Greed and profits, twin destinies
Theorists of capitalism say that while technology goes up, growth falls, and exclaim: Oh what a paradox! Marx one century and a half ago proved capitalist mode of production leads to diminishing rate of profit and to unemployment. That is the reason
.Greed and profits, twin destinies
Fernando García Izquierdo
We live in a world where the aim of the individual, it appears, is accumulation, which necessarily implies the constitution of an elite based on the possession of wealth: the sacred right of private property. I possess ‘ergo’ I am.
Another way of expressing the same thought is to say, quite simply, that we live under capitalism: a system of society where its members are classified in two antagonistic categories. A few possess capital, property, lots of it at times, and actually deprive others of the necessary means of subsistence. In legal terms this is called usurpation.
We are all of the same ‘homo-sapiens’ species. We are endowed with reason, not governed exclusively by instinct like other animals. We speak of the law, of all humans holding the same rights. Philosophers have spoken of reason and freedom being one and the same thing. And it seems this is a big lie. Everywhere we deprive humans of freedom.
Under capitalism some humans hold power because they possess capital in a country of dispossessed, depriving the masses of the most essential rights, “human rights”.
Those who usurp power rush to inject (says Montesquieu) « la crainte dans le coeur et donner à l’esprit la connaissance de quelques principes de religion. » In other words, put fear in the heart of people and teach them religion.
Wealth converted into capital.
The agents of the rich, who are those that hold power vicariously in society (for the real masters we shall never get to know who they are), having first brought the masses into a state of dispossession, have engaged them in the process of production, for the capitalist has to accumulate to be what he is.
“The wealth of those societies in which the capitalist mode of production prevails,” writes Karl Marx at the very beginning of his monumental work, ‘Capital’, “presents itself as an immense accumulation of commodities.”
In former times there was a portion of the population who worked mainly to satisfy their own needs. For them, the result of that part of their labour represented use value.
In a way, in essence, you were free at your work. You were creating something which you perceived with your own eyes, your own senses. You gathered your own fruit, potatoes, etc. You made your own shoes, furniture, etc. and in that way (but in that way only) you were free.
When little by little the system (our capitalist system) was taking shape, imposing itself on society (just as today), all that disappeared, and the need for some persons to accumulate became paramount, became the trait of the system, our system, which we call ‘democracy’.
We were not happier before, and I mention all this just to point out that our endeavours, for producting goods generally, previously was our daily rational task. Now, when we talk of a woman or a man working, we mean something else. Work has been transformed into labour power. When we go to work every morning, we are not selling ourselves (like the slaves of yesteryears). We are selling our labour power, under the law. All is quite legal, legitimate.
This, it will be said, is splitting hairs, but I have to mention it because I want to speak in this article about Marxian thought, and this is the first thing I learnt reading Marx about Capital.
Leaving aside the concept of services (i.e. people who work to supply services, not goods) WORK under capitalism doesn’t mean seeking to satisfy your needs (use value), but to make things for the market-place. In other words, and emphasising that I am speaking in general terms, a contracted labourer produces nothing but exchange-values.
The tendency under capitalism has always been to deprive the masses of their rights. And the law making the worker enter in a contract with the employer, the former does not sell himself, as when there was slavery. He sells his labour power.
Marx writes that the labourers work to produce commodities for exchange. It is important to note this, just to understand a situation in which the capitalists command absolutely. The workers must create value. Full stop. The two classes of our society become irreconciliable. In Marxian philosophy: we are all human, rational, free; but in the process of production and what follows a minority hold power absolutely and the majority, the workers, are naked, deprived of all rights. A contradiction? About a century ago, the dispossessed attempted to obtain their rights, the trade union movement. But today the trade union movement has been smashed.
Necessary labour and surplus labour.
In the prosess of production Marx calls necessary labour the time during which the labourer (in general terms) works for himself, that is for his wages, to cover his personal needs and those of his family. The remaining working hours the labourer works for the capitalist and this work produces surplus value, which the capitalist turns into money, which he accumulates. In the rhymes which mothers used to sing to their kiddies not so long ago it was said that the capitalist (the king) went into the counting house (to accumulate).The capitalist calls this his profit.
