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De-valorisation
For Saturday 12 December 2015, radio 3CR
Throughout the year we’ve talked each month
about capital. And we’ve been doing
so in relation to its on-going implosion. Today, I‘d like to tackle that implosion
from a different angle. I’d like us to think about a solution.
No solution can
suit everybody. What’s good for capital is bad for labour. From the point of
view of capital, the solution has to be what Marx calls ‘de-valorisation’. So,
what is it that has to be devalorised? i.e. what must lose value? And how?
Share price
There’s a couple of issues to clear out of
the way before we can get down to real de-valorisation. Two months ago, we were
talking about the collapse of the share market. The media had reported that $50bn
dollars had been wiped off the value of shares. Not quite. $50bn had been wiped
off the price of shares.
Devalorisation
is not about the share price. Devalorisation is a drop in the value of physical
goods and machines. Of course, any loss of real value can lead to a drop in the
share price. However, that outcome is a matter of ‘can’ - not ‘must’. Indeed,
the closure of inefficient production can improve a firm’s bottom line. The
prospects of a return to profitability should push its share price up. Share prices register shifts in
value. They are not value.
The stock-market
boom was linked to the general price-bubble and to huge amounts of credit. We
began the year by saying yet again why the cliché about a Global ’Financial ’ Crisis
is a doubly wrong. First, what blew out after 2007 was not just a financial
crisis. And secondly, whatever 2007-8 was, it’s turned out to be very much more
than a ‘crisis’.
Yes, there was a
financial panic in 2008. There’ve
been a few more since. And there’ll be more in the not-too-distant future. But
the financial domain was only where the implosion of capital erupted. One side
effect was a gush about ‘fictitious’ capital, which not one in a thousand
understood, instead treating it as synonym for finance capital.
That location is
no accident. The Capitalist Mode of Production has always depended on access to
credit. That means that every segment is always in debt. Even the world’s
biggest banks ‘borrow’ from each other. Some form of money has to be fed into the
circuits of capital every second of every day. If that flow is blocked - for
any reason - the entire system seizes up. Once bankers become too afraid to
lend, the system freezes. That’s what was happening in October 2008. The capitalist
state stepped in to rescue the so-called ‘free’ market. Hence, ‘financial’ is utterly
inadequate for explaining what’s still going down.
But we also
pointed out that – by definition - no crisis can be permanent. A patient with a chronic condition will suffer successive crises. They are but symptoms – not the underlying disease.
Similar fevers
have been breaking out throughout capitalism for seven years. The Economist in mid-November (14th)
carried a feature article about three waves of this upheaval:
‘The world is
entering a third stage of a rolling debt crisis’, it writes, ‘this time centred
on emerging markets.’
The Economist
went on to compare the recent doings of global capital with the gangster trilogy,
the Godfather. It quotes Michael
Corleone from Part III:
‘Just when I
thought I was out, they pull me back in.’
It’s not at all Marxist, that is to say,
scientific, to describe capitalist as gangsters,
Moreover, the rolling debts are more like Star Wars. And like Star Wars VII, this discussion is headed back to the origins of the
implosion.
The bankers’
bank – the Bank of International Settlements – warned in June 2007 of a
upheaval like the 1930s depression. Last year, its annual report warned that
the steps taken by governments and corporations had done no more than to postpone
the day of reckoning. That means that there hasn’t been enough factory closures,
aka, de-valorisation. China is the prime case of a government propping up
firms, and not only state-owned-ones, ‘creating zombie companies and entire
zombie industries’, according to the Economist,
p. 24) This year, the Bank seems resigned to the fact that the unthinkable has
become the new normal. In short, the global economy is still standing only because
the termites are holding hands.
Despite eight
years of turmoil, the implosion of global capital is side-lined by the Left in
Australia. It’s as if the mighty intellectuals got bored. For instance, only
two out of the 104 sessions at the ‘Marxism Today’ programme for 2016 touch on
the implosion. If that’s Marxism Today, then Marx wasted his life in writing Capital.
We talked in
March about why capital has to keep expanding to survive.
That relentless drive results in excess
capacity and over-production. Here’s a
stunning example of the source of the implosion. Ten years ago, if all
the car plants in North America, ie, Canada, the U.S and Mexico, had been shut
down, the rest of the world could have produced more vehicles than there was
effective demand for them.
Some car plants
closed in the U.S. during 2009. But U.S. capital has shifted the ‘cost’ to its
economic and political dominions. Hence, in Australia all three car-makers are
to go by 2017.
