Rate of profit

In my previous discussions with Nick Rogers I put forward an example where a capitalist owns a firm with a production function such as: (1) C 1,000 + V 1,000 + S 1,000 = E 3,000 (C = constant capital, V = variable capital, S = surplus value, and E = the exchange value of the end product).

I argued that, using Marx’s method, if the value of C (let’s say it is 100 kilos of cotton) doubles, because the labour-time required for its production rises, then the production function becomes: (2) C 2,000 + V 1,000 + S 1,000 = E 4,000.

Nick argued various versions in which this was not the case, but that the value of C was determined not by its value, but by what the capitalist had paid for it. For example, in the above case if all capitalists had only paid £1,000 for the cotton, then it would be this price that would be transferred to the final product, not its current value.

In his interview with Andrew Kliman, Andrew, on this substantive point, agreed with me, rather than Nick, that it is the £2,000 current value which is transferred (‘Crisis, theory and politics’, September 27). However, the rest of Andrew’s argument simply does not stand up. Let me give just a few of the many reasons why.

Andrew agreed that the production function is as I have set out in (2) above, but he also wants to argue that, when it comes to calculating the rate of profit, it is the £1,000 in money the capitalist laid out which has to be used, not the £2,000 current value of the cotton. So he agrees with Nick that the rate of profit would be 1,000 surplus value/1,000 constant capital = 100%, rather than the 1,000/2,000 = 50% that Marx’s value analysis derives (in actual fact, the rate of profit including V is: S/C+V = 1,000/2,000 + 1,000 = 33.3%.)

Yes, I measure the rate of profit using the historical cost of the fixed capital because a rate of profit is a rate of return on investment and the money that’s been invested in the fixed capital is its original, or historical, cost. It is inconsistent to step outside a value analysis and argue that, although the value created in and transferred to the product is £4,000, the cost to the capitalist is only £1,000 V plus £1,000 C. Marx states clearly that surplus value is the difference between the value of the product and C+V.

This combining together, eclectically, of values and money prices within the same calculation is rather like counting up all the apple trees in an orchard, but then working out its value on the basis of the price of oranges!

Claiming that the capitalist has, in fact, made £1,000 profit, and £1,000 capital gain, leaves you needing to explain the source of the capital gain. It is clear that it has not come from the labour employed, and so its only alternative source is the constant capital itself, in which case you have abandoned Marx’s labour theory of value in favour of a factor-contributions theory of value. Andrew correctly states that, prior to production, the revaluation of the cotton from 1,000 to 2,000 represents a capital gain of 1,000 for this capitalist. But capital gains are not increases in surplus value. They are not an expansion of capital in general. On the contrary, capital gains can only be realised if surplus value is created elsewhere.

Moreover, it is no more acceptable to simply state that a capital gain has arisen without explaining its source than it is to say that other forms of profit have arisen without identifying their source. Capital gains only redistribute existing surplus value via the realm of distribution. Assume there are two people with houses, or some other such asset. Each house is valued at £100,000. House A is revalued to £150,000. Its owner could realise a £50,000 capital gain if they could sell. But the owner of house B only has their house to offer in exchange, so the capital gain cannot be realised - it is purely theoretical. The owner of B cannot make up the difference by working, because selling their labour-power at its value means all their income goes on buying wage goods. The only way that B could buy A’s house at £150,000 is if they could produce and realise a surplus value of £50,000. Having done so, they exchange their house plus the £50,000 of surplus value for A’s house. The surplus value was created in the realm of production by B, and was redistributed to A, in the sphere of distribution/exchange.

Capital can only truly expand when it is able to employ more abstract labour-time because it is this which creates surplus value. In fact, it is for this reason that capital can most easily expand when constant capital is devalued rather than when it is revalued.

As Marx points out, the increase in value of the cotton arises not in this sphere of production, but in the sphere of the cotton manufacturer. The capitalist can only realise this capital gain if he liquidates his capital. Suppose he does this. He does not employ the £1,000 of variable capital, and instead sells his cotton stock to realise his £1,000 capital gain. Capitalist B pays him £2,000 for the cotton, and lays out £1,000 for variable capital. What is the production function his firm now faces?

It is precisely that set out in (2). Moreover, even on an historic-cost basis, the situation for capitalist B is exactly the same as the current-reproduction-cost basis, because his historic cost is the current value of the cotton. Viewed objectively from the standpoint of capital then, rather than the subjective standpoint of the individual capitalist, the situation is clear - it is the value relation that gives the true picture, not the historic cost.