The industrial revolution.
Capitalism came in the wake of the industrial revolution, which first took place in England. Let me say a few words on the subject of said ‘revolution’. It arrived little by little, as all changes do. It happened during a great part of the eighteenth century. The country was well prepared to take this step forward in history. Both the land and the people were ready: the geography of the place, the soil and subsoil; the abundance of rivers and other waterways, the proximity (in all points) of the sea and harbours and ports along the coasts; the fact of most of England being flat, which made for easy communication, roads and canals, a temperate climate… and finally the English themselves, convinced of a certain racial superiority, ready to work and ready to accept with enthusiasm some constraints, wars abroad, dangerous navigation over all seas and oceans, discoveries and conquest; paying a price for colonisation.
I mention all these facts and beliefs because I am convinced that without them this advance in history would have taken longer; there would not have been this combination of industrial revolution and capitalism.
Also to be pointed out (it is important), that what in Latin countries became in the course of time an unwieldy Administation (bureaucracy) in England became the Law and in a way it made for ‘democracy’.
Common Law was more democratic than codification, more ingrained in the soul of the people from tribal times, and more manageable indeed. It was the Squire of the place, generally, who ‘administered’ it, and not the bureaucrats from the Crown (in principle.) But it was also easier for the rich to manipulate things. Whereas in Spain, France, etc., the spoliation of the people was more brutal, it was less hypocrital. All this counted for future history. In France there was an abrupt break in history when the people, in 1789, broke out into the streets shouting: “Les aristocrates on les aura!”). The English nobles and upper-class avoided all this.
Besides, England was the land of the Carta Magna, which put an end to the king’s absolutism. That counted a lot too. In time the aristocrats (who saw their ‘cousins’ arriving by the thousand as ‘émigrés’) learned a fundamental lesson.
Another thing: English lawyers have always been the best in the world and sycophancy being what it is, the law (the rich always praising ‘law and order’) constituted, from the beginning, an instrument at the service of the rich. Accumulation of wealth in a few hands followed. This is the subject of this article.
All laws (as Montesquieu would suggest) are made to oppress the people. It was the English who invented Company Law, and it was such a good invention then for nascent capitalism! The invention of a person that is not a physical person but still endowed with a juridical personality, as we say, was a stroke of genius by those at the service of capitalism.
We have in a company of limited liability the ideal tool for capital accumulation, without personal risk. The idea of limiting the responsability is more or less an invitation to rob.
Under capitalism, a corporation, made by the law ‘a juridical person’, may act, make money, speculate, commit fraud and other crimes, as often happens... and yet not be in general terms responsible for its actions. This was a momentous invention, by rascal English lawyers.
I don’t mean to say that there had not been companies before the eighteenth century, as well as banks, usury and crimes allowing the rich to accumulate. What I am trying to convey is that the English, who made the industrial revolution, gave occasion to a minority of the population to accumulate money. Capitalism took over in England from feudalism which in other parts of Europe still went on. Under capitalism populations that had under the previous system been working the land now flocked to factories, mines causing the country to become much wealthier than before; and this made the British less free, more dispossessed and more downtrodden than ever before. Capitalism became imperialist. British men flocked to become sailors and soldiers, devoted to building an immense empire, which would allow the rich (and only them) to accumulate more and more.
The exploiting classes had always disposed of the State power. In a social organisation where the purpose is not ‘l’intérêt général’, but to keep all power in a few hands, the division between the rich and the pauper becomes greater all the time. Or to put it in Marxian terminology. We first have in history “primitive accumulation”, which implied mainly wars and submission by Force. The rich begin to constitute a solid social class, a solidly established elite, aristocracy. Fraud, chicanery, hypocrisy, lies… become the order of the day. The Law is an indispensable weapon in the bandits’ hands on their march towards the complete exploitation of human by human. That is what I would like to study today.
Conquest, Commerce, Capitalism.
Laws were enacted, companies were constituted, things got rolling and it was these juridical “persons” (companies) that conquered the world. Finance, helped by armies, navies… and if you believe I exaggerate, read the history of colonial India, or simply have a look at Thackeray’s novels (“The Newcomes” for example). For centuries natives throughout the world were deprived of what belonged to them and of course mountains of gold (to use a meaningful expression) were transferred to the City of London and other ‘counting houses’ of Europe and America.
