Archive for the ‘Prices of Production’ Category

Three Books on Marxist Political Economy (Pt 6)

May 21, 2017

Shaikh’s theory of money

Shaikh deals with money in two chapters—one near the beginning of “Capitalism” and one near the end. The first is Chapter 5, “Exchange, Money, and Price.” The other is Chapter 15, “Modern Money and Inflation.” In this post, I will concentrate on Shaikh’s presentation in Chapter 5. In Chapter 15, Shaikh deals with what he terms “modern money.” I will deal with his presentation in this chapter when I deal with Shaikh’s theory of inflation crises that is developed in the last part of “Capitalism.”

In Chapter 5, Shaikh lists three functions of money—considerably fewer than Marx does. The three functions, according to Shaikh, are (1) money as a medium of pricing (p. 183), (2) money as a medium of circulation, and (3) money as a medium of safety. Shaikh deals with money’s function as a means of payment under its role as a means of circulation. The problem with doing this is that money’s role as a means of payment is by no means identical to its role as a means of circulation and should have been dealt with separately.

Anybody who has studied seriously the first three chapters of “Capital” Volume I will be struck by how radically improvised Shaikh’s presentation here is compared to that of Marx. It is in the first three chapters of “Capital” that Marx develops his theory of value, exchange value as the necessary form of value, and money as the highest form of exchange value. He does this before he deals with capital. Indeed, Marx had to, since the commodity and its independent value form, money, is absolutely vital to Marx’s whole analysis of capital.

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Three Books on Marxist Political Economy (Pt 5)

April 23, 2017

Shaikh’s wrong theory of interest rates

“The interest rate is the price of finance,” Shaikh writes at the beginning of Chapter 10, “Competition, Finance, and Interest Rates.” Shaikh treats the rate of interest as fluctuating around the price of production of the “provision of finance.” Late in Chapter 10, Shaikh indicates he was confused on this subject in the 1970s and the early 1980s but brought to his current views by the Sraffrian-neo-Ricardian Italian economist Carlo Panico. Is this the correct approach to ascertaining what actually determines the rate(s) of interest? I believe it is not.

Do interest rates really fluctuate around a “price” of the provision of finance the way market prices fluctuate around prices of production? Strictly speaking, price is the value of one commodity measured in terms of the use value of the commodity that serves as the universal equivalent—money. According to this definition, interest rates are not prices at all.

It is true that we often use price in a looser sense. For example, we talk about the prices of securities that are in reality legal documents that entitle their owners to flows of income. Another example is the price of unimproved land whose owners hold titles to flows of ground rent. It would be absurd to talk about the price of production of unimproved land if only because unimproved land is a form of wealth produced by nature and not by human labor.

Some other ‘non-price’ prices

Another example of a price that is not a real price is the dollar “price” of gold. This very important economic variable is not really a price at all but instead measures the amount of gold that a dollar represents at any moment. Other examples of “non-price” prices are the “price” of one currency in terms of another—exchange rates—and the price of politicians.

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Three Books on Marxist Political Economy (Pt 3)

February 26, 2017

The election of Donald Trump as the 45th president of the United States, combined with the rise of similar right-wing demagogues in Europe, has prompted a discussion about the cause of the decline in the number of relatively high-wage, “middle-class,” unionized industrial jobs in the imperialist core countries. One view blames globalization and bad trade deals. The European Union, successor to the (West) European Common Market of the 1960s; the North American Free Trade Area; and the now aborted Trans Pacific Partnership have gotten much of the blame for the long-term jobs crisis.

This position gets support not only from President Trump and his right-hand man Steve Bannon and their European counterparts on the far right but also much of the trade-union leadership and the “progressive” and even socialist left. The solution to the problems caused by disappearing high-paid jobs in industry, according to economic nationalists of both right and left, is to retreat from the global market back into the safe cocoon of the nation-state. Economic nationalists insist that to the extent that world trade cannot be entirely abandoned, trade deals must be renegotiated to safeguard the jobs of “our workers.”

Most professional economists have a completely different explanation for the jobs crisis. They argue that changes in technology, especially the rapid growth of artificial intelligence in general and machine-learning in particular, is making human labor increasingly unnecessary in both industrial production and the service sector. Last year—though it now seems like centuries ago—when I was talking with one of this blog’s editors about possible new topics for future blogs, a suggestion was made that I take up a warning by the famous British physicist Stephan Hawking that recent gains in artificial intelligence will create a massive jobs crisis. This is a good place to examine some of the subject matter that might have been in that blog post if Brexit and Donald Trump had been defeated as expected and the first months of the Hillary Clinton administration had turned out to be a slow news period.