If we continue to look at this situation from the standpoint of capital in general, things do not improve for Andrew’s argument. Capitalist A has undoubtedly realised a capital gain of £1,000. But capital exists simultaneously in its various forms - money capital, productive capital, commodity capital. The total national capital is contained in the combination of these forms. Now capitalist A had his capital in the form of productive capital. To realise the capital gain on it, he had to sell it to capitalist B, who had his capital in the money form. But the same cause of the revaluation of the cotton increasing its exchange value against money is the same cause that devalues B’s money capital, reducing its exchange value against cotton. In other words, capitalist A has made a capital gain of £1,000, but capitalist B has made a capital loss (in real terms) of £1,000, cancelling it out from the standpoint of capital in general.

But if capitalist A continues production - which is the expectation of Marxist analysis - then it is clear that, once it has entered the final product, the increased exchange value of the cotton no longer represents a capital gain. Its exchange value is £2,000, and this exchange value passes into the final product. The final product has an exchange value of £4,000, but, if the capitalist is not to contract rather than expand his production, then all of this £4,000 is required, so that the capital gain disappears. He started the production cycle with 100 kilos of cotton, and 100 workers and, leaving aside the surplus value, he would be able to commence the next cycle again with only 100 kilos of cotton and 100 workers.

But is the real cost to the capitalist just £1,000 C? On an opportunity-cost basis, clearly the answer is no. On this, as in other aspects, the temporal single-system interpretation (TSSI) method for calculating the rate of profit provides spurious results. Looking just at the return on the constant capital, for ease of calculation, demonstrates this. Suppose that capitalist A can make a surplus value of £100. As a rate of profit on the £2,000 value of their constant capital this is a 5% return. But on an historic-cost basis it is a 10% return. Suppose the capitalist could invest their capital elsewhere and obtain a 7.5% return. According to historic cost, the capitalist should leave his capital invested where it is because 10% is more than 7.5%. However, on a value basis, he should clearly take his actual current £2,000 of value in his constant capital, and invest it at 7.5%, thereby obtaining a return of £150 rather than £100. In other words, the historic-cost basis would result in a misallocation of capital.

Finally, if the concern of the TSSI is to view the situation in terms of the actual money laid out by actual capitalists, and the returns they achieve on it, then why bother with examining productive and value relations at all? Why not apply this logic consistently? A few years ago, I had a debate with a supporter of the Austrian school on precisely this point. He argued that what counted as the rate of profit for capitalists was indeed the total return (yield plus capital gain/loss) they made on the money they laid out. He pointed out, however, that the majority of money is not laid out by capitalists in buying constant and variable capital, but on buying shares, and bonds and other financial assets. That is undeniably true, and nor is the majority of this money even spent in buying productive capital indirectly. Most shares and bonds bought by capitalists are not new issues, but are bought in the secondary markets. If the real concern is what return individual capitalists make on their money, then it’s on this basis that the calculation should be undertaken.

Supporters of the TSSI, if they were consistent, would found their analysis on that basis. It is consistent with their philosophy and stated objective of analysing things in terms of the real world - though, as Marx points out, that real world is merely a superficial reflection of the underlying reality.

Arthur Bough

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One-way street?

Heather Downs’ determination to portray all opposition to her views on rape as “reactionary” or “patriarchal” are as befuddled as they are wrong (Letters, September 27).

She is also determined to avoid trickier questions, such as the use of allegations of rape in the context of societies based on racial superiority, segregation and imperialism. I gave the instance of the Scottsboro boys in my previous letter (September 20). But there were many other such instances where a black man or youth was lynched because he looked at a white woman the wrong way or was found in a sexual embrace and the woman vindicated her ‘honour’ by proclaiming rape. Heather seems to suffer from tunnel vision in dismissing this. Some acknowledgment that it isn’t all a one-way street would be honest.

I mentioned the radical feminist support for Israel and Zionism that was current in the 1980s. But I could have pointed to a long tradition of feminist support for and identification with imperialism and indeed fascism. Nora Elam, the suffragettes’ general secretary, graduated to become the British Union of Fascists women’s organiser for Sussex and Hampshire in 1935. No doubt she believed in women’s equality: it was just that Jewish women weren’t equal. Likewise white women in the dominions fought for equality, but not alongside indigenous women.

