Anti-Capitalist Chronicles: Where Does Profit Come From?

welcome to uh the anti- capitalist Chronicles which is a production of politics in motion uh now today I want to take us back to the very origins of a lot of the argument about Capital by asking the question where does profit come from and what are the consequences of profit making [Music] uh what we really have to look at here however is a recognition that profit means there is more at the end of the day than there was at the beginning of the day that therefore we're not going to be looking at a cyclical process in which uh labor power is put to work uh to produce a commodity which is then taken to Market and sold for money which then comes back into the system to expand it's not simply the circle that we're looking at we're looking at a spiral that is we're going to be looking at a process which is in constant expansion and we'd have therefore to ask the question where do the expansion come from and how is the expansion uh constructed uh Marx answers that question in a very simple way he says at a certain point well when the capitalist goes upon the market and buys Commodities to make a new commodity which is going to be then sold to profit when the when the capitalist does that they have to find on the market a commodity which has the capacity to create more value than it itself has and this commodity is of course labor power you paid labor power the value of Labor power which is the value of the Commodities needed to reproduce the laborer at a given standard of living but you then put the labor to work and they after a bit of covered their own costs of reproduction and you then can produce even more so that let's suppose that the capitalist has prod has reproduced the cost of Labor production uh in uh six hours and if the work works for 10 hours then there's four hours of surplus and that is the origin of the profit so you in a sense got four hours of Free Labor which the laborer gives and that then is the F of or profit making this is a very simple argument and it's a very convincing argument because it says that the origin of profit lies in the exploitation of living labor in production and that is a very simple finding and one which uh carries us a long way into the answer of where does profit come from but there's another step in the in the argument and that step in the argument is to say Well when the capitalist take the commodity to Market to sell there must be an increase in the market capacity that is the market has to have grown as well as the production grown so if you increase production you have to increase consumption so then that makes the question of well where does the excess consumption capacity come from now on this point Marx doesn't bother to actually provide a very distinctive answer he just assumes that there is always a market and he does this explicitly in capital volume one he kind of says I assume all Commodities exchange at their value which means that the market is assured but uh before Marx there was a sort of little discussion went on between the political economists of the time uh around this question uh Ricardo argued that uh there was always a market and that therefore there was nothing to be bothered about on the other hand there was this economist malus who Marx did not like and who most marxists don't like but malus uh did an analysis in his political economy and he raised the following question he said well if uh there is uh to be a market then we have to specify where the market comes from and he said obviously the market cannot be the laborer because the laborer is always going to be paid less than the the product that they send to Market so the the labor is not going to have sufficient uh consumption capacity to provide the market for the expansion the capitalist can't do it either because the capitalist is required to reinvest a lot of the money so that that neither the laborer nor the capitalist can have a uh uh neither the laborer nor the capitalist uh is going to have sufficient consumption power uh to actually pay for the extra consumption which is required in order to complete uh the the value of the commodity on the market so what that then needs malus to do is to say so uh the only way in which I can square this whole thing so that the cyclical nature of Capital circulation can become a spiral the only way I can square it is to create uh a class of people whose uh identity is fixed around consumption in other words uh we we need to we need to imagine that there are consuming classes around now who are the consuming classes well you have the monarchy you have the state officials you have the Lords you have the priests you have the lawyers all of those kinds of things so there's a a bunch of people who do not produce any value but who consume Val value and and so malus kind of said the conspicuous consumption of that segment of the population is a very important condition for the reproduction of capital because that's the only way in which the extra amount which is required uh to cover the profit can be found in society now this is very strange because on the one hand amalthus is arguing that the poor people are poor because they reproduce too much they uh have too many children and they create overpopulation and so the surplus of Labor is there and therefore the surplus of Labor uh is such that uh um we end up with mass poverty so malus conveniently constructed a society in which the poor people were destined always to remain poor while the rich people were actually required to consume up to the Hilton as much as they could conspicuously uh as Vin would later on talk about the the the consumption habits of the Leisure Class so what what malus Justified was hyper consumption on the part of the consuming classes and that is the only way in which uh Capital could keep on expanding it would have to expand production and it would have to expand consumption and the expansion of consumption had to be uh independent of what what is going on in terms of the actual nature of production so this was malus's solution now Marx obviously uh really didn't like that solution and so when he talks about the way in which malus does this uh he kind of mocks it and says no that's not not it but on the other hand Marx doesn't actually uh set up an answer that question of where does the extra consumption come from which is going to actually found the make the profit realizable in the market uh and allow the spiral form of accumulation uh to proceed uh so Marx doesn't take that up uh and he assumed that there was not a problem um at various points however he sometimes does come back to the idea that there may be consumption classes around who play a very vital role now this of course argument of malus was very