Australia is
unlikely to have any steel making by 2020. The shrinkages at Whyalla – 600 more
jobs to go – and by Bluescope at Port Kembla are examples of de-valorisation to
deal with global excess capacity. So is Palmer’s Townsville plant.
This is a good
time as any to repeat the rule that Warren Buffett applies when deciding to
invest.
What matters is
not how much money went into the firm. All that matters is how much you can
still get out.
Buffet has to be certain that there will be
an effective demand for the firm’s products? Has a competitor locked it out by
producing better quality goods more cheaply? When that happens, the existing
capital stock will be worth no more than can be got for the machines as scrap
metal.
2. DEVALORISATION – GOOD AND BAD FOR
CAPITAL
The source of the on-going implosion is
excess capacity. That occurs from the
inescapable il-logic of capital expansion. Hence, the only solution for capital
is to kill off some of that excess. Which means what in practice?
De-valorise
means to lose value. Now we have a further pair of questions to answer. First,
how did machines get to be valuable in the first place? Secondly, in what senses
do they lose that value?
First question
first. How did the value get there? The answer is essential for the expansion
of capital. The machines are valuable because they were made by wage-slaves who
added value to raw materials and semi-finished goods. In short, surplus-value
is present in the machines. That’s why Marx called the machines ‘dead labour’.
They transfer
little parcels of that value to each unit of production. The second points to
the pain necessary for capital expansion to resume. Before the new machines can
transfer any of their deal labour to new commodities, they are themselves
commodities. The factory that makes them has to sell them at a profit. Only
after that payment can the owners get their hands on any of the surplus-value
that their wage-slaves have added. Only after that step can they extract any
profit. Some of the profit is for their own living expenses. Some goes to re-invest
on a larger scale for survival. It’s that new investment that interests us
today.
In a modern
capitalist system, the point of disruption from excess capacity is not from the
over-production of consumer goods – not unsalable cars, fridges or food. Nowadays,
the greater threat is from a seizing up of the effective demand for the machines
used to make those consumer goods. In turn, out of that shrinkage comes a
seizing up of orders for the machines that wage-slaves use to make the machines
that other workers use to make consumer items.
The best kind of
de-valorisation happens all the time under capitalism. This form of de-valorisation
is essential for capital to expand and hence exist.
It occurs in the best years for capital as
well as during the worst. This is where a tiny fraction of the value – dead-labour
– present in the machines etc passes to the new commodities. However, this
process is really re-valorisation on an expanded scale. Hence, this loss of
value from the machines is intrinsic to the expansion of capital.
De-valorisation
is not the same as depreciation. The latter is often no more than a
accountant’s ploy to swindle stockholders or avoid tax. Even where
de-valorisation and depreciation are numerically the same, they are
qualitatively distinct.
Here we see one
effect of competition. The socially necessary costs of production can be cut by
adopting new production process. One firm introduces a new method. It thus
gains an advantage over all its rivals. For a while, the front-runner can take super
profits by selling its goods at the old price even though its costs are now lower
than the average. In time, all the producers will be forced to switch to the
new method - or go bust. Many will have to so well before their existing
machines have given up all the value – the dead labour – present in them. That
‘value has to be jettisoned. This is part of what Marx means by the ‘constant
revolutionizing’ of the means of production. This kind of de-valorisation is
essential for the system as a whole though it is also be very bad for
individual capitals. Next year, we shall go more deeply into the acceleration
of the pace of de-valorisation.
END
A vitally important political point to end.
Capitalism is not “collapsing”. It never will “fall over” of its own accord. What
we are going through is another implosion in the expansion of social, ie, aggregate capital. We are not watching is a “collapse”.
What’s happened since 2007 has been confined to the economic sphere. The fate
of Greece is proof positive that the agents of capital retain control of the
state. The Arab Spring is another proof, should any be needed.
We must never
forget what Lenin told us on this question. Capitalism can pull through any and
every crisis - so long as it can shift the costs to working people. It can do
that for so long as its agents hold state power.
For capital, the
only solution is a massive de-valorisation. Its escape can be effected only at
horrendous costs to working people. Those sufferings also bring risks of
political and social upheaval to the rule of capital.
For labour, therefore,
the solution must be to confront the state that enforces those restructurings. We
shall have to replace the covert dictatorship of the bourgeoisie with a
dictatorship of the proletariat.
Back next year with more cheery news from
the four volumes of Capital.
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