Expanded model of Absolute Surplus Value

Synopsis:

This post adds a given aspect to the Absolute Surplus Value{1} model of Ben Fine and Alfredo Saad-Filho, given in their book "Marx's Capital". Kindly note that the author of this post is only adding a particular aspect[already mentioned in the book] but not included in the given model[diagrammatic representation].

The Given Model:



Source courtesy: Marx's Capital, 4th ed., Fine and Filho, Page no. 41, Viva Books.



Expansion of the given model:

Adding the variable- 'Labour Intensity' to the above model refines and makes the representation much more dynamic. Hence, following analyses are possible using the expanded model.

Prepared by: Bhagirath Baria, based on the model by Fine and Silho

Absolute Value:

 

Lengthening the working day or increasing the intensity of work[measurable by productivity per hour per labourer] or both results in increased surplus value[s] accrued to the firm owner/organizer/capitalist. The given model[as in 'Marx's Capital'] focuses on the working day variable while mentions in theory about the possibility of increasing the surplus value through increased intensity of work.

 

"There are other ways of producing absolute surplus value. For example, if work becomes more intense during a given working day more labour would be performed in the same period, and absolute surplus value would be produced. The same result can be achieved through making work continuous without breaks either of limited duration or even for rest and refreshment."{2}

 

Hence, when both the possibilities are included- 1). Lengthening of the working day and 2). Increased intensity of work during given hours; 3 possible situations may arise. Note, we are not here dealing with an Equilibrium/Disequilibrium situation. This model depicts the possible changes in order to increase the production of surplus value, and hence increase the rate of exploitation.

 

Lets understand each of the three possibilities:

 

Point E0: The given state of working day and labour intensity. Following a change in any of the two variables- working day or labour intensity, surplus value increases.

 

Point E1: Labour intensity remaining constant, working day lengthens. Hence the area E0E1X1X0 represents the increased exploitation of labour by capital, hence an increase in surplus value. This increase in Working time driven.

 

Point E2: Working day remaining constant, Labour intensity increases. Hence, increased surplus value as depicted by the area RNE0E2. Here, some further modifications and debate is required.

 

Point E3: Both Working day and Labour intensity increase. Hence increase in surplus value by the sum of areas- RNE0E2 + E2E0E1E3 + EOE1X1XO = RE3X1X0E0N

Conclusion:

Thus we see that the expanded model provides a much more dynamic analysis of the capitalist reality. It does not explain abstract ideas divorced from political realities. Most of Marx's works were a part and parcel of his political project of overthrowing capitalism, hence, his works aim to explain realities of the society and economy around. This helps his analyses to be much more realistic and provides a radical alternative to all sorts of heterodoxy as well as mainstream understanding about Socio-economic reality.

Notes & References:

1). As in Marx's Capital, 4th ed., Fine and Filho, Page no. 41, Viva Books.
2). ibid.
3). 'v' refers to variable capital in Marx's terminology- the amount of money in the form of capital whose value labour transfers to finished commodities in the production activity. 's' refers to surplus value- the amount of value created by labour in excess of variable capital[raw materials, etc]. s' refers to the increased surplus value due to above explained measures.

R & E crosses the 3000 mark, thank you, again!

 

R & E crosses the 3000 mark. Just recently in April 2012, this site had crossed the 2000 mark in terms of number of visits. Within 8 months, it has seen an increase of 1000 visits, which is a commendable milestone in terms of reach of the site. Thank you dearest visitors, for your support & consistent participation on this blog. Your comments, visits and participation are the most valuable motivations for running and maintaining this site. Keep visiting.

 

--- Read. Share. Enlighten.

 

--- Bhagirath Baria.

Knowledge: An Epistemological Inquiry

"For any way of thought to become dominant, a conceptual apparatus has to be advanced that appeals to our intuitions and instincts, to our values and our desires, as well as to the possibilities inherent in the social world we inhabit."

--- Harvey, A Brief History of Neoliberalism

Knowledge is a very important issue in the current days of rise of concepts such as 'Knowledge Economy', 'Information Economy' and 'Intellectual Economy'. The increasing importance of Knowledge makes it a subject matter of great interest. Since thousands of years[1], humans have struggled to define Knowledge and the various issues related to it. Epistemology, as a branch of Philosophy, still does not have a proper, completely agreed upon definition of Knowledge. This is inevitable because this concept is as broad as the magnificent Universe, and cannot be encompassed within a few words. 

