By Michael Roberts
The joint conference of the International Initiative for the Promotion of Political Economy (IIPP), the French Association of Political Economy (AFEP) and the Association of Heterodox Economists (AHE) brought together a large gathering of radical economists in Lille France last week. The theme of the conference was Envisioning the Economy of the Future and the Future of Political Economy.
There were hundreds of presentations on various themes: World Economy, Economic Thought, Environment, Financialisation, China, Social Capital, Beyond Capitalism; Neoliberalism and Marxist Political Economy. Of course, it is impossible to cover all or even most of the papers presented, particularly as sessions often clashed with others. So, as usual, for such conference reports, I shall just discuss papers in sessions I attended or where the presenters have kindly sent me their papers.
The word Financialisation once again dominated many sessions. Readers of this blog will know that I am very sceptical about whether this concept adds much to our understanding of modern capitalist trends; indeed it may even confuse on many issues. Does it simply mean that the financial sector has grown in importance quantitatively in the structure of capitalism in the 21st century; or does it mean much more; that capitalism has entered a fundamentally new stage in the capitalist mode of production? Those who push financialisation seem to be in the latter camp: finance is where we must look for the key fault lines in capital and not in capital overall. If so, I disagree. But whatever it is, ‘financialisation’ seems to dominate the research of many radical scholars.
Marx’s theory of value and the law of profitability
I wanted to attend these ‘financialisation’ sessions to get a better idea of where the concept was going but in the end I missed most of those papers, so I shall return to the discussion of ‘financialisation’ in future posts. In the meantime, here are few papers and sources on the subject.
On Marxist political economy, Nick Potts of Southampton Solent University and a leading advocate of the Temporal Single State Interpretation (TSSI) of Marx’s theory of value and law of profitability, presented an incisive critique of those scholars who have argued that creative industries like advertising require a revision of Marx’s value theory based on the value-form interpretation that value is only created at the point of exchange or sale.
Potts, correctly in my view, denies that advertising and marketing sectors produce value. They are activities that appropriate value at exchange from those activities that are productive of value. Under capitalism and production for the market, advertising, branding, marketing, copyright, etc may be necessary for individual capitalist companies to gain market share and profit, but they are still unproductive of new value. In the same way, through the process of international exchange, imperialist countries can appropriate extra value transferred from dominated countries that produce value: “if we simply think advanced countries produce all the value they appropriate, then we cannot see how the success of the advanced is built on capturing value (robbing) from everyone else ie we would thus make growing global inequality appear to be ‘fair’”.
Transfer of value from poor to richer economies
Indeed, the nature of the economics of imperialism and the way in which there is a transfer of value from the poor capitalist economies with lower levels of technology to the rich imperialist economies has been greatly neglected by Marxist economists in the recent period. The discussion on imperialism has centred more on political and military power, or on ‘forced dispossession’ of natural resources or on the ‘super-exploitation’ of the poorest workers worldwide by transnational corporations. But Marx’s analysis of the transfer of value through trade, the hidden ‘unequal exchange’ of value beneath the apparently equal exchange in trade, has not been analysed or quantified, until recently.
Now Lefteris Tsoulfidis and colleagues at the University of Macedonia have produced results using world input-output tables to show how value is steadily transferred from the rest of the world to a small group of imperialist countries. And they have measured the unequal exchange between Germany and Greece in Marxist value terms.
And at the Lille conference, Andrea Ricci, Assistant Professor of Economics, Department of Economics Society and Politics, University of Urbino, presented a new paper (which is also published in the latest Review of Radical Political Economics) Ricci unequal exchange, in which he develops a model to measure unequal exchange in international trade. Again, using world input-output tables like Tsoulfidis to calculate hours of labour in trade for 78% of world export, he shows that there were positive transfers of value to the top imperialist economies of around 2% of GDP a year from the rest of the world.
Two things struck me as important in this analysis. First, that imperialism is concentrated in just a few top ten economies, with the US in the lead (taking $195bn in 2007) while everybody else is in deficit, including the so-called BRICS that are often considered as ‘sub-imperialist’ (ie both subject to transfers to the imperialists but gaining transfers from those lower down the pecking order). That does not seem to be the case: China had a negative UE value transfer of $382bn in 2007; India $189bn, Brazil $63bn etc). China is not an imperialist economy on this definition.
The economics of imperialism
G Carchedi and I are working on a paper on the economics of imperialism that covers measuring unequal exchange in trade, factor income flows on the current account; and foreign investment on the capital account. We reach similar conclusions to Ricci in that imperialism is alive and well and inequality between the imperialist economies and the rest is just as wide as it was 100 years go. Value produced in the dominated countries get appropriated and transferred to the imperialist economies in ever-increasing amounts.
