David Horowitz’s challenge
offers a welcome occasion to test the validity of the labor
theory of value as an instrument for analyzing and explaining
the functioning of contemporary monopoly capitalism. At the same
time, it enables us to deepen both our appreciation and our
criticism of Baran and Sweezy’s book.
The concept of “surplus” is
today widely used by anthropologists and students of primitive
societies in its most elementary sense: that part of social
production which exceeds the immediate consumption needs of
society. Since primitive society, in which “surplus” first
appears, is a classless society, consumption by producers (i.e.
restoration of the producer’s labor power and reproduction of
the given number of producers), and social consumption are
largely equivalent. In that sense, “economic surplus” covers
the same socio-economic concept as the Marxist concept of
“surplus product,” that part of social product over and
above “necessary product.”
In all but the most backward of
primitive societies, “necessary product” has, however, still
another function to fulfill in order to reproduce society’s
productive capacities. It also has to guarantee equivalent
substitution of all means of production used up in the process
of social production. The more a society develops, the more
important this second function becomes.
In a capitalist society, the
necessary product includes constant plus variable capital (c+v),
that is, reproduction of dead and living labor necessary to
restart production at the same level as during the previous
cycle. This ensures what Marx calls “simple reproduction.”
The surplus product represents the difference between the value
of the social product, c+v+s, and the
value of the necessary product. It is equal to s,
surplus value. In fact, surplus value is simply the specific
form under which surplus product is appropriated in the
capitalist economy.
Baran and Sweezy do not dispute
this definition. They actually repeat it on pp.8-10 of their
book. They add that, if they prefer the term “surplus” to
the term “surplus value,” it is only because “most people
familiar with Marxian economic theory” – contrary to Marx
himself – identify surplus value “as equal to the sum of
profits plus interest plus rent.” (p.10.) In that sense, they
seem to start from identical definitions as Marx, and David
Horowitz seems wrong in his assumption that they have abandoned
the labor theory of value.
However, as the authors develop
their arguments, it becomes more and more apparent that they
substantially depart from this initial definition. The
impression is created that they have abandoned the labor theory
of value. Whether or not this is the intention is for Paul
Sweezy himself to clarify.
Depreciation
Allowances
In evaluating “surplus”,
Baran and Sweezy lay particular emphasis on the question of
depreciation allowances. They allege that “excess depreciation
allowances” (pp.99-100 and 372-378) constitute “surplus”
and they get entangled in various calculations of this factor.
But they do not pose the question the way it should be posed
from a Marxist point of view: What is the value of the
fixed capital actually used up in the process of production?
Several arguments plead against
their and Joseph D. Phillips’ thesis about “excessive
depreciation allowances.” The use of a percentage of gross
investment similar to that of the Soviet Union is obviously
untenable, because the rate of net investment in the Soviet
Union is greatly superior to that of the US economy. Excessive
depreciation allowances are not the only form of tax evasion.
Profits are even better hidden by charging expenses for capital
renewal to current operations; this is widely practiced by big
business.
And last but not least, in
order to have a correct estimate of real fixed capital values
used up in current production, one must start by having a
correct estimate of real capital value. This is usually even
more underestimated than are current profits. And as the
accelerated rate of technological expansion, which Baran and
Sweezy acknowledge, tends to reduce the lifespan of plant and
machinery, the value of annually used up fixed capital is very
large indeed, probably larger and not smaller than official
depreciation allowances contend.
Consequently, one should
subtract, not add, depreciation allowances from gross receipts
in order to establish corporate “surplus.” And this
calculation strongly reduces Phillips’ statistical
demonstration of the “tendency of the surplus to rise.”
Without any part of depreciation allowances, the surplus, as it
is defined by the authors, declines to 43.3 percent of the GNP
in 1929, 49.4 percent in 1949, 49.2 percent in 1959 and 49.8
percent in 1961.
On the other hand, if one
defines the “surplus” in the way the authors initially do as
“the difference between what a society produces and the costs
of producing it” (p.9) and eliminates interest and rent from
the
“costs of production,” one
is following the labor theory of value: The “surplus,” or
“surplus value,” is then the difference between the value of
the social product and the value used up (in the form of
constant and variable capital) in producing that product
But this classical Marxist
definition is inconsistent with the more sloppy definition of
“surplus” as “the difference between aggregate net output
and the aggregate real wages of productive workers” (p.125).