We shall understand nothing of the modern History of Europe (and of the big mess that this continent has become) unless we know all about this. Are we surprised at the fact that Europe is still wealthy and, at the same time a continent with millions of redundant workers, and still thousands of workers from previously colonial or otherwise exploited nations knocking at our frontiers, searching for work?
Well there is a reason for all that. Look at the London banks, finance, speculation and finance-inspired wars. “The freedom of the seas” the British used to call (including Adam Smith) the fact that the Royal Navy began to take illegitimate action around the world in order to deprive other people of their coast, their land and their natural rights.
Mountains of gold were transferred to the London banks. It has always been the same, accumulation. Read the classical novels and see besides how miserably the people, the poorest of them, the masses, lived in the British Isles. And all the time those local sufferers (‘les misérables’) were helping their ‘betters’ to conquer the world, dying in wars, drowning in the oceans, or dying of poverty in the London slums: dying at home and dying likewise thousands of miles away for the Glory of the Crown.
A nation may humble other nations via colonialism; but its own people don’t fare better. That is a lesson to learn. We are all in the same boat.
General Motors Corporation.
Once we have seen what is the importancce of the Law, and particularly Company Law, in capitalism and exploitation, the next step is to show just a little bit of what has signified, these last thirty or forty years, the conquest of the world by the multinationals, transnational corporations moving around as if the universe belonged to them. GM is just case. There are literally thousands of these cases, brigands dressed in sheep clothes.
The story of General Motors is unbelievable. This was for many years the Number One Corporation in the United States and in the World. At least that was what we read, with great excitement, in my Manhattan joint, when we received regularly ‘Fortune Magazine’. Year after year GM (which was our client in some matters of patents) was every year at the pinnacle of its glory.
Then, one morning, two or so years ago, I read that it had become bankrupt or something to the like effect. It was as if one had heard that God, Our Father, had descended upon the Raging Inferno to take over command from Lucifer.
“Have you heard?” people cried, looking at one another in surprise, “General Motors! a cadaver! And what is going to happen next? Oh Jesus! What is to be done?”
Mountains and mountains of dollars, thousands and thousands of plants in America and around the world, hundreds and hundreds of trademarks and patents and other recent innovations… What a huge loss! Still worse, millions and millions of workers losing their jobs overnight everywhere! Would they call it Collateral Damage like in the Vietnam war (General Westmoreland)? To think that people in every corner of the world were crying in despair (if the reader cares about mass unemployment).
And on the third day, it resurrected.
I have not studied the file. There is so much to consider here. But, let us, all the same, look at some of the things that happened afterwards, in Detroit, Flint, America and in the world, beginning with Michael Moore’s famous film. And then the famous miracle, which for me remains a mystery. I thought of when I was a child and regularly went to Sunday School.
There was once a prophet in Palestine called Jesus who one day was told by his disciples to go to a property where a corpse was lying in an open coffin. People were lamenting, and the prophet was asked to fix things for them. And this Prophet Jesus saw on entering the property that the corpse was in a bad state of decompositon; but he was a good witch-doctor and he said: “Lazarus, stand up and walk!”
Well, dear Christian reader, exactly the same has happened now, I believe, twenty-one centuries later in America, a land of miracles. A modern Jesus or some State Agency of value, you see, came with trillions of dollars and the corpse called General Motors stood up and promenading it is among the trade-centers of the free world again. This modern prophet, I learned, is the Federal Reserve Treasury, if I got my story right.
Now let me cite just one more example of ‘gone and dead’ macrocorporation, a French one. For many decades during ‘les trente glorieuses’, as the French call the period of prosperity that followed the end of the second world war, there was in France a transnational corporation whose capital was expressed in really astronomical figures. It was said that it possesed, ‘inter alia’ nearly all the territory of then called French Central and Western Africa: soil and subsoil, river, transport, buildings and probably the native people too, ‘les indigènes’ as they were called in French. It possessed lots of nuclear plants in France and abroad, uranium mines, etc., etc. I am speaking from memory, but know personally that the corporation became in the eighties interested in diamonds too: Liberia, Sierra Leone. When I say ‘personally’ I mean that I was consulted by a company on the subject (a big American firm was interested in Liberia mines)
when I was no longer in the law, it must have been in the late eighties. I heard one day that the said legal entity was called Areva, but I never got to know if it was simply a story of a change of name, or if there had been a transfer of proprietorship; say, for instance, that a group of financiers had purchased ‘la société Cogéma’.
