[OPE-L:4907] Re: Re: faux frais, armaments, and security guard services

From: Rakesh Narpat Bhandari (rakeshb@Stanford.EDU)
Date: Wed Feb 14 2001 - 20:01:42 EST

>  With regard to
>(3) it  doesn't matter who buys these weapons ( in Marx's simple
>reproduction schema unproductive consumption is part of the process, and it
>is well known eg  that privately held hand guns/ rifles  in the USA are
>extraordinary in number when compared to NATO's ).  Profit is made in their
>production, and labour is 'productive' of capital

Paul B,
I don't think I agree with this.

Let's say the govt borrows. So a debt has been incurred equal to the 
sum of costs + profits in the arm mfg's sale to the government. Thus, 
even if the arms mfg's private property has served as capital, his 
profits are cancelled by the debt incurred by the govt for which 
'society' is now responsible.

If the purchase comes through taxation, then the arms have simply 
been purchased out of the surplus value seized from the private 
sector; isn't this simply a transfer of surplus value rather than an 
additional production thereof?

All the best, Rakesh

ps here is an excerpt from Mattick Sr's contribution to the 1967 
Marcuse festschrift (it is not clear to me that he is saying the same 
thing as I say above):

The government increases effective demand through purchases from 
private industry, either financed with tax money or by borrowings on 
the capital market. In so far as it finances its expenditures with 
tax money, it merely transfers money made in the private sector to 
the public sector, which may change the character of production to 
some extent but does not necessarily enlarge it. If the government 
borrows money in the capital market, it can increase production 
through its purchases. Capital exists either in liquid form, i.e. as 
money, or in fixed form, that is, as means and materials of 
production. The money borrowed by government puts productive 
resources to work. These resources are private property, which, in 
order to function as capital, must be reproduced and enlarged. 
Depreciation charges and profits gained in the course of 
government-contracted production--are 'realized' out of money 
borrowed by the government. but this money, too, is private 
property--on loan to the government at a certain rate of interest. 
Production is thus increased, the expense of which piles U.S. as 
government indebtedness.
	To pay off its debts and the interest on them, the government 
has to use
tax money, or make new borrowings. The expense of additional, government
contracted production thus carried by private capital, even though it is
distributed over the whole of society and over a long period of time. In
other words, the products which the government 'purchases' are not really
purchased, but given to the government free, for the government has 
nothing to give in return but its credit standing, which in turn has 
no other base than the government taxing power and its ability to 
increase the supply of credit money.
  	We will not enter here into the intricacies of this rather 
complex process, for, however, the credit expansion is brought about 
and however it is dealt with in the course of expanding 
government-induced production, one thing is clear, namely, that the 
national debt, and the interest on it, cannot be honored save as a 
reduction of current and future income generated in the private 
sector of the economy..."
	Because government induced production is itself a sign of a 
declining rate of capital formation in the traditional sense, it 
cannot be expected to serve as the vehicle of private capital 
expansion effective enough to assure
conditions of full employment and general prosperity. It rather turns into
an obstacle into such expansion, as the demands of government on the 
economy, and old and new claims on the government, divert an 
increasing part of the newly produced profit from its capitalization 
to private account.
		Of course, claims on the government, which make up 
the national debt,    
   can be repudiated, and 'profits' made via government induced production   
   are thus revealed for they actually are, namely, imaginary profits

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