Crisis and Transformation in Seventeenth-Century China

Transcription

I think most of you probably found the three chapters this week easier reading than the three preceding chapters. At least I hope so. Because they're much more straightforward and I think…targeted than what went on before. Because we're seeing a macro-transition in the argument which, if you reflect back on where we've been, we started by looking simply at the exchange of commodities, commodity on commodity, kind of a barter situation, in which we imagined the socially necessary labour time embodied in each commodity even though there was a pretty much impossible thing, so we went from a C-C relation, Commodity to Commodity relation, then to the argument that in order for exchange to become general, you need some way in which markets can function and that required the emergence of the money form. So we went to the… Commodity exchange is mediated by money. And towards the end of the money chapter we suddenly got into this inversion where we started to look at a form of circulation which had this form: (M-C-M), in which the objective is different from the C-M-C. And as Marx puts it, in the C-M-C circuit you're perfectly happy about the fact that you're exchanging equivalence, because you're exchanging different qualities of shirts and shoes and apples and oranges and all the rest of it. And you're perfectly happy with the idea that you end up with the same value as you started out with, because you're simply interested in the use-value. When we get to this, however, as Marx points out, it's an absurd idea that you would actually take money and go through all of the risk, and of all the problems, going through this circulation process, to end up with the same amount at the end. So he kind of says: the only way in which this circulation process makes sense is by adding in Delta-M or as he's going to define it: the surplus value. And that poses the big question: where does that surplus value come from? When the laws of exchange are very explicit, as they are laid out in classical political economy and all the rest of it: that in perfectly functioning markets you should have equivalents in exchange, that: an equivalence here, an equivalent there… so where does the extra come from? And the answer is going to be that there's going to be a commodity which has the capacity to produce more value than it itself has, and that's labour-power. So that's the answer, if you like. So these three chapters are really about this transition, where we're looking at what's going on in the market. So that's the story of these three chapters. But as usual with Marx there are some conundrums and some oddities and things that we need to sort of work out. And on the very first page of this chapter, which opens this analysis on…the general formula for capital, he poses an issue which I've actually raised a number of times already. But here, I think, it takes on a more meaningful form and a form that we need to reflect upon, because, I think, it has considerable significance for how we understand our current situation. In effect, what he does on this first page is to point out that there is both a logical origin of capital, but there is also a historic origin. And we have to pay attention to that historical origin. So he says: "The circulation of commodities is the starting point of capital. The production of commodities and their circulation in its developed form, namely trade, form the historic presuppositions under which capital arises." So, the historic presuppositions are important. "World trade and the world market date from the sixteenth century, and from then on the modern history of capital starts to unfold." Here he's talking about the historic origins of capitalism. And of course, by mentioning the sixteenth, century, taking up an argument that Wallerstein made a great deal of in his world systems argument about the formation of the world markets, sixteenth-century onwards, that this is the origins of capital. And towards the bottom of this page he says: "Historically speaking, capital invariably first confronts landed property in the form of money; in the form of monetary wealth, merchants' capital and usurers' capital." And we're going to find this question of the positionality of merchants' capital and usurers' capital, or as we would now call it 'finance capital', much more respectable to call it that. What's the role of them in relationship to industrial capital? And then he makes the logical argument: "However, we do not need to look back at the history of capital's origins.(…) Every day the same story is played out before our eyes." That capital enters "in the shape of money, money which has to be transformed into capital by definite processes." Now the immediate implication of this is that money is not necessarily capital. Capital is money used in a certain way. So not all money is capital. I can create capital by just simply taking the money in my pocket and using it in a certain way, launching it into this form of circulation. I can take capital out of circulation simply by saying: Oh, I'm not going to do that anymore, I'm going to take all this money and put it back in my pocket. So if you ask the question: 'What's the total amount of money in society?', and 'What is the total amount of capital in society?', you're asking two fundamentally different questions. And you have to understand that capital is created by a social decision, on the part of some people somewhere to use capital in this particular way. And it is that process of conversion of money into capital which Marx really wants to look at in these sections. "The first distinction", he says, is really in their "form of circulation". And he here goes back over some of the stuff he earlier did in the chapter on money, he kind of repeats some of this stuff about: well going from C to M and M to C are two different operations. In the same way, starting with M and going to M is a different kind of operation from this one. So, you know, and then he gets into this notion immediately, as he says on the middle of page 248: "…the circulatory process M-C-M would be absurd and empty if the intention were, by using this roundabout route, to exchange two equal sums of money, £100 for £100." But, then there's something else in here which is very important, which is: What is done with the money when it's received. As he says, on page 249, towards the bottom, two thirds down: "The money therefore is not spent, it is merely advanced." That is, the capitalist uses the money and departs with the money but doesn't spend it in the ordinary sense on consumption. (He) advances the money in such a way to get back that money plus the profit, the surplus value. So the intent of the circulatory process is what really matters. The exchange of use-values is one thing. And that is about the satisfying of a social need, or of a particular individual need or want, or desire and so on. But then the other is this quantitatively different amount of value, which you're seeking to acquire by this form of circulation: the M-C-M' prime circulation. And that leads into his definition, which is a very important definition on page 251, which says: "The process M-C-M does not therefore owe its content to any qualitative difference between these extremes, for they are both money, but solely to quantitative changes. This increment or excess over the original value I call surplus-value." A fundamental category in Marxian Theory: surplus-value. And the big question that is going to be posed, of course is: 'What is surplus-value, where does it come from, what is it all about?' On top of page 252, he then elaborates on this a bit: "The value originally advanced, therefore not only remains intact while in circulation, but increases its magnitude, adds to itself a surplus-value, or is valorized." The valorisation of capital is about the way in which the original intent to gain more money, is realized at the end of the circulation process. And he then goes on to say: "And this movement converts it into capital." Now, several times I've made the kind of comment, that Marx is always interested in processes, rather than things. And if you ask yourself the question: 'Well, what is capital?' The answer is immediately, I think, foretold in this phrase: It's value in motion. It is a circulation process. It is value which is moving in such a way as to create more value. And that is the definition of capital. When he says: 'And this movement converts it into capital.' So it is the movement that does it. It's not a thing. It's not that I go and look at something, and say: 'Ah, that's capital.' That's not what happens. As far as Marx is concerned it's when