Wednesday, January 29, 2014


historically, we see a pattern of government intervention in the birth of capitalism. Very simply put, wealth accumulation that drove the industrial/capitalist revolution in Europe, was very much due to colonization and the trade profits that ensued. Profits from the 3 addictions we have today -sugar, tobacco and coffee - (if we can call coffee an addiction!) were highly profitable based on the new maritime technology, and profits were ploughed into emerging industries. The new maritime efforts were encouraged by the British monarchy in the 17th century, particularly King Charles II, who set up all kinds of technological societies for scientists, and also, allowed merchant ships to fly under the British flag. Sailing around the world entailed devising a way of telling time uniformly. This is how Greenwich Mean Time was established, something we use all the time today to coordinate our activities globally across geographic space. Greenwich Mean Time (GMT) originally referred to the mean solar time at the Royal Observa1tory in Greenwich, London.
This comes under the theory of 'mercantilism'....the protection of trade in its early days in the 16-17th centuries.

Sunday, January 19, 2014


Q. Why doesn't Marx incorporate the costs of the capitalists into his analysis?

A. Marx incorporates to the costs of the capitalist into his analysis. Marx refers to the costs of machines etc, as THE MEANS OF PRODUCTION (MOP) which is owned by the capitalist. This is covered in Ch 15 of Das Capital "Machinery and Large Scale Industry'. He describes the shift from the means of production owned by the artisan to the development of the factory system, where the MOP are owned by the factory owner.

Q. How does Marx differentiate the skilled and unskilled laborer?

A  He addresses the differences in the section in Das Capital "The Division of Labour and Manufacture." He explains that the unskilled laborer is performing the same simple repetitive motion all this life, as an appendage to a machine. Manufacture, he said, has taken over the skill of the specialized worker  by breaking down his/her work until the finished product, into smaller and repetitive tasks. The unskilled laborer does not see the finished product, which contributes to his alienation. In this way, the guilds of the Middle Ages were no longer needed. The productivity of the laborer depends on the breakdown of the craftsman's tools into dozens of varieties of tools that can be used repetitively.

Q Where does  Marx say the capital come from re: the initial investment?

A. This is covered by Part 8 of Das Capital "So-called Primitive Accumulation". Basically, in Europe, there was an appropriation of the land cultivated by individual peasants, which was turned into a cash crop (sheep) to produce wool. This was the genesis of the 'capitalist farmer' which raised the income necessary to begin the industrial revolution. Also, European imperialism which started in the 17th century, for example, the colonization of India which helped the UK to accumulate wealth.
You asked '(is it really that simple to calculate to subsistence needs?). In fact, that is what is done in the US every year with the Minimum the state of Arizona, it's $7.50 an hour. In fact, the Minimum Wage hasn't kept up with inflation and so can hardly be said to cover subsistence costs. This is the reason why the US has about 40 million 'working poor' who cannot afford health care.
Today, capital for investment comes from hereditary wealth, bank loans and investment capitalists.

Q. Does Marx take into account labor costs of products getting to market (original conceptualization, design, subsequent  transportation and marketing costs)?

A. This is addressed by Marx, under the concept of  'ABSTRACT LABOR'. This is quite a difficult concept to grasp. Marx distinguishes CONCRETE LABOR (the worker on the job producing a gadget for so many hours a day) from ABSTRACT LABOR (the sum total of labor power that goes into designing, getting a gadget to market). This concept also takes into account the impossibility to compare the value of one type of labor with another (such as the unskilled worker with the professional, such the designer of a product).  Marx writing in the 19th century obviously doesn't address the huge taxes, marketing and advertising costs we have today, specifically. In his day, neither taxation or advertising presented enormous costs.  Interestingly, the use of psychology in advertising was developed in the early 50s by Freud's nephew. This installed false needs in consumerism (do we need 50 brands of shampoo?)
Back to ABSTRACT LABOR. This is one of the most controversial but intriguing concepts that Marx introduced. It's the idea that a product is not just the idea of a manufacturer, but incorporates the knowledge and expertise of people over the millenia. So for example, where would today's technology be without the introduction of calculus by Sir Isaac Newton in the 18th century? Or, for another example, you wouldn't be eating corn today without the expertise of unknown indigenous populations who developed it in the Americas.

