Review of Thier’s Book “A People’s Guide to Capitalism,” Part Two

I recently participated in a group called No One Is Illegal here in Toronto. The group decided to provide a zoom reading meeting every week to discuss the book A People’s Guide to Capitalism, by Hadas Thier, with many participants not belonging to the group but interested in understanding more about capitalism. We read the book in parts, with each participant taking turns to read out loud a section, with questions to be asked and discussed after each section or difficult part. The group did not finish the book–the number of participants dwindled; it is unlikely that there was much emotional attachment to understanding–despite the participants’ apparent interest in understanding the nature of capitalism.

I sent along some comments to the group (but not to the other partcipants) in order to provide the group with my understanding of the nature of capitalism–which does not always coincide with Thier’s view.

The following is what I wrote before the second session:

Page 56:

What Marx is saying is that the specifics of whether linen’s value is being measured against tea or sandals or coats doesn’t matter. What matters is the amount of abstract human labor objectified in each. These items lose their subjectivity as they become simple units of measurements of the value of linen. They can become equivalents only because they, like linen, embody human labor in the form of value.

In a sense, the specific commodity that becomes money does not matter, but once a specific commodity has become money, then it does matter since money becomes the exclusive form of the embodiment of immediate exchangeability or convertibility of one commodity into another.

Page 57:

Her reference to the universal equivalent: Same critique as in the previous post. She fails to link this up to the nature of abstract labour and value and the adequate expression of abstract labour. As abstract labour is not social labour as it is being performed, its social being must be located outside its own use value and outside all other use values—except one.

 Describing the anonymity and boundlessness of this circulation, he wrote

(she then quotes from Marx: Here is my interpretation of the quote, preceded by some preliminaries. From my blog:

The Escape of the Whole Process of Simple Circulation from the Control of the Participants with the Emergence of Money

In the external measure of the value of commodities via money as measure, there is, indeed, all commodities on one side and money on the other side, but in the actual exchange of commodities with money (money as a means of purchase or as a means of circulation) this is not the case; on the contrary, there is necessarily a separation in space and time between the act of sale (realization of the value of the commodity in money) and the realization of money in various use values (purchase).

The unity of value and use value, hidden in the commodity, is expressed as mutually exclusive and external forms of sale and purchase so that crisis becomes a possibility as the gap between the realization of the value of a commodity and the realization of use values of an equivalent value becomes intensified.

Page 79:

Thus, if after you finish making $120 worth of coffee, instead of throwing down your apron and going home, you finishout your eight-hour shift, one hour will be necessary labor, and seven hoursare surplus labor!

To make the following a little easier to follow, we can consider the following:

  1. The owner of linen wants to sell the linen in order to buy a Bible.
  2. The owner of money who buys the linen obtained the money by selling wheat.
  3. The owner of the Bible sells the Bible to the former linen owner in order to buy brandy (but the brandy does not directly figure in the total metamorphosis or total exchange of the linen for the Bible since we end with the Bible owner possessing money and the linen owner possessing the Bible.
  4. At the beginning of the total exchange process, the linen owners owns the linen (a use value for others) but does not want it.
  5. At the end of the total exchange process, the former linen owner now owns a use value useful to her (and the linen also is useful for the farmer, the former owner of wheat).
  6. The money stops circulating for the moment at the end of the process with the former owner of the Bible aiming to purchase some brandy (but not yet doing so).
  7. [linen owner, bible owner, wheat owner, brandy owner?] [wheat-linen; linen-bible; bible-brandy] [the wheat owner depends indirectly on the bible owner to purchase the
  8. linen owner sells linen to money owner, who sold the wheat to obtain the money
  9. linen owner buys bible, and owner of bible sells bible in order to buy brandy
  10. at end of one complete exchange process, two exchangers have use values and one exchanger has money: asymmetrical: two complete realizations of a commodity and one incomplete.

