From: Jurriaan Bendien (adsl675281@TISCALI.NL)
Date: Mon Feb 04 2008 - 15:46:33 EST
Paul, I don't doubt that a lot of financial intermediation and enforcement is technically superfluous (or indeed counterproductive), but for the social existence of capitalist society it is to a large extent essential. Because the interdependencies in society are not simply economic or technical, they are social, cultural, political etc. in accordance with the voluntary and coercive dimensions of cooperation and competition in class society. I do not regard the financial sector simply as "parasitic", though parts of it clearly are (nobody I think doubts that). I meant - that if you import more goods than you export, ceteris paribus the physical surplus which can be claimed will rise regardless of domestic production; the specific trading arrangements making this possible are irrelevant in this respect, since we are simply talking about the growing physical stock of items which can be claimed in the domestic economy. No rocket science here. - if this trading process evolves, such that you produce less and less of your own material goods, but instead obtain more and more through trade from elsewhere, that isn't an economic problem per se, but it creates a vulnerability, insofar as it increases your dependence on trade; if trade breaks down, you are suddenly left without the material goods you require, and possibly without adequate means to produce them (cf. certain African countries). But to assess this vulnerability ("resource security") you really have to understand specifically the (potential) production capacity of a particular economy, i.e. its ability to find internal or external subsitutes for normal trade. As you have pointed out, people find this out particularly during military wars, when normal trade is obstructed. - the distinction of productive versus unproductive labour at least in Marx's final thinking has I think nothing directly to do with its role in the economic reproduction process, except insofar as circulation labour is concerned (because of his principle that no net new economic value can ever be newly created in exchange processes in themselves). - at least in Marx's theory, the volume of surplus value is equal to the volume of surplus labour, and does not refer to the scope of material production specifically. Total realised profits in an economy do not necessarily correspond at all to total current surplus value produced. Just because profits are realised from material production, does not mean they will be reinvested there, that just depends on the rate of return and sales volume. It is just that "in the final analysis" the capacity to repay debt or extend credit depends on the growth rate of real production. - Marx's argument is that circulation labour transfers value, but does not itself create it, but in that case you need a consistent explanation of how that transfer process really works. In national accounts, the problem of transfers is tackled in two main ways: either a transfer is a unilateral disbursement of funds (i.e. the income does not arise from an exchange) or, the flow of funds falls outside the scope of the concept of production. This is in practice not very satisfactory (i.e. the definitions are rather arbitrary, capricious or eclectic from a theoretical point of view), and more in the nature of a convention, rather than based on a fully consistent theory about the valuation of gross product (a set of principles about comparable value, value equivalence, value used up, value conserved, value transferred and value newly created). - If the actual distinctions operated in the capitalist division of labour between productive and unproductive labour leads to the result that the production of material wealth slows down or stagnates, that is not a problem for Marx's own theory, but rather a part of the critique of the limits of the capitalist way of producing, i.e. the fact that the requirements of capital accumulation do not necessarily correspond at all to the requirements of the material reproduction process which satisfies material needs. For example, house prices rise, but proportionally much fewer new houses are built to meet demand (in parts of Europe and elsewhere). But in neoliberal theory the exact reverse is argued: all this happens because there is not enough capitalism, the problem is that there is not enough capitalism. Many theories of surplus value and surplus have been mooted in the history of economic thought, as Marx himself notes and Ronald Meek also documented in his Phd thesis, so there's plenty of scope for different measures and theoretical dimensions. I think on balance that a good case can be made though for the argument that Marx's own final concept is quite consistent (we ought to put his various comments in chronological order to trace the evolution of his thinking, since not all his ideas about it are logically compatible). It is just that it is quite difficult to measure empirically - the number of assumptions you have to make in the estimation procedure, given inadequate data, make the results less than robust. Because he thought all the talk about "productivity" just concerns the exploitability of labour with given means of production, Marx had little interest in the notions of gross and net product per se. He argues, the only thing that really matters in capitalism, as far as that is concerned, is the size of the value product, and more specifically the size of surplus value as a share of that value product. Size does matter, in this respect. And growth does too. Theories of how specifically to do the grossing and netting to arrive at something like the value