something is put in motion. Only when it is put in motion is it capital. And when the motion ceases it is not capital. So it is this process-definition of capital, which is fundamental to Marx's argument. And as I already pointed out, all of us can go out and create immense amounts of capital tomorrow, if we take all of our money in our pockets, and start using it in this way. We could also get rid of a lot of capital tomorrow, if we went around and took away all that money and said: 'Okay, we're just going to spend it.' And not use it in this kind of way. But this then also creates another interesting element in the story. Because on page 253 he points out the following: "The simple circulation of commodities…" "…the appropriation of use-values, the satisfaction of needs…" etc. "As against this, the circulation of money as capital is an end in itself, for the valorization of value takes place only within this constantly renewed movement. The movement of capital is therefore limitless." Now, remember the chapter of money. When he talked about the way in which money is a form of social power, and as a form of social power it is potentially limitless. Therefore there are no limits on how much money, and that kind of social power you might accumulate. Whereas, there is a limit on the number of use-values you can reasonably hoard, the numbers of shoes, numbers of Ferrari's, the number of yachts, the number of houses. All those kinds of things. There is a limit, whereas this is limitless. So this is a form of circulation then, that tends always towards breaking limits. Extending, expanding, growing, by definition. Movement. It must move, it must expand. It must always be finding delta M, more delta M. Whereas in a society governed by simply exchange of use-values, we wouldn't have that imperative. Now, I earlier on posed this question in Marx's Capital: What is socially necessary? But what we're seeing here is Marx immediately making the argument, that what is socially necessary for the survival of capitalism is its constant expansion, its constant growth. And that its striving towards limitless growth. It may not get there, it may encounter all kinds of limits, it may crash, it may destroy the environment, it may destroy politics, it may do all kinds of horrible things. But capitalism as a system is socially necessarily connected to this drive for surplus-value. Which leads him on page 254 to define the role of the capitalist. Now again remember, in Capital we're dealing with roles, not individuals. I said, you and I can become capitalists immediately. We can stop being capitalists. Some of us may to some degree already be mini-capitalists. I have a pension fund which actually invests in things. So in a sense I'm a bit of a capitalist. It's in the stock market. The pension fund is in there. So it is the role which we are going to look at, the role of the capitalist. And what Marx says is this on page 254: "As the conscious bearer of this movement, the possessor of money becomes a capitalist. His person, or rather his pocket, is the point from which the money starts, and to which it returns. The objective content of the circulation we have been discussing is his subjective purpose, and it is only in so far as the appropriation of ever more wealth in the abstract is the sole driving force behind his operations that he functions as a capitalist…" That is - if you're a capitalist you have to be seeking that expansion. Seeking the surplus value. Gaining the surplus value. Creating a world around you in which that surplus value can be realized, in which your capital can be valorized. The implication of this is that: "Use-values must therefore never be treated as the immediate aim of the capitalist; nor must the profit on any single transaction. His aim is rather the unceasing movement of profit-making. This boundless drive for enrichment, this passionate chase after value, is common to the capitalist and the miser; but while the miser is merely a capitalist gone mad, the capitalist is a rational miser. The ceaseless augmentation of value, which the miser seeks to attain by saving his money from circulation, is achieved by the more acute capitalist by means of throwing his money again and again into circulation." The literary example of that, which I always loved is Balzac's novel "Eugenie Grandet", which almost certainly Marx had read. And the beginning of the novel has this miser Grandet, with all of the gold hidden away in his house somewhere. And in the end of the story he puts all the gold in bags, and he's riding into town in order to convert it into rents, so he can get a rate of return //in the money market on it. So this is a story of // the miser and the capitalist. And the conversion of the miser into the capitalist. I often wonder if Marx had that story in mind when he wrote this brief thing. He read all of Balzac. We know that. So almost certainly, I suspect he had that in mind when when he wrote this. This then leads to a further contemplation on pages 255-256 on the definition of capital. Because, while capital is value in motion, it also takes on these physical forms. It is objectified in these physical forms, and it has to be objectified in physical forms. As he says: "It is constantly changing from one form into another, without becoming lost in this movement; it thus becomes transformed into an automatic subject… We reach the following elucidation: capital is money, capital is commodities." That is, when we look at this form of circulation: we see capital here exists in money form; here it exists in commodity form; here it comes back into the money form. So in terms of its objectifications it's in these forms. He then goes on: "In truth, however, value is here the subject of a process in which, while constantly assuming the form in turn of money and commodities, it changes its own magnitude, throws off surplus value from itself considered as original value, and thus valorizes itself independently. For the movement in the course of which it adds surplus-value is its own movement, its valorization is therefore self-valorization. By virtue of being value, it has acquired the occult ability to add value to itself. It brings forth living offspring, or at least lays golden eggs." Two things about this - First: value is a subject. Value is here the subject of a process, because the capitalist is a bearer of this quest for surplus-value. And so Marx is kind of saying: 'The capitalist doesn't have necessarily any choice. If they're going to be a capitalist this is what they have to do.' And what that means is that instead of analyzing what individual capitalists do, we analyze the circulation of value in these terms, in order to understand what it is that capitalists do. What is it that drives them to do the things they do? The second thing about this passage is, there is heavy irony involved. When Marx talks about the way of being value: "(..)it has acquired the occult ability to add value to itself. It brings forth living offspring, or at least lays golden eggs." Now, Marx often uses irony and often uses heavy jokes. And you have to be careful not to take the jokes as actually serious. Of course he's talking about the world of appearance. It appears as if it's got occult, and much of capital is going to be about elucidating what goes on behind that apparent occult quality of laying golden eggs for itself. I once was invited to be an examiner on a doctoral thesis in philosophy which actually took this passage seriously, and went on and on about Marx's occult theory of value-creation. And I said something like: 'Well, did you read the section on fetishism of commodities? Didn't you realize that actually what Marx is going to do here, is set up the fetish concept, in order to deconstruct it, and to demystify it?' All of the student's advisors were very embarrassed, and said: 'What was that?' So be careful reading Marx, not to take something like this, which is an irony or a joke, and treat it too seriously. A lot of problems arise out of that. So he's setting it up in this world of appearance. What does capital appear like? You can see from where the occult quality comes from. If you have a savings account you put it in a bank, you put it in a savings account. By the end of the year you end up with interest… golden eggs…happened magically…right? You think it's natural. But Marx is kind of saying: 'Yeah, we all live in a world where, actually, it seems as if it's inevitable that our capital grows.' So the point here is that indeed it does have that appearance of occult quality. And if we are simply content with that occult quality and imagine it's just going to lay golden eggs in a sense, what the argument was