An enquirer describes our piece on Major Douglas as "..at best vacuous and at worst an incompetent write up which damages the progress for reform of the capitalist system. Something you do not want, hence your vacuous write up." Hopefully, most readers will be aware that the Socialist Party is not actually opposed to reforms as such - some may benefit our class in a minor but often temporary way - rather reformism. With regard to Major Douglas, we are uncertain if our enquirer is referring to this essay from 2003 or The Douglas Scheme. Either way, judge for yourselves. We say supporters of social credit have a vacuum to fill as far as evidence is concerned.
Marxian economics constitute a direct refutation of the illusions up on which Social Credit doctrines are premised. Not only did Marx demolish the "credit creation" theories but this was already a hoary fallacy when John Stuart Mill disproved what he described as this "confused notion" in a work written before 1847 and published' in 1872. The notion that an insufficiency of money was the cause of sluggish trade was criticized by Sir Dudley North in 1691 before the development of the modern credit system and this was quoted by Marx.
We challenge anyone to provide the evidence for attributing to Marx the claim that the recurrent cause of real crises is to be found in the alleged defects of the monetary system.
Marx's major works were devoted to a study of the capitalist system of commodity production, to an analysis of the commodity (a thing for sale), the form which the wealth of capitalist society assumes. The common quality that renders commodities commensurable, and therefore exchangeable, is the socially necessary labor time incorporated in them, which determines their value. Marx demonstrated that labor power itself is a commodity. As the producer of all commodities, including itself, it is the sole creator of value. But most significant of all, labor power was shown to possess capacities apparently greater than that of any legendary conjuror, inasmuch as it performs the unique feat of producing values greater than the sum of those it itself contains. Marx revealed that this apparent paradox was achieved by virtue of the fact that what the worker received was not the value of his labor, as had been heretofore supposed, but the value of his labor power, a distinctly different magnitude. The value of his means of subsistence, which is equivalent to his wage, is less than the worker can produce by means of the physical energies expended and which these means renew. The worker produces values equivalent to his wage in only a fraction of the time he has contracted to work for. This excess of working time beyond that necessary to reproduce his labor power, Marx designated as suplus labor time, and the values produced therein as surplus values.
That wages, therefore, must necessarily only represent a portion of the goods the workers produce is not due to any supposed defect in the monetary system. Rather, it is the very nature of the wages system that ensures this. Marx's major contribution to political economy was in disclosing that it was this commodity nature of labor which determined that profit and capital is produced by the unpaid labor of the workers.
It is as we shall see, an inadequate conception of the function of money and its relationship to commodities that underline Social Credit proposals. Money was shown by Marx to be, like labor power itself, also a commodity. Gold, or any of the previous materials that assumed the money form, did so, first of all precisely because they are commodities, and hence depositaries of exchange values. One of these commodities by general usage and agreement becomes the money commodity. By virtue of having the attribute common to all other commodities, of being the embodiment of so much labor time, the money commodity thus becomes the general equivalent and measure of value of all the other commodities.
Money emerged and acquired its function of medium of circulation as a product of the historical development of exchange. The primitive inter-tribal direct barter beginnings of exchange was only of an occasibnal and non commodity nature since in primitive society goods were not originally produced for exchange, or sale. But occasional barter between one tribe and another developed into a more sustained form and provided an impetus to the development of the private property institution. Goods became more and more produced for the purpose of exchange, rather than for the personal use of the owners.
The beginnings of commodity production and exchange, the production of goods for sale, demanded the use of one commodity as the universal equivalent which would serve as the translator of the values of all the others.
It will be seen then that exchange did not originate with money but that the converse is true; i.e. that money arose as a medium of circulation only as a
result of the circulation of commodities.
At this point let us allow Marx to speak.
"Although therefore the movement of money is merely an expression of the circulation of commodities it seems as if conversely the circulation of commodities was only an outcome of the movement of money. On the other hand money only has the function of a medium of circulation because it is the objectivized value of commodities. Consequently, its movement as circulating medium, is in actual fact only the movement of commodities under changed forms." (Capital, vol. 1 page 95, Eden and Cedar Paul edition.)
