From: OPE-L Administrator (ope-admin@ricardo.ecn.wfu.edu)
Date: Tue Apr 27 2004 - 09:11:30 EDT
-------- Original Message --------
Subject: Unproductive consumption
From: "Jurriaan Bendien" <andromeda246@hetnet.nl>
Date: Mon, April 26, 2004 8:53 pm
To: <glevy@pratt.edu>
Jerry,
You argue:
At the most basic level, the rate of accumulation of
capital (and whether there will be accumulation or
de-accumulation of capital) depends on the magnitude
of surplus value productively consumed by capitalists
relative to the magnitude of s unproductively consumed
(i.e. used for the purposes of individual consumption of
capitalists).
Just briefly, this "basic level" is true only insofar as that
(1) in order to be able to exchange something for the
purpose of making money out of it, you have to produce it first.
But once tradeable objects exist, current new output is no
longer a main condition for capital accumulation, since you
are able trade, regardless of what happens in production, and
you can trade in financial claims to assets. Much more
capital is in fact tied up in those assets and
in the trade of those assets and products.
(2) If capital is invested in portfolio securities and derivatives, then
most of that capital still has to be invested in some form of production
in order to realise a net income for the portfolio
manager, i.e. the ability for circuits in the sphere of
circulation to gain autonomy from the sphere of production
is limited, even although the expansion of credit can
increase that autonomy. In the last instance, financial
claims to assets are claims to a portion of surplus-labor
which conserves and produces them.
Whereas Marx shows how under capitalism production
of output is conditional on the accumulation of capital,
this does not mean that capital accumulation is conditional
on production of output, since products of previous cycles
of production (such as durables, surpluses and real estate)
may also be traded in. Moreover, if, as Marx says,
capitalist production is "the unity of the production process
and the circulation process"", then the distinction between
productive and unproductive consumption refers to
ten distinctions in the application of capital funds,
looked at from the point of view of the reproduction of
total social capital:
(1) investment of capital versus consumption of capital
(2) investment and consumption, versus hoarding (idle funds
and reserves)
(3) investment in the production of ordinary producer
and consumer goods, versus investment in weapons
and luxury goods
(4) investment in production of goods and non-financial
labor-services, versus investment in the trade in goods
and money
(5) investment in production capital versus investment
in money capital and commodity capital
(6) investment in production of tangible goods and
services, versus investment in financial services,
financial claims and property rights.
(7) investment in the domestic economy versus
investment in imports.
(8) the growth of total capital versus the growth
of production capital.
(9) Stock and flow definitions of investment
(10) Current claims versus future claims, as
reflected in assets/liabilities.
De-accumulation is not really part of Marxian
vocabulary. Capital is devalorised or devalued,
not de-accumulated, i.e. capital value is lost
if net profits are negative. Negative accumulation
does not exist because the loss of capital means
accumulation is not occurring at all.
You ask:
What do we know about recent empirical trends
concerning the percentage of surplus value productively
consumed?
The answer is, very little. The reason is that in
estimating annual surplus-value, most Marxists focused
on GDP or FDI. However, GDP conflates
(1) the valorisation process and the realisation process,
(2) new surplus-value produced and total surplus-value
realised.
FDI represents only one fraction of total capital
investment, the other components include bonds,
securities, various equities, derivatives, special
deposits and a portion of invisibles trade. I have
covered some of these issues on PEN-L.
An adequate measure of surplus-value would need
to combine data concerning the gross personal
income of the capitalist class and the government
with data on undistributed enterprise profits. Another
way of expressing that is to say that GDP, being a
measure of current net output of production, excludes
many circulation activities which treated as
transfers or unrelated to current production, even
although current net income is obtained from them by
capitalists. The activities include new net income
from unequal exchange through foreign trade.
Likewise, FDI excludes a very large
portion of international investment which does not
consist in controlling interests through equities.
So anyway, to estimate annual surplus value, you
need to look not just at production, but at the incomes
of social classes and the state.
You ask:
-- Is it greater than or less than previous periods?
The answer is, basically, less, i.e. the total amount of
capital grows faster than the growth of the stock of capital
invested in real production. The basic reason for that
is that fewer workers become more productive and
can produce a greater output, while income inequalities
simulatenously increase. This means slower growth
of ordinary consumer demand, and higher profitability
in areas outside real production. In turn, this means
greater indebtedness. The growth rate of debt
claims is even faster than the growth rate of total
capital. This changes the balance of power within
the capitalist class in favour of financiers, who
consequently can, over time, increase the cost
of borrowed capital, insofar as dependence
on borrowed capital increases. But this tends
to increase the need for credit rather than
lessen it.
