Addressing Capitalist Accumulation and Money Production in the US

[Human Lefts]

Basically, how does this work?

In a capitalist system, the capitalist acquires all of the wealth by extracting surplus value from workers. So, I assume that the US addresses this through inflation (money production) and through a minimally effective progressive tax system. But, the US currency is the standard worldwide, so we could be also extracting surplus value from the workers of other countries of which some goes to the workers in the US.

There's something about how the Federal Reserve gets bonds and then loans money to district banks which then loan money to private companies...and I get lost. My conspiracy brain organ tells me that it is complicated so no one can understand it. I don't really even know what a bond is, so any layperson person clarification on this will be appreciated!

Side question: What is the main theory of macro economics currently used in the US?

[Blake's Baby]

What?

You're mixing up some very different things here. Labour theory of value (LTV) and exploitation of surplus value have nothing to do with taxation or inflation.

LTV is a theory that explains where profit comes from for the capitalist. It's obvious that profits come from somewhere; otherwise how would the owner of a company every be able to pay himself? So where does it come from? We posit that a capitalist has certain costs - electricity, wear and tear on machines, paying for raw materials, transport and distribution costs, advertising etc. None of these actually make money for the capitalist, they just help the capitalist to sell his products.

These products are made by the workers. They turn raw materials into something that can be sold (ie, they turn materials into commodities through the application of labour). It should go without saying that there needs to be a market at the end (Marx says that commodities have 'use-value' as well as labour-power which produces 'exchange value') but some times free-market types forget about the use-value bit in an attempt to rubbish the theory.

So, it's the workers that actually produce the products that the capitalist sells. The capitalist pays the workers. But if the 10 workers make 10,000 units in a year, and the capitalist sells them for $100 each, and has a $1 million income, does he pay each of the 10 workers $100,000? No, because he still has to pay out his costs - rent and electricity and materials and whatnot, and he has to repair his machines as well as pay his advertising team and the transport people... so all of that means he only has $500,000 to pay the workers. But he hasn't taken any wages yet, he's the director so he takes $100,000... and because he borrowed from abank or from shareholders or got the start-up capital from somewhere, he's paying back a loan too. That's another $100,000. So in the end all that's left for the workers is $300,000, and they get $30,000 each, even though the value of their work was $100,000.

The missing $70,000 per worker is the amount of 'surplus value' extracted from them, the value to the company of the work they do for free for the capitalist. Now you could claim that the transport guys and advertsing guys are all contributing to the process and therefore deserve a cut, which is an argument. But they're not actually creating the value, they're allowing the value being created to be turned back into money. It's the commodities themselves that embody the use-value and the exchange-value.

Whether you look at the directly productive workers as a group, or all the workers involved, it's obvious that there's a lot left over. The transport people are on a contract, as are the agency, and all their productive workers don't get it all... the owner and the bank both take a massive cut (20% of total income between them). Have they made any value? No, they've just provided a framwork for the workers to make value. So where does their money come from? It's the labour of the workers that produces the value and they expropriate it, through legal ownership of property - the owner borrows the money, buys machines and materials, the workers use the machines on the materials, the owner has workers from the transport company pick up the products and take them to a warehouse, an amount of money is transferred to the owner and he pays the wages of the workers. The people who have done the work are the last to see the money, because the director 'owns' the machines and materials, and therefore products, and the bank (or shareholders, or both) to an extent 'own' the director...

Anyway that's LTV and surplus labour...

[Human Lefts]

Okay. Let's pretend that what I wanted to know was how the US corrects for the capitalist class' accumulation of wealth. How does it do that?

[Zulu]

That's two different things.

First the capitalists take what the workers make with their hands, but leave them a "fair share" (according to the labor contract, anyway, which the workers sign of their supposedly free will) of the surplus value in the form of wage. That's accumulation technique #1.

Then, (practically unbeknownst to the workers, and definitely without their consent), the capitalists emit more money, thus diminishing the value of the wage. that's #2.