Pages 207- 209:

The circulation of commodities differs from the direct exchange of products not only in form, but in its essence. We have only to consider the course of events. The weaver has undoubtedly exchanged his linen for a Bible, his own commodity for someone else’s. But this phenomenon is only true for him. The Biblepusher, who prefers a warming drink to cold sheets, had no intention of exchanging linen for his Bible [the owner of a particular commodity intends to exchange what he owns for other commodities; but the owners of other commodities need not have any intention of exchanging their commodities for what the owner of the particular commodity owns]; the weaver did not know that wheat had been exchanged for his linen [and the owner of a particular commodity has no intention of exchanging his particular commodity for the commodity owned by another owner but not wanted by him] [the owner of linen may not want any wheat] . B’s commodity replaces that of A, but A and B do not mutually exchange their commodities. It may in fact happen that A and B buy from each other, but a particular relationship of this kind is by no means the necessary result of the general conditions of the circulation of commodities. We see here, on the one hand, how the exchange of commodities breaks through all the individual and local limitations of the direct exchange of products, and develops the metabolic process of human labour. On the other hand, there develops a whole network of social connections of natural origin, entirely beyond the control of the human agents. Only because the farmer has sold his wheat is the weaver able to sell his linen, [to sell a particular commodity, another person had to be able to sell their particular commodity and convert it into money] only because the weaver has sold his linen is our rash and intemperate friend able to sell his Bible, and only because the latter already has the water of everlasting life is the distiller able to sell his eau-de-vie. And so it goes on.

The process of circulation, therefore, unlike the direct exchange of products, does not disappear from view once the use-values have changed places and changed hands. The money does not vanish when it finally drops out of the series of metamorphoses undergone by a commodity. It always leaves behind a precipitate at a point in the arena of circulation vacated by the commodities. In the complete metamorphosis of the linen, for example, linen-money-Bible, the linen first falls out of circulation, and money steps into its place. Then the Bible falls out of circulation, and again money takes its place. When one commodity replaces another, the money commodity always sticks to the hands of some third person.  Circulation sweats money from every pore.

Circulation bursts through all the temporal, spatial and personal barriers imposed by the direct exchange of products, and it does this by splitting up the direct identity present in this case between the exchange of one’s own product and the acquisition of someone else’s into the two antithetical segments of sale and purchase. To say that these mutually independent and antithetical processes form an internal unity is to say also that their internal unity moves forward through external antitheses. These two processes lack internal independence because they complement each other. Hence, if the assertion of their external independence proceeds to a certain critical point, their unity violently makes itself felt by producing – a crisis. There is an antithesis, immanent in the commodity, between use-value and value, between private labour which must simultaneously manifest itself as directly social labour, and a particular concrete kind of labour which simultaneously counts as merely abstract universal labour, between the conversion of things into persons and the conversion of persons into things*; the antithetical phases of the metamorphosis of the commodity are the developed forms of motion of this immanent contradiction.

Page 65: She quotes Jim Stanford from his book Economics for Everyone: A Short Guide to the Economics of Capitalism. Stanford, however, lacks an adequate theory of money, and he seems to go out of his way to avoid relating money to labour. Thus, his only definition of money is “purchasing power.” He does not explain why one particular thing has this purchasing power, why other things (commodities) do not, and why such power is embodied in a thing rather than in the people who produce their lives. Stanford, by the way, was an economist for the former Canadian Auto Workers (CAW) and then for Unifor. He is a social democrat and social reformist.

Mr. Stanford seems to consciously avoid adopting a Marxian theory of capitalism. One possible explanation is the title of my critique of Stanford’s theory of money (among some of his other economic views) on my blog: Economics for Social Democrats but not for the Working Class.

More generally, Thier occasionally fails to engage critically with the material. Thus, in an earlier chapter, on page 10, we read:

Ideological shifts have been as dramatic as the protests on the streets. Even before the pandemic struck, polls consistently showed that the majority of millennials reject capitalism, and in some cases specifically prefer socialism.7 In the US, where the two-party system has a vice-like grip on the electoral process, Bernie Sanders, a self-proclaimed socialist, won the support of tens of millions of primary voters in 2016, who “felt the Bern” of his anti-corporate political revolution. By the 2020 election, the previously fringe candidate became a front-runner in the national elections and fundamentally shifted the national discussion on every major issue: from health care and climate change to racial justice and class inequality.

This is very problematic. In the first place, what does “reject capitalism” mean? And what does “prefer socialism” mean? When I was working at the brewery, there was a lab assistant who tested the beer for quality control. We talked in the lunch room occasionally, and he indicated that he was somewhat of a socialist. He later became a foreman–and oppressed us just as much as other foremen. He conceived of socialism in terms of welfare capitalism and not in terms of the elimination of the class power of employers.