about the privatisation of social security was, we were invited, or you were invited- it's a bit too late to invite me on this- but you were invited to put your money in somewhere, and just wait for it to grow. And to actually believe in this occult quality, that somehow or other this was going to be your golden nest egg. So what Marx is doing here, is simply pointing out that, actually, we live in a world, and this was true of rentier incomes during Marx's time, and which is the story of Eugenie Grandet, that he's going to get the golden eggs that come from investing in rents. So this then leads him to say the following: That out of these two forms, money - commodity - money, at what point in that process are you in a position to measure how much value you've got? The answers is: in the money form. So there's a certain asymmetry in all of this. I don't know what the commodity is worth until I get it to the market. Only when I get it to the market, I know that I get the money form, and only then I know that I've got the surplus value. So he says on page 256: "In simple circulation …the circulation M-C-M, value suddenly presents itself as a self-moving substance which passes through a processes of its own, and for which commodities and money are both mere forms." And then he talks about the way this works. And earlier on, he's made the comment: "There is here no antagonism, as in the case of hoarding, between the money and commodities." Then he uses this expression, which I'm sure some of you wondered about. "The capitalist knows that all commodities, however tattered they may look, or however badly they may smell, are in faith and in truth money, are by nature circumcised Jews, and what is more, a wonderful means for making still more money out of money." Further down he comes to the conclusion. "Value therefore now becomes value in process, money in process, and, as such capital." That is money is the place where we start. Now, there are a number of things going on here, which I think are important to look at. On the passage about Jews there is a debate, where I'm sure, if want to you get into it, you will find no end of it. As to the the degree to which Marx is anti-semitic. And his comments on Jews are frequently of this nature. The are various ways in which you can read this. There are various explications as to how and why he used this kind of language. Of course it was not uncommon language at that time. You've only got to think of Dickens and Fagin and all the rest of it. So this was not uncommon. But then, I think, there's also one other way in which you can read this. And that is to say: What Marx is saying is that all those really nasty horrible things that are said about the Jew, had long been said about the Jew in Christian society, should in fact be said about the capitalist. That actually you should take all of that stigma, and all that rhetoric which is directed at a particular ethnic group which is associated with money, and then actually transfer it onto that group which is really using the money that way - which is the capitalist class. You can take that, or leave it. Go read the debate and the discussion, there's a lot of discussion on this topic. But we come back again and again in this chapter to the idea that capital is value in motion. It is a process. It is defined in those terms. But it is a process which can only be measured and understood in terms of the money value. So the money form becomes, as it were, upfront in the circulation process. He then comes back to a topic he briefly touched on in Chapter Two. Which is to say: 'Well, there are various ways in which M-C-M can occur, we get merchants capital, we get interest-bearing capital, we get industrial capital.' So we have to take into account all those different forms of circulation and recognize that they all fall under this general rubric of this M-C-M plus delta-M form of circulation. Next chapter. He immediately raises the problem of where can this surplus value possibly come from. On pages 260-261 he starts to talk about the problem. Right at the bottom, first off he talks about: "The vulgar economists have practically no inkling of the nature of value; hence whenever they wish to consider the phenomena in its purity, after their fashion, they assume that supply and demand are equal, i.e. that they cease to have any effect at all." I have several times mentioned to you this argument, which Marx is frequently introducing. Which is that supply and demand conditions explain why prices are yo-yo-ing all over the place, but the equilibrium price is what we're going to be looking at. And even the capitalist theorists accepted that equality should be a condition of exchange. So on page 261 he says: "Where equality exists there is no gain. It is true that commodities may be sold at prices which diverge from their values, but this divergence appears as an infringement of the laws governing the exchange of commodities." Now, the laws are the laws of political economy as set up in a perfectly functioning competitive market world of Adam Smith and Ricardo. So he says: "In its pure form, the exchange of commodities is an exchange of equivalents, and thus it is not a method of increasing value." He then goes on to say, well one of the ways of which classical political economists, and he singles out Condillac, has dealt with this, is by kind of immediately switching, say: well, it must be something about use-values. But Marx rebuts that and says: you know, our whole analysis says it can't be use-values. And their analysis says it can't be use-values. Faced with this conundrum, of where does the profit come from, they can't take refuge in use-values. Which leads him therefore to the following conclusion on page 262: "If commodities, or commodities and money of equal exchange-value, and consequently equivalents, are exchanged it is plain that no one abstracts more value from circulation than he throws into it. The formation of surplus-value does not take place. In its pure form, the circulation process necessitates the exchange of equivalents, but in reality processes do not take place in their pure form. Let us therefore assume an exchange of non-equivalents." And then he goes through a series of cases. Let's suppose the seller is privileged for some reason. Sellers are privileged for some reason. But then when you examine people's roles you find out, if the sellers are privileged, then as buyers they are underprivileged. So, they're not going to get a net gain. The same thing applies if buyers are privileged for some reason. Then as sellers, they're going to be losers. So there's no net gain. Which leads him, on page 264, to consider the issue of what he calls 'effectual demand' and what we now call 'effective demand'. What he's dealing with here is one answer that was given to this conundrum by some economists, particularly Malthus, in his political economy. Which used to say: Well, there's a class of consumers, somewhere or other, whose duty it is to consume as much as they possibly can, because they've got excess money. And that's where the extra demand is going to come from that's going to give you the delta-M. And in particular Malthus argued in the following way: There are three big classes in society: Workers, who cannot possibly be a source of effectual demand. Capitalist, who are reinvesting their money. So they can't be a source of effectual demand. And then there is a bunch of parasites in society; aristocrats and lords and parsons and all the rest of it, who sit around with loads of money, and their job is to consume to the hilt in order to stabilize the system. And Malthus also suggested that in the absence of a consuming class domestically you might also go for foreign trade. And Marx answers both of those questions in the negative by saying: Well, if there's a class of landlords out there somewhere, then at some point or other they're going to be brought within the system and to the degree that they are actually using money, the money's going to come from here somewhere, so they're not going to be the answer. All of those hangers-on in the state apparatus get their money from somewhere, it comes from this circulation process, so it's being extracted. So whatever is being extracted is simply being brought back in. And then he uses the arguing about tribute to Rome, to say, well you know, even if you exchange with foreigners and you rip them off then they rip you off in reverse and so again, there's no surplus value which is going to come out of that. So the effective demand argument, the external source of effective demand does not work in Marx's view. Nor does the internal class of consumers work. I mean, one of the great paradoxes