[OPE-L:3825] Re: productive and unproductive labour (continued)

Chai-on Le (conlee@chonnam.chonnam.ac.kr)
Sat, 14 Dec 1996 19:23:36 -0800 (PST)

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At 09:40 am 96-12-14 -0800, Jerry wrote:

>Second: let's consider the costs and benefits of expenditures on some
>forms of unproductive labour for capitalist firms. For instance,
>advertising and marketing expenditures (which typically represent a very
>significant cost indeed for firms that, especially, produce means of
>consumption). These costs are essential ones in the sense that they are
>required for firms to compete effectively, especially in branches of
>production that are dominated by oligopolies and where there is a
>significant degree of product differentiation. While these expenditures
>represent a deduction from surplus value in one sense, they also allow the
>firm (if successful in its product differentiation strategy) to increase
>profits through a redistribution of surplus value (at the expense of other
>firms within the same branch of production). Yet, these expenditures might
>under certain circumstances increase profit via another route. Suppose as
>a result of product differentiation, these firms are able to mark-up the
>price of the commodities that they sell significantly above their value
>(if you want examples, think of sneakers and soda). In these cases,
>wouldn't the increase in profitability also result from a transfer of
>value from the working class as consumers to these capitalists? That is,
>couldn't it result in a depression of real wages due to the increased cost
>of the commodities that wages are exchanged against?
>Third: management compensation frequently varies to a very significant
>degree even within the same branches of production internationally. For
>instance, the compensation for managers in Japanese corporations is
>significantly less than the average compensation for managers in
>corporations in the US. This would seem to be an obstacle for the
>"competitiveness" of US corporations. Yet, these compensation inequalities
>persist. Why is this? From the perspective of managers, does the
>increased salary that they can obtain outweigh the possible disadvantages
>to the firm in terms of increased costs and decreased "competitiveness"?
>(I should add here that the issue of management compensation is also one
>that frequently comes up when there is contractual bargaining with labor
>(2) The Costs and Benefits of State Expenditures on the Military
>If the state is increasing expenditures on the military, that requires the
>state to increase taxation (on corporations and/or classes) and/or
>borrowing. In either case, this represents a transfer of value and surplus
>value to the state which, in turn, reduces the amount of money capital
>that capitalists have for increased accumulation (a kind of Marxist
>variation on the monetarist "crowding-out effect"?). In *that* sense, an
>increase in military spending represents a barrier that decreases the
>maximum rate of accumulation.
>Yet, very clearly, there are also advantages to the *individual*
>capitalist nation of increased military spending. Let's consider some of
>these advantages:
>(1) An old story -- often repeated -- is that increased military costs can
>more than pay for themselves *if* as a result of war the winning side in a
>war gains through the redivision of wealth (i.e. plunder) more than the
>costs of the militarization. This story seems to have been more accurate
>when describing either the "original accumulation of capital" (e.g.
>colonial plunder) or some previous wars among imperialist powers. Yet,
>when we consider some of the wars in the 20th Century (e.g. WW2) one
>wonders whether this story is still valid. In what sense does the "winning
>side" in an imperialist conflict continue to realize this redistribution
>of world wealth?
>(2) Of course, another story -- frequently told -- is that increased
>expenditure on the military (including expenditures on "covert actions"
>by "intelligence" agencies) is "justified" since it can be a force that
>can "contain" (i.e. repress) revolutionary movements and stop the "spread
>of communism." From a certain standpoint, these expenditures have been
>successful in accomplishing these goals (e.g. Chile, Nicaragua). Yet, the
>costs of international repression have largely been born by the US. How
>has this benefited capital accumulation within the US? (Of course, there
>are some practical benefits for some US corporations at times, e.g. US
>corporations that had substantial material investment and property
>holdings in Chile. Yet, for the US capitalist class as a whole, did the
>gains -- in *economic* (rather than political) terms -- outweigh the
>costs?). Similarly, the US eventually won the "Cold War" with the
>collapse of the USSR, etc.. Yet, from the standpoint of capital
>accumulation in the US: was it worth it?
>(3) A more recent development, that perhaps originated with the "Gulf
>War", is for the US government to attempt to shift the costs of military
>expenditures and actions to other capitalist nations that also gain from
>those actions. In a sense, one could say that the US is marketing its
>military especially now that it is basically *the* military power in the
>world. If other countries want protection, they are now expected to pay
>for those benefits (in a way, this is a kind of mafia-style extortion).
>Yet, questions remain. For instance, even when the extortion money is paid
>out to the US, does it cover the cost to the US of the military action? I
>think NOT -- in fact, I think the US government is only able to recapture
>a small percentage of the amount of $ that it expended on the military.
>Also, there is the question of the militarization of other imperialist
>powers. Clearly, if these other nations are expected to now *pay* for
>protection, then the incentive to develop their own military grows. It
>also means that "foreign policy" becomes less dependent on US policies (or
>should I say ... policeies?).
>(4) When we consider why the level of unproductive expenditures on the
>military has not decreased in recent years, even after the downfall of
>the USSR, don't we have to consider the self-interest of the military as a
>social institution? That is, even *if* there is less of a need for these
>expenditures, there are powerful *political* and social forces opposed to
>reduced military spending. The "military-industrial-complex" (including
>capitalist firms which are "defense" contractors) have a lot to lose in
>terms of profit, income, and [that intangible] prestige if there is a
>large reduction in military spending. As economists we tend to emphasize
>economic forces. Yet, these "non-economic" forces need to be considered as
>well if we are to understand important contemporary developments. Do you
>(5) In practice, private capital has benefited in many indirect ways as a
>result of military spending. Most importantly, I believe, they gain when
>as a result of R&D by the military, new product and process technologies
>are made available to private capital. That is, the costs of R&D to a very
>significant degree have been born by the state. For instance, consider
>commodities like computers, radar, navigation systems, jets ... and even
>the Internet. All of these were originally developed by the military but
>were then made available to capitalist firms. Relatedly, state
>expenditure on "space exploration" have resulted in many tangible
>benefits for capitalist firms, e.g. satellites. Consequently, capitalist
>firms in a very real sense frequently benefit as a result of military
>expenditures. Yet, on balance, over the long-term do they gain more than
>they lose in increased taxation?
>I realize that the above is a bit (understatement) off-track in terms of
>Simon's original questions. Yet, I think it is important for us to discuss
>these questions of contemporary political importance -- as well as more
>abstract theoretical concerns.
>OK, I've said enough on these topics for now. Who wants to take the next
>In solidarity, Jerry
Faculty of Economics,
Chonnam National University,
Kwang-Ju, 500-757,
S Korea
Tel +82-62-520 7329
Fax +82-62-529 0446
E-m: conlee@chonnam.chonnam.ac.kr