In the second place, it should not be forgotten that, before the First World War, many members of the Social Democratic Party in Germany (some of whom undoubtedly also called themselves Marxist) voted for war.

In the third place, it has been my experience here in Toronto that most self-proclaimed socialists aim for enhanced welfare capitalism and not for the abolition of capitalism.

The issue is relevant, politically, since an overestimation of the support for the abolition of capitalism greatly underestimates the work needed to gain support for such abolition.

Thier, page 71:

Ultimately, the only way to change the value of the chair is through reducing or increasing the amount of labor-time that goes into making it.

It is true that Marx ultimately claims this to be the case. However, there are circumstances which seem to contradict this. Thus, on pages 130-31 of volume 1 of Capital, we read:

The same quantity of labour provides more metal in rich mines than in poor. Diamonds are of very rare occurrence on the earth’s surface, and hence their discovery costs, on an average, a great deal of labour-time. Consequently much labour is represented in a small volume. Jacob questions whether gold has ever been paid for at its full value.* This applies still more to diamonds. According to Eschwege, the total produce of the Brazilian diamond mines for the eighty years ending in 1823 still did not amount to the price of 1 years’ average produce of the sugar and coffee plantations of the same country,t although the diamonds represented much more labour, therefore more value. With richer mines, the same quantity of labour would be embodied in more diamonds, and their value would fall. If man succeeded, without much labour, in transforming carbon into diamonds, their value might fall below that of bricks. In general, the greater the productivity of labour, the less the labour-time required to produce an article, the less the mass of labour crystallized in that article, and the less its value. Inversely, the less the productivity of labour, the greater the labour-time necessary to produce an article, and the greater its value. The value of a commodity, therefore, varies directly as the quantity, and inversely as the productivity, of the labour which finds its realization within the commodity.

For substantial periods of time, especically in labour directed more directly to the earth (land), supply and demand can be in disequilibrium, or unbalanced. Ultimately, though, as capital moves from branches of production where profits are low relative to other spheres of production (and where supply tends to exceed demand) to branches of production where profits are high relative to other spheres of production (and where demand tends to exceed supply), there is a balancing of supply and demand (as a dynamic process that never is achieved except perhaps momentarily).

Land is a non-produced means of production and has no value, but it can have a price. This pertains to Marx’s theory of rent, which has two components: differential rent and absolute rent. However, I have not really studied this area to any great extent and cannot adequately comment on it. Marx further separates differential rent into differential rent I and differential rent II.

Differential rent I pertains to differences in land used to produce agricultural commodities, mined commodities, forest commodities and fish commodities. Some land will be, for example, more fertile than other land. If effective demand exists (backed up by money), then capitalists will invest in agriculture where there is more fertile land and less fertile land. With more fertile land, there is greater productivity of labour (more commodities can be produced). The capitalists will invest in agriculture, with different levels of fertility and hence different levels of commodity production per unit of labour. The least productive capital, with the worst land, will result in zero differential rent; all, more productive capitals that are due to the increased quality of fertility, will result in differential rent 1—a surplus beyond the regular level of profit. The capital invested in the least fertile land will determine the value of commodities.

Differential rent arises due to private property in land—and land is, ultimately, non-produced.

Differential rent 2, by contrast, has to do with the application of different techniques within agriculture, within mining, within forestry, etc. In other branches of capitalist commodity production, when techniques are used that enable workers to produce a greater amount of commodities in the same period of time, a surplus profit can arise(hence, there is an incentive to innovate). In agriculture, etc., the surplus profit can be captured by landowners rather than by the capitalists, reducing the incentive to invest intensively in this sector. The extent to which the surplus profit is divided between capitalist farmers and landowners will depend on their economic and political power.

This leads in to a further kind of rent: absolute rent, which has to do with, as Ben Fine and Alfredo Saad-Filho remark, with differences in productivity between different branches of production (such as differences in productivity between the production of hops and beer production) rather than within them (such as differences in productivity between the growing of grapes and the growing of wheat). This issue has to do with what Marx called the composition of capital, or the proportion of investment in means of production and labour power (c/v), or constant capital divided by variable capital) or, in some variations, the proportion between the value of the means of production, on the one hand, and labour power and surplus value, on the other (c/(v+s).