The gold standard is supposed to prevent emission before the product called "gold" is produced by the workers, but that still leaves us with #1, and the capitalists are usually reluctant to put their "fair share" of gold money into direct and indirect (pointless jobs) social welfare, as opposed to the paper money, which they are not so greedy about.

[Blake's Baby]

Okay. Let's pretend that what I wanted to know was how the US corrects for the capitalist class' accumulation of wealth. How does it do that?

What do you mean 'corrects'? The US state is founded on the principle that capitalists accumulate wealth, it's what it's for. Why does it have to 'correct' anything?

[Human Lefts]

What do you mean 'corrects'? The US state is founded on the principle that capitalists accumulate wealth, it's what it's for. Why does it have to 'correct' anything?

Eventually, one/a few capitalist/s will have all of the wealth and no one will be able to purchase anything. So, the capitalist class has to do something so the workers can still afford to purchase commodities, right?

If that's correct, then my guesses are that it is done through inflation, progressive taxes, and neocolonialism.

Inflation -- produce more money so there is more to go around

Progressive taxes -- off-set accumulation, but almost ineffectively. Probably more lip service than anything.

Neocolonialism -- force other countries to accept our economic proposals and extract all we can from them, some of that going to the working class in the US

Are these guesses correct or on the right track?

[Blake's Baby]

Eventually, one/a few capitalist/s will have all of the wealth and no one will be able to purchase anything. So, the capitalist class has to do something so the workers can still afford to purchase commodities, right?...

No, not really.

The point where 'few capitalists have all the wealth and no-one can afford to purchase anything' is not real. The whole system breaks down long before this point.

Sure, the rich get richer. But they can only get richer while other people (primarily. workers) have money to buy commodities. It's necessary to pay workers or they can't buy anything. Long before one person has all the cash, the working class has been mortgaged to the hilt, banks go to the wall in a panic about bad debt, the state steps in to bolster the economy (either by putting massive quantites of cash into the system, as in the US currently, or promising very hard to be good and pay its debts, like Greece).

There's the problem of the falling rate of profit to consider, which reduces capitalism's ability to make money, and there's the problem of underconsumption/overproduction/saturation of markets to consider (again, interfearing with teh ability of the capitalists to turn commodities into money), which both presage breakdowns in the system.

The capitalist crisis isn't just a matter of 'bad policy'. It's a systemic failure because capitalism isn't a stable system. No restructuring, taxation, inflation, austerity, or neo-colonialism can restore the system because it's basically broken.

[Human Lefts]

I am under the impression that there are mechanisms in the US that prevent total accumulation of wealth within the US in order to maintain the system. I think this because my logic states that accumulation of wealth in the US should have already occurred a while ago. During the Great Depression, communism was looking pretty good to the working and non-working poor and they were starting to become a force with power. Then, the New Deal stuff came in and provided some safety net and wealth redistribution in order to calm some of the "discomfort". However, a great depression hasn't really occurred since then, and I was thinking that it was probably due to a combination of mechanism in place to prevent such financial inequality. I don't think it that crazy of an idea that their are purposeful systems in place that do so considering that most of the best social scientists in the US are hired by political think tanks.

Then what would a leftist approach say the purpose(s) of inflation in a capitalist society is(are)?

[Blake's Baby]

Inflation is to preserve the rate of profit.

Capitalists want to make as much money as possible. Each capitalist (each firm, each board of directors) wants to pay their workers as little as possible, and to make as much profit as possible.

However, in order to sell stuff, they want all the other capitalists to pay their workers as much as possible. Rich workers outside the company can buy the things that are produced by badly-paid workers in the company.

That doesn't work of course. All the other capitalists are trying to keep their wage bills down and their profits up. The workers are of course trying to keep their wages up - sometimes they're persuaded this means keeping 'their' firm's profits up (sometimes it's protecting 'their' country's jobs), sometimes not.