I’m sorry that Heather doesn’t recognise that feminists like Andrea Dworkin, in supporting imperialism, supported the oppression of the most oppressed women. Instead she caricatures what I said as suggesting that “feminism is a branch of imperialism”. But Women of Colour formed the paper Outrage in response to the Zionism of Spare Rib magazine.

I have never said that Assange cannot rape someone because of his looks or alleged anti-imperialism. What I do raise is the context in which these allegations are made - the convening of a secret grand jury in the United States and the desire to extradite him. Heather Downs obviously considers these irrelevant and if the cry of ‘rape’ is made then someone must be extradited regardless. I disagree.

Feminists portray rape as one seamless horror without recognising that there are shades of grey. ‘Yes means yes, and no means no’ is a good slogan, but it can often belie reality. A man may well believe he has the woman’s consent when he hasn’t, since a situation of intimate sexual encounter might be seen as one of implied consent. The woman herself may be uncertain as to whether she wants sexual intercourse and that is taken as a signal by her bedmate. To raise these questions is to risk bringing howls of outrage on one’s head, but to fail to do so is to lose touch with the experience of ordinary people and how they develop sexually.

By way of contrast, crimes of violence are subdivided legally into several categories and it might well be better if rape was not separated off into its own separate category, but was also seen as an offence of violence. It is not at all true that “only in rape is the victim’s behaviour under closer examination than the perpetrator’s”. The behaviour of the victim of any form of violence is examined - for example, to see if their injury was sustained in self-defence. Was this not the argument put forward by women who attacked and killed their violent partners: that it was a form of self-defence? Or would Heather rather have seen them serving a life sentence instead?

Heather argues: “Continuing a sexual or social relationship with a man [following an alleged rape] is not evidence of his innocence or guilt.” It depends on the circumstances. Where there is an economic tie of dependence or children, this is undoubtedly true, but the Swedish women in this case had no such ties. What possible reason could they have for wishing to persist in a relationship with someone who has raped them, or for actually boasting of the encounter in text messages? Clearly they took it a lot less seriously than either the Swedish state or Heather.

I am aware of the judgement of the witch-finding judge, Sir Matthew Hale. I am also aware that the common law was changed by that otherwise reactionary judge, Lord Justice Lane (he who declared that, the longer he had heard the appeal, the more convinced he was of the guilt of the Birmingham Six).

I can also speak from personal experience. At university I had a one-night stand with a feminist who threatened to get up and leave if I went for a drink with my comrades. I then found myself accused in public, some months later, of rape. At the time I had campaigned against her as a local area National Union of Students official, because she was a political opportunist in the Socialist Students Alliance. It was clear to those present, men and women, that she had made the accusation out of anger at my role in having organised her political defeat, but the fact that it was made by a self-declared feminist made me wonder about how some feminists, who are not mentally ill, will use such an allegation in a totally unprincipled fashion. But maybe I was just the 1%?

Feminist demands are, like their gay equivalents, demands for the democratisation of capitalism. They come from the least oppressed women, who talk glass ceilings in investment banks, not the low wages of cleaners. We saw this in Brighton, when the organisers of Gay Pride openly supported the police attack on and kettling of the Queers Against the Cuts contingent.

Tony Greenstein

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Doubled up

The best example of ‘doublespeak’ seen in recent years has been that accompanying the outcry over a runaway couple - a student and her teacher. ‘Doublespeak’ was a means of oral deceit, whereby the state redrafted words to mean something entirely different from their true meaning - even their direct opposite.

So we have ‘a child’, who is a 15-year-old young women and not a child at all, ‘abducted’, although she went quite of her own free will, by the man she volunteered to accompany, pushed into a corner by pressure of their love and a restrictive, repressive British state, fled to France where their relationship, had they been French, wouldn’t have been an offence and they wouldn’t have to flee. She can’t consent to go with him or have sex with him because at 15 the state says you can’t, and you haven’t even if you actually have. At 15 you are a child not because you feel or act like a child, not because you haven’t reached puberty or sexual maturity, but because we deem you to be so. You can’t consent because we deem you not to have the mental capacity to do so.

The 10pm BBC news headline on Saturday September 29 headed up the arrest of the teacher and return of the ‘child’ to Britain. Second item - seven British climbers killed in a plane crash! That the deaths of seven young people in Asia, plus their Asian fellow travellers, would take second place to a puerile exploration of an absolutely private family relationship problem should at first gasp be remarkable. It had never occurred to me that the News of the World editorial team had been moved over to run the BBC news, but there you go.