The same theoretical theme and empirical analysis on the transfer of value through trade from the low-technology, high labour intensity economies to the high-tech, low labour input economies, a la Marx’s transformation of values into prices model, was taken up in another session by Ivan Rubinic within the context of the Eurozone. Here was a trading area using one currency and free movement of labour and capital – an excellent laboratory test for Marx’s theory.
Rubinic and Tajnikar (Rubinić and Tajnikar – Labour Force Exploitation and Unequal Labour Exchange as the Root Cause of the Eurozone’s Inequality) use a model that compares the ratio between national income and value added for the each Eurozone economy for the ten-year period 2004-13. If the aggregated national income is higher than the aggregated value added, that implies an appropriation through unequal transfer from other Eurozone economies. They find that 10 of the 18 EZ economies suffer a negative transfer to the other six (led by Ireland with its American-owned tech industries and core Europe). In my view, it is another validation of Marx’s theory that value is transferred through trade from the low-tech economies (the laggards) to the high-tech economies (the leaders); the higher the country’s capital-labour ratio, the more net transfer of value in trade.
The question still unclear is whether unequal exchange is the result only of differential technical composition or organic compositions of capital between trading nations or is due more to monopoly barriers and pricing. In other words, is it due to ‘differential rents’ or ‘monopoly rents’? Ricci is not clear on this. Also, much trade (one-third) is within companies across borders and the value transfer there is not captured.
The productivity puzzle
The argument that monopoly power is the main reason for unequal appropriation of profits among capitalist entities can also be considered within a country. Armagan Gezici presented a paper (Concentration and Technology Gezici,July 2019) that dealt with whether rising concentration in sectors was the explanation for slowing productivity growth in the US economy – the so-called productivity puzzle. Gezici poses it thus: “A crucial question is why the relationship between concentration and productivity turned negative throughout the 2000s. A possible explanation is that firms did gain market power in the late 1990s due to productive investments in technology; once they grew large and well-established, they relied on their market power, monopoly rents, and practices rather than productive investments to keep their superior positions.” Gezici’s conclusion is in the context of the US economy; but it also suggests that imperialist economies in general may gain their hegemonic position in the appropriation of value and the accumulation of capital through their superior technological position, but then sustain it through monopoly practices.
Movement in the rate of profit in a capitalist economy
This brings me back to the hoary old subject of measuring the contributions to the movement in the rate of profit in a capitalist economy. If the rate of profit declines, is this due to a rising organic composition of capital (OCC) outstripping any rise in the rate of surplus value or exploitation, a la Marx; or does OCC play little role and it is all down to the class struggle between wages and profits (profits squeeze)?
Erdogan Bakir presented some new research on the US economy. He found that in the post-war period, the US rate of profit fell an average 0.3% a year (I too find a similar result). Erdogan decomposes that fall among whether workers increased wages at the expense of profit share (offensive), or merely defended wage share as profitability declined; or whether the rate of profit fell secularly because of a secular rise in the OCC. Much of the fall depended on the ability of labour to defend its wage share in new value but also “changes in the organic composition of capital had secondary but still significant effect on the profit rate over the full period. 39 percent of the decline in the profit rate over the full period was accounted for by the rising organic composition of capital.”
The rate of profit was also the subject of the session on the UK that presented a paper on the UK rate of profit since 1855. The UK rate of profit and British economic history is also published in World in Crisis, jointly edited by me and Mino Carchedi. In my paper, I argued that Marx’s law of the tendency of the rate of profit to fall helps to explain the development of British capitalism since it became the hegemonic capitalist power in the mid-19th century at the time Marx himself was writing Capital, his fully fledged analysis of the capitalist mode of production, based on the reality of the UK economy.
From the analysis of the movement in the rate of profit from various sources, it is clear that there was a secular decline in the UK rate of profit over the last 150 years, supporting the predictions of Marx’s law and paralleling the decline of British imperialism.
The most difficult times for British capitalism
The periods of steepest decline in the rate of profit matched the most difficult times for British capitalism: the long depression of the 1880s; the collapse of British industry after 1918; the long profitability crisis after 1946. But there were also periods when profitability rose: the recovery after the 1880s in the late Victorian era; the substantial recovery in the 1920s and 1930s after the defeat of the British labour movement and demolition of old industries during the Great Depression; and the neo-liberal revival based on further dismantling of the welfare state, the privatisation of state assets, the defeat of labour struggles and, most important, a switch to reliance on the financial sectors as Britain increasingly adopted rentier capitalism The UK economy now lives or dies with the health of the global financial sector and its associated business, legal and commercial services.
I have missed out many key discussions and papers on the nature of China’s mode of production (capitalist, state capitalist or not?), on the latest research in post-Keynesian economics; on developments in Brazil, Mexico; and also the plenary sessions on the future of political economy, the environment; the future of the EU etc. But in this post, you will only read about my own particular interests.
July 8, 2019
For the original article, with charts and hyperlinks, go to:
https://thenextrecession.wordpress.com/2019/07/