of course in Malthus' case was, his political economy talked about the necessity of a class of consumers who consumed like crazy in order to keep the economy in equilibrium. At the same time he talked about poor people who were poor because they were reproducing to such a point that there were not enough resources to go around and there were… all of those kinds of problems. So, in a sense, when he wrote his political economy Malthus had a completely different explanation of how the world worked than when he wrote his theory of population. And it's very interesting to look at those two representations that Malthus came up with, but his recognition of the effectual demand problem was important. As I mentioned last time, Keynes took that up as being very critical and said: Well actually, debt financing is going to be one of the ways we can do this. But for Marx that can't work. And then he goes through the final argument which is: Well, maybe the problem is we're looking at the thing in aggregate, so we just simply look at individuals. And if we look at individuals, what we see is in a sense: Yes, indeed, there can be a lot of robbing Peter to pay Paul, but there's no aggregate surplus value available in society that way. One person's loss is somebody else's gain. But then it quickly gets reversed, so there's no aggregate benefit that comes from that. Which leads into the conclusion on page 266: "However much we twist and turn, the final conclusion remains the same. If equivalents are exchanged, no surplus-value results, and if non-equivalents are exchanged, we still have no surplus-value. Circulation, or the exchange of commodities, creates no value." Very important proposition in Marx, and something you really have to think about. Circulation creates no value. Value cannot be created by market exchange. It can be redistributed through market exchange, but it cannot be created through market exchange, if the market exchange is of this perfect competitions sort. Which leads him then to say: 'Okay, we also have to deal with merchants' capital, and usurers' capital.' And he says: 'Yes, ok, merchants' capital was one of the antediluvian forms of capital, back in the early sixteenth century, seventeenth century.' And merchants' capital was indeed based on violating the laws of exchange. On page 267 he quotes Franklin: "War is robbery, commerce is cheating". So yes, merchants cheated much of the world of value. They stole it; predatory practices, and all the rest of it. But that is a violation of the laws of market exchange as envisaged by the classical political economists. The same applies to usurers capital. And usurers' capital poses the problem of Aristotle's distinction between economics, which for Aristotle was about use-values. What Aristotle talked about as chrematistics was about money-making, and money-making was filthy, bad, and all the rest of it; economics was good because it is about the exchange of use-values. And so, there's a critique of interest in here. Then Marx says something interesting on page 267: "In the course of our investigation, we shall find that both merchants' capital and interest-bearing capital are derivative forms, and at the same time it will become clear why, historically, these two forms appear before the modern primary form of capital." What he's leading to here, is this following idea: Capitalism had to get going somehow. From the sixteenth century onwards merchants' capital and usurers' capital played a crucial role in the dissolution of pre-capitalist forms of power; notably feudalism in Europe, some predating state forms elsewhere. Usurers lent to the landed nobility, and then the landed nobility couldn't pay them back and the landed nobility lost their lands. Merchants who couldn't make money internally within a country went outside, robbed the rest of the world of use-values, came back, made lots of money. Used that money-power to start to develop political power, which allowed them, at some point or other, to confront and destroy the power of landed property. So there's a historical story to be told about the origins of capitalism, which Marx is alluding to. And that historical story has a very powerful, and important role assigned to it, by merchants' capital and usurers' capital. But at some point or other, the modern industrial form of capital takes over. And the industrial form of capital needs merchants, and needs an interest system. But that system has to be disciplined to the needs of industrial capital. So what Marx is talking about, is a transformation in the role of merchants' capital and usurers' capital from something which is undisciplined, out there, doing all kinds of outrageous things, which are non-permissible in terms of the rules of the market. Are being corralled and brought back into the capitalist system, disciplined to the requirements of industrial capital. The historical distinction which is made between usury and interest for example. What was Martin Luther about? Nailing to the wall his theses and so on, saying: Interest is a fair rate of return on capital. Usury was abhorred, and as we know, it is still the case that interest is not consistent with Islamic law. But what we frequently don't know is that the Catholic Church had a ban on interest up until the eighteen forties, eighteen fifties, even to the eighteen sixties. And interest… the taking of interest was associated directly with forms of prostitution. In nineteenth century France, for example, this was a very common way for right wing catholics to talk about it. There is a wonderful cartoon that I used in my Paris book which is by a cartoonist called Gavarni, about mid-century, in which this buxom lady is attempting to lure this old gent into an investment house. And she says to him: 'You can put down as much as you want, I'm sure your rate of return will be very good. Whatever you give me, I'll make sure you get it back with interest.' And the poor guy is shrieking away from this whole kind of thing. So this association of an investment house with a brothel, in nineteenth century France, was very strong. So the whole kind of question of the role of interest in relationship to industrial capital is a problematic one. And it continues to be problematic and we may want to think about this further today because there is a question: To what degree is industrial capital in control? Right now to what degree is interest-bearing capital, finance capital, in control? For many years in Britain, particularly in the post war period, there was a contest between the interests of industrial capital in Britain and the city of London financial interests. And if the city of London financial interests were going to be served, that frequently harmed seriously the British industrial interest. And it was a Labour prime minister, Harold Wilson, back in around 1964/65 who made a key decision to favor the city of London over the industrial interest. And one of results of that eventually was the deindustrialization of Britain, in the same way that the rising power of financial interest in the United States has coincided with a huge wave of deindustrialization inside of the United States. So the big question then is: Who has the power? But what Marx is dealing with is a situation where, as far as he was concerned, industrial capital was the key to understanding how surplus value is going to be produced, how it was going to circulate. And industrial capital, therefore, was the form of capital he was going to concentrate on, but he's here giving this historical role. So we come back, on page 268, for the final conundrum: "We have shown that surplus-value cannot arise from circulation, and therefore that, for it to be formed, something must take place in the background which is not visible…", that's the occult side, OK, "is not visible in the circulation itself." Bottom of page: "Capital cannot therefore arise from circulation, and it is equally impossible for it to arise apart from circulation. It must have its origin both in circulation and not in circulation. (…)The transformation of money into capital has to be developed on the basis of the immanent laws of the exchange of commodities," that's the equality principle, "in such a way that the starting-point is the exchange of equivalents. The money-owner, who is as yet only a capitalist in larval form, must buy his commodities at their value, sell them at their value, and yet at the end of the process withdraw more value from circulation than he threw into it at the beginning. His emergence as a butterfly must, and yet must not, take place in the sphere of circulation. These are the conditions of the problem. Hic Rhodus, hic salta!", here is the ball, now you run