It got worse the next morning, following the ‘child’ being returned, with the pronouncements of all sorts of self-declared experts and well paid reps of the child protection industry. We had the announcement that a 14-year-old girl had been charged with murder. Now this girl clearly wasn’t a child - she was deemed able to voluntarily and consciously have enough maturity, intelligence and self-choice to decide to murder someone. Odd, isn’t it? You can’t consent at 15 to go away with your boyfriend, but you can decide to murder someone at 14? No great child protection experts here saying how she couldn’t possibly make such a decision because she was just a child, and why the very notion was absurd.

Then the USA, which set all this bollocks loose in the first place, goes one better. Announcing that they have arrested another 14-year-old girl for ‘distributing child pornography’ of herself on MySpace! So she will appear on the child abuse register as a child molester (of herself) for life, whatever happens in court, and now is facing the charge of ‘child sex abuse’ (against herself) with a potential sentence of 22 years. Anyone see any ‘child abduction’ headlines on this one? No 10 o’clock national news on ‘child’ abuse? Nope, me neither.

David Douglass
South Shields

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No no-platform

The motion to ‘no-platform’ Tony Benn and George Galloway was put to the National Union of Students just a short while after ‘national culturalists’ were chased from Liverpool University’s freshers’ fair (September 23).

The far-right group, led by Jack Buckby with assistance from Craig Crooke (British Freedom Party), had been refused a stall, but planned to leaflet anyway. They were opposed by protestors, who chanted “Nazi scum, off our streets” and some protestors grabbed their leaflets and tore them up. One student said: “It’s a bit over the top … Obviously I don’t agree with what they’re [the national culturists] saying, but I don’t agree with what they’re [the anti-fascists] doing either”.

Countering ideas that are wrong, dangerous and offensive, as both rape apologism and the far right’s ideas are, cannot be achieved by censorship. It doesn’t make a difference whether the censorship is by the state or by militant working class direct action. Freedom of speech is a principle, not a tactic, but at the very least comrades and students should be able to admit no-platform hasn’t and doesn’t work at suppressing undesirable ideas.

Jon D White
Socialist Party of Great Britain

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Choice of words

At the United Nations last week Binyamin Netanyahu talked of “Iran’s nuclear plans to build a bomb” and, as usual, both the mainstream and alternative media ignored a fundamental fact: the unanimous view of the US intelligence agencies (as of February this year) that Iran not only doesn’t have a nuclear weapons production programme, but it hasn’t even decided to have one. Moreover, to go back one more step, it hasn’t even decided to make enough highly enriched uranium for a single nuclear warhead.

These facts should be central to the interventions of Hands Off the People of Iran and others, because it isn’t just the warmongers who have raced ahead of events. As an example of the misunderstanding on the left, here was John McDonnell in a February 20 parliamentary debate partly quoted in the Weekly Worker (March 1): “The notion of Iran being close to having nuclear weapons is open to doubt, as there is no solid evidence, but, as the honourable member for Basildon and Billericay said, the issue is really about nuclear capability” (Hansard, column 692).

No, not weapons, not capability, because the Iranian state managers haven’t even decided to make enough highly enriched uranium for one warhead, let alone started to discuss whether they want to devise a nuclear weapons production programme.

Why do I say this? Three weeks before this Commons debate James Clapper, US director of national intelligence (DNI), made public what the federal ‘intelligence community’ thought of the nuclear weapons talk: it has no basis in reality. Clapper is the head of the US’s 16 federal spy agencies and the principal advisor to the president on intelligence matters concerning ‘national security’. On January 31, Clapper testified to the Senate select committee on intelligence and had written into the record his ‘worldwide threat assessment of the US intelligence community’ (www.dni.gov/files/documents/Newsroom/Testimonies/20120131_testimony_ata.pdf). Iran was so marginal to the perceived threats that it appeared only at the bottom of page 5. He used the following evasive language to describe my first point: “We assess Iran is keeping open the option to develop nuclear weapons, in part by developing various nuclear capabilities that better position it to produce such weapons, should it choose to do so. We do not know, however, if Iran will eventually decide to produce nuclear weapons.”

Clapper adds in the next paragraph but one: “Iran’s technical advancement, particularly in uranium enrichment, strengthens our assessment that Iran has the scientific, technical and industrial capacity to eventually produce nuclear weapons, making the central issue its political will to do so” (p6). His next sentence makes my second point: “These advancements contribute to our judgment that Iran is technically capable of producing enough highly enriched uranium for a nuclear weapon, if it so chooses”.