This post is a brief analysis of some aspects of Epistemology, viz. the subject of Knowledge. It presents a particular viewpoint about Knowledge in modern times, its Production, Distribution, Consumption and even Exchange. Increasingly, we as a Global society are moving towards an era of increasing Privatization. Knowledge, too is quickly becoming such a commodity, once it enters the realms of exchange-relations. This post is inspired by works of various Marxists and non-Marxists writers who wish to bring positive changes in the present form of Society, and hence its mode of Production. For simplicity's sake, this post will be presented in four parts- each dealing with one of the four aspects of Knowledge.

Part I:

Production of Knowledge:

Knowledge, as it is, is produced in Human minds. In turn, this production reflects the material reality around it. The culture, infrastructure, social condition, economic condition, politics, inter-personal relations, subjective desires and perceptions, and so many more constitute the material reality that helps produce Knowledge. It thus becomes clearly visible that Knowledge, as Idea, is a reflection of the World around us, and the constant Dynamics it possesses. 

Formal Knowledge[2]  is produced in Academics- Universities, Institutions of Learning and other such Organizations. The individuals and the groups of individuals that produce it, do so with what we may call a particular mindset. This is nothing but the Ideology that the given human/s possess. A particular model of World is prepared in an individual's mind[3]. Based on this model, information is consumed, which at last forms the sum total of what she knows- her Knowledge.

Production of Knowledge may not always be consumer-demand oriented. It may be for its own sake. But we are here concerned with a particular species of Knowledge- namely that of Economics. "Political Economy incites the cruelest emotions of the human breast", once proclaimed Marx[4]. And it is true. It does. When we enter the realms of Economics, all sorts of human emotions come into play. These are not limited to the "rationality" and "marginal utility maximizing" emotions. These are a great number of emotions that undertake a complex interplay to create a particular viewpoint of an individual.

When Knowledge is produced, it is produced with a given mindset. We may call it Producer's Ideology. This is then to be distributed and consumed. Production of Knowledge is not a material reality- independent process. Rather it is based on it and in turn shapes it. This is important to recognize as it signifies a mutually dependent process at work. 

When Knowledge is produced, it has to be tested scientifically. Here, we are not bringing into question the types or methods of Knowledge production which tend more towards non-falsifiable ideas[5]. We are solely concerned with ordinary form of knowledge that is produced and distributed through mainstream institutions. Here, Knowledge is produced through a particular ideological-set. This then becomes the backbone of all further testing, inquiry and analysis of produced knowledge. Thus, the knowledge that is produced and distributed in Economics, is wide with a variety of Ideological-sets producing their own types of knowledges[6]. 

When Institutions of Knowledge produce a given knowledge and distribute it, it is not 'Knowledge' per se. Rather, it is a particular kind/species of Knowledge. This knowledge may be presented as the sole form, but that is not the case, as we now understand it. Due to presence of a varied forms of Ideological-sets, any kind of Knowledge has to confirm to one or the other Ideology. It may be a hybrid form, in the sense that it derives its production to more than one ideology. Thus, the Knowledge that is produced and consumed in Institutions, Organizations, etc. in Economics, is a particular kind of Knowledge, a particular idea. 

Here comes the role of building of a conceptual apparatus[7] that instantly gets the approval of masses, their emotions, beliefs, etc. Hence, when a particular species of Knowledge becomes dominant, it requires a rigorous propaganda, distribution and consumption of it to spread horizontally and vertically in Geographical boundaries. Harvey very beautifully brings out how a particular kind of knowledge- called Neoliberalism- with its specific set of ideas, emotions, perceptions, etc. has become dominant and is now deeply embedded in our 'common senses'. But, as we saw above, it is only a specific kind of Knowledge, not Knowledge per se. Appreciating this fact will help people realize the existence of other forms of Knowledge, independent and different than Mainstream Knowledge.

In the next post we shall analyse the Distribution aspect. How a particular kind of Knowledge is disseminated to masses, how it is popularized and how it becomes dominant. The various related aspects too will be discussed.

Notes and References:

1). Eg. Plato, Socrates, Aristotle and so many more who have been writing on this subject.

2). That which is distributed in Mainstream institutions of Education world-wide.

3). More on this can be found out by referring to Stephen Resnick's lecture series on youtube and Stephen Hawking's work- A Brief History of Time.

4). Within the first few chapters of Capital by Karl Marx.

5). Eg. School of thoughts based on purely Deductive logic, etc.

