Notes on John Smith's Imperialism in the Twenty-First Century

Chapter One: The Global Commodity

12 Companies based in the West such as Walmart, M&S, Primark have gone to enormous efforts to offshore textile production to Bangladesh in pursuit of lower labour costs. According to trade and financial data however, none of these firms profits or government revenues derived from the labour of the workers who made the goods.

All the goods appear as ‘value-added’ in the UK and other countries where these goods are consumed. As a consequence, each item of clothing expands the GDP of the country it is consumed in by far more than the country in which it is produced. to such efforts to offshore textile production to Bangladesh.

The T-Shirt

13 In The China Price Tony Norfield outlines that the enormous profits Western companies such as H&M make are in turn dwarfed by the state’s cut of income tax and VAT.

14 ‘Wage rates in Bangladesh are particularly low, but even the multiples of these seen in other poor countries point to the same conclusion: oppression of workers in poorer countries is a direct economic benefit for the mass of people in the richer countries’

Chapter 2: Outsourcing, or the Globalisation of Production

41 Global outsourcing begins in the sixties and seventies, with the movement of production jobs in shoes, clothing toys and the assembly of electronics to low-wage countries, assisting Tesco, Walmart and others in establishing the supremacy of commercial capital in consumer goods markets.

This shift in the balance of power to the benefit of commercial capitalists increases pressure on producer monopolies to de-unionise and flexibilise their domestic labour force, outsourcing labour-intensive production regimes to low-wage countries.

These profits are re-distributed from industrial to commercial capitalists and passed on to sections of the western working class in the form of falling prices of consumer goods.

42 The outsourcing of the tech industry was also determined by competition between USian and Japanese companies. Outsourcing to Taiwan and South Korea radically reduced US production costs. These economies are often referred to as ’newly industrialising’ which is misleading; it is the most labour-intensive parts of the production process which are being transferred overseas.

Notes on Trade Statistics

43 Trade statistics double-count imported inputs: Bangladesh’s earnings from garment exports include the cost of the imported texiles that Bangladeshi garment workers fashion into clothes. As the share of intermediate inputs in total trade increases this distortion grows larger and statisticians in the WTO and the OECD have had to develop new analytical tools and datasets to account for this distortion.

The UNCTAD’s 2013 World Investment Report estimates that ~28% (5 trillion dollars of 19 trillion in 2010 figures) of gross exports consist of value added that is first imported by countries to be incorporated into products or services which are then exported again, i.e. they are double-counted.

Outsourcing and the Reproduction of Labour-Power in Imperialist Nations

45 Outsourcing replaces higher-paid domestic labour with lower-paid Southern labour in the global south, exposing workers in imperialist nations to competition with southern nations while falling prices of clothing, food and other articles of mass consumption protects consumption levels from falling wages, magnifying the effects of wage increases.

In World Economic Outlook 2007, the IMF reports:

Although the labour share [of GDP] went down, globalisation of labour as manifested in cheaper imports in advanced countries has increased the ‘size of the pie’ to be shared among all citizens, resulting in a net gain in total workers’ compensation in real terms’.

Cost savings from outsourcing therefore benefit workers in imperialist countries. This is an economic imperative for the capitalist classes in the west but is also a political strategy in pursuit of industrial peace.

The Globalisation of Production Processes

46 In the early stages of the industrial revolution, before the widespread introduction of power machinery, the processing of raw materials into goods usually took place in a single factory. Mechanisation spurred concentration and specialisation, fostering growth within national borders of more complex production networks.

For two centuries global trade consisted of raw materials and final goods. Production in the neoliberal epoch extended the links in the chains of production and value-creation across national borders, increasing the role of intermediate goods in international trade either within firms through Foreign Direct Investment or sub-contracting.

47 This is often omitted from mainstream trade statistics, which omit the export of intermediate inputs to low-wage nations for final assembly as well as finished goods destined for consumption by workers. The pace and extent of globalisation is therefore hugely under-estimated.

48 - 9 One way we can get an idea of the extent of outsourcing and offshoring relationships is to analyse manufactured exports from low-wage nations to imperial nations as a whole, which have more than tripled between 1980 and 2016.

In a study published by UNCTAD in 2013 Rashmi Banga found that 67% of the total value-add generated in global value chains is captured by firms in rich nations.

50 Transnational corporations are the prime movers of production’s globalisation, the UNCTAD estimate that 80% of global trade (in terms of gross exports) is linked to the international production networks of TNCs.