Clapper’s assessment was not challenged, either by commentators or, significantly, by an off-the-record comment of even a minority of analysts from any of the 16 agencies he was speaking for. His assessment was simply ignored - at the time, and since. Now the world is transfixed by Netanyahu’s poster, seemingly inspired by the turban-bomb depiction by a Danish cartoonist.

Has Clapper revised or updated this assessment? Does the DNI still believe that Iran has not decided to enrich enough uranium for even one nuclear warhead? Perhaps a more observant Weekly Worker reader can tell us.

Part of the problem here is the making of general statements, sometimes deliberately chosen, sometimes plain sloppy. So instead of particulars - ‘nuclear weapons programme’, ‘nuclear weapons production programme’, ‘enriched uranium programme’, ‘highly enriched uranium programme’, ‘nuclear power programme’ or ‘nuclear power generation programme’ - we get the blanket ‘nuclear programme’, ‘nuclear plans’, or ‘nuclear capability/capacity’. Our choice of words is important.

Dave Gannet

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Soviet treasure

Two years ago I requested and received the index of Pod Znamenem Marksizma (‘Under the banner of Marxism’), the leading monthly philosophical and socio-economic journal of the Soviet Union. At http://libcom.org/library/under-banner-marxism there is an online translation of the titles from 1922 to 1929 and a few articles - eg, on abstract labour, the quantity theory of money, credit romanticism, international exchange and the law of value. I invite Marxists of every stripe to look into the debates held in PZM, to make more of this freely available resource and to discuss which articles should be translated from it.

PZM published on a wide range of topics: eg, ‘Physics and reality’ (Einstein, 1937), ‘Towards the question about the tasks of Soviet palaeontology’ (1937). I expect everyone can find articles worth saving from oblivion, but the theoretical legacy of Soviet Marxism must also be confronted in depth. While the names of the authors are mostly unfamiliar, from a purely academic standpoint many titles provoke interest: Hegel’s ‘Philosophy of right’ (1935), ‘Schelling and his philosophy of transcendental idealism’ (1938), ‘John Locke and his essay concerning human understanding’ (1940), ‘Critique of classical German philosophy in the works of Herzen’ (1943).

There are other intriguing titles: eg, ‘Dialectics of revolution and sophistry of O Bauer’ (1930), ‘Theory of social-fascism on the transition period’ (1931), ‘Theoretical foundation of “Hooverism” and the bankruptcy of bourgeois economic thought (Theory of cycles and crises in the work of Foster and Catchings)’ (1931), ‘Social-fascist theory of crises of Hilferding’ (1931).

In particular, the CPGB could take up the task of confronting such titles. PZM grappled with the history of the socialist movement and in its own way attempted to recover the history of Marxism and of socialism in general. Despite practical difficulties in accessing PZM, it is wholly intolerable that up until now communists have not bothered to look into this journal.

Noa Rodman

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Grassed up

Rajah Bagal makes some comments about the National Shop Stewards Network and Grassroots Left (Letters, September 27).

He is completely misinformed about the nature, origin and policies of Grassroots Left, which is a genuine rank-and-file group that emerged in Unite in a battle against the bureaucratic apparatus. This led to a contest between Grassroots Left and the bureaucracy in the election for general secretary. Jerry Hicks stood on a principled campaign: (1) election of all full-time officials; (2) right to recall those officials if they fail to carry out the membership’s wishes; and (3) a worker’s wage for all elected officials. Grassroots Left is not controlled by anyone; it is building an organisation that is independent of capitalist interests - and that means the bureaucracy, whether left or right (the NSSN, unfortunately, is very close to the left bureaucracy of Crow, Serwotka, Wrack and McCluskey).

We in Grassroots Left are not “ex-Marxists/Stalinists who see the British bourgeoisie as their mates in the struggle against Brussels”. Rajah Bagal better get his facts right before he makes false statements. Bagal makes some correct criticisms of the bureaucracy before then throwing his hands up by saying there is nothing to be done and sticking his head in the sand. That is not the policy to defeat capitalism or wage a ruthless struggle against this bureaucracy.

The task, as I have said in this paper before, is to build a genuine rank-and-file movement in the trade unions that is independent of the bureaucracy, and that is Grassroots Left. We will be organising a series of regional conferences, to be held in London, Liverpool, Manchester and Birmingham. I would call on all serious workers to come to our first one in London on November 4 from 12-4pm at the Calthorpe Arms, Grays Inn Road, London NW1.

Laurence Humphries

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