with it!. So that's the conundrum to be solved and looked at in the next chapter. So let's let's look at the sale and purchase of labour power. And having posed a rhetorical question at the end of the last chapter, kind of saying: where on earth does this surplus value come from?, he immediately says: well, there's an immediate answer and we'll just go straight to it on page 270: "In order to extract value out of the consumption of a commodity, our friend the money-owner must be lucky enough to find within the sphere of circulation, on the market, a commodity whose use-value possesses the peculiar property of being a source of value, whose actual consumption is therefore itself an objectification of labour, hence the creation of value. The possessor of money does find such a special commodity on the market: the capacity for labour, in other words labour-power." Now Marx is going to make a big distinction between labour and labour-power. Labour-power is the capacity to create value. And of course we know that value is socially necessary labour time. And the important idea here is that the capitalist must find a commodity, and in particular the commodity labour-power which can be bought and sold in such a way as to make absolutely sure that the labour power which is given to the capitalist is greater than the labour which is required to reproduce the laborer. That's the calculus we're going to get into. Now, one of the big consequences of this is that Marx is going to make an analysis of capitalism that does not involve in any way cheating, in the world of exchange. All commodities, in this analysis, are going to exchange at their value. There is no violation of the equivalency requirement. Now this is something that some people find a bit strange about Marx. He would have thought that Marx would have said: Oh, those people violating exchange, you know, power relations, this kind of thing. But here we come back to, I think, one of Marx's central missions, which is to undermine classical political economy. And classical political economy, as I've suggested, perpetually spun the story that, if the world was made out of perfectly functioning markets, then everybody would be better off. And perfectly functioning markets assume equivalence in exchange. So Marx says: Okay, I assume equivalency in exchange also. Now does this mean he believes that that's how capitalism is? No, not necessarily at all. So here he's beginning to look at the whole kind of relationship between classical political economy and the realities on the ground, and he's firmly going after classical political economy rather than trying to describe the realities on the ground. Let us suppose a perfectly functioning market economy. And he says: "We mean by labour-power, or labour-capacity, the aggregate of those mental and physical capabilities existing in the physical form, the living personality, of a human being, capabilities which he sets in motion whenever he produces a use-value of any kind." But various conditions must be met if labour-power is going to become a commodity. The first condition is that the laborer must be, as he says on page 271, "(…) the free proprietor of his own labour-capacity, hence of his person. He and the owner of money meet in the market, and enter into relations with each other on a footing of equality as owners of commodities, with the sole difference that one is a buyer, the other a seller; both are therefore equal in the eyes of the law." So again, we assume that the law is going to be good in all of this which it ain't necessarily so, but Marx is going to assume it. So "(…) the proprietor of labour-power", that is the laborer, "must always sell it for a limited period only (…)". He hands "(…) it over to the buyer for the" [buyer] "to consume, for a definite period of time, temporarily. In this way he manages both to alienate his labour-power and to avoid renouncing his rights of ownership over it. The second essential condition", on page 272, is this: "(…) that the possessor of labour-power, instead of being able to sell commodities in which his labour has been objectified, must rather be compelled to offer for sale as a commodity that very labour- power which exists only in his living body." This is Marx's version of bio-politics. "For the transformation of money into capital, therefore, the owner of money must find the free worker available on the commodity-market; and this worker must be free in the double sense that as a free individual he can dispose of his labour-power as his own commodity, and that, on the other hand, he has no other commodity for sale, (i.e.) he is rid of them, he is free of all the objects needed for the realization of his labour-power." Now this is an interesting riff on the notion of freedom. The laborer is free in the double sense: free to sell his or her labour-power to whomsoever, under any conditions of contract, always in control of their own body as a laborer, a proprietor over their own body, we're not dealing with slavery here, even though of course slavery continues to exist, but Marx is talking about the free laborer. But they're also freed of any control over the means of production. So they're free in that double sense. So every time I hear George Bush talk about how he's going to deliver freedom unto the world I think: Yes, this is what he's about, he's going to free everybody of any control over the means of production. At the same time he's going to turn them into individual proprietors and wage laborers. So next time you hear this mission about bringing freedom to the rest of the world, then remember what Marx's definition of freedom is, under capitalism. And then when you actually look at politics on the ground under the Bush regime you got a pretty good idea that indeed, this Marxian definition is pretty much what it is about. It's hardly an accident that coalition provisional authority in Iraq, about a year after the occupation, actually enforced the whole free labour regime rights, all this kind of stuff, as central part of the Iraqi constitution. At the same time, as they were saying, that there should be no barriers to foreign ownership and no barriers to finance capital, no barriers to anything. You know, they were freeing up the territory for relieving people of any kind of concern about having control of the means of production. Now this then brings us to, of course, the historical question on page 273: "Why this free worker confronts him in the sphere of circulation is a question which does not interest the owner of money, for he finds the labour-market in existence as a particular branch of the commodity-market." This is where we recognize that there has been a historical process. And Marx goes on to say: "And for the present it interests us just as little. We confine ourselves to the fact theoretically, as he does practically." Then he throws in an immediate qualification: "One thing (…) is clear: nature does not produce on the one hand owners of money or commodities, and on the other hand men possessing nothing but their own labour-power. This relation has no basis in natural history, nor does it have a social basis common to all periods of human history. It is clearly the result of a past historical development, the product of many economic revolutions, of the extinction of a whole series of older formations of social production." And then he goes on to say: and the economic categories have undergone a similar revolution. That what we understood by labour under feudalism is something very different from what we understand by labour under capitalism. What we understood as commodities, and, at the bottom here, he makes, I think, a very important argument, towards the bottom of page 273: "The appearance of products as commodities requires a level of development of the division of labour within society such that the separation of use-value from exchange-value, a separation which first begins with barter, has already been completed. But such a degree of development is common to many economic formations of society, with the most diverse historical characteristics." Not all markets societies are capitalist societies. You can have sophisticated market systems, commodity exchange systems, which are non-capitalistic. He then goes on to say, well on the next page, that all of these other forms were precursors, if you like. So he says on page 274: "The historical conditions of its existence", that is capital, capital's existence "are by no means given with the mere circulation of money and commodities. It arises only when the owner of the means of production and subsistence finds the free worker available, on the market, as the seller of his own labour-power. And this one