This definition uses the labor theory of value in the second
part but denies it in the first. “Aggregate net output,” as
defined by current bourgeois calculations, includes
redistribution of surplus value and many incomes which are
simply the result of inflation (e.g. payments to armed forces,
veterans or state functionaries financed through budgetary
deficits, etc.). Our authors thus shift back and forth between
value and “aggregate demand” calculations. Horowitz is right
in assuming that they try to combine Marx and Keynes. He is
wrong in assuming that this contributes to a clearer
understanding of the “laws of motion” of monopoly capital.
Horowitz bases his rejection of
the labor theory of value on an old article written by Oskar
Lange in the thirties. [1]
This article contains what amounts in our opinion to several
misconceptions both about Marx’s economic theory in general
and his labor theory of value in particular. This is not the
place to answer Lange’s arguments extensively. But we would
like to take up one of his basic points, which has a direct
bearing on our critique of Monopoly Capitalism.
Lange’s assumption that
Marx’s labor theory of value is “nothing but a static theory
of general economic equilibrium” (op. cit.,
p.194) seems to us utterly mistaken. One could make this point
about the special application of this theory to conditions of
simple commodity production. But it is completely wrong to
maintain it about the theory of value as applied to capitalism.
And it is to this application, and not to the special case of
static equilibrium in a pre-capitalist society, that Marx after
all devotes nearly all his economic studies, from 1844 until his
death.
In order to understand the
dynamic nature of the labor theory of value as used by Marx, it
is sufficient to understand Marx’s purpose in perfecting
Ricardo’s labor theory of value by working out his theory of
surplus value. What he wanted to explain was the essentially
dynamic problem of capital accumulation: How the exchange of
“equal values” between the worker and the capitalist leads
to constant enrichment of the capitalist. It is unnecessary to
develop the way in which Marx solved this problem at length: the
distinction between labor and labor power; the discovery that
the worker does not sell his “labor” but his labor power;
the distinction between exchange-value of labor power and its
use-value for the capitalist (which is precisely to produce more
value than its own exchange value) etc.
The labor theory of value thus
corrected by Marx introduces two dynamic elements into what
Lange mistakenly calls a “theory of general economic
equilibrium.” By its very nature, it implies a process of
economic growth built into the model. And it indicates the dual
processes which provide the rationale of capital accumulation:
competition between capitalists; and competition between
capitalists and workers. [2]
For the same reason, it is
inappropriate to speak of Marx’s model as a model of
“general economic equilibrium.” In reality it is a model
which presents a dialectical unity of equilibrium and
disequilibrium, the one leading necessarily to the
other. This is the reason why it is futile to try to
“discover” Marx’s theory of crisis in the famous
reproduction schemes of Vol.II of Capital,
because these schemes actually make abstraction of
“competition between capitalists.” And any study of business
cycles must necessarily come under that heading, according to
Marx himself. [3]
All the “laws of motion” of
the capitalist mode of production arise out of the process of
capital accumulation, based upon and explained by the labor
theory of value as perfected by Marx. This is especially true
for the law of centralization and concentration of capital and
the law of increasing organic composition of capital, both of
which result from competition between capitalists (“the big
fish eat the small fish”) and from competition between capital
and labor (the necessity to increase the production of relative
surplus value, i.e. to increase the productivity of labor).
Indeed, the attempt to divorce
the activities of capital accumulation from these two rational
explanations offered by Marx, or even to divorce one from the
other, must lead to the discovery of some mystic “accumulation
urge” beyond the realm of scientific investigation. Authors
embarked upon this perilous path generally end up with the kind
of tautological explanations like “capitalists accumulate
because (!) it is their mission – or function, or role, or
goal – to accumulate.” One is reminded of Molière’s
immortal definition: “Opium causes sleep because it has
dormative qualities.”
Competition
between Capitalists
Baran and Sweezy strongly
contend that to accumulate capital is still “Moses and the
Prophets” for today’s giant corporations. With this we fully
agree. But they do not give any exhaustive explanation of the
reasons why this is so. On the contrary, they do not incorporate
at all the basic competition between capitalists and workers
into their analysis; it appears only in the final chapters
treating the current displacement of workers by automation. As
for competition between capitalists, they waver between
erroneous positions: On one hand they identify competition with
“price competition”; on the other hand, denying that
“price competition” prevails, they seem to say that
competition does exist, but in a system which is “radically
different” from Marx’s model.