Services and the Globalisation of Production

57 Mainstream conceptions of globalisation focuses exclusively on manufacturing and ignores services, regarding the later as a weightless, intangible commodity.

Productive and Non-Productive Labour

60 Marxist value theory maintains economic activities which are not integral but contingent to the production process, such as banking, finance, police and security services, government bureaucracies make no net addition to social wealth; they produce no value, they are forms of social consumption of values elsewhere and are hence non-productive.

61 We need to update our view of services in line with Marx’s perspective. Marx’s view of transportation is that it does not alter the form of the commodity, but only its position.

Financial services and other non-productive, rent-seeking activities which have come to debate the economics of the West have a smaller weight in the Global South (and are in any case largely dominated by Western TNCs).

62 Mainstream economists equate value with value add, which erases exploitation and erases the distinction between productive and non-productive labour. If every price is value then any activity that leads to a sale is productive.

63 In reality the social wealth consumed by non-productive labourers is derived from surplus labour (labour performed in excess of necessary labour) produced by productive labourers.

The distinction between necessary and surplus labour time exists in all modes of production; under feudalism it records the days the serf toils on the lord’s land as opposed to their own, under capitalism it represents the extension of the workday beyond the time needed to replace the value of the basket of goods for which they exchange their wage.

The ratio of surplus to necessary labour - the rate of surplus value - is equal to the rate of exploitation.

This rate can go up by the reduction of wages and it can go down as the number of workers in non-productive sectors increase, which has been the case in Western economies over the past half-century. This puts the onus on TNCs to increase the exploitation of the workforce.

If workers in finance, advertising and security produce no value, are they exploited? As long as workers are required to work for longer than the labour-time required to produce their basket of consumption goods, yes they are. This is independent of the specific way their labour is employed or what sector they work in, whether production, circulation or administration.

We therefore assume all these works endure the nationally prevailing rate of exploitation in common with production labour.

Nonproductive sectors are sustained by part of the surplus value extracted in production; the values consumed by them subtract what is available for profit.

Services and the Productivity Paradox

64 Many service tasks are labour-intensive and are difficult to mechanise, leading to what appears to be stagnant or falling levels of labour productivity in the service sector, as happened in the education, health, auto repair and legal sectors between 1977 to 1997,

By contrast, the rate of productivity growth in manufacturing accounted for the most overall productivity growth in the US economy, releasing labour for redeployment to service jobs or the unemployed, resulting in a relative decline in manufacturing’s contribution to GDP.

The more rapidly labour productivity grows in industry, the more important that industry becomes in sustaining the rest of the economy and society. But this means that industry’s share of GDP and total employment diminishes. This is what lies behind the discourse regarding ‘post-industrial society’.

65 While some productive increases are due to intensification of the labour process and the introduction of labour-saving technology, some of it is due to the externalisation of service tasks, i.e. an industrial firm sub-contracting out labour-intensive services such as cleaning. This raises productivity per unit even if nothing else changes as there is no a smaller workforce.

Outsourcing services overseas raises productivity even more as wage costs have been slashed. This is an enormous part of the reason behind productivity gains.

66 This export-oriented strategy former colonies have pursued were forced on them by international financial institutions, academics and western governments. This has been a conscious strategy employed by Western capitalists to disrupt union organisation and repress wages.

This wage disparity also generates migration of low-wage workers to Western nations; outsourcing and migration are therefore two aspects of the same process.

Chapter 3: The Two Forms of the Outsourcing Relationship

68 Production outsourcing takes two basic forms:

i) foreign direct investment, where the production process is moved over-seas but kept in-house ii) arms-length outsourcing, when a firm outsourcing part or all of the production process to an independent supplier, independent in the sense that the lead firm owns none of it but controls its activities.

Mainstream economists and Marxists have tended to over-rate the significance of FDI because it is the most easily accessible phenomenon from an empirical perspective, but the growth of the latter form renders this approach increasingly anachronistic.