It is a fact that over the last 40 years computers and computer-controlled machines—robots—have increasingly ousted workers from factories and mines. The growth of artificial intelligence and machine learning is giving the “workers of the brain” a run for their money as well. This has already happened big time on Wall Street, where specially programmed computers have largely replaced humans on the trading floors of the big Wall Street banks. No human trader can possibly keep up with computers that can run a complex algorithm and execute trades based on the results of the computation in a fraction of a second.

Wall Street traders are not the only workers of the brain whose jobs are endangered by the further development of AI. Among these workers are the computer programmers themselves. According to an article by Matt Reynolds that appeared in the February 22, 2017, edition of the New Scientist, Microsoft and Cambridge University in the UK have developed a program that can write simple computer programs.

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Trump and the Resurgence of Imperialist Economic Nationalism

January 30, 2017

As the inauguration of Donald Trump as U.S. president approached, a political uproar unfolded in Washington that was more fury than substance. A little more than a week before Trump took the oath of office, the on-line site BuzzFeed published an unverified 35-page document by a “former” member of MI6, Britain’s counterpart of the CIA, on Trump’s alleged relationship with the Russian government and its intelligence agencies. Reportedly, the document was originally created on behalf of anti-Trump—Republicans eager to find some dirt that could be used to stop the billionaire political adventurer in the Republican primaries.

The text’s most sensational part was the claim that Russian intelligence obtained documentation of Trump’s perverted sexual tastes while he was staying at the Ritz-Carleton hotel during a visit to the Russian capital in 2013. It is well documented by many other sources that Trump has abused women throughout his adult life. So even if the claims of the document are taken at face value—they would, to tell the truth, be rather tame stuff. For the record, President Trump has strongly denied the allegations, as has the Russian government.

Far more importantly, the document claims that, in exchange for the help of Russian intelligence obtaining and distributing through Wikileaks damning evidence about the Hillary Clinton presidential campaign, Trump’s business organizations passed information about the activities of “Russian oligarchs” in the West back to Russian intelligence. If true, that would mean that Trump engaged in activities that could leave him open to charges of spying for a foreign power, namely Russia, an impeachable offence. Could this form the basis of bi-partisan—”Party of Order“-sponsored—articles of impeachment against Donald Trump in the not too distant future? Stay tuned on that one.

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Three Books on Marxist Political Economy (Pt. 2)

November 6, 2016

Profit of enterprise and monopoly profit

As we saw last month, Marx’s prices of production are not identical to the marginal cost = equilibrium prices of “orthodox” bourgeois microeconomics. The biggest difference is that prices of production include not only the cost price and interest on capital but also the profit of enterprise. Modern bourgeois microeconomic orthodoxy holds that in “general equilibrium” any profit in excess of interest will be eliminated by “perfect competition.”

In contrast, Marx—and the classical economists before him—did not believe that competition had any tendency to eliminate the profit of enterprise. Instead, they believed that in addition to interest, there is an additional profit of enterprise that is appropriated by the commercial and industrial capitalists. Profit of enterprise is defined as total profit minus interest. The profit of enterprise must not be confused with monopoly profits. The only monopoly necessary for the profit of enterprise is the monopoly of the means of production by the capitalist class.

True monopoly profits do exist. But within the classical-Marxist tradition, monopoly profit is an addition to the profit of enterprise. Anwar Shaikh affirms that monopoly profits exist but he has little to say about them in his “Capitalism.” Instead, Shaikh is interested in “real competition,” which quickly eliminates any profit beyond the profit of enterprise.

Shaikh’s failure to analyze monopoly profit is in full accord with his rejection of the Monthly Review and heterodox post-Keynesian schools, which often treat any profit, or at least any profit beyond interest, as monopoly profit.

Shaikh’s lumping together of these two quite different theories of a monopoly capitalist stage—the Hilferding-Lenin and the “Monopoly Capital” theories—is in my opinion a legitimate criticism of Shaikh’s “Capitalism” and his “fundamentalist school” in general. In “Monopoly Capital,” Paul Baran and Paul Sweezy were quite clear that they were not simply repeating or writing yet another popularization of the Hilferding-Lenin theory of monopoly capitalism. They found that theory inadequate and developed another, quite different theory of monopoly capitalism.

I believe that Shaikh is correct in seeing the influence of the Leon Walras-inspired theory of perfect competition in “Monopoly Capital” and other theories of modern capitalism influenced or inspired by Baran and Sweezy’s “Monopoly Capital.”