6). Plural made deliberately

7). Harvey's work- A Brief History of Neoliberalism, discusses on this issue in detail- Refer especially Chapter I.

-------------------------------------------------------------------------------------------------

Cooperation and the Modern Organization

Image source:  http://europamedia.files.wordpress.com/2011/05/cooperation-international2.jpg

This post is a brief analysis of Modern Organizations- the molecules of Economic Production. It aims at bringing out the inherent co-operative nature of traditional[orthodox]{1} organizations of Modern Economies. It thus attempts to bring to people's conscience that Cooperation and Cooperative Management are highly relevant concepts, not only to understand cooperative Organizations but also to enrich one's knowledge of modern Organization realities.

Cooperation: 

To undertake production in a modern Capitalist Organization{2}, medium or large sized, strict cooperation{3} is at the heart of harmonious economic activity, the smooth running of the economy. It is not that people had not cooperated to produce Commodities{4} in previous forms of societies- eg. under ancient communism, slave, feudal, and others. There too, cooperation was the ultimate necessity facilitating production. But, it is only under the modern mode of production[called Capitalist mode] where a comparatively large number of labourers are required to cooperate and produce.

A modern form of organization pre-supposes: 1). A highly specialized and complex division of labour within the Organization itself, 2). A complex division of labour in society, and 3). Cooperation of the labourers involved in the process of production.

It is this third aspect that is very essential to understand the concept of Cooperative method of Organizing and its inherent existence in every form of Production organization. We thus see, that Cooperation of labour is evident in every modern 'firms'{5}- be it Microsoft, Google, a Textile unit or any other production site{6}. Harmonious acceptance of each other and of the method of production along with the acceptance of the way it is organized, the political-legal back up it has in terms of property relations, the structure and content of labour-process, is what helps in daily reproduction of the given society in its current form.

Cooperation: Heart of the economic molecules

Every firm{7} that exists today, exists only because the labour force employed under it obeys the larger social-economic categories that create and sustain the modern forms of production. For eg. Suppose a strike occurs{8}. News of workers' strikes are common. At these moments do we realize how important the mutual cooperation of labour-force is. Whenever there is a disequilibrium in this set-up, in the uninterrupted flow of cooperative work within a traditional organization; the importance of this element is seen, naked in front of our eyes. 

It is very important to protect this mutual harmonious work-flow in order to sustain healthy economic activity, failing on which the economic system in dominance can come to a stand-still{9}. Many different processes have to be undertaken, outside the firms in order to sustain the given form of mode{10}.

Cooperative Organizations: A different class-structure

Hence, we see that any form of firm needs cooperation at its heart in order to reproduce itself profitably, daily. Still, we do have a completely separate discipline of study that confines itself only to Cooperative forms of Organizations. Such organizations, though rest on the same fundamental element{11}, still differs from traditional organizations in one very important way- the difference of internal class structure{12}.

In private or public organizations, the produce of the firm is a property of a particular individual or a group of individuals, but not of the direct producers. While in a Cooperative organization the produce of the firm is under ownership of the direct producers- the decisions regarding which are taken by the direct producers themselves. Hence, the need to undertake a separate study of this concept.

Conclusion:

Cooperation is at the heart and profit-chart of modern market-based profit-oriented firms. Lack of mutual harmony among themselves and with the larger social-economic variables around them, results only in disruption and crisis in the Economy- given a relatively labour-dominated industry/economy. The belief that Cooperation and Cooperative Organizations are alien and different than traditional Organizational set-ups is incorrect. As we saw, every firm, be it under any social-economic system, is a cooperative firm, where labourers work under complete harmony. Any disequilibrium to this fact results in interruption in the production process and hence in the entire economy. 

In modern times, we have separate disciplines such as Motivation, Leadership, Human Resource Management and a plethora of others whose ultimate aim, it seems, is the sustaining of Cooperation of the labour-force, both within the firm and within the Society at large. 

Notes:

1). Here referred in reference to modern private/public enterprises.

2). Medium or Large scaled, employing many labourers.

3). Cooperation that is a must, for working in a given firm, to which every employee must obey. This is based on Company's rules/regulations/etc.

4). Here referred to as simply any Good or Service produce for selling to others.

5). Used in the sense as in microeconomics

6). Irrespective of its produce- Goods or Services.

