From: Cyrus Bina (binac@MRS.UMN.EDU)
Date: Fri Mar 19 2004 - 18:18:00 EST
Dear Rakesh, Please forgive me for my delayed response. Racing against time is worse than the fate of Sisyphus. ISSUE # 1: "In a previous exchange on treatment of gold in neo Ricardian theory, we discussed Michele Naples' emphasis on that class of commodities in which a kind of inherently scarce land is a means of production." ANSWER: Starting with scarcity is the characteristic of 'vulgar economics (including neoclassical economics). The notion of Rent in Marx is has nothing to do with 'inherent scarcity.' Rather, it is due to the existence of landed property that rent obtains its significance. Moreover, any theory that starts with 'inherent scarcity' is doomed to become a tautology. In a concrete situation an actual scarcity may develop in which case it has to do with the condition and location of 'regulating capital,' particularly in the rent-related production processes. Oil is not an 'special' commodity for this and many other reasons. Oil is ONLY different from an industry like Auto or Steel industry because of the impediment of landed property and thus the formation of oil differential rents. ISSUE # 2: "With the production of high quality, 'reasonably priced' oil, isn't an inherently scarce kind of land a means of production? And isn't oil a special commodity for this reason? (In saying that inherently scarce land is a means of production for oil, I am not saying that oil is sold at a monopoly price.)" ANSWER: Given the answer to ISSUE I, the notion of scarcity is like putting the cart before the horse. And, more important, oil is not a 'special' commodity for that matter (P.S.: trained also in neoclassical school, I realize that the axiom of 'scarcity' is not equivalent to 'monopoly'). ISSUE # 3: 'In order to produce this high quality and cheap oil and capture the profits (if not some of the rent) therefrom, mustn't the capitalist--say, an oil services company--have access to that land? Why would a capitalist rely on his ability to gain that access through competitive bidding if his government can secure it for him by providing 'security' to the landlord state (or in the case of KSA creating the state) that controls access to the inherently scarce means of production?" ANSWER: Competition of oil regions around the globe leads to a uniform rate of profit in the industry in conjunction with the various magnitude of differential oil rents for each oil-producing region around the globe. One has to do away with the myth of 'cheap oil.' The quality of oil, on the other hand, is subject to market conditions. Therefore, in an extreme case, the prolong and forceful capturing of oilfields in Iraq results in capturing of (competitively determined) differential Iraqi oil rents only. Here, pronouncements such 'access' and 'security of supply' (as, for instance Michael Klare does) are nonsense for, at least, two reasons: (1) Unlike its cartelized stage, oil has already been globalized and thus can be obtained through the transnational markets at global spot prices and (2) The oil exporting states (of the Middle East and elsewhere) are almost singularly dependent on the revenue from this source and there is no reason to refrain from selling it. For instance, even Saddam Hussein never wanted to cut of the sale of oil to the international market. Moreover, he wanted to produce and sell more quantities of oil than the capacity of Iraqi oilfields could endure. Providing 'security' for 'landlord states' [your term, not mine!] is also a hoax due to the reasons provided above. (P.S.: a few days ago, I had a chance to have debate with Michael Klare on the UCLA campus. Some of these points were also raised by him, which were immediately become the object of my vigorous deconstruction.) As for the oil services companies, such as Halliburton, they are outfits to gain from the wholesale destruction of Iraq and thus 'construction.' These entities are connected to a tiny interest group that is now conducting the US foreign policy from the Pentagon. These outfits are not the GLOBAL OIL INDUSTRY. Indeed, in my judgment, the oil industry hates this predators and their backers in the US government for creating a domino of instability (with no end in sight) in the Persian Gulf. ISSUE # 4: "Doesn't the US fear that other big consumers of Middle East and Central Asian oil and gas may demand ever more participation in extraction, refining and transportation and thus push US companies out of their presently favored position with state oil companies in the Gulf? While (as you have shown) a struggle to control the differential rent yielded by low cost oil cannot explain the costly US military thrust in the Middle East, perhaps the attempt to secure rent and the profits from oil production/refining/transportation can?" ANSWER: US may fear that sky is falling! However, one has to look at the material conditions of the oil production in conjunction with the changed social relations of the globe. We are in era of post-Pax Americana and loss of American hegemony. Correspondingly, we are living in the era of post-cartelization and globalization of oil. There is no such thing as US companies anymore. These are transnational corporations. The role of state in this era has fundamentally transformed. We are living in the era of globalization and global hypercompetition. As far as crude oil production is concerned you can take a hike! The refining and transportation, however, are separate entities that must be dealt with separately. Finally, 'securing rent' needs the existence of rent, and existence of rent (i.e., through production) is through global competition in the oil industry today. I hope that have left not too many stones unturned at this time. In solidarity, Cyrus March 19, 2004 Cyrus Bina, Ph.D. Professor of Economics Division of the Social Sciences University of Minnesota, Morris Morris, MN 56267 Office: (320) 589-6193 Fax: (320) 589-6117 E-mail: binac@mrs.umn.edu ----- Original Message ----- From: "Rakesh Bhandari" <rakeshb@STANFORD.EDU> To: <OPE-L@SUS.CSUCHICO.EDU> Sent: Friday, January 30, 2004 4:53 PM Subject: Re: (OPE-L) Re: s/v & c/v: macroeconomic categories only? > Dear Cyrus, > In a previous exchange on treatment of gold in neo Ricardian theory, > we discussed Michele Naples' emphasis on that class of commodities in > which a kind of inherently scarce land is a means of production. With the production of high quality, 'reasonably priced' oil, isn't an inherently scarce kind of land a means of production? And isn't oil a special commodity for this reason? (In saying that inherently scarce land is a means of production for oil, I am not saying that oil is sold at a monopoly price). In order to produce this high quality and cheap oil and capture the profits (if not some of the rent) therefrom, mustn't the capitalist--say, an oil services company--have access to that land? Why would a capitalist rely on his ability to gain that access through competitive bidding if his government can secure it for him by providing 'security' to the landlord state (or in the case of KSA creating the state) that controls access to the inherently scarce means of production? Doesn't the US fear that other > big consumers of Middle East and Central Asian oil and gas may > demand ever more participation in extraction, refining and > transportation and thus push US companies out of their presently > favored position with state oil companies in the Gulf? While (as you > have shown) a struggle to control the differential rent yielded by > low cost oil cannot explain the costly US military thrust in the > Middle East, perhaps the attempt to secure rent and the profits from > oil production/refining/transportation can? > If the above suffers from an an egregious lapse of logic (or two), > please don't hesistate to point that out! > > As Lewontin says about the wind chill factor, it proves that > organisms don't simply adapt to but create their own > environments--boldly thrown into relief as the arctic wind dissipates > the environment that we ususally create for ourselves! > > Yours, > Rakesh >
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