Re: [OPE-L] the global labor force and capital accumulation

From: Rakesh Bhandari (bhandari@BERKELEY.EDU)
Date: Sun Jan 15 2006 - 23:34:36 EST

Jerry, thanks for sending this interesting piece. I was hoping
that there would be some comment.

>China, India and the Doubling of the Global Labor Force: who pays the
>price of globalization?
>By Richard Freeman
>Though little recognized in Japan and
>elsewhere, there has been an effective doubling of the global labour force
>(that is workers producing for international markets) over the past decade
>and a half, through the entry of Chinese, Indian, Russian and other
>workers into the global economy. The effective supply of capital, on the
>other hand, has virtually remained unchanged.

But in this intro to Freeman's piece Japan Focus 
does not explain this shortage of capital vis a 
vis the new global  labour force. A remarkable 
(if not astonishing) silence, no? And I am hardly 
clear as to what kind  of capital it  is talking 
about. Accumulated means of production? Savings? 
The wage fund?

Freeman himself writes:

>The capital/labor ratio is a critical determinant of the wages paid to
>workers and of the rewards to capital. The more capital each worker has,
>the higher will be their productivity and pay. A decline in the global
>capital/labor ratio shifts the balance of power in markets toward capital,
>as more workers compete for working with that capital.
>Even considering the high savings rate in the new entrants  the World
>Bank estimates that China has a savings rate of 40% of GDP  it will take
>30 or so years for the world to re-attain the capital/labor ratio among
>the countries that had previously made up the global economy.

This would mean that until that point we should see the renascence of
a vicious Malthusianism and social Darwinism as a global and national ideology.
(This is what my dissertation was about.)

But I would argue that the fundamental apologetic mistake Freeman makes
is to confuse the source of the present global 
oversupply of labor vis a vis capital with its
source in Malthus' time.

Here is my translation of Grossman (this is not 
in the English abridgement; improvements
to my translation most welcome!):

>It is clear that for the entire period from the 
>16th to 18th century for political economy the 
>problem of population was expressed in the 
>preoccupation for securing an abundant labor 
>force. Referring to slavery in Surinam, Brazil 
>and the American south, Marx said as early as 
>1848: Just like machines, credit etc., direct 
>slavery is the foundation of the industrial 
>bourgeoisie. Without slavery there would be no 
>cotton; without cotton there would not be modern 
>industry. Slavery has given its value to the 
>colonies; the colonies have in turn created 
>universal commerce and universal commerce is the 
>necessary condition of large scale industry. In 
>the end slavery is an economic category of a 
>most elevated importance." Building on this: the 
>presentation of the colonies as a territories 
>which function explicitly for the realization' 
>of surplus value that had been produced in 
>Europe only  contributed the obscuring of the 
>most brutal system of production in the 
>colonies. Slavery is a necessary and 
>constitutive element of capitalism; it does not 
>simply belong to the past as others have 
>detailed; it is as Marx notes "an economic 
>category of a most elevated importance" despite 
>the different juridical guises that reveal the 
>treatment or conditions of workers of colors in 
>the colonies. The prohibition of the traffic in 
>slaves with the 1815 Vienna congress, the 
>abolition of slavery in the US in the 1860's 
>(for example in South America the last 200,000 
>slaves were liberated in 1888) was the result of 
>the industrial revolution during the last third 
>of the 18th century and the initial introduction 
>of machinery. The new technical possibilities 
>occasioned a transitional overturning of the 
>population problem. Hence Malthusian fear of 
>overpopulation was understandable in a time in 
>which human labor was replaced by the machine, 
>but where capital accumulation finds itself in 
>its initial state, unemployment cannot therefore 
>be compensated through [Mehreinstellung] of 
>workers. Constant capital plus variable capital 
>(c+v)  was of little significance in relation to 
>population. But in a mode of production whose 
>base itself constitutes the exploitation of 
>human labor, Malthusianism can and should only 
>be a transitory tendency. Since as a consequence 
>of progress of the accumulation of capital, 
>capitalism in developed Western European 
>countries enter a new phase of development 
>within a few decades. As a consequence of the 
>strength of capital accumulation in the early 
>stages of capitalism, the accumulated capital 
>(c+v) was excessively large in relation to the 
>population. In other words the population that 
>grows according to a determined percentage is 
>not sufficient to the proportion of the mass of 
>surplus value necessary for the normal 
>valorization of accumulated capital and the 
>capital that grows by a most rapid percentage.
>But given that the always growing population 
>requires additional capital (ac+ av)  for its 
>employment, additional capital which will only 
>be drawn from the mass of surplus value (pv) , 
>as this additional surplus value becomes 
>insufficient enough for the valorization of the 
>capital already accumulated, it becomes even 
>more insufficient for the additional 
>accumulation. Thus, despite overaccumulation and 
>its consequences, a reserve army of the 
>unemployed would necessarily form. But growing 
>unemployment in the capitalist countries is in 
>essence very different than the unemployment of 
>Malthus' time. At that time (c+v) was much too 
>scarce in relation to the population; in the 
>current situation (c+v) is far too great. On the 
>contrary (ac+av) are now too small.

In other words surplus value relative to capital 
invested was heathily positive in the early 
stages of accumulation but capital still could 
not be accumulated fast enough in the early 
stages of the industrial revolution to absorb the 
population. Hence Malthusianism. Then capital 
(c+v) accumulated at a fast pace, resulting in a 
shortage of workers vis a vis  the accumulated 
capital. Workers are imported and/or capital is 
exported. In the still later stage of 
accumulation, surplus value relative to capital 
declines such that capitalization no longer pays. 
Again there is mass unemployment. But this is the 
result of  the overaccumulation of capital at a 
late stage of capitalist development.  The 
shortage of surplus value now appears as a 
shortage of capital vis a vis the growing working 

We are thus not in the early stages of  global 
capitalist development (as Meghnad Desai has 
but rather in the dark times of a late stage of accumulation.

Time (30 or so years in Freeman's apparently back 
of the envelope calculation) will not magically 
return the capital/labor ratio to Freeman's 
Golden Age levels!

About the source of the scarcity of capital, 
Grossman had written earlier in his magnum opus 
(Jairus translated this):

>The supply of capital is too small. But what 
>capital is Cassel talking about...
>What is the source of the supply of this 
>capital? Why is there a shortage of this 
>capital? Instead of pursuing the formation of 
>this capital to its birthplace - the sphere of 
>production - Cassel gets bogged down in the 
>sphere of circulation. Before it is saved it has 
>to be produced. It is produced by the workers 
>and appropriated by the capitalist as surplus 
>value. This future capital forms only a portion 
>of the surplus value, the portion that is not 
>consumed but destined for accumulation. To say 
>that this additional capital is increasingly in 
>short supply as accumulation progresses only 
>means that in the course of accumulation the 
>primordial source of this capital, surplus 
>value, becomes progressively more scarce, too 
>small, in relation to the already accumulated 
>mass of capital. If the mass of surplus value is 
>too small then so is the portion destined for 
>purposes of accumulation.
>Cassel simply mixes up concepts. He speaks of a 
>capital shortage, an insufficient supply of 
>capital. In the language of the banker 
>everything is capital. But Cassel is not talking 
>about capital, but about a part of surplus value 
>that still has to be accumulated, a part that 
>represents capital only potentially and becomes 
>capital only through its function in the 
>valorisation process. So really there is not a 
>shortage of capital, but a shortage of surplus 
>value. In contrast, there is an overaccumulation 
>of the already functioning capital. 
>Overproduction of capital and imperfect 
>valorisation are correlative concepts each of 
>which determines the other.

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