7). As in point 5

8). Any event or issue that stops the production process can be equally used here

9). Not to suggest that only this particular reason can cause crisis

10). For eg. Ideological, political, intellectual propaganda

11). i.e. Cooperation of labourers

12). More on this concept- refer Richard Wolff's website and Books

---------------------------------------------------

Reflections on Fine and Filho's "Marx's Capital"

-------------------------------------------------------------------------------
  

[Source and Courtesy: Marx's Capital, Ben Fine and Saad Filho, Pg. 62, Figure 5.1] 

This post is a specific reflection on the above Diagram- Economic Reproduction in Capitalism[1], as depicted in the worth-studying book- Marx's Capital by Ben Fine and Alfredo Saad-Filho. This book is one of the most reliable introductions to all the four volumes of Marx's Capital. The above diagram shows, in essence, how economic activities- specific to capitalist mode of production[2], are reproduced, in simple[3] as well as expanded[4] commodity production. More such commentaries on other concepts dealt in the book, shall be put in future.

Preliminary Observations:

Some important preliminary observations may be noted here-

1. The circuit above correctly brings out the geo-spatial motion of 'capital'. It necessarily presents a dynamic[5] view of the economy, which is constantly in motion.

2. The process of reproduction may be divided into two parts:

[A] Department 1(D1)- 'Means of Production' department: Thus, the lower half part of the circuit is D1.

[D1- Department 1, of means of production]

[B] Department 2(D2)- 'Means of Consumption' department: Thus, the upper half part of the circuit is D2. 

[D2- Department 2, of means of consumption]

3. The areas of circuit representing P1 and P2 depict the Production part of the entire process.

4. Consequently, the area representing 'Exchange' depicts that part of circuit wherein the sales and realization of commodities produced is done in the economy. In other words, it represents the market exchanges.

Some reflections:

'M' represents the total pool of money in the given economy. Looking at this model from a macro level will give a better understanding of how Marx's system analyzes the capitalist economy, giving an alternative view to other approaches. As we are analyzing two departments, D1 and D2, 

M = m1 + m2 

and also

M = m'1 + m'2

where, m1 = total money with the producers of D1, and m2 = total money with the producers of D2. At the end of the numerous transactions, entire amount, assuming zero savings, returns to the money pool M. This movement of money, to the extent it is capital advanced and then sales realized, is constant, disrupting frequently thought, and causing crisis[more on this in future posts].

The capitals advanced are:

for D1: c1+v1

for D2: c2+v2; 

where, c1 and c2 are "constant capitals", and v1 and v2 are variable capitals[6].

The capitals- raw materials, etc.,[represented by C1 and C2 ] of respective departments flow within the economic unit of production- firm, pass through Production[P1 and P2], then get converted into commodities ready for sale[C'1 and C'2]. These are then sold, i.e. exchanged for money through market exchange. 

The point of production is Profit. What if the same amount of Money M returns back in the hands of the owner? This would negate the entire purpose of production of commodities. Hence, it is very much essential for an excess amount to be received, which surpasses the original capital advanced. This, we call as per the model- m'1 and m'2 respectively for Departments 1 and 2.

m'1 in the model above is c1+v1+s1, m'2 is c2+v2+s2 respectively for their concerned departments. The mystery then is this 's'- surplus value. The orthodox belief will suggest that this surplus value- the amount excess to the original capital advanced[M1 and M2] has come through the market exchange. But as the model suggests, that's not the case. As soon as the production process is over- P1 and P2, we find the  emergence of surplus values- s1 and s2. Hence, we have a mystery.

This mystery, we shall keep unsolved till future posts. 

Notes and References:

1. Economic Reproduction means the constant generation/production of given social-economic conditions of production, and the production of commodities in a particular given manner, that reinforces the particular mode of production.

2. Capitalist mode of production may also be called, for the sake of simplicity- Capitalism.

3. Simple economic reproduction is wherein the surplus value produced- 's', is not ploughed back into production, but utilized for personal consumption. 

4.Expanded reproduction is where this surplus value 's' is put into production of commodities[Goods or Services], which thus increases the pool of money 'M', every time this happens.

5. By dynamic, we mean an economy constantly in motion rather than a static version of it. This constant movement is seen in the national and global economy as a whole.

6. Variable capital here means the amount of money advanced as 'wages' to the workers[in any enterprise producing any commodity(goods or services)]. Constant capital means the amount of money put into raw materials, machines, tools , equipments, other expenditures, etc. These definitions are different than mainstream definitions.

