[OPE-L:4950] Re: arms, roads and fictitious capital

From: Rakesh Narpat Bhandari (rakeshb@Stanford.EDU)
Date: Sat Feb 17 2001 - 23:36:27 EST


re 4948

Paul B,

I think you are right, and I am wrong.

I was thinking of the idea of fictitious capital; it is conceivable 
that  the capitalist/creditor class could come to think that a govt 
which has to and is willing to finance its expenditures through debt 
financing expands the possibilities for capital accumulation. Of 
course an arms mfg could come to this conclusion and so could the 
govt's creditor. And I think it is this conclusion which has to be 
resisted.

But let me go to the beginning.

If an arms mfg sells directly to another capitalist, we agree that 
this can be classified as a dept III activity in which value and 
surplus value has been produced by the arms mfg, though the outlay by 
the purchaser has been expended as revenue for the arms will play no 
role in the future absorption of surplus labor. The arms are 
"unreproductive" goods. Got you right?

It then makes no sense for me to say that if the state taxes or 
borrows from from the private capitalist purchaser and then buys the 
weapon itself that the arms no longer embody value and surplus value. 
As you ask: why should a change in the agent who purchases affect the 
process of the expansion of capital?

I think you are right, but here is what bothers me (though of course 
this is probably what you have been saying all along).

Let's say the govt has purchased a better roads system from private 
contractors, instead of arms.

Would you still agree that the surplus value which the state has 
seized through taxation or borrowing in order to make purchases from 
private capitalists no longer serves as capital?

  Even if a better roads system facilitates the circulation of 
commodities, the capital which was taken from the private sector to 
finance its construction has been destroyed. If the state has 
borrowed to have private contractors make these roads or canals or 
bridges, it still will not pay back the loan (plus interest) out of 
the surplus value which results from any capitalistically productive 
investment which was undertaken on the basis of that loan.

The roads are productive in a real sense but not capitalistically 
productive. The loan and the interest thus have to paid by seizing 
surplus value produced in the private economy, as Mattick Sr argued 
long ago.

In such cases I would say that state spending constitutes the 
destruction or consumption of capital. Money loaned to the state 
through private purchase of bonds then only seems to function as 
capital.

And here is the difference--this is why arms production for the govt 
can't simply be classified as a dept III activity.

  If the capitalist had bought arms directly, it would have been 
obvious that this was akin to a luxury expenditure; he should not 
expect a return from them on the hope that he can use them for the 
production of commodity output in which surplus labor would be 
embodied. But if the capitalist makes a loan to the government which 
then buys weapons or roads, he does think he has used the money as 
capital. But that capital has in fact been consumed and destroyed.

So as Mattick Sr (1967), Duncan (1986) and Carchedi (1991) have 
argued--and in Duncan's words-- the capitalized value represented by 
a govt bond represents fictitious capital because it appears to its 
owner to be a capital value but in fact represents no real part of 
the social productive capital.

  Yours, Rakesh




>Rakesh,
>
>I respond below IN CAPS SIMPLY TO DISTINGUISH THE EXCHANGE...
>
>-----Original Message-----
>From: rakeshb <rakeshb@stanford.edu>
>To: ope-l@galaxy.csuchico.edu <ope-l@galaxy.csuchico.edu>
>Date: 16 February 2001 23:45
>Subject: [OPE-L:4923] Re: Re: Re: Re: faux frais, armaments, and security
>guardservices
>
>
>>Paul B writes:
>>
>>Rakesh, you art not denying that profits are made by the armaments
>capitalist, ie that surplus value is extorted from their employees. Why then
>are these
>>workers not productive of capital?
>>
>>>
>>>
>>>      But this argument then denies that the armaments capitalist extorts
>  >surplus value ( profits) from the workers. So you contradict yourself. How
>can the State spending both realise profit as you state 'So a debt has been
>>incurred equal to the sum of costs + profits in the arm mfg's sale to the
>>government', but at the same time NOT produce SV ?
>>
>>Paul B,
>>
>>But profit and surplus value are not the same. The commercial and banking
>>capitalists make the former without the producing the latter, yet the
>private property of these capitalists does serve them as capital.  The
>question
>then is whether  purchases by the state represent a similar kind of
>deduction
>from surplus value. (SAYS RAKESH)
>>
>I THOUGHT THIS MIGHT COME UP: ARE YOU SAYING BANKERS ARE THE SAME AS
>ARMAMENTS MANUFACTURERS ? ARE ARMS MONEY? IF SO I'M NOT SURE THAT WE ARE
>GOING TO MAKE PROGRESS.
>
>SECONDLY, THAT THE STATE  DIRECTLY CONVERTS CAPITAL INTO REVENUE WHEN IT
>DIRECTLY EMPLOYS ITS OWN ADMINISTRATORS, ARMY, ETC. IS DIFFERENT FROM ITS
>RELATION IN THE MARKET TO MANUFACTURERS.
>
>HERE, AS IT SPENDS, IT REALISES THE VALUE AND SURPLUS VALUE  IN THE
>ARMAMENTS. YOU ARE NOW SUGGESTING THAT THE ARMAMENTS WORKERS ARE NOT
>CREATING SURPLUS VALUE, BUT SIMPLY CONSUMING IT. IE THEY ARE UNPRODUCTIVE.
>BUT HOW CAN THIS BE IF THEIR EMPLOYERS EMPLOY THEM TO SELL THEIR COMMODITIES
>ON THE MARKET TO OBTAIN MORE CAPITAL?
>
>IF YOU CONTINUE TO FOCUS  ON THE AGENT WHO PURCHASES RATHER THAN THE PROCESS
>OF THE EXPANSION OF CAPITAL WE SHALL BE RELYING ON THE NATURE OF THE
>CONSUMER, OR THE SOURCE OF THEIR REVENUE, AS THE BASIS  OF THE DEFINITION OF
>PRODUCTIVE LABOUR.  THIS SEEMS OFF THE MARK TO ME.
>
>OF COURSE IF YOU WANT TO START A TREND TO 'OBLITERATING' THE NOTION OF
>SURPLUS VALUE  ALTOGETHER IN ALL OR PART OF THE OPERATIONS OF EVERY SUPPLIER
>TO THE STATE, DENYING THAT THESE SUPPLIERS ARE CAPITALISTS ( BECAUSE THE
>STATE USES SURPLUS VALUE TO BUY THINGS,) THEN  WE WILL SOON BE LEFT WITH
>PROFIT AND PROFIT ALONE IN  A HUGE EXPANSE OF THE ECONOMY.
>
>
>
>   In your quote Mattick is not saying what you say. nb where I have
>>highlighted the text which is consistent with what I have said
>>
>>Highlights did not come through.
>>
>>Yours, Rakesh
>
>>Try format: /rich text, /and the colours might come out.  Paul
>>



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