From: Francisco Paulo Cipolla (cipolla@UFPR.BR)
Date: Thu Apr 29 2004 - 17:13:18 EDT
I think it is always very good when we make an effort to apply our knowledge to interpreting present day capitalism. That is why I enjoyed Jurrianīs post. However, I would like to pose a question related to the shifting of the burden of taxes away from capital and on to workers. On this issue Jurrian says: "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." Does this mean that wages were generally above the value of labor power so that state taxes scoop off the excess and redistributes them in favor of the capitalist class? Or is it that in the end this redistribution ends up diminishing wages below the value of the labor power? For the workers to get the value of labor power any taxation on them implies that their money wages should be higher the the VLP, otherwise they are not able to buy what they need as workers. This means that any taxation on workers either comes from surplus value or is levied on them in detriment of their normal consumption level. Paulo OPE-L Administrator wrote: > -------- 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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