Purchasing power resides in the goods which when produced belong to the capitalists. Gold, which was the actual material medium of circulation in earlier times, was with the rise of banking superceded in that function by the development of tokens and of paper representatives, which were convertible into money. Today banknotes and other paper are no longer convertible into gold. Nevertheless gold remains the money commodity since it still functions as the measure of value and as world money.
The commercial credit which the capitalists engaged in reproduction extend to one another by means of the promises to pay, constituted by bills of exchange and other certificates of indebtedness, is the basis from which the modern credit system developed. Banks are the intermediary agencies which facilitate the exchange of goods between the various owners, whereby one set of ccmmodities is sold for another. They act as middlemen between buyers and sellers who are each both borrowers and lenders in turn, since every seIler must also be a buyer before he can seIl. The seIler on depositing the purchaser's check is in reality ordering the bank to collect the debt; to transfer this amount from his debtor's account to his own. When his own debt to another seller is due his check issued to this creditor is in essence an order on the bank to transfer the stipulated amount from his own account to that of the creditor's.
"These mutual claims of indebtedness represented by bills of exchange or checks are balanced either by the same banker, who merely transcribes the claim from the account of one to another, or by different bankers squaring accounts with each other."
Checks, being orders to pay money are therefore certificates of indebtedness. Banks are institutions for the transference of debts and purchasing power which arise from the sale of goods and services. The issuance of a check is the conversion of commodities into a form of credit money and if cashed, into another form of money, banknotes. Thus we see, contrary to Social Credit dogma that banks cannot create credit from nothing since it is the creation and sale of goods that create credit. Purchasing power derives from the ownership of goods and the consequent command of services and must therefore always be equal to the totality of goods on the market.
The bank too occupies the dual position of being both debtor and creditor since it lends out at a higher interest rate the great part of the deposits it has borrowed at a lower rate. This is generally the source of its profits.
The total product of society (minus that portion necessary for the replacement of used up means of production) can be said to resolve itself into income of wages, profits and rent (including money rent) although value is not determined. by these elements of income. The A plus B theorem of Major Douglas, founder of Social Credit, is supposed to demonstrate that A payments for wages and dividends, plus B payments for raw materials, bank charges etc., comprise the cost of production, while only A gives rise to income. Therefore, says Douglas, B payments must Iead to a shortage of purchasing power.
But this is fantastic nonsense, aside from regarding dividends as a cost as it can readily be seen that the cost of raw materials has already been included when dividends have been disbursed. Also considering category B it will be realized when viewing the process of production in series that the raw materials of one industry is the product of the previous producers and this product produced the distribution of wages and profits. By adding the cost of production twice and thus doubIing it Social Crediters have certainly merited the description of their propaganda as double talk and this is the twaddle that is passed off as economics. The total income of society can never equal its total product since a part of this product, which represents no profit, must be used to replace the constant capital consumed (means of production). But this does not mean that the result is a lack of purchasing power.
Neither does it cause an inadequate supply of money to circulate the goods produced. This will be realized when we consider the relationship of production between the two great divisions of industry, i.e., class 1 producing means of production, and class 2, producing articles of individual consumption. The revenue (wages and profits) of class 1 are not spent on the consumption of the products of that class but for the consumption goods of class 2.
"On the other hand the product of 1 to the extent that it represents a revenue of class 1, is productively consumed in its natural form by class 2 whose Constant Capital it replaces in its natural form. Finally, the consumed constant portion of the Capital of class 1 is replaced out of the products of this class itself, (which consists of instruments of labor, raw and auxiliary materials,) either by an exchange of the Capitalists of 1 among themselves, or in such away that a portion of these Capitalists can use their own means of production." (Capital, vol. Ill, page 976, Kerr edition. )
In conclusion, as far as Marx's views on crises is concerned, he had the following to say after mentioning the dependence of the reproduction of productive capital on the consuming power of the non producing class.
