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Capitalism in the 21st Century: Through the Prism of Value (IIPPE)

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In a capitalist economy, due to competition among the many producers of the same commodity, a commodity sold on the market may not realise the value contained in it and so not all the labour which has been needed for its production. Competition on the market decides the socially necessary labour time required to produce and realise the value of a commodity. Profitability varies for different producers, but through competition there is a tendency towards an average profitability. So the price of a commodity will tend to be set by the cost of production plus the average rate of profit across the economy. The value contained in a commodity is thus modified into a price of production. First, the idea that state ownership does away with the capitalist nature of the productive forces is false. Were it true, large parts of the Global North would already count as non-capitalist, since big sections of the workforce in many such countries are employed by the state. Indeed, Carchedi and Roberts appear to partially agree with this point. Writing about China, they argue: Callinicos, Alex, 1991, “Marxism and Imperialism Today”, International Socialism 50 (spring), www.marxists.org/history/etol/writers/callinicos/1991/xx/imperialism.html Capitalist imperialism grows out of the accumulation of capital as the ­intersection of competition between capitalist states and capitalist firms. It is a global system of powerful states competing for domination of the world system using all the economic, military and political means at their disposal. Lenin, analysing capitalism at the start of the 20th century, explained the origins of the First World War as the outcome the conflict between rival imperialist powers. 23 Over time, the effect is for the quantity and capital cost of the means of production to increase relative to the labour required to produce goods. Marx calls this shift in the balance of machinery compared to labour, a rise in the organic composition of capital. The problem for capitalism is that machinery can only transfer the value already embedded in its own production. It cannot create surplus value; only labour can do that. This means that overall, capital becomes less profitable the higher the organic composition of capital. This is the tendency for the rate of profit to fall. Carchedi and Roberts discuss this law, and the various countervailing factors which act against it, in detail, but also refer to the increasing volume of evidence showing its empirical validity across economic history.

Brilliant Marxian theoretical and empirical analysis ... as if updating Ernest Mandel’s Late Capitalism for the 21 st century' Marx’s law has a double edge. Even if the rate of profit falls, it is perfectly possible for the mass of profits to rise, and this can keep investment and production rising. Nonetheless, a persistently falling rate of profit will eventually slow and reverse the rise in the mass of profits. When the rate of profit falls to the point where the mass of profit goes into decline, this is a tipping point that opens the way for crisis. Profitability falls first, then investment falls. As profits go down, less is left for investments. Following an examination of the data, Carchedi and Roberts argue: Notes: This figure plots the share of total top income in the form of wages, business, and other capital income for each income bin. Note that “Other capital income,” beyond “Wages” and “Business,” does not play a significant role until roughly the top one-tenth of 1 percent income bin. The speed at which things are changing is remarkable. The Financial Times recently reported that physical money accounted for 60 per cent of transactions in Britain as recently as 2008, but now makes up only 15 per cent. 10 States are ­responding by considering creating their own digital currencies, and there are already moves in the United States, China and Britain to explore the use of digital currencies. A digital dollar would, more than likely, drive out much of the competition.It is very common to associate the law of value with market determination. However, the law of value is not about how individual market prices are formed; rather, it concerns the regulation of competition between capitals through the formation of socially necessary labour time. Marx argued that, when the law of value is operative, “the labour time necessary to produce the products asserts itself as a regulative law of nature. In the same way, the law of gravity asserts itself when a person’s house collapses on top of him.” 35 There are, of course, many differentials in the flow of surplus value internationally between different countries. Thus, Taiwan benefits from a relation of unequal trade against Turkey, while suffering negatively in trade with the US (p.143). This example does emphasise that unequal exchange is only one component of imperialism, and does not describe the totality of it. Nevertheless, China, for the authors, is not an imperialist power, on the basis that it is overall a victim rather than a beneficiary of unequal exchange.

A better understanding of income at top levels is helpful as policymakers discuss the ramifications of, and responses to, income inequality The association of planning, ownership and control by the state with a move towards socialism is very common across the entire political spectrum from left to right. Apparently, the greater state ownership and planning exists, the more progress towards socialism has been achieved. Nationalisation itself is seen as progressive. This is a conception of socialism that has been rejected by the political tradition associated with this journal, which has always argued that a transition towards a socialist society requires direct workers’ control over the economy. The authors conduct a number of other tests to determine the value of human capital at high-income levels, including whether most top earners are simply children of 1-percenters living off an inheritance, and they find that more than three quarters of top-earning children are “self-made.”Applying all this to the post-war period, the inflationary period of the 1970s was therefore not caused by a ‘wage-price spiral’, as the mainstream insists. Rather, the cause lies in the interaction of constant capital growth and combined purchasing power growth (CPP, including profits and wages). While ‘total value rises at 8.7 per cent, constant capital grows by 19.2 per cent and the CPP by 8.5 per cent … Thus, the CPP falls as a percentage of total value, but given that total value grows strongly, the CPP rises percentage-wise. This explains inflation’. While the income of public C corporation owners is well known, most of the very rich earn pass-through income that is never made public: 69 percent of the top 1 percent and over 84 percent of the top 0.1 percent earn pass-through income. This raises the question: how much of this pass-through income represents labor income or just capital income accruing to idle owners?

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