much uh opposed by Ricardo because Ricardo really couldn't stand what he called the parasitic upper classes who didn't make anything and who simply consumed things and in fact they were a drag on society so Ricardo was trying to get rid of those upper classes who were super consuming and malus was saying well if you got rid of them uh there would be a terrible situation in which there would not be enough uh demand in the market uh and you would get a crisis of of capital so you have two um of the great figures of classical political economy on our opposite side around this question is where does the Market expansion come from Ricardo saying we you don't need that it's just always taken care of and marks following Ricardo but Mala saying if you don't have this there's going to be a crisis and it's going to be a crisis of underc consumption or overproduction however you want to to to call it and uh Ricardo started to refer to malus and rather uncharitably as having this General glut theory that there was a constant tendency towards over over production or underc consumption and that that was there going to be the give rise to crisis and Ricardo said that's that's all nonsense and so the ricardian economics was to say that that would not and could not possibly occur uh malus saying that a crisis was bound to occur uh if you actually restricted uh what was happening in terms of uh the consuming classes so that was the situation and it remained the situation through right through uh much of the 19th century but then later on uh there came uh the writings of uh Marxist Rosa Luxembourg and Rosa Luxembourg wrote a wonderful book called The accumulation of capital in which this whole question of where does the expansion come from from on the at the moment of consumption she was perfectly happy with the argument about production where does the uh consumpt expanding consumption come from and she sort of looked at all things and and followed malus and said Well it can't come from the workers it can't come from the uh it can't come from the the capitalists uh after a while there won't be sufficient uh extra Consumer Power amongst the consuming classes to go on forever uh that after all of the gold and the silver has been melted down if you want to do that and so on the consuming classes will not not not really have the capacity to to to to perform the the task that malus suggested so uh Rosa Luxembourg looked at it in lots and lots of ways and came to one very simple conclusion and the very simple conclusion was that it came from outside it came came from Trading between capitalist social formation and non-c capitalist social formations and she was particularly interested in the China trade and that in in a sense uh her answer was that some kind of imperialist uh solution to this problem would be that uh you would sell your Commodities uh not to the consuming classes uh but to non- capitalist classes uh and non- capitalist social formations like China in the 19th century and the Chinese would pay for it with uh silver or something of that kind so she set up this whole idea uh that uh the answer as to who where the extra demand is going to come from came from international trade and from imperialist structures of international trade and this explains something which is I think uh just a historical marker that in the early 19th century Britain traded with India which of course is a very large Market but uh uh the trade with India was organized through a monopoly trading organization called the East India Company and the East India Company controlled all of the trade which meant that the cotton manufacturers didn't have a market in India because theyd had to go through the East India Company but the East India Company was abolished I forgotten exactly when 1830 1840 something like that and when that happened that meant that the India market was opened up so that uh the Manchester industrialists could sell their cotton cloth uh to the Indian market so that was the and and and then further on of course China is opened up by sort of violent uh opening and uh the China trade became important and the China trade was uh then then part of the answer to this question of where does the Surplus consumption come from but then the question was how do the Indians and the Chinese pay for it and the answer was well the well the Chinese had could had a lot of silver and they could pay for it with the S silver but in order to get the silver you had to come up with a trade with China and actually what the what what happened was the Indians were actually uh encouraged to grow opium and to sell opium to China to get the silver so that the silver would come from China and go to India and then go from India to London so that uh that was the way in which this this this this question was uh was resolved in the middle of the 19th century uh but Rosa Luxenberg at the end of the day kind of said yeah but what happens when uh say uh China goes capitalist what happens when China is uh uh China's silver is exhausted or something of this kind so that imperialism was a short shortterm answer to the question of where it came from and at certain point uh the if if if the malthusian answer which which was that the the capacity of uh the consumer classes was exhausted internally uh and then externally uh the capacity to to do the trade in such a way as to satisfy the the expansion of consumption that also would be exhausted but that would that would then lead to the end of capitalism so her argument was that capitalism will end when imperialism ceases uh which was a convenient argument in many ways because imperialism was going gho when she was writing and of course imperialist practices continued right to the present day so the imperialist answer is still still possible but the imperialist answer is becomes a little bit limited I mean China has now gone capitalist India is increasingly going capitalist uh so that uh what we find is that the capitalist demand for the new market is no longer the same size as it was in Marx's day it's now a humongous demand which needs to be taken care of and the big question is how is it going to be taken care of uh given unless unless you run into crisis and in the N 1930s those a Cris that was generally described as a crisis of underc consumption that the consumer power was not sufficient enough to absorb the surpluses so that uh the 1930s led to a very diff very different sort of way of assessing this problem of where where does the extra and excess demand come from and here we have a I think a extremely very extremely interesting answer and the answer is oh uh yeah well if uh I as a producer uh go into the market but I haven't got enough money to buy the the Commodities I need to to take into production