of monopoly capitalism that should be considered a serious criminal offense. Public monies should go for public enterprise, public services, social programs and the general interests of society. If public monies are necessary to rescue private enterprise then owners of that private enterprise must relinquish their ownership and control in favour of public ownership and control that serves the public good and general interests of society.
To introduce restrictions on monopoly right requires an organized and conscious Workers' Opposition with enough power to push through government reforms of the socialized economy which are necessary to stop the monopolies from their path of nation-wrecking based on egocentric greed. These measures, which also include reforms of the tax system, controls over capital movement, and changes to international terms of trade and the Canadian currency that favour the people and public good could be characterized as a political trial of strength between the Workers' Opposition and owners of capital, a rehearsal leading to a revolutionary transformation to socialism when the working class has sufficiently developed the subjective conditions for such a change to a more advanced and harmonious economic and political system.
Fiat Currency
Modern fiat currency is an example of the contradiction between use-value and exchange-value carried to an extreme by monopoly right. Modern fiat currency reflects the growth and power of the monopoly capitalist state. Fiat money exists as an edict of the state. State-issued fiat money is legal-tender for use as means of exchange and capital, and to pay taxes. Fiat money is deemed to contain a certain exchange-value, which is not fixed and is not meant to be fixed for therein lies its power to attack the working class and serve the most powerful owners of monopoly capital within the imperialist system of states.
Fiat money, in contrast to specie-backed money, is not backed by any commodity such as gold or silver whose exchange-value should change slowly corresponding to changes in its use-value determined by the socially necessary work-time contained within it. The dramatic fluctuations in exchange-value of gold during the last decades have not been due to changes in its intrinsic use-value but rather its domination and manipulation by monopoly-controlled fiat money, especially the U.S. dollar.
Fiat money exists by virtue of the power of the monopoly capitalist state and monopoly right. The use-value of fiat money equals the work-time required to produce it, which for paper currency that needs protection against counterfeiting, is possibly only a little more than coloured paper confetti. The monopoly capitalist state and international financial oligarchy dictate the exchange-value of fiat currency, which fluctuates according to an economy and country or group of countries' (in the case of the Euro) position, role and relative strength within the imperialist system of states.
Fiat Money Is a Social Relation
Workers must recognize that money in the form of capital, and fiat money in the form of means of exchange both internally and for settlement of international trade, are social relations. When something is a social relation, it means contending class interests exist within the social relation as a living dialectic. If workers are passive within these social relations and do not defend their interests in an organized conscious way then the other social force within the relation, owners of monopoly capital, will dominate and abuse the working class.
In Canada or any monopoly capitalist state, the class interests of owners of capital dominate social relations generally and in particular forms, such as within the social relations capital, fiat money and prices. Workers must organize and fight with a conscious agenda for their class interests on these fronts of struggle.
Modern fiat money reveals that the contradiction between use-value and exchange-value, which exists under any system of commodity production, has been intensified with the growth of the monopoly capitalist state. With the ascent to power of the monopolies, the financial oligarchy and its state have gradually gained the power to issue fiat currency in place of a spontaneously developed general equivalent form, a commodity such as gold or silver. A general equivalent form has long been used directly as money or to back specie-money, as a means of exchange or to hoard wealth.
The use-value of a modern fiat twenty dollar bill is close to that of coloured paper confetti while its exchange-value is dictated by the monopoly capitalist state and the international financial oligarchy. Prior to monopoly capitalism, money as means of exchange was not a social relation dominated by the ruling class. Only after a certain quantity of money was amassed in private hands, during nascent capitalism, did money change its quality and become a social relation in the form of capital.
Under monopoly capitalism, in particular with the introduction of fiat currency whose exchange-value is under the control of the financial oligarchy and the prevailing dominant power within the imperialist system of states, money of any quantity has become a social relation. For example, the U.S. monopoly capitalist state can simply issue $600 billion of new fiat currency virtually out of thin air to defend its interests within the imperialist system of states, more or less without concern for the damaging global consequences to other nations or even to its own working class and middle strata.
Money itself has become a social relation, with the dominant monopoly capitalist class manipulating it to its advantage. This consideration is crucial in grasping why it is necessary to restrict monopoly right on the front of prices of production and the wholesale sector.