The basic idea is that, due to the existence of landed property (with land ultimately being a non-reproduced and non-reproducible means of production), there is a barrier to the entry of capital into agriculture, etc. This barrier results in a slower rate of development of innovation and substitution of v for c in agriculture, etc. However, since the sole source of surplus value is labour, the lower composition of capital in agriculture (a lower c/v), etc means that more surplus value is produced in this sector per unit of investment (c+v) than in branches of industry where there is a higher composition of capital (a higher c/v). But with different compositions of capital, the rate of profit, which is measured by the proportion s/(c+v) will differ. This difference in rates of profit, however, will spur capitalists to shift investment to the higher rates until there is an equal rate of profit (which is only temporary, given the dynamics of capitalist accumulation).

With an equal rate of profit in all capitalist industries, in agriculture, with a lower c/v than the average, what Marx called the production price of commodities would be lower than the value of the commodities. (In cases where c/v is higher than the average, the production price would be higher than value of the commodity). In essence, what this means is that the production of surplus value in a particular branch of the economy is not identical to its distribution; some capitalists will receive surplus value from other capitalists (those capitalists with a higher c/v than the average)), and other capitalists will see part of the surplus value produced in their branch (due to a lower c/v than the average) transferred to other capitalists; Marx sarcastically called this capitalist communism, since the principle is the distribution of the total surplus value produced by workers according to equal rates of profit.

In the case of agriculture, etc., because land is a non-produced commodity, since the price of production is lower than the value of commodities, the difference can be pocketed by the class of landowners as absolute rent when capitalist farmers invest in new land. This, again, depends on the relative power relations between the class of capitalists and the class of landowners.

The issue of urban rent is undoubtedly much more complicated. As Ira Katznelson wrote (Marxism and the City. Oxford: Clarendon Press, page 227):

As capitalism entered the industrial epoch, the concept of the land-rent gradient that pointed toward the highest economic use by introducing a profit motive into land use and housing was already established. With the explosion in the demand for land for factories as well as for working-class housing, this market logic accelerated the processes oi segregation of both uses and social classes.

What’s Left, Toronto? Part Three

In two earlier posts, I looked at the introduction and first talk of several leftist activists on September 19, 2018 in the city of Toronto, Ontario, Canada, about what was to be done politically (presented just a little over a month before city elections on October 22). The talks were posted on the Socialist Project website (What’s Left, Toronto? Radical Alternatives for the City Election)  on October 7, 2018 (15 days before city elections).

The second talk was made by Stefan Kipfer, professor of environmental studies at York University. Professor Kipfer talked mainly about the housing issue in Toronto. He indicated that housing has two senses, one narrow and one wider. The wider sense has to do with how people appropriate space and make life livable for themselves within that space. The narrow sense has to do with the provision of housing (its production and distribution presumably). He points out that any solution to housing problems has to be wider than the narrow sense and needs to take into the labour market, for example.

Unfortunately, he then restricts his reference to solutions to two models that address problems in the narrower sense. Both the right and the left agree that there is a housing problem, but they differ in their solutions. The first, right-wing model is the private-market model of housing, or the supply-side model, which requires the market to dictate housing production and distribution. Social regulation is to be minimized. Such a view is characteristic of the Board of Trade of Toronto, and the two mainstream mayoralty candidates John Tory and Jennifer Keesmaat.

The left-wing solution is purely negative–it does not rely on the private market model for solving housing problems. Diverse solutions have this negative quality about them. otherwise, they differ somewhat in their approach. For example, there is a housing struggle over the expansion of shelter space, led by OCAP, and there are struggles over establishing coop housing. Despite the differences, they all suggest an expansion of social, non-profit housing, coop housing or at the least the maintenance of existing housing infrastructure.

The exclusion of such vital issues as the labour market from explicit consideration mars the presentation. Indeed, it distorts the definition of the problem and its solution. Thus, Professor Kipfer argues that housing is not like the production of pies or bicycles since it permits capitalist developers, banks and insurance companies an increasing flow of rent payments. Now, there is certainly a sense in which an increasing flow of rent payments (rather than a steady flow of rental payments) makes the production of housing different from the production of pies and bicycles in a capitalist society; professor Kipfer implies that there is a monopoly in production that permits such an increasing flow of rental payments. Presumably the supply of housing is constantly less than the demand so that the prices of housing do not correspond to their value over the middle term since there is an artificial restriction of the supply due to the monopoly in land. That is, presumably, why housing in Toronto is becoming more and more unaffordable.