A good deal of clarification is
in order. It is true that in Volume III of Capital,
when Marx develops his theory of the formation of “production
prices” (equalization of the rate of profit as a result of
flux and influx of capital between different branches of
industry), prices rising or falling are the mechanism through
which the profit equalization process takes place. But a
moment’s thought shows that this is only a subordinate
mechanism, not the crux of the matter. If instead of price
cutting, aggressive advertisement is used as the vehicle for
appropriating a greater share of the market, the whole reasoning
stands exactly as in Volume III of Capital. The
important point is that one firm realizes a substantially higher
rate of profit, and that this higher rate then attracts capital
of other firms (say: other monopolists) to the same field, until
equalization occurs. To say that the monopolists try to avoid
excessive risks means precisely in this framework that they will
avoid excessive deviations from the “normal” monopolistic
super-profits, because such deviations would unavoidably attract
other capital.
The crucial weakness of Monopoly
Capitalism, however, is the authors’ failure to deal
with the exploitation of labor by capital and their consequent
omission of the capitalists’ need to increase
relative surplus value. When speaking about poverty in the
United States, Baran and Sweezy correctly point out (p. 286)
that the total disappearance of the reserve army of labor during
the second world war led to an “improvement of living
standards of poor people ... nothing short of dramatic.” This
in turn led to an upward pressure on real wages, exemplified in
the great postwar strike wave. They continue (p.287) to state
that in the fifties “unemployment crept steadily upward, and
the character of the new technologies of the postwar period
sharply accentuated the disadvantages of unskilled and
semi-skilled workers.” It seems to us that the “new
technologies of the postwar period” created that
upward tendency of unemployment, i.e. that the US economy then
entered the most dramatic period of “displacement of labor by
machines” in its whole history.
There can be no further doubt
that this move was successful beyond all expectations, that for
more than 10 years US real wages nearly stagnated as compared
with the rapid increases in all other imperialist countries, and
that the big increase in profits during that period was a result
of the fantastic increases in relative surplus value so
produced.
By leaving out’ of their
analysis of monopoly capital the continuous struggle of the
capitalist class to maintain and increase the rate of
exploitation of the working class, Baran and Sweezy put their
whole economic concept of the present functioning of the
capitalist system outside the realm of contending social forces,
i.e. outside the realm of the class struggle. It is not
surprising, therefore, that they end by denying any validity to
the anti-capitalist potential of the American working class;
they imply this negation already in the premises of the
argumentation: We are faced with a classical petitio
principis.
As for the competition between
capitalists, as said before, Baran and Sweezy’s argumentation
is vague, to say the least. They recognize the need of
the corporations to reduce costs. They recognize the need of the
corporations to increase profits for goals of increased capital
accumulation. They also recognize the fiercely competitive
nature of the “monopolists’ jungle,” not to speak of the
fierce competition between the monopolists and the
non-monopolized sectors of the economy. Yet they shy away from
the obvious conclusion: That the main rational explanation of
that accumulation remains competition, exactly as it was in
Marx’s model. And this leaves a gaping void at the center of
their analysis.
Value
Analysis
The reason for this weakness is
easy to discover. The labor theory of value implies that, in
terms of value, the total mass of surplus value to be
distributed every year is a given quantity. It depends
on the value of variable capital and on the rate of surplus
value. Price competition cannot change that given quantity
(except when it influences the division of the newly created
income between workers and capitalists, i.e. depresses or
increases real wages, and thereby increases or depresses the
rate of surplus value). Once this simple basic truth is grasped,
one understands that the displacement of free competition by
monopolies does not basically alter the problem in value
terms. It means that the distribution of the given quantity
of surplus value is changed, in favor of the monopolists and at
the expense of the non-monopolized sectors. It can mean
(but this must then be demonstrated) that the general rate of
surplus value is increased. But it does not modify in any sense
the basic relationships which explain the creation of
surplus value.
By jettisoning the field of value
production for the field of monetary aggregate demand,
Baran and Sweezy obscure the simple basic relationships. They
speak loosely about “the surplus being absorbed” when idle
men and machines are put to work. But what has not been produced
cannot be absorbed. When machinery is idle, we do not have an
“unabsorbed surplus,” i.e. surplus value not spent,
or unsold commodities. We have unused capital, which is
something quite different. And when “idle men and machinery”
are put to work, “surplus” (surplus value) is not being
“absorbed” but is being produced, i.e. its amount
grows, as a result of an increase in variable capital.