Foreign Direct Investment

70 - 1 FDI can be categorised into four separate types:

i) Efficiency seeking: FDI’s paradigmatic form - outsourcing in order to cut costs

ii) Market-seeking: dominant form in the years before the neoliberal epoch, devised when protectionist barriers required TNCs to move production close to markets - this is the form FDI assumed in Ireland in the postwar era. In contrast to efficiency-seeking FDI this form does not involve the fragmentation of productive processes but their replication in the host country.

iii) Resource-seeking: foreign investment in extractive industries such as hydrocarbons and minerals, but also foodstuffs, ingredients for cosmetics and much else. At arms-length sub-contracting is less evident here because the collection of rents from rich deposits is more straightforward when the lead firm owns the resources.

iv) Technology-seeking FDI: seeks access to scientific or technological knowledge available in the host location.

72 Again we would misunderstand this process looking at mainstream statistics: the extent to which FDI flows between imperialist countries is over-stated by non-productive investments in finance and business, the degree to which it is made up of the accelerating concentration of capital in the form of mergers and acquisitions.

The Profits of FDI

76 FDI going from the West to the West and from the West to the South cannot be equated. Flows of investment and repatriated profit between the US, Europe and Japan are symmetrical, in that they invest in each other, whereas cross-border investment between the Global South and the West are extremely asymmetrical.

The Mysteries of Outsourcing

80 - 1 One reason arms-length outsourcing is more profitable than FDI is that TNCs pay their employees better than local companies do.

Wages in middle-income country TNCs are 80% than those paid by local employers, 100% in low-income countries.

It also externalises direct responsibility for pollution, poverty wages and suppression of trade unions.

82 Increased profits achieved via outsourcing are are not invested in production at home or as FDI and can be vdevoted to leveraging asset values through stock buybacks and generous dividens payments or invested in financial markets to reap speculative profits. Avoidance of FDI in favour of arms-length therefore releases funds for investments and stock buybacks.

The Structure of World Trade

84 Northern firms do not compete with Southern firms but compete with other Northern firms in order to outsource production to low-wage countries. Southern firms compete with each other to sell cheap labour to leading northern firms. N-S competition, when compared with N-N competition or S-S competition is insignificant.

The Index of Complexity

86 - 7 The index of complexity is a measure of the exclusivity and diversity of an economy’s component parts, diversity being the number of products a country exports with a ‘revealed comparative advantage’, that is, where the country has specialised in what it does best at the expense of others.

88 Broad consensus that the loss of competitiveness by peripheral countries in the Eurozone viz. Germany and other core nations is behind the present crisis in the EU:

‘Unable to restore their competitiveness through currency devaluation, their only option is savage cuts in nominal wages, including that part of it received in the form of social wages’

Assymmetric Market Structures: Monopolistic ‘Lead Firms’ in the North, Cutthroat Competition in the South

91 The Index of Complexity’s shows:

‘richer countries are the major exporters of the more complex products while the poorer countries are the major exporters of less complex products…developing country exports tend to be increasingly concentrated in…labour-intensive production processes’

This is another reason why countries in the global South do not compete with those of the Global North.

The race among developing nations to export more dynamic products will more than offset the marginal gains - this inculcates a ‘race to the bottom’ dynamic.

The success of the first Newly Industrialising Countries (South Korea, Taiwan and Singapore) seemed to show the path for other poor and underdeveloped nations

92 The only way for one of these nations to escape this is erecting a barrier to competition, some form of monopoly, against the prevailing notions of how international trade works.

Slow Growth in the South’s Share of Global Manufacturing Value Added

95 The long-running decline in Manufacturing Value Added (MVA)’s share of GDP in imperialist nations is interpreted as indicating a declining importance for manufacturing, in favour of a knowledge economy or post-industrial society, while they have actually been exported. Industry’s contribution to GDP is far greater than the statistics indicate; manufacturing is the source of value consumed by non-productive sectors and misread as their contribution to GDP.

96 We have seen that this is a consequence of capitalists seeking to replace workers with machines or lower-wage workers in the global south: increasing productivity and fewer workers giving the misleading impression that industry is declining in importance as society is becoming more complicated with fewer workers.

Chapter 4: Southern Labour, Peripheral No Longer

102 As a consequence of these off-shoring activities, 83% of the world’s manufacturing workforce lives and works in the Global South, not only becoming more numerous but becoming more integrated into the global economy, magnifying their importance and social weight.

Informalisation and Social Retrogression

118 This greater degree of integration fuelling a larger and larger reserve army of labour

119 Formal labour markets unable to absorb millions of self-employed, casual, sub-contract, temporary and part-time workers; this too has been a policy dictated by World Bank structural adjustment programmes, part of a worldwide anti-labour offensive.