And it came to happen that this immense Leviathan went down. And, as in the case of GM, the fall caused millions of people to wonder. “What! from the sublime to the ridiculous! But here law and administration follow the napoleonic traditions of paternalism and bureaucracy. In a word, it was very difficult to understand much, save that Cogéma-Areva had ceased to exist.
The French Republic, the State rushed to spend its billions to patch up some failure or some crime. In the French language you say “l’État a payé les pots cassés’. Billions and billions of euros were spent in the operation. Nobody knew what to do with the thousands of workers who lost their jobs or with anything connected “avec la société Areva”. The dead corporation was bought by the National Electricity Company. One euro, it was said, it paid for the cadaver. And it was believed that said national company would proceed to bury it. At least that was what I thought.
Until the other morning, having breakfast at home, the news came on the air (“France Inter”) that some company called Areva was still floating down therein (in the doldrums) shrouded in some mysterious effluvia.
In the meantime, humanity suffers and nobody is putting a remedy to this suffering. On the contrary, people are dying all over the world by the million, lacking the most simple means of subsistence, and, as Rajoy said in Spain, “no hay dinero”, save for the mountebanks.
I have read of a report by Oxfam, mentioning that a few billionaires (or trillionnaires, who knows) have accumulated more private property than one half of the inhabitants of the globe.
And in “Time Magazine” (February 1, 2016) I read that people are studying the so-called ‘Solow paradox’ to try to solve the problems of our time, which paradox is formulated as follows: “You can see the computer age everywhere but in the productivity statistics.”
It was formulated thirty years ago by a certain Robert Solow. And now, in our world and day, in a particular point in Switzerland, every vulgar economist, it would appear, is studying Solow. “The Solow paradox!” we hear a cry.
Let us go on analysing the article in the magazine and consider, please consider, whether Karl Marx (in the middle of the nineteenth century) was not a genius, when you read what he said on the subject
The writer of this article points out that “at this year’s World Economic Forum in Davos, Switzerland, the annual con-fab of top politicians, chief executives, bankers and economists” have been studying the Solow Paradox: the truth is that everybody recognises that in today’s capitalist world everything is topsy-turvy, to say the least.
But is this the way to solve our problem, to talk of a paradox to be solved, like in a game? I remember that in 2008 the then French President Sarkozy, in the flurry of a discovery or under tremendous fear, because of the crisis, said to members of other free-world governments that it was necessary to change capitalism. “Il faut recomposer le capitalisme”. He and his pals did nothing then; but the present esoterism is worse.
I would have recommended the mentioned top politicians, chief executives, bankers, etc. to leave the sumpuous gatherings at Davos, London, Paris, etc., and spend a few hours in some library reading “Capital”, by Marx.
Marx wrote “Capital” in London. When he died, in 1883, only the first volume had been published. It was his friend, Engels, who published Volumes II and III. He worked for years tirelessly, numbering pages, deciphering illegible passages, editing everything, consulting books for quotations... and he became blind in the process.
I have just reread, in the mentioned article by Rana Foroohar, that among the discussions at Davos (World Economic Forum, Jan, 2016) the fourth industrial revolution was mentioned. If I have understood the article, it is expected (in view of such ‘revolution’) that arrtifial intelligence will do more and more of what people used to do, and “this encompasses a lot of the most exciting and promising technological innovations of our day in fields including artificial inteligence, machine learning, robotics…” Robots!!
She is worried, however, because everywhere under capitalism economic malaise is being generated and generalised, and extremely worried because she knows that under the capitalism of our time growth is done for. It has gone down a cliff; and still more worried because she knows that unemployment has gone over a still steeper cliff. Well, if you want to now why, you only need to peruse again Chapter XIII, Part III (Capital, volume III.)