Abandoning the firm ground of
value calculation for the slippery field of “aggregate
demand,” Baran and Sweezy often show an amazing inability to
distinguish between the micro-economic behavior of the firm and
the macro-economic result of such generalized behavior. They
correctly state that the modern monopolist corporation tends to
“maximize profits” at least as much as its competitive
ancestor did. But they seem to forget that the average rate of
profit is precisely the macro-economic result of such behavior
in the individual firms. This follows immediately from the
assumption that surplus value, which can be distributed among
different firms, is a given limited quantity each year.
If any monopolist corporation
succeeds in gaining an excessive share of total surplus value,
other corporations quickly move into the same line of business.
The examples of aluminum, electronic computers, duplicating
machinery, petrochemical products, just to note only a few
“growth” industries during the last three decades, clearly
confirm that this actually happens. Thus we arrive at the
conclusion that under monopoly capitalism exactly as under the
“competitive model,” profit maximization of individual firms
leads to the tendency toward equalization of the rate of profit.
The only distinction one has to make is that under monopoly
capitalism, two different average rates tend to evolve:
one for the monopolist sector of industries, and another for the
competitive sector. [4]
We can therefore conclude that
Baran and Sweezy have been unable either to prove that Marx’s
model was based on some specific feature linked to price
competition, or that capital accumulation under monopoly
capitalism unfolds along lines which are qualitatively different
from those of “competitive capitalism.” Under monopoly
capitalism as under “competitive capitalism” the two basic
forces explaining capital accumulation remain competition
between capitalists (for appropriating bigger shares of surplus
value) and competition between capitalists and workers (for
increasing the rate of surplus value).
In Marx’s model, the tendency
of the average rate of profit to decline arises from two causes.
First, since human labor alone produces surplus value, only one
part of capital, variable capital, corresponds to the production
of surplus value. If there is a tendency for variable capital to
be a smaller part of total capital, there will be a strong pull
for the relation s/(c+v) to decline.
Second, this pull could be neutralized only if at the same time
the rate of surplus value s/v would increase.
But historically, it is very unlikely that the increase in the
rate of surplus value occurs in the same proportion as
the rise in the organic composition of capital. And in the long
run, this is impossible. Because, whereas the organic
composition of capital can grow infinitely (the limit being
complete automation, i.e. complete expulsion of living labor
from the process of production), the rate of surplus value
cannot grow infinitely, because this would imply that wages of
workers actively engaged in production fall toward zero.
Baran and Sweezy contend that
the tendency toward a decline of the rate of profit is somehow
linked to Marx’s “competitive model” and no longer
operates under the reign of monopoly capital. But they do not
make the slightest attempt to examine the two basic ratios from
which the falling rate of profit results: the organic
composition of capital and the rate of surplus value.
In relation to the organic
composition of capital, the authors of Monopoly
Capitalism do not make any overall assessment. On the
one hand, they say that “under monopoly capitalism the rate at
which new techniques will supersede old techniques will be
slower than traditional economic theory would lead us to suppose
... Technological progress tends to determine the form which
investment takes at any given time rather than its amount”
(pp.95, 97). But a few pages further, they write, “the decade
1952-1962 was one of rapid and probably accelerating
technological progress” (p.102). The figures they quote bear
out the thesis that investment in fixed capital rises quicker
than wages. In 1953, expenses for research and development and
outlays on plant and equipment of non-financial corporations
amounted to $27.4 billion, while they amounted to $44 billion in
1962 (and have since risen to a figure double that of 1953!).
Wages paid to labor engaged by the same corporations have
certainly not risen by 100 percent between 1953 and 1966! [5]
Technological
Advance
First Baran and Sweezy contend
that the only technological revolutions which really caused
tremendous spurts in productive investments were related to the
steam engine, the railways and automobile. But later (pp.267-8)
they admit that the technological revolution linked with
mechanization, automation and cybernation has reduced the number
of unskilled workers in the American economy from 13 million in
1950 to less than 4 million in 1962, and that, according to many
authorities, this technological revolution is still in its early
stages! Surely, a displacement of workers by machines at what
Baran and Sweezy call this “fantastic rate” expresses a
tendency toward an increase in the organic composition of
capital, does it not?