Fiat money as a social relation in a very practical way underscores the importance of having and defending indexed pensions and wages backed by a powerful Workers' Opposition. The people must be on guard to defend themselves against any sudden movement in the exchange-value of fiat money such as the "shock therapy" of high price inflation experienced in Russia in the 1990s after the collapse of the Soviet Union, which destroyed people's savings especially their retirement savings, or now with a threatened significant lowering of the exchange-value of the U.S. dollar, which will spark price inflation globally.
Karl Marx on Rate of Profit
((Workers' Centre comments in double parentheses))
The capitalist does not care whether it is considered that he advances constant capital to make a profit out of his variable capital, or that he advances variable capital to enhance the value of the constant capital; that he invests money in wages to raise the value of his machinery and raw materials, or that he invests money in machinery and raw materials to be able to exploit labour.
((Constant capital: amount of capital advanced for means of production both fixed (machines, buildings etc.) and circulating (raw materials, electricity etc.) that is required to activate a certain number of workers to allow production to take place.
Variable capital is the original Marxist term for that portion of value added by workers from their work-time that is claimed by them as wages and benefits.
Surplus-value is the original Marxist term for that portion of the value added by workers from their work-time that is claimed by owners of capital.))
Although it is only the variable portion of capital that creates surplus-value, it does so only if the other portions, the conditions of production, are likewise advanced.
((The variable portion of capital is the paid labour-power or wages. In contemporary terms, this constitutes the claim of workers on the value they produce or add in the realm of production. In the realms of circulation and most services, which have grown stupendously since the days of Marx, the variable portion of capital is the added-value workers claim according to their work-time and qualifications. For these claims to be made, added-value must be transferred from the realm of production into the realms of circulation and most services. Similarly, added-value transferred from the realm of production into the realms of circulation and most services is the source from which owners of capital in those realms make their claims. The law of value demands that only something produced can be consumed. This may sound simplistic but under the capitalist system, nothing is quite what it appears to be. Nothing is "produced" when a commodity is sold to a retail customer yet it appears that money has been "made." When a shyster cheats people on a business deal or makes a fortune on a big score, money may be "made" during the transaction but nothing has been produced. The "profit" is a re-division of added-value already produced by the working class in the realm of production.))
Seeing that the capitalist can exploit labour only by advancing constant capital and that he can turn his constant capital to good account only by advancing variable capital, he lumps them all together in his imagination ((costs of production plus claims of workers on the wealth they create (wages) are combined together as a "cost-price")), and much more so since the actual rate of his gain is not determined by its proportion to the variable, but to the total capital, not by the rate of surplus-value ((ratio between added-value claimed by workers in wages and added-value claimed by owners of capital)), but by the rate of profit ((ratio between the sum of costs of production plus workers wages and the amount of added-value claimed by owners of capital)). And the latter ((rate of profit)), as we shall see, may remain the same and yet express different rates of surplus-value.
The costs of the product include all the elements of its value paid by the capitalist or for which he has thrown an equivalent into production. These costs must be made good to preserve the capital or to reproduce it in its original magnitude.
The value contained in a commodity is equal to the labour-time expended in its production, and the sum of this labour consists of paid and unpaid portions. But for the capitalist the costs of the commodity consist only of that portion of the labour materialized in it for which he has paid.
((For capitalists, the paid portions of the labour materialized in a commodity consist of costs of production (previously produced means of production such as buildings, machines, electricity etc.) and the claims of workers on the value they add (wages, benefits and pensions). The unpaid portion is the claim by capitalists on the value added by workers.
Marx explains these concepts from the point of view of owners of capital, which he clearly states in many passages, was the only way the concepts could possibly be understood at a time when the working class was in its infancy and the modern science of political economy had only just begun to be elaborated in battle with classical political economy.))