"The last cause of all crises always remains the poverty and restricted consumption of the masses as compared to the tendency of capitalist production to develop the productive forces in such away that only the absolute power of consumption of the entirø society would be their limit."
The working class's claim on the wealth it produced is restricted to the limits imposed up on it by the commodity status of labor power not by any supposed insufficiency of medium of circulation.
CARPONIOUS
(This is an abridged and slighty modified version of an essay which first appeared in The Western Socialist of July-August 1953)
7 comments:
You are simply misrepresenting social credit and A+B.
Social credit is actually all about addressing the problem of the surplus value.
Marx, of course, was right that the total value of products produced in the economy is always greater than the costs put in (in wages or costs for raw material etc that ultimately winds up in someone's pocket). Obviously, no one is going to bother making products if there is no profit. You want to put in five dollars but be able to sell it for ten.
But that's just the problem. In a sense there are two values of something: there's the cost (determined by how much labor, materials, etc went into it). And then there's the price, determined by supply and demand (Marx is somewhat absurd here: it's not just labor that creates value, it's desire and scarcity. If products fell from heaven with no labor...people would still want them and be willing to pay for them.)
A+B isn't ridiculous. Indeed, it's basically just a formulation of surplus value: the fact that the costs (including wages) of production are less than the value produced. "B" does not represent payments for raw material. B represents the surplus value that arises because the average supply-and-demand-set price is higher than the average costs put into products (ie, the sum of the supply and demand prices of the constituent elements of the product including labor).
What Marx was wrong about is the manner in which the surplus value is stolen from workers. Indeed, stolen from all of us.
He had some notion that the problem lay in the ownership of the means of production and that for some reason the workers should own them and that by not having to give a capitalist's share to someone else, they'd have the full value of their work.
But this is not really where the exploitation lies. The ownership of capital itself represents an accumulation of labor value by the owner or his rightful ancestors, and his share for providing the means (machines, tools, etc) without which the laborer could not produce...is perfectly just. This is not where the exploitation lies.
Additionally, even if the workers themselves were the full shareholders of their own means of production (or collectively were collectively so)...that doesn't solve the problem that society's total production will be valued at more than what was put in. Society will spend three million to produce four million worth of goods.
This doesn't change even if workers own the means of production. You still have to ask "where are we going to get the extra million to buy our own production?"
You could have massive deflation, but it seems desirable to keep the value of money stable. Currently the "gap" is filled by credit. The very existence of credit proves A+B: if society really were distributing (as wages, costs, etc) enough to buy all its production each year...why is there an increase of the money supply through credit at all?? Shouldn't what was paid in be enough?
But it's not, so we close the value gap through new money to represent the new value. It makes sense: there is surplus value, so there is new money to represent the new value (assuming you maintain a steady proportion between total money and total value).
The problem is we create this money as a debt! And ask for interest on it even though it's created out of nothing.
The workers SHOULD indeed be getting the surplus value that they aren't currently. But it's not the capital owners taking it from them. It's the bankers.
The surplus value should be distributed to all citizens each year in the form of a dividend and/or price rebate representing the new value created with new money.
Instead, private bankers have for some reason been given a monopoly on monetizing the new value, and then charge a fee (interest) for doing so...essentially requiring that we pawn our own production in order to buy itself.
This, usury, is thus the location of the exploitation and the concentration of the surplus value in the hands of a few.
It seems you, yourself, fail to understand Marxian economics.
"by not having to give a capitalist's share to someone else, they'd have the full value of their work." i suggest you re-read Gotha critique since he explains why the worker cannot get the full value.
Surplus Value is not the difference between the cost of production and the selling price. Surplus value is the portion of wealth remaining after paying wages, cost of raw material and of machinery used up in the given time. But this as a rule undergoes further deduction for rent for the land, interest, and rates and taxes. The portion of the surplus value that remains is the capitalist's Profit. Profit, therefore, is only a part of surplus value.
Your example that manna from heaven proves Marx is wrong is of course ridiculous...fresh air is free ...however if it is transformed into a can by labour and sold in polluted cities then the price is determined by the labour.