product, are more or less encapsulated in ideological notions revolving around this essence, which presuppose different theories of value. It is just that if you want to measure the value product or surplus value, either in labour hours or money units, you can only do this by referring both to flows of costs/purchases and revenues, as well as output (sales) volumes in particular because the proportions of surplus labour and necessary labour are not self-evident, but must be derived. In this respect Kuznets was not wrong, although of course he has different concepts from Marx, and focuses on net output rather than the value product of human labour. But as I have said several times, in my opinion gross product measures such as GDP are less and less satisfactory measures of total income, both from a conventional and a Marxian point of view, because of the growing circuit of property income (including capital gains, rents of various kinds, leasing, royalties, grants, fees and interest). Some economists confuse factor income with property income a lot. An additional aspect I think is, that the distinction drawn between final output/consumption and intermediate consumption becomes more questionable these days, but to prove this I have to do more research into the operational definitions actually used to classify final goods/services and intermediate goods/services. Paradoxically, if e.g. people rent goods or services more than buy (for example because renting becomes cheaper than buying, if real wages stagnate), this acts to shrink the GDP measure, whereas e.g. if more homes are owner-occupied, this raises GDP. Plus of course GDP measures are influenced strongly by what deflation techniques are used. Classical Marxism never dealt with these problems theoretically, among other things because the total results of the accumulation process were not considered, i.e. the fact that more and more physical and financial assets which can be traded (and thus generate income, including transfer income) exist external to the sphere of production. The UNSNA does in principle cater to this problem analytically to some extent, insofar as accounting systems are conceptually provided both for the primary and the secondary circuits of income (broadly, the primary circuit is the income generated from production, the secondary circuits are those outside the sphere of production), but in fact the secondary circuits are rarely fully computed and in a satisfactory manner. The lack of an integrated accounting system for incomes and expenditures by persons, enterprises and governments is not such a problem, insofar as you can often obtain relevant data from other sources, but it is a problem insofar as the categories and numbers which are presented provide a distorted picture of what is really happening in economic processes. All sorts of claims are made about GDP, including many false ones (such as that it represents the whole economy), it is just that there is no other comparable measure of net output or other "synthetic" measure that would indicate the rate of economic growth or level of economic activity. I cannot solve all the quantitative and conceptual problems just now, because I have many other things I have to do, I mean I don't have a cushy paid research job to do that stuff, I just write some ideas in my leisure time when I am not in my fulltime job at the council or doing other chores. Anyway I am not a qualified economist, I just studied what things mean, and what follows from that. Point is that it might not mean what you think it means, economics is a very deceptive science in that sense, in contrast to e.g. demography. Marxisant archaeologist Bruce Trigger retrospects (Understanding Early Civilisations, p. 313) that "regardless of the agricultural regime followed, between 70 and 90 percent of the labour input in early civilisations was, of necessity, devoted to food production" which meant "all early civilisations had to remain predominantly agricultural" and the surplus resources available to upper classes were never large relative to total production. But this very fact (which contrasts with our own time) implies that the existence of a surplus product itself does not explain very much about those civilisations. It was more or less a constant factor constrained by natural necessity, with only limited possible variations. In which case, historical change in early societies concerned much more the patterns of co-operation and their antithesis, i.e. wars (abstracting from natural disasters) in which competitors fought out their rivalries. The parable of the king, the soldiers the craftsmen and the peasants sounds interesting, but in fact the existence of a surplus product does not explain a great deal about the relationships involved and what happened to them, precisely because it was pretty much a constant. I realise Marxists are always strongly focused on this, but in historical reality it does not explain a lot about those societies, beyond what necessarily had to follow from the compulsion to perform surplus labour. Stalin was able to increase the surplus product only by means of force or the threat of violence, but this had the result of a lot of inefficiency, low morale and waste, as well as ruined lives. It is not accidental that his material product accounts did not publish quantities of labour hours worked. Accounting is a very political science insofar as it provides tangible evidence of who is getting what and how much from whom.Typically its concepts lift the veil here, but disguise it there. I will return to this some other time when I have more time. Jurriaan.
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