Re: [OPE-L] basics vs. non-basics and financial services

From: Rakesh Bhandari (bhandari@BERKELEY.EDU)
Date: Tue Oct 04 2005 - 05:56:29 EDT

At 10:19 AM +0100 10/4/05, Paul Cockshott wrote:
>Diego Guerrero wrote:
>>Paul, you say: "The mass of surplus value can not
>>>be altered by activities in the 3rd sector producting luxuries etc."
>>Suppose a system producing 10 iron, 10 corn and 100 luxuries, with 10, 10
>>and 100 workers respectively. As distribution can be any distribution, this
>>would be possible. Do you mean that wages and profits in this third sector
>>come from the two former? I don't think so. Another, very different thing,
>>would be if this third sector were public administration. Then productivity
>>in the two productive sectors would have to be much higher that in the
>>sector in order for them to be able to pay taxes and redistribute such a
>>quantity of surplus value.
>>In my opinion, in the first case we have new areas for accumulation of
>>capital and production of new surplus value. In the second case we would
>>have new areas outside value production that would reduce the potential of
>>accumulation of capital.
>What I mean is that the third sector
>1. Can not produce relative surplus value
>2. Can produce some absolute surplus value but, and this is crucial
>3. This absolute surplus value can not be accumulated
>1. The luxury sector can not produce relative surplus value
>    since to produce relative surplus value its output would
>    have to enter directly or indirectly into the real wage.
>2. It could produce absolute surplus value, so its employees
>    can be exploited by being forced to work beyond the time
>    necessary to reproduce the value of their wages, but in
>    this they are no different from butlers and the other feudal
>    retainers that Smith stigmatised as unproductive. These too
>    may have to work long hours.

No, this isn't true. Expenditure on butlers (or feudal retainers) is
not returned as value and surplus value; it is indeed expended. A
third sector capitalist enjoys return and valorization of capital.
The butler is unproductive; the employees of third sector capitalist
are productive. Third sector employees are not like feudal retainers.
This is not, as you suggest below, a juridical distinction. It is a
basic economic one, and Marx makes it in TSV, especially in regards
to discussion of Asiatic Mode of Production about which he was

>3. Why can the surplus value produced in this sector not be
>    accumulated?
>    Because of its material form.
>    Assume depts I, and II remain unchanged, but that working hours
>    increase in dept III. This increase in working hours will result
>    in a more valuable product in dept III, but this surplus comes
>    in the material form of luxuries and services which can not be
>    accumulated as constant capital. Its output must thus be unproductively
>    consumed by the capitalist class.

Again this does not follow. Surplus value from third sector
activities can obviously be capitalized; third sector businesses can
and do themselves grow; their capitalization of their own
appropriated surplus value need not be a drag on growth especially if
there are no potential borrowers for surplus value in depts 1 and 2.
Indeed if that be the case, then the growth of sector 3 is bringing
the whole system forward.

>Thus the third sector is not what you describe as "new areas for
>accumulation of
>capital and production of new surplus value".

Diego seems right to me.

>It is what it always was, a drain on the process of accumulation and
>thus on capitalist economic progress.

Why is the capitalization of surplus value in the third sector a
drain; it creates a market for the products of the first two
divisions. Indeed you criticized me for critiquing Andrew Trigg's
emphasis on the importance of debt financed luxury spending as the
source of continuing accumulation. You seem to be reversing your
position. I thought you agreed with Trigg's picture of growing
capitalist expenditures on luxuries creating the demand to sustain
the accumulation process as long as the financing to back it up was

>  This is the reason why Smith
>insists on productive labour producing vendible commodities that
>persist through time.
>This is the same reason why the production of weapons is unproductive,
>whether this takes place in state factories or private factories.
>Workers engaged in the production of nuclear missiles are
>producing means of *destruction* not means of *production* and
>as such can not contribute directly or indirectly to the
>accumulation of the means of production.

But the growth of the arms industry creates demand for means of
production; moreover, if the surplus value in that industry would not
have been otherwise capitalized--that is, no one in depts 1 and 2
would have borrowed  for their own expansion-- then the self financed
growth of dept 3 is indeed a boon to the system as a whole.

But of course you are correct in terms of abstract possibility. The
use value side of the accumulation process matters greatly. The
faster the growth rate of depts 1 and 2, the more means and wage
goods there are to employ more labor and thus extort more surplus
value. But if they are not willing to expand, then expansion in
sector three prevents spiral into ever higher unemployment

I have argued, against Foley and Laibman, that the most important
mistake TSS makes is ignoring the use value side of accumulation, so
I am in sympathy with part of your argument.  They disarticulate the
rising material rate of profit from the value rate of profit as if
the former would not have even indirect positive effects on the

>If we loose sight of the underlying material relationships of
>production and focus only on legal superficialities we get led
>astray by the 'illusions of competition'.

We're not dealing with legal differences but economic relations, the
difference between value and revenue.

>Given your figures for labour inputs we have
>Let us now look at your example
>       labour  wages   constant   gross value
>                       capital    output
>I     10      1        10         20
>II    10      1        2          12
>III  100      10       8          108
>Sales by dept I
>     10 within the department
>     2  to dept II
>     8  to dept III
>Sales by dept II
>     1 to workers in dept I, 1 to workers in dept II, 10 to workers in dept III
>Sales by dept III
>     9 to capitalists in dept I
>     9 to capitalist in dept II
>     90 consumed by themselves
>Now suppose that hours of work in III are raised 10%, we get
>       labour  wages   constant   gross value
>                       capital    output
>I     10      1        10         20
>II    10      1        2          12
>III  110      10       8          118
>Sales by dept I - unchanged
>Sales by dept II - unchanged
>Sales by dept III
>     9 to capitalists in dept I
>     9 to capitalist in dept II
>     100 consumed by themselves
>So the net effect can only be to increase the personal consumption of
>one section of the capitalist class - that section whose workers make
>luxuries. The effect therefore is identical to what would have
>occurred if they made their personal servants work longer hours.
>Paul Cockshott
>Dept Computing Science
>University of Glasgow
>0141 330 3125

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