[OPE] Problems in International Political Economy (IPE) shaikhs defence of Marx

From: Jurriaan Bendien (adsl675281@tiscali.nl)
Date: Mon Apr 21 2008 - 18:53:57 EDT

Dear Alejandro,

I haven't tracked down Ajit's paper yet. An excerpt from the quote which I cited in my introductory wikipedia article on production prices (to keep it short) is the following one:

"It is possible for agricultural products to be sold above their price of production and below their value, while, on the other hand, many industrial products yield the price of production only because they are sold above their value." 

- Karl Marx, Capital Vol. 3, chapter 45 http://en.wikipedia.org/wiki/Prices_of_production

If you want to read on, here's some additional remarks.

In the theory of ground rent, we learn for example that the terms of trade between agriculture and industry may for a prolonged time be skewed strongly in favour of industry. However, beneath the observable unequal terms of trade (as made famous by the Prebisch-Singer theorem, the origin of modern unequal exchange theories, as Rhys Jenkins notes) Marx argues there is a dispersion of labour-values, market prices and production prices.

However, the theory of ground rent is, as Ernest Mandel quite correctly noted (although he doesn't give a very good exposition of it), only a special case of the theory of surplus profits (extra-Mehrwert or Mehr-gewinn etc.). The driving force of real capitalism is not to reach any "uniform rate of profit", but instead to realise above-average profits (surplus-profits), and this competition for extra profitability also involves blocking competitors in one way or another (i.e. there is no "level playing field" most times, but a whole lot of different "fields" in a curved landscape, with differential yields to which different types of property relations pertain). 

So economically the real developmental path of world capitalism is spearheaded by those activities which can realise the greatest surplus-profits (industrially - other than asset speculation - currently the oil sector, the private healthcare sector, etc.). This becomes increasingly the dominant trend in the age of "rentier capitalism". Already in the mid-20th century, a lot of economic sectors were dominated by a few giant corporations. But there were many other sectors, such as for example real estate, the media industry, electronics, synthetics, telecommunications, computers, healthcare, environmental protection, rubbish processing and certain forms of capital finance where that was not the case, and where new "enterpreneurship" was still possible, and gigantic new fortunes could be made by new classes of capitalists outside of the old elites (cf. the research by Christopher Freeman). 

Henri Pirenne also noted in 1914, "for each period into which our economic history may be divided, there is a distinct and separate class of capitalists. In other words, the group of capitalists of a given epoch does not spring from the capitalist group of the preceding epoch". They make their fortunes from new activities, from spheres not previously under the domination of capital, which at least initially can generate spectacular surplus-profits. Forbes magazine notes the same thing. As a corollary, Dunning notes Michael Novak's remark that "each age of capitalism depends on a moral culture that nurtures the virtues and values on which its existence depends". http://www.unctad.org/en/docs/iteiit20061_en.pdf Currently the obsession is with portfolio risk, life-chances, giving credit where credit is due, paying the rent on time, and suchlike.

In his simple models of the tendency of industrial rates of profit to level out, Marx typically assumed an equal rate of profit had been achieved already, or existed already, as the result of a competitive process, in order to show how this affects enterprises generating unequal amounts of surplus-value with unequal capital compositions and unequal labour-utilisations. He does this, in order to show clearly what the logic in the behaviour of competing enterprises will be, as they battle with market conditions imposing norms and ruling averages which none of them can individually control. The critical factor as far as production is concerned is the discrepancy between the value produced, and the profit income that can actually be realised from it, because that is what the competition to cut costs and increase sales ultimately centres on. The more control there is over the whole value-chain, the more profitable the endeavour becomes. Agribusiness is a good example of this.

Of course, you might be able to prove that it is impossible for a production system to actually reach any uniform rate of profit, but that is not really Marx's concern anyway I think. He is just trying to show in a simplified way what the outcome will be of the clash between the law of value and the law of capitalist competition, how these laws interact - why prices and values must diverge, and what constrains that divergence. The economic "forms" of "production prices" and "market values" represent mediations of the contradiction between the two laws. 

Unfortunately, as I note in my wiki article, Marx's story is not fully consistent because he fails to distinguish very clearly between at least four different types of production prices. The fact is, that many cases of surplus-profits imply that a general production price cannot be formed, because there is no free competition, and no free entry and exit of capital. That in turn in implies that, in those cases, no levelling-out of profit rates can occur. So really the existence of surplus-profits helps explain why there is no uniform rate of profit.

Effectively, the theoretical assumption of a uniform rate of profit presupposes something like "perfect competition" among capital and labour, as Marx himself notes, but as I mentioned before, competition is almost never perfect, because the very meaning of competition also involves blocking competitors, in one way or another. If competitors are blocked in some way, it's not perfect competition in the way that an Olympic running race along a straight track by competitors of similar ability is.

The way it works out basically is that the "little guys" can do most of the production, while the "big guys" battle over the economic rent margins which you can obtain out of that production. The more developed the speculative game becomes, the more market integration there is, and the greater the concentration of capital in ownership terms, the more this will be the case. 


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