Chapter 5: Global Wage Trends in the Neoliberal Era

133 Data on wages needs to be handled very carefully, not least because of the distortion introduced by market exchange rates, buying power differing by jurisdiction.

145 - 6 Smith introduces the labour share of national income on this basis, its continuous decline over the past fifty years is one of the most noteworthy feature of the neoliberal epoch.

Labour share = ratio of total employees’ compensation (pre-tax wages and salaries + employers’ national insurance and other social contributions) to total national income.

*Wages are recorded pre-tax because it is assumed that workers receive benefits in exchange for and equal to the taxes they pay to the state. In this sense the state adds no value, which Smith uses as an example of the biases built into bourgeois economics.

Indirect taxes, insofar as they are paid out of labour income, automatically count towards labour share. Resultantly, most of the fraction of GDP that accrues to the state is counted towards labour share, even that part which funds foreign wars, services the soverign debt.

In this way decreasing labour share of income is regarded as its opposite.

Other distorting influences include stock options, super-wages, bonuses, benefits paid to employers and managers.

148 According to the ILO’s World of Work Report 2011, share of domestic income to labour declined in almost three-quarters of 69 countries with available information, this decline is generally more pronounced in emerging and developing countries than advanced ones.

158 Huge wage differentials can be observed between the north and south and this trend persists when we break them down by sector.

Chapter 6: The Purchasing Power Anomaly and the Productivity Paradox

The Productivity Paradox

174 Statistics on labour productivity, obtained by dividing the value added in a firm, industrial sector or nation by its total workforce are highly deceptive. Much of the increase in imperialist nations arise as a consequence of the outsourcing of low value-added, labour-intensive production processes to low-wage countries.

As detailed above, this is because the size of the workforce under consideration has been reduced.

175 There is therefore a ‘ventriloquist effect’. The more labour-intensive a production process is, the larger living labour is deployed in relation to dead labour, much of this is captured by capital-intensive capitals, showing a much higher value add per worker.

Productivity, Industry and Services

As discussed above: service tasks are labour-intensive and less susceptible to productivity-enhancing capital investments; labour productivity advances much faster in industry, which exhibits a tendency towards relative decline in employment.

The faster labour productivity in manufacturing advances the more rapidly its contribution to GDP declines.

176 - 7 Important to distinguish between the bourgeois conception of productivity versus Marx’s understanding: the use-value of a pencil is the same today as two centuries ago (or higher due to superior lead etc.), yet the quantity of labour necessary to produce one is many magnitudes smaller.

In terms of use-values there has been a colossal leap of producitivty, but considered from the point of view of exchange-value, it is moot whether producitivty has grown.

From society’s point of view the quantity of use-values is decisive, but capitalists are only interested in how much they can be sold for.

Productivity can also not be compared across sectors. As Marx says:

‘Productivity…naturally ceases to have any bearing on that labour as soon as we abstract it from its concrete useful form’

This is the core of Marx’s understanding of value and the commodity, containing a contradiction between use and exchange value.

Under capitalism, productivity = the amount of value-add that can be harvested for each unit of value paid in wages. If wages are cut and everything remains the same, labour becomes more productive by default, despite producing no additional use values.

178 To a Marxist this definition of productivity is the rate of exploitation. According to the logic of capital: the more workers are exploited, the more productive they are. This is also called Unit Labour Cost (ULC), which is significantly lower in Southern than Northern Countries.

186 Bourgeois economists attempt to obfuscate this higher degree of exploitation by insisting that there are international differences re: the productivity of labour, the marginalist theory of value, against which Marx’s theory of value as dual in character must be posited.

Chapter 7: Global Labour Arbitrage: The Key Driver of the Globalisation of Production

Global Labour Arbitrage and Marxist Theories of Globalisation and Imperialism

196 - 7 The rate of exploitation or the rate of surplus value can be increased by lengthening the working day (increasing absolute surplus value) or reducing the value of labour-power (increasing relative surplus value).

Relative surplus value can be increased in three ways:

i) raising the productivity of labour in the branches of production involved in the production of workers’ consumption goods, thereby reducing the amount of labour time needed to produce the basket of goods consumed by the worker and her/his family.

ii) lowering the real wage by reducing consumption (i.e. the size of the basket of goods)

iii) reduction of wages below the value of labour power

Contemporary Marxists and the Global Labour Arbitrage

199 David Harvey argues that the overaccumulation of capital forces capitalists to increasingly depend on non-capitalist forms of exploitation, rather than extracting surplus value via waged labour, social welfare regimes are privatised, communal property is confiscated.