Consumer is the King, And King never bargains! Part I

This is the philosophy of modern day service/goods providers, at least in many developing cities of India. Bargaining is opposed even before it can begin. This post attempts to trace this emerging[or maybe inherent] concept of anti-bargaining culture, mostly in the 'booming' middle class. It also explains how the notions of consumer freedom, sovereignty, liberty, etc. are merely theoretical deductions to showcase a merrier image of modern society as it is. Finally, it proposes an alternative view to look at consumers and pricing, criticizing the traditional beliefs that price is determined by demand and supply and that profit arises in market exchanges.

Note: This issue will be dealt with, in a series of articles, Part I is presented below.

Bargaining: A crucial feature of market

Bargaining is what brings demand and supply in equilibrium[1]. Demand and Supply aren't some living phenomenons that act and react on their own will. Humans, living and organic, do so. Demand and Supply, just like other economic categories[Capital, Labour, Rent, Profit, Value, Price, etc] is a bearer of 'social production relationships'. In other words, Demand represents 'consumers' and supply- 'producers/sellers'. Hence the popular way of talking about Demand and Supply as some human-independent phenomenon that functions through some magical 'invisible hand'[2] is purely a sophistry.

When Demand exceeds supply, humans, in form of consumers and sellers bargain, take decisions and react, hence resulting in a given price prevailing- where Demand and Supply intersect. This means that bargaining, especially on the side of buyers is an essential element for an equilibrium to occur.

Markets, Perfect competition and Consumer choice:

With the emergence of organized[3] sellers[modern day goods/service providers], bargaining has begun to loose its importance as a crucial characteristic of markets. Indeed, in local markets where many unorganized sellers are present[4], bargaining is prevalent and normal. But in more organized markets and selling centres{cafes, cybers, jewelry stores, large hotels, etc.}, bargaining is of least necessity. Also, with the emergence of the 'booming' middle class whose ultimate goal of life, it appears, is maximizing its marginal utilities, bargaining is deployed carefully, only where one's economic/social status isn't put at stake if she is found bargaining.

This raises an important question:

Is Consumer really the King?

The philosophy 'Consumer is King, and King never bargains' implies that consumers must quitely accept whatever price prevails, and if they do not want to, then may find another place to buy. It clearly is a violation of the so-asserted consumer sovereignty. It merely shows the hollowness of those who proclaim that markets provide freedom through choices, while these choices being decided and established by non-individual factors, or maybe by the sellers themselves. More on this issue later.

We thus understand that when bargaining is made to loose its prevalence and when buyers are forced to accept the prices as given, except of course their right to find some another seller[5], it reduces consumers' decision making ability, her freedom to ask for a change in price which doesn't suit her. 

An industrial phenomenon:

Bargaining being made to look as 'low standard', 'poor' and 'non-king' behaviour is not a special but an industry-wide phenomenon. Many industries such as cyber cafe, precious metals, garments, luxury items, and some more have such a culture creeping in. This means bargaining is made to look as a shameful phenomenon which a consumer must avoid so as to preserve her standard in society. Of course, social and cultural variables too are responsible for this, but when such phenomenons are asserted in stores, malls and shops, it reinforces and multiplies such a culture.

Hence, the options for choosing another seller looses its significance once it is understood that this is not limited to a single firm, but spread throughout an industry. If Consumers cannot bargain, then the notions of consumer freedom are utterly foolish and useless. The worst part is, the consumers themselves accept and reinforce such a culture, which at the end harms their own 'marginal utility'.

References and Notes:

1. It means that when buyers and sellers actively negotiate with each other, only then and then can an equilibrium occur. If, one party were to be completely mum, the price reached would have been dictated by another side, which is against the so-cherished consumer freedom, consumer choice, etc.

2. This obviously is not a reference to Adam Smith. He didn't use the term in the manner that modern day Economists have made it out to be. For more information on this issue/controversy, refer here. Of course this blog of Mr. Gavin Kennedy is plagued with all sorts of fallacious thinking about Karl Marx and his economics, it still defends Smith well, and is a worth looking at apologetic of Smith.

3. The term "Organized" here is meant to signify far more institutionalized, coordinated and centralized sellers. For eg. cyber cafes, branded garments sellers, etc. 

4. Such as mandis, local vegetable markets, grocery stores, local bazaars{eg. of electronics} and so on. 

5. This option is superficial as explained in the next part, because it is an industry-wide phenomenon. Some exceptions might exist, but only rarely.