But profits can't be had indefinitely. Each capitalist tries to squeeze as much as they can from everyone else, workers, customers, suppliers, everyone. Capitalists start to raise their prices either to the end-users or to the other parts of the supply-chain and a cycle of prise-rises starts. No company is prepared to take a fall in profits now (unless it means a bigger rise later, which is what investment is for) so they will put their prices up to, or put wages down, increase productivity somehow or all of these.

Increases in productivity are often derived from new machines, which cost money, so are anoither source of inflation - the company invests in new machines so at to improve output but needs to pay back the bank or recoup the capital, so it puts prices up...

So there's always inflationary pressure in the system. Governments try to limit this, rather than fuel it, if they've got any choice in the matter. They don't 'cause inflation to stop the capitalists getting all the money' because 1-capitalists get more money through inflation than through a flat economy (economists really can't handle 'zero growth' or 'zero inflation', they prefer things to be moving up or down, it doesn't seem to matter much, because either way someon'e making money and that's the point) 2-governments don't mind if 'capitalists get all the money', but on the whole they don't much care for inflation because it makes the economy difficult to handle.

Yes, governments can add more money to the economy if they think a lack of cash is causing a lack of investment (the classic nightmare for the bourgeoisise is 'stagflation' as we saw in Britain in the 1970s where there is no growth - 'stagnation' - and inflation. It's not 'supposed' to happen but it does). The excess cash does have an added inflationary pressure but it's supposed to be balanced by the growth it's supposed to allow cancelling that out. Sometimes it does, sometimes it doesn't.

Then there's debt, of course...

[Zulu]

Capitalists start to raise their prices either to the end-users or to the other parts of the supply-chain and a cycle of prise-rises starts...
...
Yes, governments can add more money to the economy...

Wouldn't the capitalists be unable to rise prices if they weren't sure the central banks would be always printing enough money to keep this inflationary race going? Because classically, the demand has to be there first to determine the price. Of course, greed is good, but the capitalists are smart enough to realize that it would kill the market pretty quick, unless there is some material substance to fuel this race, which is (in Marxism at least) the value added by the labor. So in the end, barring some lucky moves and outright swindles of their counterparts, it's not the "other parts of the supply chain" but the "end-users" who bear the main brunt of inflation?

[Blake's Baby]

Markets aren't about choice.

'The choice to eat or not eat' is a simple one in capitalism, oh, I'll not eat and save all that money and then I'll be able to start my own business and become a rich entrepreneur... actually I feel a bit woozy... I need to... oh I've died, without being able to save enough to buy the necessary machines to start my business.

So, people can't 'not consume' (not just food, but electricity, paying for houses - rents mortgages etc) so it doesn't matter. There's whole load of stuff for which the market is always going to be there; also, no capitalist ever goes, 'I know what, I'll put the price of the 45p tin of beans up to £86 to make more profit, oh, wait, no-one's buying my beans', which is the scenario you're suggesting. The demand is there, because in the end commodities are things that have a use; whether that demand is always met, or met in any way sensibly, is another matter.

As to whether it's the other parts of the supply chain that bear the brunt, no I never said it was. The cost is passed as you say to the end user. The thrump-mining company passes its price rises to the thrump-processing companies which pass their increased costs (due to more expensive materials) to the thrump-distribution companies who announce that they've had to increase the price of thrumps at the tills. Meanwhile the consumer finds that thrumps that used to cost $3 a kilo now cost $4.25.

[Human Lefts]

Markets aren't about choice.

'The choice to eat or not eat' is a simple one in capitalism, oh, I'll not eat and save all that money and then I'll be able to start my own business and become a rich entrepreneur... actually I feel a bit woozy... I need to... oh I've died, without being able to save enough to buy the necessary machines to start my business.

Yes! Where we acquire our commodities is up to us to a certain extent. However, out relationship to the means of production stays the same. I can only trade money for goods in a capitalist fashion. For example, someone told me today that some states in the US will not let residents grow their own food at home. The excuse is that it will bring rodents to residential neighborhoods, but I think that if I was the owner of a business in the line of supplying food, I wouldn't want any competition that could out do my need to make a profit, especially people liberating their dependence on my service. Like Lenin said, think about who a policy benefits.