There is no doubt in our mind
that starting with the late fifties (i.e. with the upward shift
hi the unemployment rate) there has been a significant increase
in the rate of surplus value, which crystallized in the
“profit explosion” of more than 50 percent between 1960 and
1965. But that this increase can continue to displace more and
more productive workers, who alone create surplus value, at an
equivalent rate with the rise in the organic composition of
capital is doubtful. Automation will continue to displace more
and more productive workers; the wages of the productive workers
may well represent a gradually declining part of the new income
generated in industry; but they will certainly not fall rapidly
enough to offset the rising organic composition of capital. So
there is no reason to assume that the tendency of the rate of
profit to decline will be historically reversed.
There is striking proof of this
which interestingly enough is quoted by Baran and Sweezy without
drawing the necessary conclusions. On pp. 196-7 they indicate
that between 1946 and 1963, direct foreign investments of
American corporations increased more than five fold, because the
rate of return on investment abroad was much higher than in the
US. Obviously, the organic composition of capital is lower, and
the degree of market control by monopoly capital is less in
these foreign countries, than in the US. Isn’t it reasonable
then to conclude that the more they become “Americanized,”
the more the rate of profit will tend to fall? And in the US new
technological progress will result in a new and significant
decline of the rate of profit compared to its present level.
Baran and Sweezy’s insistence
on a continuous rise of the “surplus” is based upon very
simple reasoning: Under monopoly capitalism, costs decline,
prices rise together with profits, therefore the surplus must
increase (p.79). But here again price calculations instead of
value analysis obscure the macro-economic problems involved.
“Under monopoly capitalism
employers can and do pass on higher labor costs in the form of
higher prices,” write Baran and Sweezy (p.77). But a
moment’s thought shows that such sloppy statements, useful as
they might be in agitation, do not mean very much in terms of
real economic relations. For if the employers “pass
on” identical higher labor costs in the same way to all
consumers, all commodity prices rise in the same proportion, and
far from “surplus” having increased, relations between wages
and surplus value, and between the parts of total surplus
allotted to each firm, remain exactly as they were before. If
this “passing on” can be done only by the monopolists, there
is a big probability that real wages will actually have risen,
and that the biggest gains of the monopolists will have been
made at the expense of the non-monopolist sectors of the
capitalist class who will have been unable to raise their prices
in the same proportion. In that case again, “surplus” has
not been increased but only redistributed and probably even
slightly reduced at the expenses of one part of the capitalist
class. And if prices of consumer goods actually rise more than
wages, then there is a decrease in the real wage and indeed a
rise of the “surplus” – but not through any special
“new” device, but through the age-old method of capital:
lowering wages.
The origin of Baran and
Sweezy’s theory about the tendency of the “surplus” to
rise is easy to determine. It is, on the one hand, an incorrect
generalization from a temporary occurrence: the sharp rise in
capitalist profits during the late fifties and the first half of
the sixties. It is, on the other hand, a result of a tendentious
use of the term “surplus,” even to the point of making it
synonymous with “aggregate demand.” Such reasoning simply
eliminates the problem of inflation and includes a number of
cases of counting the same income two or three times.
Here we can see clearly, that
contrary to David Horowitz’s contention, Baran and Sweezy’s
attempt to combine Marx with Keynes is precisely one of the main
reasons they are led astray. Marx makes it crystal clear that on
the basis of the labor theory of value, all income generated in
capitalist society (except for the income of small owners of the
means of production who do not exploit wage labor) can only have
two sources: either variable capital or surplus value. When
capitalists use their surplus value to buy directly the
individual services of housemaids, private teachers, clergymen,
etc., they do not create new income. They simple distribute part
of surplus value as revenue. It is unimportant how many times
this surplus value circulates in a year’s time. It is always
the same surplus value which is redistributed. Mayors of small
towns, whose industries have disappeared know this through sad
experience: Eliminate the original wages and surplus value, and
all service income disappears as if by magic! But if you
calculate “aggregate demand” in the way in which it is at
present defined in the United States, you get the impression
that income of all service industries is simply added
to profits of industrial firms and you then easily arrive at
calculations in which part of the “surplus” (defined in this
sloppy way) is two or three times as big as it really is. [6]
Sales Effort
A good example of this is that
of the problem of increased sales effort. Sales costs do not add
to value produced, but are an example of what Marx called “the
expenses of circulation ... paid out of a given quantity of
surplus value.” Baran and Sweezy actually quote this passage
from Capital on p.112 of their book. Yet they
not only treat increased sales effort as a means of “surplus
absorption” (surplus value absorbing surplus value!). They
even see therein a means of increasing profit for the
capitalists, because part of the initial outlay will be “paid
by the workers” through increased consumer prices! They
don’t seem to understand that the whole outlay was paid by the
capitalists in the first place, and that you can’t add it
three times: first as surplus value (capitalist profits); then
as advertisement outlays (part of profits used for sales
efforts); and finally as additional capitalist profits (part of
the sales effort recovered from the workers’ wages).