200 He calls this accumulation via dispossession.

Smith charges Harvey and Ellen Mieksens Wood who also writes on contemporary imperialism with missing what is most characteristic about imperialism in the present epoch, namely, the global operation of the law of value and the exploitation of waged labourers in the global south.

203 Brenner is also criticised for failing to recognise that the excess capacity in the global economy is a consequence of imperialist economies seeking to contain over-production by shifting low value-add production overseas.

205 - 7 Samir Amin’s notion that there is a single value associated with labour-power and that it should be understood globally is criticised on the basis that it is suppresses the uneven qualities of the global labour market. [Amin is later criticised on 215 for upholding Stalin’s analysis of national liberation struggles, recommending the working class in the Global South ally with their indigenous bourgeoisie]

Dependency Theory and International Differences in the Rate of Exploitation

Dependency theory first arose among Latin American, Asian and African economists, academics, reformists, activists and revolutionaries in the sixties and seventies seeking to explain the persistence of imperial domination of the global economy following the collapse of territorial empires. Smith represents this as the best means of analysing imperialism according to Marx’s theory of value, despite the fact that it arose before neoliberalism; when developing countries exported raw materials and imported manufactured goods.

The rapid export-oriented industrial development seen in South Korea, China and Singapore in the seventies at first seemed to undermine dependency theory’s legitimacy.

Unequal Exchange

208 Two economists Raúl Prebisch and Hans Singer separately devised what is now known as the Prebisch-Singer hypothesis, the notion that there is a long-run tendency for commodity exporters to suffer deteriorating terms of trade with manufactured goods-exporting rich nations and that this reduced or cancels the benefits of comparative advantge for primary commodity-exporting countries, perpetuating their underdevelopment and widening the gap between them and developed countries and smith argues that empirical evidence has borne this prediction out.

This contradicts Bukharin’s prediction for the tendency of raw material prices to rise, on the basis that the development of agriculture lags behind the development of industry. The rate of profit rises and falls in inverse ratio to fluctuations in the price of raw materials

Presbisch-Singer theorised that declining terms of trade of raw materials stems from the asymmetric structure of the global economy and specifically the different properties intrinsic to the production of raw materials viz. manufactured goods, i.e. that the prices of raw materials fluctuate to a much greater extent.

A pre-condition of capitalist development is therefore to move from a dependence on agriculture and resource extraction to modern industry, which is only possible if indigenous industry can be protected from foreign competition through an Import Substitution Strategy (ISI).

209 In sum: for poor countries to become developed capitalist nations the state has to intervene to protect domestic industry from competition, a view and strategy which is perfectly compatible with the interests of a domestic capital owning class, which became highly influential among developmental agencies.

A cohort of Marxist thinkers also engaged with dependency theory to bolster an economic analysis of anti-imperialist revolutions in Cuba and China, but these were divided due to alternating allegiances to Moscow or Beijing; when Cuba was isolated dependency theorists were cut off from the most advanced debates regarding the law of value, imperialism and the socialist transition.

Cuba fought with the Soviet Union and other Comecon states to develop the first example of fair trade between industrialised and developing nations, based on fixing prices to ensure commodities were exchanged based on equal quantities of labour, taking the edge off the law of value.

211 The partial rolling back of this arrangement by incorporating Cuba fully into the Comecon states in 1973 were a disaster later condemned by Fidel.

Dependency’s Euro-Marxist Critics

219 - 20 In rejecting dependency theory Marxists such as Weeks and Dore argue that because productivity levels in imperialist countries are higher, workers in imperialist countries are more exploited, despite their higher levels of consumption.

Chapter 8: Imperialism and the Law of Value

Lenin and Imperialism

225 Lenin’s Imperialism, the Highest State of Capitalism outlines that imperialism was an expression of capitalism and not an historical coincidence and thereby rendered in central to anti-capitalist strategy.

226 Lenin’s vision of imperialism’s role in the production of value was by necessity limited as this phenomenon only emerged at later stages in capitalism’s development.

Ellen Mieksins Wood therefore mis-represents Lenin when says Lenin’s notion of imperialism depended on pre-capitalist forms and instruments (such as territorial expansion, military force, etc.), these were fixtures of the political moment at the time Lenin was writing.