The law of the diminishing rate of profit.
When Marx began writing his monumental work, “Capital”, he had spent hundreds of hours reading relevant volumes and documents on the subject, in the British Museum library. He had studied ‘inter alia’ the question of the effects of labour on the production of commodities, i.e. on the workers! As an anecdote I’ll say that in a recent edition of “The Wealth of Nations”, the editor writes: “Not until Marx did someone really challenge its dictates – Smith basically won the argument on most points.” (Amazon, ‘printed in the USA’.)
To thinkers of prior enlightened eras that was still the way. No real economic study, but repeating hollow arguments.
However “Time” says that’s one reason everyone is watching General Electrics’ push into the industrial Internet, or the Internet of Things.” (Emphasis added.)
The one hundred and twenty-four year-old firm (as old as Edison and almost as old as Marx) –and it is the only one in a list of old important American corporations today extant – Great Expectations -.
And that is because it has transformed itself into a bank, as the same Rana Foroohar informed us in a previous ‘Time’ article.
The tendency of the rate of profit to fall.
The worker works, first and foremost, to satisfy his or her own needs (and their children’s). This, Marx calls necessary labour. But to carry out production (the process of production) the worker has sold his capacity to another, the labour process embodying labour and capital. So that the workers also work not only to satisfy their needs, but in order to produce surplus value for their employers.
Labour and Capital, I have said, Wages and Profit.
That’s how the capitalists envisage production. Marx writes that this employment, this labour which uses the money designed to produce commodities, is split fifty-fifty, say, capital and labour. The working day lasting ten hours, five represent the number of hours a labourer works for himself (herself.)
It is not difficult to understand that the labourer works because he or she has to eat (satisfy his or her needs) and in consideration of the wages received. According to philosopher of classic capitalism mentioned, these wages must be sufficient for the worker’s necessaries: food for himself, his wife and the ‘prole’, so that in future the capitalist may utilise more workers and the army more soldiers and the navy sailors.
Variable and constant capital.
Marx uses the terms ‘variable capital’ and ‘constant capital’ as we have intimated, to express the two forces or values, labour and capital, that intervene in the process of production. We have said that the purpose of said process is gain. Naturally. This gain is called surplus value.
The capitalist calls this his profit, and I know that any vulgar economist (term employed by Marx, by the way, I haven’t invented it) if these pages are at all read, will come out shouting, “Eh, you, hold it! Hold it man! - Profit? You must be mad, for you know that the entrepreneur also has to have his salary, and besides, he will or may suffer losses. And he won’t stop here. Besides, there is the interest to pay to the bank. There is the transport of merchandise, that too costs the entrepreneur a pretty penny. Haven’t you heard the scientific word, circulation? And what about preparation and packaging, plastics, cardboard? Half of my benefits go on advertising and when I do special promotions, I lose so much… and lobbying, insurance policies... and when my money is not for the time being used! I could have put it in the hands of speculators, increasing my capital. Managerial costs, financiers’ salaries… and the working lunches in the Ritz, eh! Is that nothing? Donation schemes every so often. All that costs money.
In a word, capitalists live in a different world, difficult to understand. Therefore the reader will allow me to sweep all this vulgar economy under the carpet… and go on.
“The gradual growh of constant capital in relation with the variable capital must necessarily lead to a gradual fall of the general rate of profit, so long as the rate of surplus-value, or the intensity of exploitation of labour by capital remain the same.”
Let me repeat, Marx calls variable capital the money which the capitalist employs to pay his workers. It is called variable because labour is the only factor in the process of production that creates value, as even Adam Smith and David Ricardo said. All the other expenses by the capitalist in said process merely transmit their own value. That is to say labour varies the amount of value, its own value reappears in the resulting product multiplied . That is why it is variable capital. A human works in the human way (intelligence), only a human creates something.
On the other hand, Marx calls constant capital all the rest. This money employed by the capitalist (we repeat), which does have a value, only passes this value on to the product. It is capital, money; but it does not (itself) create value. The value remains constant; thereby the term used by Marx.
