Global Financial Crisis 2008 – Article No 34
by Humphrey McQueen
Turnovers
This sequence of responses to the crisis in the accumulation of capital has stressed the need to return to Marx’s critique of political economy.
Even people who accept the relevance of Capital to the exploitation of labour wonder whether those insights can help us to penetrate a financial crisis. That skepticism is reasonable unless exploitation and high finance can be linked.
The earliest of these items showed how the eruption of the current crisis in the financial sector is the latest instance of the crises that arise through the expropriation of surplus value. (The crisis flows from the inability of aggregate capital to realise a profit because wages are less than the value of the commodities in which surplus value resides. In such circumstances, more sections of capital attempt to make money out of money, that is, by swindling each other. Exploitation is thus pivotal to the financial crisis.)
Asserting that Marx must be the starting point for every analysis of capitalism is vacuous without demonstrating how that truth in detail. As a contribution towards that understanding, this item takes a two-page segment from Chapter 12,’The Working Period’, in Volume Two of Capital.
Bank rescue packages are promoted to get money-capital flowing for businesses. This item will track the effects from blockages in access to money-capital by pursuing the crux of Marx’s analysis in Chapter 12:
Interruptions and disturbances of the social production process, as a result of crises, for example, thus have a very different effect on those products of labour that are discrete in nature, and those whose production requires a longer connected period.
Marx illustrates this unevenness by comparing extreme scales of production - a factory producing cotton goods with a workshop making locomotives. In the first case, the working period is one week while in the second example the period runs to three months.
Any return of surplus value as profit is always delayed by a period of circulation. The turnover times in both cases, therefore, will be longer than the working period.
In both cases, money-capital is needed to buy labour power, raw materials, semi-finished goods and ancillaries such as power.
A Chinese sweatshop delivers cartons of socks every day. Suppose also that they are paid for them on delivery. That small business might scrape by without borrowing at all. Its owner will use the receipts from Friday to buy the cotton and boxes needed for Saturday. He can extend credit to himself by making his workers wait for their pay.
But now suppose that effective demand for socks slumps and the wholesaler cannot place any more with WalMart. This agent delays paying the sweatshop. Its owner has no horde of cash and so cannot pay his labourers or suppliers. Within a couple of weeks, the gates are shut and the workers on their way back to their villages.
At the other extreme, a firm like Boeing must have lines of credit over its long periods of production. Aircraft-manufacturers entered the current crisis with extended credit arrangements. Those necessary precautions encouraged the creation of exotic financial instruments from futures trading and their derivatives because corporations bet (hedged) on future prices of materials and money-capital.
This comparison helps us to see why different kinds of business are failing at different rates. Coastal China is reeling from the closure of thousands of factories that had been snapping together consumer goods for re-export. As soon as the effective demand dried up, so did their cash flow.
What does re-thinking Marx’s analysis provide? Memorising Chapter 12 will not help Warren Buffett to pick a corporation in which to invest. Nor can Marx’s investigations allow militants to predict when this or that employer will file for bankruptcy.
The re-thinking clarifies our responses by revealing a pattern beneath the chaos of ‘the news’. The roller-coaster is law-bound. Its uneven pace is conditioned by the different time periods for the raising and repayment of money capital.
This scientific approach directs attention from mindless moralising about ‘extreme capitalism’, ‘greed’ and ‘irrational exuberance’.
Random and immoral events do happen. For example, a firm can go bust because the accountant stole the earnings to buy a Masarati for her toy-boy. But these thefts illumine the Faustian bargain facing every capitalist: to re-invest or to indulge? Too much of the latter risks putting an end to being a capitalist – crisis or no.
Next: [yet to be written]