Here again, the source of Baran
and Sweezy’s confusion is easy to discover. For the “sales
effort” they speak of (which is not part of the distribution
costs treated by Marx) is in reality financed out of capital,
and not out of current surplus value. Inasmuch as monopoly
capitalism is characterized by huge amounts of surplus
capital, “sales efforts” (in the same way as the
“service industries”) offer a welcome outlet for this
capital. As supplementary workers are employed, and as they buy
commodities with their wages and salaries, the “increased
sales effort can trigger indirectly increasing “realization”
of surplus value, out of an increased capital outlay. But to add
this capital (generated from yesteryear’s surplus value) to
this year’s surplus value is an evident error in calculation,
as far as value calculation is concerned.
The valid and important kernel
of truth contained in Baran and Sweezy’s book is their
insistence on idle and unused capital. This indeed is a specific
feature of monopoly capitalism, arising precisely out of the
slowing down of price competition and the concentration of
capital in the monopolized sectors. It increases precisely
inasmuch as the average rate of profit tends to be higher in the
monopolized sectors than in the non-monopolized sectors of the
economy. And it poses the crucial question of surplus
capital disposition which Baran and Sweezy have elucidated
in many important fields. The monopolists receive indeed higher
profits – but they are unable to reinvest all of them without
endangering this very rate of super profits!
This is, be it said in passing,
the main reason which compels monopoly capital
to invest more and more capital in armaments and – together
with an attempt to counteract the falling rate of profit – one
of the main reasons which explains the growing volume of capital
exports by US imperialism. Without these two elements added to
the analysis, US imperialism’s intervention in both world
wars, and its present attempt to “make the world safe for
capitalism,” cannot be explained in a sufficiently
thorough-going manner, as being inherent in the system.
But adding surplus capital to
surplus product doesn’t clarify the issue. Had the authors
applied the labor theory of value to this question, they would
immediately have noted both the relations and the differences
between the two crucial problems aging monopoly capital faces:
investment of surplus capital and increasing difficulties in
realization of surplus value.
In an essentially
underdeveloped economy this difference is negligible. There the
social surplus product does not consist of industrial goods
which need to be sold; at the same time, the ruling class is not
essentially geared to productive capital investment. Social
surplus product takes essentially the form of land rent, income
of the compradore bourgeoisie, and profits of the
foreign trusts, none of which are industrially invested in the
country. To lump these incomes together, call them “surplus”
and show that the mobilization of this surplus for the goal of
productive investment through planning and industrialization
would make possible a rapid process of economic growth, is
entirely legitimate. That is why the concept of “surplus” is
operative when Baran applies it to the problem of underdeveloped
countries. [7]
But in an industrialized
imperialist country, the situation is entirely different. The
social surplus product essentially takes the form of industrial
goods which have to be sold before surplus value can be actually
realized. This process meets with increasing difficulties. On
the other hand, under conditions of monopoly capitalism, there
are great reserves of capital on hand – as a result of the
past realization of surplus value – which find more and more
difficulties for profitable investment, and plants corresponding
to invested capital are generally run below the optimum level of
capacity. These twin problems of surplus value realization and
of surplus capital investment both demonstrate the irrationality
of the system. And neither can be lumped together in a new
category of “surplus.”