historical pre-condition comprises a world's history. Capital, therefore, announces from the outset a new epoch in the process of social production." What's involved here is that capital could not be capital without there having been a whole process of wage labour creation, proletarianization, which preceded it. So it's not simply money and commodities in these sophisticated forms that is necessary. Yes, they are necessary, but the other element that is necessary, which comprises a world's history, is the creation of a proletariat, the creation of a wage-labour-force which is selling its labour-power as a commodity. So again there is this historical element which enters in. And we'll see that entering in a different way, too. The big question that then arises is: What constitutes the value of labour power? And in the next series of passages he says: Well, the worker needs subsistence, needs to live. So you have to provide enough commodities to allow the worker to live. But that then immediately poses the problem: how many commodities does the worker need to live? Part of that has to do with the nature of the labour which you are demanding of the worker. You work them very hard, you've got to feed them better. As he says on pages 274-275: "(…)definite quantities of human muscle, nerve, brain (…) have to be replaced. Since more is expended, more must be received. (…)His means of subsistence must therefore be sufficient to maintain him in his normal state as a working individual." Now, normal state, what is a normal state? "His natural needs(…) vary according to the climatic and other physical peculiarities of his country. On the other hand, the number and extend of his so-called necessary requirements, as also the manner in which they are satisfied, are themselves products of history, and depend therefore to a great extent on the level of civilization attained by a country; in particular they depend on the conditions in which, and consequently on the habits and expectations with which, the class of free workers has been formed. In contrast, therefore, with the case of other commodities, the determination of the value of labour-power contains a historical and moral element. Nevertheless, in a given country at a given period, the average amount of the means of subsistence necessary for the worker is a known datum." The value of labour-power is not simply a physical quantity. Dependent upon the degree of civilization of the countries, dependent upon the dynamics of class struggle. It depends on what people got used to, it depends on climate, it depends on the nature of the labour. In other words, when we come to say: What is the value of labour power? What is the value of a workers labour power? We have to recognize this as a determination that comes from multiple sources. And it's obviously a very complicated history. And it varies greatly from place to place and from time to time. But, he then goes on to say, in a given situation we know what that value is. Now it's interesting when you look at contemporary society. We have various ways in which we start to set that datum. There is something, for example, called the 'poverty level' in this country. What does it take to feed, house, cloth, reproduce…a family of four. I don't know what the contemporary figure is. Anyone know? 17, 18 thousand something like that a year? Something like that. »STUDENT: 18 and change currently. »HARVEY: 18 and change currently, thanks. So in a sense you could say: well, in this society we still have got some datum there…about, in this society it's that. Now if you're in Ecuador, what would the poverty level be in Ecuador? What would it be in contemporary Argentina? What would it be in contemporary China? Clearly it is very different in different places. So Marx is accepting: yes, it's going to vary all over the place, and when class struggle gets hold of it, the definition of what is the value of labour-power starts to change. And when the bourgeoisie starts to feel guilty and decide they want to live in a civilized country where there's not poverty on their doorsteps all the time, they may say: well, maybe we should raise everybody up to a certain 'civilized' level. So there are all kinds of forces at work in the determination of the value of labour-power. But what Marx is going to do is to recognize that and then say: but for our purposes of analysis I'm going to assume it's known. And just make that assumption, say: We know what the datum is. And the datum is further flexible because you also have to incorporate in here some accounting for reproduction costs. Because you're not simply feeding the laborer at night so they can come back the next morning. You gotta think about, you know, kids, reproduction of the working class. You've also got to think about the qualities of the labour-power, the skills, how much you're going to spend on skills, this kind of stuff, what's the value of skills and so on. So what we're coming up with here is a movable datum which, nevertheless, we're going to have to say, for purposes of analysis, we know what it is. But we see straight away that labour-power is not a commodity like any other commodity. Because a moral, civilizational, class struggle element enters in. Now there may be other commodities where that happens, too. But in the case of labour all of that is upfront and fundamental to what determines the value of labour-power. And therefore you have to look at it in those terms. Furthermore there's another peculiarity about labour-power as a commodity. The capitalist goes into the market and buys all of these commodities and then puts them to work. But in the case of labour-power the capitalist only pays the laborer after the work is done. So in effect the laborer is advancing their labour to the capitalist, hoping to get payed at the end of the day. And in China, as we know about, I don't know, thirty percent of the labour force in some parts of the country don't even get their wages. So they advance their labour and they don't get their wages at the end of the day. And of course declaring bankruptcy is one of the ways in which you can get away with that in this country, too. So there are all kinds of peculiarities in this commodity, so when we start to talk about the commodity 'labour-power' we have to acknowledge its peculiarities. Now, what is it that went into the value of labour-power? And here, I think, the best way to look at this is, what Marx is arguing is in effect, how the original poverty level was defined in this country by Mollie Orshansky, I think it was, back in 1965 or something like that, and they first set-up the definition of the poverty level. And the way it was set up was this- They asked the question: what is the market basket of commodities which a family needs to survive, how much do they need to pay on housing, how much on clothing, how much on food, how much on transportation? They add up the value of all of those commodities and the aggregate value of all of those commodities when prorated over the year gave you the poverty level. in other words it was a particular market basket of necessary commodities at a given standard of living at a given time. Now, it's interesting to go back and look at the history of arguments over what should be in that market basket of commodities. Back in 1965 it did not include cell phones. Does it include that now? Should it include it? Some items have fallen out, some have entered in. And of course what the conservative right does is to say: You've chosen the wrong market basket, and they find a market basket which gives you a poverty level of sixteen thousand. And if you're of the left you make it so that it comes to twenty thousand. But it is a social determination. Nevertheless, it's based on the value of the commodities which the laborer needs to survive. In other words you pin the definition of the poverty level and the minimum wage and all the rest of it, or living wage, even the idea of a living wage, for example, is about what is it that you need to survive, what is the market basket of commodities you need to survive in today's world in the United States? And that's what you use. So the value of labour-power is fixed by the value of the commodities which are necessary to reproduce the laborer at a given standard of living, at a given moment and a given place. That's how the value of labour-power is determined. And that value is fixed in a given place and a given time. And you can see also how it is sensitive to the changing value of commodities. For example: if necessities suddenly decrease in value then the value of labour power declines. They still get the same bundle of goods, but the goods are much cheaper because the