Fixed capital in the first place, which means the things, factors, components that remain more or less intact during the process of production, i,e. land, factories or plants, machinery, other buildings, etc. The raw materials are in another category, they are transformed, going into the body of the resulting commodities, the product. And there is another category of capital used, auxiliary materials, things that are needed but do not appear to intervene here. They assist, however, help.
Whatever happens, even when millions of workers are sent into unemployment, the intensity of exploitation always increases, even though variable capital decreases.
Marx also explains that if the capitalist gets rid of workers (variable capital decreasing, as we have said) and the object of the production is realised (more constant capital being employed), the productivity of extant labour of course must have improved; but this will produce more unemployment, and the reduction of the working classes living-conditions will cause a reduction of demand. The workers spend less, there is a greater amount of the product which does not even reach the market place. This is clear as daylight. This is one of the main reasons why there is no growth, or to say the same thing differently why under our capitalist economy there are continuous periods of recession; overproduction so-called, a halt of production, unemployment and misery…
I may be entering into a different subject, but (as the reader knows) under capitalism “cycles” exist, periodical unemployment. They have been recurring since the very start of the industrial revolution, and have caused, likewise periodically, the downfall of the working classes.
Distribution versus accumulation.
Marx says “that owing to the distinctive methods of production developing in the capitalist system the same number of labourers, i.e., the same quantity of labour-power set in motion by a variable capital of a given value, operate, work up and productively consume in the same time span an ever-increasing quantity of means-of-labour, machinery and fixed capital of all sorts, raw and auxiliary materials.” He also says that the capitalist consequently must invest “a constant capital of an ever-increasing value.”
The communists (Lenin) have always said that capitalism will be ruined by its own contradictions. This is evidently what is happening today. The system (first and foremost) needs to be changed. If it had occurred to the wise men and women of Davos to seriously consider the question of DISTRIBUTION, this year’s World Economic Forum would have served for something tangible.
What is called constant capital by Marx, which he splits (for clarification) into several categories of capital - i.e., land, factories, machinery and so on, called “fixed capital”, and then raw materials and auxiliary material -is accompanied by another category of capital intervening in the process of production and whose value passes into the product likewise.
It is the common knowledge of humanity, the ingenious effort of men and women since “homo-sapiens” exists. All this knowledge is utilised one way or another in whatever process of production that humans undertake from music and literature to computers. Marx calls this value ‘congealed labour’ which, in the process of production, the capitalist utilises shamelessly without paying a penny for it.
It contributes to the rising productivity of labour. ‘An ever-increasing quantity of raw and auxiliary materials are converted into products thanks to the growing application by the workers of machinery and fixed capital in general.” Application by the workers, men and women is the thing an no Artificial Intelligence; no Angel from Heaven will ever find those robots that the capitalists are seeking and Rana Fotoohar fear will end with the middle-income workers. Only humans create value.
“And this mode of production produces a progressive relative decrease of the variable capital as compared to the constant capital.” I am quoting, and if I am allowed to interpret, I’ll say that: a) employment goes down and down with capitalism, without the rich diminishing their wealth, even if the number of the chosen elite goes down; b) this is because labour is being made redundant, and the poor only receive the crumbs that fall from the tables of the rich; and c) materialised labour used in the process of producion augments, and whatever comes out of said process, nearly all goes (proportionally to mankind’s needs) into the pockets of the rich. Becoming richer and richer in a world without growth. Where is the paradox here?
The greedy capitalist, caring only about getting his profit, pretends not to understand, and he seems not to know he is condemned, has sold his soul to the Devil, and nothing will make him see real life. The final catstrophe is approaching. Everywhere there are wars and suffering, but the capitalist does not seem to have any feeling.
And yet, we do know we are not reaping the rewards of technology which is changing every aspect of our lives (we are told). It has to do somewhat with lack of growth. We cannot measure the two working in tandem, technology and growth. There is a lag and confidence is lacking.
“That is the reason why everyone is watching General Electric’s push into the Industrial Internet, or the Internet of Things,” we have heard. “Over the past several years the one hundred and twenty-four year old firm has transformed itself by reclaiming its roots as an industrial innovator…”
What does this signify?