[OPE] devaluation and revaluation of variable capital

From: Jurriaan Bendien (adsl675281@tiscali.nl)
Date: Thu Feb 21 2008 - 18:09:36 EST

I'm sorry Jerry, I am just not sure what you are talking about in your last post beyond poesis. Most of that Marxian analysis - the world market, the state etc. has already been done by various authors. It's just that nobody has pulled all the literature together yet in a really sensible and comprehensive story. 

Rent strikes are relatively rare (because difficult to organize) and you cannot defend yourself against the fall in the value of the house you own title to. If many people lose their home through mortgage defaults, this increases the demand for rented housing, which means tenant rents will rise. Although that lowers GDP, it increases the cost of living. It's not clear how this can reduce V.

A possible example of the "release and tying up" I can think of is that, in New Zealand, the neoliberal experiment meant rising unemployment and falling modal real wages, which stabilised at a lower level (the trade unions were more or less legislated out of existence as an effective barganining force) and remain fairly stagnant, but at the same time this was compensated to a significant extent (1) by the import of cheap consumer goods from Asian countries: S/V and S/C+V could rise, because the outlay on V remained fairly constant at a lower level, i.e. the modal VLP was reduced to a lower level, and stayed there. (2) rising property values yielded additional income or credit possibilities. I think this story is more or less repeated in the hierarchy of nations. Many workers responded by emigrating, i.e. they migrate to another, richer country where, although they earn a fairly low wage locally, they still earn more than they would if they stayed at home, and have a better standard of living. 

As regards the "economic reproduction process", we ought to distinguish between material reproduction, and the reproduction of capital. If nowadays world gross output (not GDP, but gross output, i.e. the value of production) is let's say $90 trillion, total world physical assets are let's say $300 trillion and total world financial assets are let's say $170 trillion, then if the wage component of world gross output which is V  fluctuates by 5% or 10% or even 20% this doesn't have much economic effect on the total reproduction of capital, although it has a large effect on the lives of billions of people. That fluctuation represents less than 1% of the total mass of capital in the world. 

The real worry from a capitalist perspective is the social effects of rising unemployment and falling real wages, i.e. it is just about social stability, a stable investment climate, security of property. It's difficult to do legitimate business, if society is disintegrating because of extremes of poverty and wealth, and if criminality increases. A collapse of asset values can nowadays have a much bigger economic effect than any fluctuation in real wages. Politically, the position of the middle classes is very important. They represent the possibility of upward mobility, of improving your position in life, and they strongly influence political culture. If their position worsens absolutely, that becomes a threat to all civilised values sooner or later. That's also what the Clinton campaign is mainly about. If you get a whole lot of people who can no longer improve their lives by honest work, if in fact they are worse off, what are we talking about? You get a whole lot of people who will do "anything" up to and including terrorism. At this stage, the problems of the US are still mainly "luxury problems" from a world perspective. Americans are worried about pensions, medicare, social security etc. In Iraq and places like that, people are worried about whether they'll survive at all.   


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