industries producing them have become much more productive. And one of the reasons why you can keep labour cost down in this country is of course because WalMart is exploiting the hell out of China. So the market basket is much cheaper than it otherwise would be, if you didn't have cheap imported commodities. This is one of the reasons why, you know, all this stuff about putting protectionism and so on is really problematic. Because if you really sort of forced the Chinese to up all those prices by revaluing, or you started to put tariffs on Chinese products, suddenly you'd find the value of all those goods would increase and you'd have to pay workers more in order to keep them at the standard of living to which they're accustomed. So what this means then is that the value of labour-power is fixed in the marketplace by these processes of configuration of what the value of labour-power is in terms of the value of the commodities used. Now there's an interesting element here. What kind of circulation process is the laborer in? They're in the C-M-C circuit. They start with this commodity 'labour-power' that they're going to trade to the capitalist. They're given money. And they're given the amount of money needed to buy that bundle of commodities which allows them to reproduce themselves and their kids, reproduce the working class, so that they are continually there. Free as air, free as always (laughter). Interesting dynamic here: the laborer is in the C-M-C, capital in the M-C-M. And that distinction is going to be very important to understanding the result of this conundrum which we've been looking at. So he says, on page 279: "The use-value which the former gets…", because in effect, what the capitalist does is to buy the use-value of labour-power. So "The use-value which the capitalist gets in exchange manifests itself only in the actual utilization, in the process of the consumption of the labour-power." That is, the capitalists are going to use the labour-power in production. "The consumption of labour-power is completed, as in the case of every other commodity, outside the market or the sphere of circulation." So, says Marx, "…therefore, in company with the owner of money and the owner of labour-power, leave this noisy sphere, where everything takes place on the surface and in full view of everyone, and follow them into the hidden abode of production, on whose threshold there hangs the notice 'No admittance except on business'. Here we shall see, not only how capital produces, but how capital is itself produced." And who produces it? "The secret of profit-making must at last be laid bare." But in order to understand this we have to get out of the sphere of circulation. So he says on page 280: we have to get out of this and depart from "…a very Eden of the innate rights of man. It is the exclusive realm of Freedom, Equality, Property and Bentham." He then goes on and talks about the way in which "Freedom, because both buyer and seller of commodity, (…) are determined only by their own free will. They contract as free persons, who are equal before the law.(…)Equality, because each enters into relation with each other, as with a simple owner of commodities, and they exchange equivalent for equivalent. Property, because each disposes only of what is his own. And Bentham, because each looks only to his own advantage." And here we get the Adam Smith view again. The only thing that brings them together "(…) and putting them into relation with each other, is the selfishness, the gain and the private interest of each. Each pays heed to himself only, and no one worries about the others. And precisely for that reason, either in accordance with the pre-established harmony of things, or under the auspices of an omniscient providence, they all work together to their mutual advantage, for the common weal, and in the common interest." Marx is being a little ironic. "When we leave this sphere of simple circulation or the exchange of commodities, which provides the 'free-trader vulgaris' with his views, his concept and the standard by which he judges the society of capital and wage-labour, a certain change takes place(…) He who was previously the money-owner now strides out in front as a capitalist; the possessor of labour-power follows as his worker. The one smirks self-importantly and intent on business; The other is timid and holds back, like someone who has brought his own hide to market and now has nothing else to expect but - a tanning." Interesting point here. This notion of rights and freedom. What Marx is actually doing here is, in a way, pointing out that bourgeois constitutionality is entirely concerned with market relations. And the definitions of freedom and rights pertain there. But bourgeois constitutionality has almost nothing to say about what goes on inside of production. What goes on inside of a factory? And when states start to interfere with what goes on inside of the factory by passing legislation like OSHA, capitalists get outraged. It is a violation of the rights of private property. You don't want anybody prying around inside of the production process. And bourgeois constitutionality has nothing to say about what goes on inside the production process, nothing to say about it whatsoever. Yes, you can try and take somebody's market relations and bring them back into… …and apply them to this world of production, but that's very hard to do. And this, I think, is a fascinating kind of point. Because a lot of politics right now is precisely about freedom and rights. Perfectly consistent with the bourgeois vision of the world. And Marx is kind of saying: Yeah, you can have a great time there playing around with Bentham, notions of freedom and rights and all this kind of stuff, and private property and all the rest of it. I mean, this is the neoliberal ethic. Run wild, it's the liberal theory, run wild, liberal constitutionality. And whenever a revolutionary movement comes in, like happened in Portugal in the 1970s, and they try to set up a constitution which actually tried to legislate how production was to be organized, the bourgeoisie went utterly crazy. That is something you cannot and must not do. And what is interesting to me is to think how much of politics over the last thirty years has actually forgotten that. How much of politics, by going to abstract notions of human rights and freedom and rights and all this kind of stuff, is actually talking about something which is outside of what is going on in the actual production process itself. Because what Marx is saying is: you can't find the secret of how capital is produced by simply looking at the market. You can see that there's a commodity there, called labour-power, which clearly has the capacity to produce more value than it itself has. But in order to crack the secret of profit making and the production of capital you have to go inside the production process, you have to go inside the labour-process. And look at what is happening inside the factory, look at what's happening in the labour process on the production line, in the fields, agri-business, in the minds, in the factories, and all those huge complexes in China, employing thousands and thousands of people making socks and all the rest of it, things we wear. So that's where we have to go. And unless we're prepared to go into that realm, we'll never going to find the real secret of how profit is made. But in order to get to that point we have to understand that a proletariat has to exist. Proletarianization has to have occurred. And again Marx is saying: Look, I'm not going to be talking here about how the proletariat was formed. Actually, he does, in Capital, talk about that, but it is in part eight where he deals with the formation the proletariat and primitive accumulation. But here he's saying: I'm assuming there's a labour market, the proletariat is already in place, wage labour is everywhere, the value of labour-power is known. All that data is known. We then go on to construct a theory on the basis of that form of argument. Now again: there are assumptions built into this. He's clearly taking on, here and everywhere else, the theses of liberalism and the theses of classical political economy. And he's taking them at their word. He then wants to show, when you take them at their word, you can't solve the secret of profit-making, unless you do something else, which is part three, which is going to be about the production of surplus value, of absolute surplus value. So what we'll do next time is to read the next three chapters. Paying particular attention to the first ten pages or so of Chapter Seven on the labour-process. So we have some time for general discussion on what's going on in these