Inflation is caused by government central banks printing too much money and the reason is to balance its books through Keynesian borrowing principles.
The ownership of capital itself represents an accumulation of labor value by the owner or his rightful ancestors, and his share for providing the means (machines, tools, etc) without which the laborer could not produce...is perfectly just. Really? And Gates acquired his wealth from who?
I could go on but we have the experience of Social Credit provincial governments in Canada to judge its worth which isn't much. http://www.worldsocialism.org/canada/
Other reading
http://www.worldsocialism.org/spgb/socialist-standard/2010s/2012/no-1298-october-2012/social-credit-fallacy
In every crisis because a symptom is financial flow problems, people look at the banking as the cause and neglect the root reason ...unplanned anarchy of production where headless enterprises are at each others throats competing.
"Surplus Value is not the difference between the cost of production and the selling price. Surplus value is the portion of wealth remaining after paying wages, cost of raw material and of machinery used up in the given time. But this as a rule undergoes further deduction for rent for the land, interest, and rates and taxes. The portion of the surplus value that remains is the capitalist's Profit. Profit, therefore, is only a part of surplus value."
Ok, but the rents and all that are someone's profits. Saying this doesn't change my point.
"Your example that manna from heaven proves Marx is wrong is of course ridiculous...fresh air is free ...however if it is transformed into a can by labour and sold in polluted cities then the price is determined by the labour."
No, the price is determined by supply and demand. Yes, of course, the seller wants the price to exceed the labor cost and may try to "build the labor" into their profit margins. But it doesn't always work out that way. Something no one wants has no value and the price will drop accordingly. Labour doesn't make something valuable that no one wants. Something doesn't gain value or go up in price if there is no desire for it, no matter how much labor I put into it. On the other hand, a single work may not have taken much labor, but if they make too few to meet demand...the price will rise.
"Inflation is caused by government central banks printing too much money and the reason is to balance its books through Keynesian borrowing principles."
In general, inflation results from the charging of interest on fractional reserve loans, which requires more and more new money, out of proportion to the increase in wealth, to pay the old debts on money created out of nothing. But the new money is itself created at a debt, so then you need money to pay the interest to pay the debt for THAT new money, etc etc etc.
"Really? And Gates acquired his wealth from who?"
Two points:
1) IF his labor as an inventor and then a manager was valued that highly by the market so to allow such a "snowballing" of his wealth, of his labor building on "the infrastructure" of his past labor in increasingly great production, then that would only be fair.
2) however, under the regime of usury, capital concentration occurs that is the result not of accumulated labor, but merely the con game of "getting something for nothing" which is usury. Not only bankers profit illicitly from their usury, but also their capitalist "allies" who benefit from the investments of usurers and financiers who (for a share) provide them with the means to acquire more capital than they naturally could if the accumulation had to be based only on the snowballing of their own labor.
"I could go on but we have the experience of Social Credit provincial governments in Canada to judge its worth which isn't much."
A provincial government, unfortunately, can't set monetary policy. So their "social credit" was merely sort of aspirational and instead became a hotbed for all sorts of right wing craziness.
Using the social credit government in Alberta as some sort of condemnation of social credit ideas in themselves is as unfair as using Stalin or Mao as condemnations of Marx.
"In every crisis because a symptom is financial flow problems, people look at the banking as the cause and neglect the root reason ...unplanned anarchy of production where headless enterprises are at each others throats competing."
Allowing bankers to have a monopoly on monetizing credit is in itself a problem. Credit is a social good, not a private good, yet one class of people (bankers) are given a monopoly on monetizing it, turning debt into money out of nothing but power, and expecting to get wealth in return for creating nothing but a symbol or ticket.
In my haste i did make a mistake value does not equal price.
Price. What must be given in exchange for something. According to capitalist economic theory, prices are the means for determining the rational allocation of resources in a money economy. But, in fact, prices under capitalism are not intended for the purpose of organising production. The function of pricing is to fix costs with a view to making profit. In practice, costing and pricing are ultimately about calculating the exploitation of labour, enabling the capitalist class to live and accumulate capital from the wealth that the working class produces but does not consume.