You ask:
-- To what extent are there significant regional and international
variations in the rate of unproductive consumption?
This is difficult to answer because you have to consider the
ten distinctions I have made in the above. In the rich
countries, the growth rate of investment in the FIRE sector
(finance, insurance and real estate) remains higher than
the growth rate of production, which has the overall
effect of braking the growth of real output. That is
one of the ways in which a situation of "excess capital"
expresses itself. In addition, an increasing fraction
of real output consumed in richer countries
is not produced there, because the production of
it is displaced to poorer countries where production
costs are lower.
You ask:
-- To what extent have the rates of the productive and
unproductive consumption of capital changed over the
course of the trade cycle?
Again this is difficult to answer, because a trade cycle is
a statistical artifact which depends on choosing certain
variables as measuring the high and low points punctuating
the beginning and the end of a cycle. A trade cycle
suggests a necessary recurrent sequence of economic
activity, measured principally by investment and output.
But a trade cycle does not in fact exist, all that exists is
fluctuations in market activity in which we then try to
see a pattern. Marx clearly related the trade cycle to
the renewal in fixed assets - the enormous
growth of the organic composition of capital and the
stratification of fixed assets makes this theory
out of date. The relative strength of currencies in
interimperialist competition has a much greater
effect, in part because it very significantly affects
the replacement cost of fixed capital in a globalised
market.
You ask:
Pursuing a supply-side (!) theme, if state taxation of capitalists and
firms increases, doesn't that then leave less surplus value
left over for the purposes of productive consumption and thereby
capital accumulation?
Many Keynesian economists would say no; one of the aims
of state taxation is, or should be, precisely to redirect funds into
productive, employment-generating activity. But this
argument tends to overlook two factors: (1) you cannot
force private investors to invest where they do not want to,
especially in a deregulated global market, and thus
the success of a state economic strategy depends
on whether it can change relative profitability in favour of
employment-generating production; (2) whereas the
redirection of tax funds into productive activity might
benefit the whole economy, the levying of the tax does not
benefit individual capitalists whose net income is reduced,
and thus while some capitalist might gain, others might
lose. And typically big capital gains, and small capital
loses, or at least big capital gains more than small capital.
The working class gains only in possible new employment
opportunities, but not necessarily in real incomes.
You ask:
Is there any evidence that in nations where the rate of taxation on
capitalists is higher the rate of productive consumption is lower
and vice versa?
Yes. If you compare the USA, certain European countries
and Japan, this is the case. But it is not clear that this is caused by
"excessive taxation". Firstly, currency exchange-rates
have much more to do with it; it is the fact, that unfavourable
currency exchange rates affect the international valuation of
assets and the total market position of enterprises in international
competition, which means additional costs, such that a higher
tax rate may have a stronger effect. Secondly, the main burden
of taxation falls not on enterprises, but on wage & salary earners, and
thus complaints that high taxes reduce the competitive
position of enterprises, may only express dissatisfaction with
a reduction in the net incomes of investors, due to lower
overall economic growth and slower market expansion.
In the history of capitalism, the situation today is the reverse
of the 18th and 19th century; whereas back then wage earners
paid relatively little or (in some cases) no income tax to the
state, now they pay the majority of income tax, and the
tax is levied mainly at source. Several factors are involved,
including a more developed national market and the
expansion of state activity. In the bourgeois revolutions
in Europe, the levying and disposition of tax funds was
originally one of the main factors in the bourgeois bid for
state power, along with clearing away obstacles to a
national market. Of course, whether tax is levied on
wages or on gross business income does not
affect production-prices a great deal, since a cost is a cost.
But the general tendency is to levy taxes as much as possible
on those individuals and agencies least able to engage in
tax avoidance and evasion, and thus the taxation system
becomes a lever to transfer net income from the
working class to the capitalist class through incentives,
subsidies, concessions and privatisation of public property.
The transfer involved is usually ignored in Marxist
discussion, because either the focus is on whether taxes
are too high or too low, and on how tax money is actually
spent. This severs the connection between the collection
of tax and the expenditure of tax revenue, reflecting the
fact that over time an increasing portion of tax has been
collected without being earmarked for a specific purpose,
i.e. the tax collected is placed in a consolidated fund,
and then the government decides how to spend it
through its budget. Thus the taxpayer has no control
over how funds are spent, except through voting for
elected government functionaries. This circumstance
has been one of the driving forces behind neoliberal
deregulation. Because at least if you invest in stocks,
then if you don't get much back for your investment,
you can sell off your stocks.
Jurriaan
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