They are even more obscured
when one passes from value production and realization analysis
to aggregate demand analysis, and thereby adds to surplus value
the vast amount of purchasing power of inflationary origin
injected into the system since the second world war. Baran and
Sweezy themselves state that the post-1945 boom in the US is to
be explained by “a second great wave of automobilization and
suburbanization, fueled by a tremendous growth of mortgage and
consumer debt” (p.244). If one adds the not less tremendous
growth of public debt since 1940, one gets a picture not of an
“increased surplus” but of increased difficulties of
surplus-value realization, which sooner or later must bring the
whole topsy-turvy pyramid down. Surely Sweezy will agree with us
that inflationary purchasing power injected into the system can,
from a point of view of value production and distribution, only
do one of two things in the long run: either redistribute
surplus value in favor of certain sections of the capitalist
class and at the expense of others, or increase surplus value at
the expense of wages. And this second “solution” would only
exacerbate the problem of surplus-value realization.
But here we arrive again at the
problem of inflation in the US, and its repercussions both on
the class struggle inside that country and on the international
monetary system. These questions need further elucidation. They
are certainly one of the main problems posed by monopoly
capitalism, as both bourgeois and Marxist economists know only
too well.
March 31, 1967
Erratum
In my
article on Baran and Sweezy’s book which appeared in the
January-February 1967 ISR an unfortunate
typographical error occurred. On p.59 it is printed: “Equally
to take sales costs en bloc as part of the surplus is
to indicate that this notion encompasses something more than
surplus value. Evidently, the part of sales cost which is just
reproduction of capital invested in the service sector
is not part of social capital.” The last sentence should read:
“... is part of social capital.”
Footnotes
1.
Oscar Lange: Marxian Economics and Modern Economic Theory,
Review of Economic Studies, June, 1935.
2.
Incidentally, in the above named article, Lange completely
eliminates competition between capitalists and assumes that
technical progress proceeds independently from such competition,
thereby introducing an element of built-in evolution. This is a
serious misinterpretation of Marxism.
3.
In his general plan for Capital, Marx
explicitly excludes crisis from the part entitled “capital in
general,” and includes it in the part called “different
capitals,” i.e. competition.
4.
In my Traité d’Economie Marxiste, Vol.II,
pp.46-51, I have tried to offer some statistical proof of this
proposition. It is clear that Baran and Sweezy seriously
underestimate the amount of competition occurring under monopoly
capitalism, both nationally and internationally. When they
approvingly quote Galbraith’s list of commodities (p.74),
which in the next generation will still be bought from the same
corporations as several decades ago, they have to leave out of
this list such important commodities as coal, airplanes,
computers, plastics and other petrochemical products, TV sets,
office machines and even electrical power or steel, from which
the statement is either partially or totally incorrect.
5.
At one point of their reasoning, in a very abstract way it is
true, Baran and Sweezy seem to imply that the rise in organic
composition of capital is impossible. They write on p.81 that it
is “nonsensical” to conceive of capitalist production as
implying that “a larger and larger volume of producer goods
would have to be turned out for the sole purpose of producing a
still larger and larger volume of producer goods in the future.
Consumption would be a diminishing proportion of output, and the
growth of the capital stock would have no relation to the actual
or potential expansion of consumption.” Two words are the
source of confusion here: the word “sole purpose”
and the word “no relation.”
It seems to us proved that more
and more producer goods are being turned out for the
purpose of producing still more and more producer goods,
although this is of course not their sole purpose.
Their purpose is also to produce at cheaper costs more consumer
goods. And it seems also proved that consumption is a
diminishing proportion of output, although this does not imply
there is no relation at all between capital stock and
the final output of consumer goods. That producer durables are a
growing percentage of current output is born out by US
historical statistics. And to deny this possibility is not only
to deny a rise of the organic composition of capital under
conditions of monopoly capitalism; it means to deny such a rise
for capitalism of the 19th century as well!
6.
Capital invested in trade and several service industries, as
well as in transportation of individuals, does not lead to the
creation of additional surplus-value through the hiring of
labor; it only participates in the distribution of surplus-value
created by labor in the productive sectors of the economy. But
in order to calculate the total sum of surplus-value produced,
one cannot just add profits of all firms. Some are clearly the
result not of distribution, but of re-distribution of
surplus-value, e.g. when they sell services in exchange of
profits from other firms (to quote only one example: the
services of brokerage firms called upon to invest newly realized
profits).
7.
Cf. Political Economy of Growth, Paul Baran,
Monthly Review Press, 1959.
|