three chapters. Anybody want to raise questions? » STUDENT: (inaudible) » HARVEY: You could make that argument, but then… that will then depend on a historical, you know, on the historical events that actually happened. We will see some of that being depicted in Capital. Now, Marx's account of that is that the formation of a proletariat really began to form in the sort of fourteenth… …thirteenth/fourteenth centuries. So it was a long, long process. So you get elements of a wage labour system, which are arising when there's no industrial capital around. There is certainly at some point an agrarian capital which begins to kick in and start to proletarianize in the countryside, wage labour, conversion of peasants into wage-laborers in the countryside through the enclosure movement. So you start to see elements of this. So yes, you could argue that there is a co-evolution of the rise of the proletariat and the rise of a capitalist class, but the way in which Marx depicts it, is that many elements of proletarianization preceded the rise of, as it was, the industrial form of capital which is going to be fundamentally concerned with the exploitation of labour-power in production at the end of the eighteenth century. By then an extensive proletariat was already in place, functioning in all kinds of ways. Including, by the way, and this is a very important element in the British case, as a servant class, which is a class of wage laborers employed as menial servants and, you know, coachmen and all that kind of stuff for a fairly affluent consuming class. So there was a class of wage laborers, that was spreading around, and then already in place before industrial capitalism could seize upon that and start to use it. So, in a sense, this was more the egg and the chicken is the industrialization that occurred a bit later. But, in order for wage labour to have occurred, there had to be kind of wage labour relations established in the countryside, established in the service sector and all the rest of it. And the service sector in Britain, for example, was very large and a lot of it was indeed straight wage-labour. So that was not a capitalist relation, that was a sort of master-servant kind of relation. » STUDENT: The notion of human rights as we know it today is much…didn't exist at the time Marx was writing. But I'm just curious, because you said something very quickly, and I was trying to understand when you're talking about notions of rights and freedoms being, something that had to be, had to address, to be evolved inside what means production in the production process. One of the more marginalized areas of human rights today is economic, social and cultural rights which I, as I was reading how he defined the actual value of labour power is… …I mean…economic and social rights is about the right to have a house… it's the struggle to define and to challenge those notions. So I was trying to understand if you were suggesting or… …that Marx or you yourself, that all notions…it's that… do we already begin with…I mean… obviously it's problematic, right, if you're trying to define things within the system without… were you saying that all human rights as we define them now do not try to challenge the actual system itself, that it's actually just a reflection of the bourgeoisie… » HARVEY: It depends, what we're talking about here is, of course one of the ways in which class struggle unfolds is over the rights of labour to a decent wage. A living wage, rights to housing and medical care and all the rest of it. So there are struggles in the market which are very important struggles to be waged. Which play a very crucial role in determining the value of labour-power and, therefore, from the standpoint of the proletariat are very important struggles, OK? That's very different, however, from rights and powers which arise for labour in the production-process. Now there's a good deal of evidence that the labour reforms that came through, I mean, the national labour relations board, which was set up in the 1930s, paralleled the setting up of legislation which empowered unions towards collective bargaining strategies which allowed them to improve their positionality in the market. And there was a trade-off being offered between empowering people in the market and disempowering them in the production process. In the 1920s and 1930s one of the ways in which workers insisted on empowerment in the production process was through definition of skills. And if you look at the number of skilled categories that existed in something like the steel industry in the 1920s, it was huge. And it meant a worker in a particular skilled category could not be displaced by another worker in another skilled category. In other words: there was a good deal of worker-monopoly-power inside of the production process. What the national labour relations board did was to start to dismantle some of that through a process of external adjudication over skill disputes within production, for example. And what this led to in the long run was a gradual disempowerment of workers at the point of production, as opposed to their empowerment in the market. So in a sense what happened was a legislative move which is deliberately about: let workers be treated however you want at the point of production. Empower them in the market. Because in the 1930s that was very important anyway, because of the effective demand problem. So the point here is not to say that struggles over rights over wages and over health care and all that kind of thing are irrelevant, but to say that they're fundamentally different from struggles over rights at the point of production. And that disempowerment of workers at the point of production is really an issue. I mean, we saw that for example in that mining tragedy in Idaho. Where people might be getting a decent wage and they're maybe getting good health care and so on, but if you die down in the pit because they haven't done anything about the production process in the pit, and they're not going to do anything about it because it costs too much, then you're in a different world. And I think what Marx is doing here is to point out that there are two different arenas, and they're quite different from each other. And if you concentrate only on one to the detriment of the other, you're going to be looking at the one which the bourgeoisie wants you to look at, where the bourgeoisie is perfectly happy to negotiate. Because it's within the area of legality and you can hire lawyers and all that kind of stuff. And of course is great for the lawyers and all the rest of it. But then, what Marx saying, empowerment at the point of production. I mean, for instance, the right of agricultural laborers who are working with all those pesticides. To know what pesticides they are working with and what the health consequences are. OSHA at one point tried to set up a system where it was mandatory for every major kind of industrial process to list the kinds of chemicals you were working with in the production process and say something about their qualities. Were they carcinogenic?, what kinds of health things could come from this etc. Of course all that disappeared with Reagan and all the rest of it. But the point here is that: what goes on at the point of production is actually very vital for what happens to the worker, and what happens to him on the production line, to what degree can they resist disciplinary actions on the production line? Is there harassment on the production line? What happens?, those kinds of things. So it's kind of complicated. Well, so what Marx is simply saying is that the field of rights is very much one that is familiar to the bourgeoisie and therefore we talk about that a lot, and some of that is very important, obviously, in terms of determining the value of labour-power and the conditions of labour and so on. But, we have to look at another field which is empowerment at the point of production. And the language of rights is very hard to apply at that point. It's about power relations. And about knowledge and information and all kinds of things of that kind. So it's hard to articulate it in terms of the simple language of rights. And so to a degree that NGOs and all the rest of it concentrate on a language of rights, they're actually concentrating on a language of bourgeois discourse where progressive things can happen. But you're still limiting yourself by not looking at what's going on in terms of the production process. And that's where Marx says you've got to also look. You've got to look at both of these arenas together. OK, we're a bit over time, the temporality law steps in, socially necessary labour time is over, so we'll see you next week.