Although the production of housing may differ from the production of pies and bicycles in a capitalist system of production and exchange due to the monopoly of land (ultimately a non-produced part of the world), there is also the commonality of the principal purpose of land use, the production of pies and bicycles in such an economy: obtaining more money than initially invested (see The Money Circuit of Capital). Construction of housing is just as much dictated by the logic of capital as the production of pies and bicycles. As Ira Katznelson wrote (Marxism and the City. Oxford: Clarendon Press, page 227):

As capitalism entered the industrial epoch, the concept of the land-rent gradient that pointed toward the highest economic use by introducing a profit motive into land use and housing was already established. With the explos:on in the demand for land for factories as well as for working-class housing, this market logic accelerated the processes oi segregation of both uses and social classes.

Since Kipfer does not elaborate at all on how solutions would differ if the wider context were considered, it is difficult to determine whether his proposed solutions within a wider context would be any different from the social-reformist left. Given his emphasis on how housing is supposedly substantially different from the production of pies and bicycles and given his reference to the nationalization of land (but not the overthrow of the owners of the factories where workers produce pies and bicycles, replacing it with democratic control), his preferences may lie in aligning himself with the social reformist left.

Indeed, the nationalization of land has been proposed by such socialists as Henry George–but not the seizure of the produced means or conditions of production. Similarly, as Meghnad Desai notes (Marxian Economic Theory, 1974, pages 40-41):

A few years before Bohm-Bawerk’s criticism (which had to wait until all the three volumes of Capital were published), Philip Wicksteed in a celebrated debate with Bemard Shaw had demonstrated that relative prices were in fact explained by relative scarcities and therefore by the ratio of marginal utilities which they yielded to a consumer. Wicksteed’s demonstration did not deal in detail with Marx’s theory but showed that an explanation based on Jevons’ theory of utility was a superior logical explanation. If prices are explained by relative scarcity rather than by labour content, then the notion of surplus value ceases to have rational foundation. Profits become a legitimate income as a reward for relative scarcity of capital. (Bernard Shaw was to admit the force of this argument and later in his life concentrated on the Ricardian notion of land rent as unearned surplus. To this day land nationalisation and appropriation of profits in real estate have been a part of the Labour Party’s economic philosophy. Profits in industrial activities are regarded as legitimate).

It is certainly illegitimate to single out housing and rent as somehow substantially different from profits, and yet Kipfer seems to imply this. There may indeed barriers to realizing an equal rate of profit in housing construction due to the monopoly of land, thereby restricting competition and increasing housing prices accordingly (without countermeasures, such as the production of social housing and coops). Even if there were no such barriers, though, the situation cannot by any means be characterized as fair for the workers in the construction industry since they are still treated as things or objects, mere means for employers to obtain more and more money. Reducing housing prices through increased social supply in no way questions the legitimacy of the power of employers as a class.

Nothing in Professor Kipfer’s presentation suggests a “radical alternative.” His proposals for social housing and nationalization of the land do not question the principle of capitalist production and exchange–the use of the produced means of production and consumption to exploit workers on an ever-increasing scale through the accumulation of capital. It is a social-democratic presentation and in no way addresses the class power of the employers as a class.

By the way, although I never produced pies for an employer, I did work in a capitalist bakery in Calgary, Alberta, Canada, producing bread for Safeway Inc. (an American supermarket chain). I lasted about a week since the pace of work and the heat were brutal.

One final point: professor Kipfer does not address the possible conflict of interests between sections of the Toronto working class who possess some form of housing and benefit from rising housing prices and those who do not. I learned about this discrepancy fairly recently. In 2014, I bought a relatively inexpensive condo not too far from Jane and Finch in North York (Toronto) for $86,000 Canadian. A few months ago, a real estate agent came to the building, seeking to buy a condominium for someone. Curious as to how much my condominium would be worth, I had him come to estimate its price. He informed me that it would be worth between $200 000 and $227 000. In a little over four years, the price had more than doubled.

Given this situation for some members of the working class in Toronto, support for housing policies that would limit the rise of prices and expand social housing may be lackluster. Some members of the working class may even oppose such policies.

In any case, so far the moderator’s introduction to the series and the first and second talks do not express any radical policies–unless you define radical as limiting your policies to those that are consistent with the power of employers as a class. This series is looking less and less radical.