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Three Books on Marxist Political Economy

October 9, 2016

The year 2016 will be remembered for an exceptionally toxic U.S. election cycle. More positively, it will also be remembered for a series of new books on Marxist political economy. Among these, two stand out. Oxford University Press published “Capitalism, Competition and Crises” by Professor Anwar Shaikh of the New School. Monthly Review Press published John Smith’s “Imperialism in the Twenty-First Century.” Smith, unlike Shaikh, has spent most of his adult life as a political activist and trade unionist in Britain.

This year also marks the 50th anniversary of the publication of Paul Baran and Paul Sweezy’s “Monopoly Capital.” Monthly Review writers, led by editor John Bellamy Foster, treat this book as a modern-day classic playing the role for monopoly capitalism that Karl Marx’s “Capital” played for classical competitive capitalism. Monthly Review magazine devoted its special two-month summer edition to marking the anniversary.

Shaikh’s “Capitalism,” published 50 years after “Monopoly Capital,” can be viewed, at least in part, as the “anti-Monopoly Capital.” In sharp contrast to the Monthly Review school, Shaikh has held throughout his career that the basic laws of motion governing today’s capitalist economy are the same as those that governed the capitalism of Adam Smith, David Ricardo and Marx. This is what Shaikh attempts to prove in his “Capitalism” and what Baran and Sweezy denied. We can expect that Shaikh’s “Capitalism” and Baran and Sweezy’s “Monopoly Capital” will be dueling it out in the years to come.

Monopoly stage of capitalism, reality or myth?

Shaikh rejects the idea that there is a monopoly stage of capitalism that succeeded an earlier stage of competitive capitalism. He rejects Lenin’s theory of imperialism, which Lenin summed up as the monopoly stage of capitalism. According to Shaikh, the basic mistake advocates of this view make is to confuse real competition with “perfect competition.”

Real competition, according to Shaikh, is what exists in real-world capitalism. This was the competition Adam Smith, Malthus, Ricardo and Marx meant when they wrote about capitalist “free competition.” The concept of perfect competition that according to Shaikh is taught in university microeconomic courses is a fiction created by post-classical bourgeois marginalist economists. Nothing, according to him, even approximating perfect competition ever existed or could have existed during any stage in the development of capitalist production.

In this month’s post, I will take another look at Baran and Sweezy’s “Monopoly Capital” and contrast it with Shaikh’s “Capitalism.” I will hold off on reviewing John Smith’s book, since his book is in the tradition of Lenin’s “Imperialism” published exactly 100 years ago, which Shaikh considers severely flawed. There are other important books on Marxist economics that have recently been published, and I hope to get to them next year, which marks the 100th anniversary of the Russian Revolution.

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The U.S. Two-Party System After Trump

September 11, 2016

For reasons I explained in an earlier post, the bipartisan Democratic-Republican leadership of the U.S. ruling class finds the prospect of Donald Trump as U.S. president unacceptable. When the conventions were held in July, polls showed a Trump victory was not out of the question. Indeed, for a brief time in July, after the Republican convention but before the Democratic convention, Trump had a modest lead in the polls against Hillary Clinton.

The media, including media that normally support the Republican Party, then launched a campaign of ridicule against Trump. Trump has even been pictured as an agent of Russian President Vladimir Putin. In the wake of this media campaign, Trump plunged in the polls. Most recent polls show Trump rebounding but still trailing Clinton and some show Trump closing the gap.

In the course of his campaign, Trump has managed to insult or otherwise alienate huge sections of the U.S. voting population. These include African-Americans; Latinos; Muslims of all nationalities, or people who “look” Muslim; Native Americans; anybody else who doesn’t look “white”; and Jews. Trump is also extremely unpopular among many female voters, who represent around half the vote. Polls show that among African-Americans Trump has the support of maybe 1 percent, at most 2 percent, of the African-American population. This is an all-time low for any Democratic or Republican presidential candidate. There was a time when the “Party of Lincoln” got the majority of the African-American vote. In recent years, however, only 4 to 6 percent of African-Americans have voted Republican. Trump has managed to whittle this down further.

Trump is extremely unpopular among younger voters, or “millennials” as they have been dubbed. Never since modern polling began has a candidate of either the Democratic or Republican party polled so poorly among young people of all “races” and genders—who represent the future. This is in contrast to Adolf Hitler during his rise to power, who was particularly popular among the non-working class German youth. The Nazis captured the campuses even before they captured the streets and then the government.

If Hitler had alienated as much of the German population as Trump has managed to do, nobody would recognize his name today. Due to the U.S. empire’s advanced and growing state of decay, fascism remains a growing long-term threat. The Trump campaign has given a boost to those in the U.S. who are trying to build a genuine fascist movement. This development should not be taken lightly. However, the victory of fascism in the world’s dominant imperialist country is not imminent. If fascism some day comes to power in the U.S., it is hardly likely that now 70-year-old Trump will be its leader.