Engels in Anti-Durhing, explains this difficulty of measuring all the labor value that goes into one commodity and offers a solution ("equal wages for equal labour-time! ").

"But let us look a little more closely at the doctrine of equality in values. All labour-time is entirely equal in value, the porter’s and the architect’s. So labour-time, and therefore labour itself, has a value. But labour is the creator of all values. It alone gives the products found in nature value in the economic sense. Value itself is nothing else than the expression of the socially necessary human labour materialised in an object. Labour can therefore have no value. One might as well speak of the value of value, or try to determine the weight, not of a heavy body, but of heaviness itself, as speak of the value of labour, and try to determine it...

How then are we to solve the whole important question of the higher wages paid for compound labour? In a society of private producers, private individuals or their families pay the costs of training the qualified worker; hence the higher price paid for qualified labour-power accrues first of all to private individuals: the skilful slave is sold for a higher price, and the skilful wage-earner is paid higher wages. In a socialistically organised society, these costs are borne by society, and to it therefore belong the fruits, the greater values produced by compound labour. The worker himself has no claim to extra pay. And from this, incidentally, follows the moral that at times there is a drawback to the popular demand of the workers for “the full proceeds of labour”."Anti-Dühring by Frederick Engels 1877
Part II: Political Economy, Section 6.

Q. Does Marx take into account what the consumer is willing to pay for a commodity?
A. This is covered by Marx' view of the falling rate of profit. He basically says that if a consumer cannot afford a product (which is exactly what is happening today due to the failing economy) then there can be no profit. He distinguishes profit from exchange value and surplus value (which carry the potential for profit, but doesn't guarantee it). He predicted that capitalism would fail for just this reason...too many products, not enough consumption due to the continual cutting back of labor costs due to machines and other factors. To me this marks the agility of his theory, to be able to predict this:
The falling rate of profit is covered in Chapter 13, Das Kapital Vol 3.
This is the relevant para:
"The progressive tendency of the general rate of profit to fall is, therefore, just an expression peculiar to the capitalist mode of production of the progressive development of the social productivity of labour. This does not mean to say that the rate of profit may not fall temporarily for other reasons. But proceeding from the nature of the capitalist mode of production, it is thereby proved a logical necessity that in its development the general average rate of surplus-value must express itself in a falling general rate of profit. Since the mass of the employed living labour is continually on the decline as compared to the mass of materialised labour set in motion by it, i.e., to the productively consumed means of production, it follows that the portion of living labour, unpaid and congealed in surplus value, must also be continually on the decrease compared to the amount of value represented by the invested total capital. Since the ratio of the mass of surplus-value to the value of the invested total capital forms the rate of profit, this rate must constantly fall. (Karl Marx, Capital, vol. 3, chapter 13, p 4)

Marx says the incentive for developing new technology, such as the sewing machine, replaces the artisan, and comes from the capitalist But the way it happens under the pursuit of profit is to 'convert the worker into a crippled monstrosity...through the suppression of a whole world of productive drives and inclinations' (Das Capital, Vol 1  p 481, Penguin Edition). I wonder what Marx would say about labor saving devices under a system not driven by profit.

Q. Why didn't expert economists predict the 2008 global economic crisis? Did Marx predict such crises?

A. One reason is that expert economists tend to focus on units of analysis like consumers, business and government. What they didn't look at was the fragility of the finance markets and the risks they were taking. Experts also don't look at the history of economies, where one can see boom and bust cycles. They didn't acknowledge or track the constant changes and fluctuations of a capitalist economy, dating back to the 18th century.
This is what Marx predicted in the 19th century. See which has come true in the 20th and 21st century:

• Stepped up technological progress
• Accelerated increase in the productivity and intensity of labor
• Spread of capitalism through every part of the world
• Growing concentration and centralization of capital
• Transformation of the great majority of economically active people into sellers of labor power
• Declining rate of profit
• Increased rate of surplus value
• Periodically recurrent recessions
• Inevitable class struggle between Capital and Labor
• Increasingly revolutionary attempts to overthrow capitalism