[OPE-L] Karl Marx on unequal exchange in the "Grundrisse"

From: Jurriaan Bendien (adsl675281@TISCALI.NL)
Date: Sat Feb 04 2006 - 05:54:50 EST

Jerry, you wrote:

That is,  the equality would only hold in general for the world market as a
whole (and even then, not all the time), not its component parts.

That sounds really good, but I don't think it holds true, if you introduce
the time-factor and such things as credit-money and capital gains into the
analysis. There is, I think, no necessary equality between total
surplus-values contained in outputs, and total profit incomes, though you
can hypothesize, that total profits will normally track total surplus-values
across time. The IMF certainly does assume this, because it strikes a ratio
between the gross profit component of value-added (VA) and the fixed capital
stock to obtain a crude indicator of the rate of return (remember,
"Mehrwert" is a German word for value-added).

As a digression:

Last night I was home and I spent some more time on the problem of the
definition of saving and investment in social accounting, in connection with
Bernanke's "global savings glut" hypothesis (how can you have a "global
savings glut" if the global savings rate and investment rate has, as the IMF
acknowledges, been declining from the 1980s onwards (due easy credit with
stagnating ordinary real wages?). Point is, it would be great, if we could
capture the whole social process of economic exchange in neat-and-tidy
accounting formulas, but, in reality you have to distinguish between the
real process, and the accounting categories imperfectly aiming to describe
the process. If you are a "literal Marxist" then the categories are
literally true and real, but for a "thinking Marxist" this is obviously not
the case. The economic category refers to a social relation that exists in a
continually shifting force-field.

For a simple example, global saving and global investment should
theoretically be equal, given the requirement that the current account
balances of nations sum to zero across the globe, in the same way as global
GNI and global GDP are equal (well, there's statistical discrepancies, the
"global current account discrepancy" and suchlike). Point is, this identity
is empirically made true by definition, given the categorisations applied in
the accounting system.

It's only when we begin to unpack the meaning of the aggregates used, and do
a real critique of political economy as Marx did (what do these categories
really mean, and how do they fit together?), that quite a different picture
emerges, i.e. total domestic "investment" is defined as only total (gross)
fixed capital formation (plus the change in inventories, and you can add in
a net foreign capital component) and total domestic "savings" equals
disposable household income less personal outlays, some kind of peculiar
VA-based calculation for government revenue less government expenditure, and
business undistributed profit on an adjusted VA basis (sometimes plus
economic depreciation).

The money-, securities, derivatives, and futures markets are mostly excluded
from the picture. Also, if somebody buys a house with a mortgage, the
purchase value of the house will enter into the annual gross fixed capital
formation, i.e. it is included in the calculation of total gross investment
for the year. But mortgage repayments to banks etc. are part of personal
outlays (final consumption expenditure). The capital gain from house
ownership or business assets does not count as "savings" in the account,
although economically it is. Somehow, you have to have a trustworthy store
of value.

So what does the "savings glut" (in Marxist terminology, it's called excess
capital, surplus capital, overcapitalisation or overaccumulation) really
consist of, using a broader sense of "savings" ? Basically, I think that
there's an enormous mass of additional capital tied up in rent and
interest-seeking financial assets and non-productive real estate, rather
than being invested in tangible means of production. The US bond market
alone is said to be worth about $14 trillion, the European market is larger.
So you have all these financial claims to income and wealth which are
largely disconnected from incomes earnt and generated by production, it's
pure property income, derived from shifting financial claims from A to B.

In simple macroeconomics, what is not consumed is saved, and what is saved
is invested. If you consume less, you save more, and investment will
increase. Then, you can blame low investment on a low savings rate. People
consume too much, save to little. But as I noted, this is in the end
basically tautological, because of an accounting identity of savings and
investment. The ideological message is really of the type that:

- job creation depends on output growth;
- output growth depends on investment;
- investment depends on saving;
- saving requires abstaining from consumption expenditure.

and the other way round, in various permutations,

- lack of saving requires more credit
- more credit means more debt
- more debt means less consumption (or at least unsustainable consumption)
- less consumption means less output growth
- less output growth means less investment
- less investment means less job creation


- job creation depends on output growth;
- output growth depends on productivity;
- productivity depends on reducing costs;
- reducing costs depends on lower wages;
- lower wages depends on lower consumption costs
- lower consumption costs depend on saving and foreign trade etc.

from which we again obtain the old idea that "if everybody values hard work
and thrift, things will come right". Except, it gets difficult to believe
for people, especially when income inequality only increases, and you owe
more and more to the bank. If you extrapolate this idea further, you can see
how the economic reality becomes the material basis for a moral crisis and
social envy - it's less and less clear, what justifiably entitles people to
wealth, and less and less clear how people in society actually get their
wealth... and hold on to it.


"There must be some kind of way out of here"
Said the joker to the thief
"There's too much confusion
I can't get no relief
Businessmen they drink my wine
Plowmen dig my earth
None of them along the line
Know what any of it is worth"

This archive was generated by hypermail 2.1.5 : Sun Feb 05 2006 - 00:00:01 EST