228 Describes Harvey’s attempt to fill the vaccuum left by his rejection of Lenin with ‘spatiotemporal dynamics’ as ‘vacuous’.

Monopoly Capitalism

Other critics of Lenin have dismissed his theory of the centrality of imperialism to capital accumulation on the basis of his argument that imperialism is indistinguishable from monopoly capitalism.

229 Smith notes that the term monopoly is deployed to describe phenomena relating to production, distribution, brand loyalty, finance, concentration of capital, technological innovations, extra-economic distortions, tariff, etc.

230 Smith defines monopoly as:

’the extent to which imperfections in markets result in equilibrium prices that do not equalise the rate of profit, enabling some capitalists to claim super-profits at the expense of their rivals’.

This affects the division of surplus value between competing capitals. Monopoly over most advanced production techniques does result in above average profits for innovative firms; these forms of monopoly are constantly created and destroyed by competition in each branch and sphere of production. A technological innovation can become an insurmountable obstacle when an innovator is given legal monopoly over its use. Another form of monopoly is the enormous size of capital investments required for new firms to enter markets for many high-technology goods.

In both of these cases monopoly power is not determined by the technological innovation or the capital as such but the way it functions in the marketplace.

231 Distinguishing technological innovation from monopoly allows rent and imperialist rent to be seen as distributional phenomena; to do with how surplus value is distributed between owners of capital and remote from the production process itself.

For Lenin monopoly was the merging of financial and industrial capital and both of these with the state. Imperialist power makes itself clear in control of markets, advanced technology, state and military power.

The Export of Capital

232 Applying Lenin’s analysis of imperialism today is difficult because though capital is still exported through FDI, purchases of financial securities and loan capital, arms-length production processes have become much more important.

Smith squares this with his defense of Lenin’s theory by saying Lenin put the export of capital forward as one form imperialist parasitism takes. The essence of the relationship from Lenin’s point of view is that capitalists in imperialist nations seek to convert of their surplus wealth into capital by exploiting subject peoples overseas; this continues to be the case.

Marx’s Capital in the Twenty-First Century

236 Arguing against a tendency assumed in much Marxist writing seeking to elide the differences between proletarians of different nationalities on the basis that there is a long-term tendency towards equalisation of wages.

Smith makes the point that equalistion of wages within a national economy is predicated on free movement of labour, freedom to sell labour-power to the highest bidder. This does not occur in the present moment as labour is massively restricted by immigration controls and racism.

Why the Rate of Exploitation is Independent of Workers’ Productivity

240 In Vol. 3 Marx outlines a number of things factors which work against the tendency of the rate of profit to fall.

One of these is the pushing of wages below the level of labour power, another is capital invested in colonial trade, a third is firms in more advanced countries selling commodities over their value, which is effectively a manufacturer making use of a new technology or discovery before its use has become generalised. This is a super-profit, as more technically advanced capital can produce a commodity is less time than the average necessary labour time required by less technically advanced capital.

These super profits only arise in competition between capitalists in the same branch of production, producing similar goods such as cars, chemicals or clothing.

242 It is crucial to emphasise that a more productive worker using more technologically sophisticated machinery does not produce more exchange value but rather allows their employer to capture a larger share of it. The rate of exploitation is not higher in more productive capitals than in less productive capitals.

243 Therefore, value transfers to innovating capitals from less advanced capitals within the same branch of production due to differences in the productivities of the individual capitals within that branch. This results in divergence in the rate of profit enjoyed by individual capitals.

Value transfers between different branches of production are effected by different value compositions of the total capital employed in the different branches.

In a unitary economy in which capital and commodities move freely this results in convergence of the rate of profit betweeen the different branches and the formation of an average, economy-wide rate of profit.

Whether trade between countries involves competition between firms trading similar goods or the exchange of dissimilar goods is very important as it determines the regime of value transfer which is in place.

As detailed above, trade between imperialist nations is in similar goods, but the trade of goods from the global north and the global south are different.

N - N trade differences in productivity are a prime cause of value-transfers and a prime determinant of above or below average profits.

N - S trade is not.

244 Therefore we need an alternate reason for the reversal of the tendency of the rate of profit to fall, which we can derive from an account of super-exploitation.

Super-Exploitation in Marx’s Capital

Two quotes from Marx on super-exploitation:

‘As far as capital invested in colonies, etc., is concerned, the reason why this can yield higher rates of profit is that the profit rate is generally higher there on account of the lower degree of development, and so too is the exploitation of labour, through the use of slaves and coolies, etc.’