Value. A social relationship between people which expresses itself as a material relationship between things. The value of a commodity is determined by the quantity of socially necessary abstract labour time needed for its production and reproduction. Price is the monetary expression of value but can fluctuate above or below value.
I'm not sure whether you went to the link i provided and read the articles but in case you believe it too partisan can i also recommend Derek Wall of the Green Party.
https://amadlandawonye.wikispaces.com/Social+Credit,+Ecosocialism+of+Fools,+Derek+Wall,+Capitalism+Nature+Socialism
Your argument is basically the same as Positive Money in that Positive Money says that banks have the power to create purchasing power that did not exist before and that this causes inflation, the boom/bust cycle and other economic ills. They conclude that what is needed to deal with these problems is to reform the banking system.
The Socialist Party says that this theory is based on a fallacy so that not only is banking reform irrelevant from the point of view of dealing with these problems but it’s also unnecessary from a capitalist point of view and could even make things worse. Capitalism is the cause of the problems wage and salary workers face and must go if these are to be solved.
I also suggest you look into the origins of social credit and see the link between Douglas, his bank conspiracy and his anti-semitism, highlighted by Wall. It seems to me that MMT want to concentrate attention of the evils of finance capital and give industrial capital carte blanche
You say there is a fallacy but you don't say what the fallacy is.
There IS a chronic shortage of purchasing power, otherwise why is there so much debt? If we were distributing enough purchasing power to buy up everything we produced, we would not collectively have to go into debt in the way every Western society now is.
Wage slavery would be ended by social credit's dividend. Workers would get their wages, yes, but they'd also get another amount that would not be tied to participation in production, but rather to the fact that all of us are co-equal heirs to credit as a whole, which is a social good that inheres in society as a whole, not this or that individual.
The banking system allows private individuals to print up money out of thin air, and then expect more than they gave back in return.
I don't see how anyone can't view that as anything but theft. If charge you for doing nothing but authorizing an accounting trick, I've stolen from you.
The article you link to rests on an outmoded notion of A+B. If B is conceived of as "other costs" then it is a fallacy, as other costs wind up as someone's payment eventually.
In reality, B is the new value created by labor. B represents the fact that the total price of goods in an economy will always be higher than the costs associated with producing them (which is sort of the whole point of production: to add value).
It's obvious that you need to increase the money supply as you produce more and more stuff, more real wealth. Otherwise you get deflation; a million dollars buying the production of a population of 100,000 is going to be worth very different than a million dollars being expected to represent the production of 100,000,000 people. Each dollar would have to be worth 1000 times as much! Huge deflation.
To avoid either inflation or deflation, the "proportion" of the money supply to total real stuff, real value, must be kept the same.
The money supply does increase and always would have to unless you had an absolute stasis (which would mean no more progress in infrastructure etc)
The question is HOW it is increased, WHO gets the new money, and whether there is an illogical charge (paying for money with money) associated with its creation.
You yourself repeat the fallacy i your comment. "The banking system allows private individuals to print up money out of thin air"
It has been exposed in numerous articles, just one being
http://www.worldsocialism.org/spgb/socialist-standard/2010s/2012/no-1298-october-2012/cooking-books-loose-talk-about-thin-air
I suggest you use the search facility for others.
Our critique goes back to the 30s when a member as employed by the Union of Postmen was tasked with investigating and Douglas himself was laughed out of a Parliamentary inquiry (as his followers in New Zealand were later to suffer, too)
No need to try and refer me to the latest Bof E report that is said to support the credit myth ..it doesn't despite a few phrases taken out of context see here
http://libcom.org/forums/theory/has-david-graeber-become-currency-crank-22032014
Theft of the worker occurs at the point of production not in the sphere of capital circulation. No Marxist would claim that the level of wages ends wage slavery, this applies to a dividend bonus or a basic income which is now being advocate by both Left and Right wingers
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