The surplus-labour contained in the commodity costs the capitalist nothing, although, like the paid portion, it costs the labourer his labour, and although it creates value and enters into the commodity as a value-creating element quite like paid labour. The capitalist's profit is derived from the fact that he has something to sell for which he has paid nothing. The surplus-value, or profit, consists precisely in the excess value of a commodity over its cost-price, i.e., the excess of the total labour embodied in the commodity over the paid labour embodied in it. The surplus-value, whatever its origin, is thus a surplus over the advanced total capital. The proportion of this surplus to the total capital is therefore expressed by the fraction s/C, in which C stands for total capital. We thus obtain the rate of profit s/C=s/(c+v), as distinct from the rate of surplus-value s/v.
((Here Marx uses the (C) for cost-price, which comes from the perspective of owners of capital that actual costs of production (c) plus claims of workers on the value they add (v) form together the cost-price of production (c + v) or (C).))
The surplus-value measured against the variable capital is called rate of surplus-value.
((Surplus-value is the total claim of owners of capital on added-value produced by workers; variable capital is the claim of workers on the added-value that they produce.))
The surplus-value measured against the total capital is called rate of profit.
((Within "total capital" Marx includes the claim of workers on added-value. He made clear that the analysis of capital had to begin from the perspective of owners of capital, as economic science and the working class movement were not in a position to do otherwise at the time. This changed with the development of capitalism to monopoly capitalism, which is the highest stage of capitalism, the era of imperialism and the proletarian revolution. During the era of the proletarian revolution, a crucial difference with the previous era is the necessity to put forward the working class perspective in political economy and all matters concerning the working class movement.))
These ((rate of surplus-value and rate of profit)) are two different measurements of the same entity ((surplus-value or claim of owners of capital on added-value produced by workers)), and owing to the difference of the two standards of measurement they express different proportions or relations of this entity.
The transformation of surplus-value into profit must be deduced from the transformation of the rate of surplus-value into the rate of profit, not vice versa. And in fact it was rate of profit which was the historical point of departure. Surplus-value and rate of surplus-value are, relatively, the invisible and unknown essence that wants investigating, while rate of profit and therefore the appearance of surplus-value in the form of profit are revealed on the surface of the phenomenon.
So far as the individual capitalist is concerned, it is evident that he is only interested in the relation of the surplus-value, or the excess value at which he sells his commodities, to the total capital advanced for the production of the commodities, while the specific relationship and inner connection of this surplus with the various components of capital fail to interest him, and it is, moreover, rather in his interests to draw the veil over this specific relationship and this intrinsic connection.
Although the excess value of a commodity over its cost-price is shaped in the immediate process of production, it is realized only in the process of circulation, and appears all the more readily to have arisen from the process of circulation, since in reality, under competition, in the actual market, it depends on market conditions whether or not and to what extent this surplus is realized.
((Cost-price is the sum of costs of production plus the claim of workers on the added-value they produce. The costs of production represent capital consumed in the course of production and within the realm of circulation. To determine a rate of profit and price of production, only capital consumed within a specific period is used in the formula. For fixed constant capital, this is usually calculated as depreciation or amortization of such assets as machines or buildings. Amortization is an accounting practice where the progressive reduction or depreciation of a fixed asset is expressed as an expense or cost of production in the accounts.
An alternative method for finding a rate of profit is to divide the total claim of owners of capital on added-value at a particular enterprise during one year with the total invested capital plus the claim of workers on added-value. This method can be used to compare the rates of profit of enterprises and sectors if the same method is used in all cases. Obviously, this rate of profit would be lower than the alternative method using only the consumed capital. For our purposes, the more accurate contemporary measurement of rate of profit, especially for use in finding prices of production is the method that uses the claims of owners of capital on added-value for a specific period divided by cost-price, which consists of costs of production (consumed capital) plus the total claim of workers on added-value. This is especially important under monopoly capitalism as inactive or unproductive capital represents a large part of the total invested capital. For example, U.S. companies presently hold $1.93 trillion in cash and other liquid assets within their treasuries. The U.S. Federal Reserve in early December reported that cash as a share of total company assets is at the highest level it has been in a half-century.))
- from Karl Marx, Capital, Volume III, Part I, The Conversion of Surplus-Value into Profit and of the Rate of Surplus-Value into the Rate of Profit; Chapter 2. The Rate of Profit
(Part Six: Determining Value and Prices of Production in Practice)
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