‘There is no reason why the higher rates of profit that capital invested in certain branches yields in this way, and brings to its country of origin, should not enter into the equalisation of the general rate of profit and hence raise this in due proportion, unless monopolies stand in the way’

Quantified Labour in Marx’s Theory of Value

245 Recapitulating important points:

The quantity of value objectified in commodities by one hour of living hour is entirely independent of the productivity of a worker. A more productive worker is allowing their employer to capture more exchange value.

Assuming all workers in this branch work with the same intensity, all of their labour is counted equally toward the total value generated in that branch. If they are all paid the same wage they are all equally exploited, regardless of productivity differences existing between those working for more or less developed capitals.

The higher rate of exploitation in the global south which follows from the above represents the paying of wages below the value of labour power.

Marxists who continue to reject dependency theory therefore reject Marx’s law of value.

246 - 7 A series of quotes from Marx relating to the role of value creation viz. skilled v. unskilled labour.

Smith argues Marx considers this relationship in transient terms, within a single national economy, progressively eroded by competition between workers and by deskilling of skilled labour as complex and labour-intensive forms of production become mechanised and simplified.

Attempts to explain the huge divergences in wages which exist between the north and south via skilled v unskilled labour are therefore useless.

Falling Rate of Profit

248 - 9 Smith’s point of view on the falling rate of profit is twofold:

First that many of its adherents fail to register the national variations in the rate of exploitation and the organic composition of capital due to monopoly rents and consequently that a substantial part of the surplus value captured by firms in imperialist countries and realised as profit was extracted from workers in low-wage countries.

and second that whether or not the rate of profit goes up or down the decisive question is whether the total mass of surplus profit is sufficient to provide returns to those with claims on it. When it is not, as occurred in 2008, it will be the far more decisive factor in triggering crises.

The Placing of Outsourcing in the History of Capitalism

A line in Grundrisse which Smith relates to outsourcing:

‘As long as capital is weak, it still relies on the crutches of past modes of production, or of those which will pass with its rise. As soon as it feels strong, it throws away the crutches, and moves in accordance with its own laws. As soon as it begins to sense itself and become conscious of itself as a barrier to development, it seeks refuge in forms which, by restricting free competition, seem to make the rule of capital more perfect, but are at the same time the heralds of its dissolution and of the dissolution of the mode of production resting on it’.

Chapter 9: The GDP Illusion

What is GDP? - 1

253 The UN definition of GDP:

‘sum of gross value added by all resident producers in the economy plus any product taxes and minus any subsidies not included in the value of the products. It is calculated without making deductions for depreciations of fabricated assets or for depletion and degredation of natural resources’

GDP is therefore the sum of the value added recorded by all firms in a national economy.

‘Gross’ value means no account is made for depreciation of capital goods.

GDP can be calculated in three ways:

i) input-output tables to calculate value-added ii) total expenditure in an economy - expenditure on intermediate inputs iii) total income of firms, households and government

254 The problem is that GDP only measures monetary value of commodities produced for final sale and does not include output that is not traded, such as domestic labour, for the reason that it does not produce commodities but use-values, which are beyond the grasp of orthodox economics.

GDP ignores this concept and renders GDP arbitrary: GDP does not measure market production, market production defines GDP.

GDP and GNP

256 GDP differs from GNP (Gross National Product) because the former includes income generated domestically by foreign firms / individuals and excludes income generated overseas by a country’s own firms and citiziens.

The shift from GNP to GDP entails output produced in factories or mines based in a particular nation state comes into that nation’s financial records, even if the money doesn’t stay there.

Chapter 10: All Roads Lead into the Crisis

280 This book has emphasised the role of productive capital, rather than finance capital, in capitalist crises.

The 2007 - 8 financial crises were side effects of two principal measures the west put in place to escape the crises of the seventies, the enormous expansion of debt and the shit of production to low-wage countries.

The first propped up demand, alleviating overproduction (the production of more goods than can be sold for a profit) and the second restoring sagging profits by substituting relatively expensive domestic labour with cheap labour in low-wage countries.

290 2008 is a story of low interest rates encouraging people to take on more debt. Rather than having claims on future value, there turned out to be nothing behind them, particularly when corporate entities are not investing their profits in further growth, but spending them on dividends and stock buybacks, inflating the value.