Though a Trump victory in November cannot be excluded at this time, it is likely that the world will have to deal with an extremely hawkish Hillary Clinton, who by all indications favors a more aggressive Bush-like foreign policy than that associated with President Obama.

Not that Obama’s foreign policy has been exactly “peaceful.” However, Obama has tried to avoid large-scale combat on the ground, limiting himself to using “special forces” numbered in the dozens or hundreds. Instead, he has made heavy use of drones combined with conventional bombers in Libya, Iraq, Syria, Yemen and other war theaters. The administration, fearing revived anti-war demonstrations in the streets, has done everything it can to fight its wars with minimal casualties
among U.S. forces.

It should be noted, however, that Obama did not keep his promise to end the war in Afghanistan. After a hundred thousand troops deployed to this war front failed to crush the Afghan resistance forces, Obama agreed to keep a U.S. ground force of around 10,000, combined with bombing using both drones and conventional bombers. This campaign is now set to continue indefinitely.

While Obama rejected the bombing of Syrian government forces, he later opened a bombing campaign in Syria against the Islamic State. The administration has now sent special forces into northern Syria to help Kurdish rebels trying to establish a Kurdish state in opposition to the Syrian government of President Assad—bringing the U.S. closer to open warfare with that government.

Under the more hawkish Hillary Clinton, chances of the commitment of large-scale ground combat forces in the Middle East, Africa or even Ukraine or other areas near Russia will, all else remaining equal, increase. And the increased warfare that Hillary Clinton is indicating she will bring can only, in the long run, strengthen the fascist forces that have been rallying around the Trump campaign in this electoral cycle. A Hillary Clinton victory in November will therefore in no way be a victory in the struggle against the growing danger of U.S. fascism.\

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Germany and the U.S. Empire (Pt. 4)

January 3, 2016

Right-wing election victories, the U.S. Federal Reserve System and the ghost of Adolf Hitler

Over the last few months, there have been a wave of alarming electoral gains by right-wing and far-right parties in a series of countries. These countries are as different as Argentina, Venezuela, Poland and France. In the United States, the racist, anti-immigrant, Islamophobic billionaire real-estate magnate and demagogue Donald Trump has emerged in the polls as the favorite candidate among Republican voters.

Not all recent elections have seen gains only by right-wing candidates. Forces on the left have won victories as well. Among these was the victory of the veteran left-wing anti-war activist Jeremy Corbyn, leader of Great Britain’s traditionally very pro-imperialist Labour Party. Parties of the left have won a majority in the recent elections in Portugal as well.

In the U.S., too, where it has been extremely weak if not altogether absent in electoral politics, the left has made inroads. In the Democratic Party, the “socialist” candidate Bernie Sanders is drawing the largest crowds. He is the first avowed “socialist” to stand any chance—even if still a long shot at this point—of actually winning the presidency in U.S. history. Nothing like this has ever occurred in U.S. politics, even during the Depression. U.S. politics is therefore not so much moving toward the right as becoming polarized between an increasingly extreme right and an emerging mass “socialist”—though not yet in the Marxist sense of the word—left.

Later in the new year, I will take a closer look at the evolution of U.S. politics that features both the rise of the Sanders “socialist” left and the Donald Trump far right in light of the long-term social and economic trends reshaping U.S. society and beginning to transform its politics.

Similar trends of gains by both the right and the left are visible in other countries as well. In the elections that have just been held in Spain, new parties of the left and the right made gains at the expense of the parties that have dominated post-Franco Spain.

So all is not doom and gloom on the electoral front for the left. But since this post examines the rise of Adolf Hitler to power in Germany during the 1930s Depression, and since we must know our enemies, I want to take a brief look at victories of parties that operate on the right wing of bourgeois politics and see if there is any common denominator that explains their wave of electoral victories.

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Germany and the U.S. Empire (Pt. 3)

December 6, 2015

*Special Statement*

I don’t normally comment on current events unless they are connected to economic events or theories of capitalist economic crises. However, the terrorist acts in Paris that led to the deaths of at least 130 civilians and the injuring of scores of others forces an exception.

I deplore the deaths of civilians in Paris whose only crime was enjoying a night of partying, drinking and music, a “crime” I have been guilty of myself. This follows the terrorist attack in Beirut and the apparent bombing of a Russian airliner that crashed in Egypt causing the deaths of 224 passengers. All these acts seem to be the work of supporters of the Islamic State, also called ISIS, ISIL and Daesh.