then what do I do well I borrow money I borrow money to get those Commodities which I need and I put them into production and I then take them to Market and what happens if I get to Market and nobody has enough money to buy the Commodities well maybe I can lend them some money or they can borrow money uh to actually uh deal with this so in in a sense what then happens when all the other possibilities are exhausted you're left with the one big possibility which is you do it on credit you do it on the Never Never and the credit system then becomes important and as marks points out credit is in effect a demand upon future labor so in a sense it's the demand for future labor which is going to be actually realizing the value of past labor so actually the whole dynamic of a capitalist economic system is dependent then upon credit creation Now if you start to look and what has happened you historically you would find that those other two possibilities the internal uh capacity for for for consumerism the imperialist capacity for for for for consumerism uh if those two things are are are still really very possible then the need of the credit system is very low but if the system is expanding very rapidly and very fast and now has huge uh increase in in demand to to to engage in Mass consumption to parallel mass production that then when that happens almost certainly you're going to increasingly rely upon credit and if you look at the data you'll find that there's been huge increase in credit creation and and credit use since about 1980 and one of the thesis I'd like to suggest is to say well the internal demand was exhausted or was very static of stationary the imperialist demand which is there was still expanding but not at the same rate as it as it had been in the 19th century and when we get to the 19 the late 1960s 1970s the amount you need in terms of uh say imperialist U uh uh trade the amount you need there is now getting so large and the capacity to furnish it is now getting much less and around 1980 of course China starts to become a big producer and raises the question again of who's going to you know who's going to uh find the consumption pattern which is going to satisfy the for the the Chinese development of of capitalism and other parts of the world start to become you know very capitalist organized and so the big the the the big question was therefore after 1980 you start to rely increasingly upon uh the credit system and Marx has some very interesting kind of comments about this fragmentary comments he never had a complete analysis of it but one of the things he pointed out was you know there comes a point when the accumulation of debts actually begins to appear as if it is the accumulation of capital so after 1980 uh increasingly the world has to rely upon an expansion of the credit system to accommodate the answer to the question of where is the extra demand coming from now of course there are still residual elements of uh historical accumulation of wealth that could be monetized and turned into uh some sort of uh uh help to to to consumerism uh for instance uh it would be possible to melt bu down a lot of the silver and gold plate in the Catholic Church uh uh something of that kind and I have seen some uh points where where where priests have done this sort of thing in order to have enough money to live on so there is a there are these residual pools of demand of this kind which can be called upon but they're very relatively small compared to the requirements uh and uh the same can be said of the imperialist uh is it's not as if imperialism has disappeared know in fact there's a good deal of draining of of of wealth from one part of the world into the other but now you have a situation where uh China was once uh uh kind of a victim of uh this kind of process of imperialist extraction China is now a great producer and that then poses the problem of how China is going to find enough demand upon the market for its own increasing output so so so we are now in a situation where the increasingly the the burden lies upon an expansion of the credit system in order to to uh uh realize the value uh of the expanding consumerism which is required uh to keep the accumulation of capital going so that then explains why it is that Marx will talk about the accumulation of wealth appearing as an accumulation of debts and how it is that the de the financial system has has leaped ahead in terms of the logic of the system now this is just one of those points where many people of course will remark upon the increase of financialization uh some uh after 1980 or so uh but I want to argue that there has been increasing financialization after 1980 or so and that is uh created uh a different kind of logic to the Dynamics of capital in which more and more burden is placed upon credit system and the expansion of the credit system in order to keep uh profit making uh uh viable and so the exist the whole existence of capital uh which in the past depended upon these other sources by which uh uh the expansion of consumerism could be funded uh they are now effectively exhausted and we're exclusively Reliant upon the expansion of the credit system and there is no uh of course accident uh that most of the crises which we've been having over the last 20 or 30 years are increasingly financial crisis crisis of the credit system in which keeping the credit system in balance with the capacity uh to finance uh the consumerism uh becomes one of the crucial features uh where the the the central banks have to therefore play a very crucial role in the monitoring and and the development of uh of Credit Finance so what I'm trying to say here is that an answer to the simple question of where does profit come from and how is the expansion of profit uh funded a simple answer to that question uh directs us to an understanding of our current uh dilemma with which is how on Earth can this credit system keep on growing and growing and growing and here of course there is one advantage and that is there is no inherent limit to the creation of of debt you can in fact create trillions and trillions and trillions and trillions of dollars of cred if you want what that would mean and how it relates to actual uh production practices is another question but what we're into right now is a dynamic which is ineffable and it's a dynamic which there's no way we can escape from the requirement that we expand the credit system at infinitum in order to keep the system which runs on the basis of profit seeking as the basic economic model uh in which economic life is going to be [Music] determined

Channel: Politics In Motion

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Id: hNaehmzZgBc

Length: 25min 28sec (1528 seconds)

Published: Wed Nov 01 2023