The media has shown much more concern about the mostly white Western European victims in Paris than they have for the victims on the Russian plane, not to speak of the victims of Islamic State terror attacks in the Muslim countries such as the recent attack in Beirut. But bad as the carnage caused by the terrorist acts organized or encouraged by the Islamic state have been, it pales before the much greater number of civilians that are being killed not only in Syria but in many other countries being attacked by U.S. imperialism and its satellites such has France.

Even if we count the nearly 3,000 people killed in the Twin Towers attack on September 11, 2001—also innocent bystanders whose only “crime” was showing up at work at the World Trade Center in New York that day—the total number of civilians killed by individual or small-group terrorist actions such as those carried out by the Islamic State or al-Qaeda is still dwarfed by the number of dead resulting from the terrorist war against terror waged by the U.S. government, Israel and the Empire’s imperialist satellite states against the peoples of the Muslim world and beyond. Are the lives of white Parisians more valuable than of “brown” Syrians, Iraqis or Palestinians? I say no! Black and Brown lives matter just as much!

It is also worth noting that the “war on terror” launched by George W. Bush and continued under President Obama has been joined with great enthusiasm by the French government. Paris is hoping the U.S. will allow France to once again become the colonial master in all but name of Syria.

The war on terror is itself being waged with terrorist methods. That is, the government of the U.S. and its satellites are using methods of warfare that in the past were associated with individual and small-group terrorist acts. One famous example is the assassination of Crown Prince Archduke Franz Ferdinand and his wife Sophie by Serbian nationalist terrorists in June 1914.

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Germany and the U.S. Empire (Pt. 2)

November 8, 2015

As the Soviet army swept westward toward Germany in 1945 and the American and British armies advanced eastward into Germany, soldiers in these armies were in for a shock. They would notice a peculiar smell in the air and then would arrive at one of the Nazi death camps.

These soldiers had been subjected to propaganda designed to portray the German enemy in the worst possible terms. Such wartime propaganda often takes more than a few liberties with the truth. In the case of the Soviet soldiers, they had plenty of experience with “the fascists,” as they called them, and their unspeakable crimes against the peoples of the occupied territories in the Soviet Union. These battle-hardened Soviet soldiers would expect the worst from the Germans.

But nothing could prepare them for what they found in the Nazi death camps. I will not attempt to describe it here. Today it is possible to watch videos of World War II Nazi death camps that are stored in digital form on the Internet. I would, however, advise anybody who is curious to watch these videos on an empty stomach.

A common reaction among the U.S. and British soldiers after they observed—and smelled—the horrors of the death camps was to tell the interviewers that now they knew what they were fighting for. The Soviet soldiers already knew what they were fighting for, but even they were shocked.

The reaction of one British soldier in one of the videos I streamed in preparation for this post unwittingly shed light on what had really happened. Interviewed many years after the war, he expressed amazement that the Germans could do this to “fellow Europeans” who simply practiced a “different faith.” A German Nazi would have explained that this was not true. The people murdered in the camps were not, our Nazi would have explained, Europeans at all. Nor were they murdered because they had a different faith. The death camp victims had to be liquidated because they were a different race.

According to the Nazis, the “great race” of white European Nordic Aryans were merely defending themselves against the racial “aggression” of the Jewish people and other “Asiatic” races such as the Roma—the so-called gypsies. In reality, our Nazi, assuming he was well educated in the “racial science” taught in all the educational institutions of the Third Reich, would explain that the Jews were a bastard Asiatic race mixed with “Negroid” elements. They had come to Europe to destroy the Nordic white Aryan race, who were the only creative race in the world and the hope of all humankind. Certainly, the Nazi would explain, a British soldier of “Nordic Germanic Aryan stock” should understand this in light of their own rich struggle against other races throughout its vast empire.

For 12 years, this lesson that the Jews, appearances to the contrary, were not white Europeans, was driven into the head of every German through the educational system from elementary school right through the universities, on the radio, in “educational” newsreels shown in movie theaters, as well through the various branches of Germany’s boy and girl scout movement—the “Hitler Youth.”

Anybody who wanted to challenge the Nazi “racial science” had no access to any media either printed, motion picture or radio. They would have to settle for word of mouth or illegally reproduced pamphlets. And if you were caught, you ran the risk being thrown into a concentration camp yourself or even being legally executed.

But what about before 1933, when Hitler came to power? Between 1918 and 1933, Germany was a (bourgeois) democracy, and before 1914 the existence of a large well-organized workers’ movement made it possible to legally oppose racist and anti-semitic ideas.

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