Review (Part 1 of 3): Paul Baran, “Some Theoretical Implications”: Monthly Review, Vol. 64, No. 3. July-August 2012.

The July-August 2012 issue of Monthly Review1 centers around the publication of one of two missing chapters of Monopoly Capital: An Essay on the American Economic and Social Order2 by Paul Baran and Paul Sweezy. Anti-Imperialism.com earlier posted about this issue and the suggestion was made that individuals who are interested in the topic of class under imperialism should find a copy. Needless to say, it provides much valuable information in support of the argument that a large proportion or majority of the populations of countries such as the US fall on the net-exploiter side of the world-economy. Along with Zak Cope’s Divided World Divided Class, 3 this particular issue of Monthly Review has made 2012 a notable year for shedding additional light on these questions.

The following review of “Some Theoretical Implications” will be the first of three on essays featured in the July-August issue Monthly Review. Part two will be on Samir Amin’s essay, “The Surplus in Monopoly Capital and the Imperialist Rent.” Part three will be on “The GDP Illusion: Valued Added versus Value Capture” by John Smith.

While I won’t be reviewing John Bellamy Foster’s Introduction, it is highly recommendable as well. In it, he describes the ideas illustrated in the missing chapter, particularly that of “surplus” (as distinct from “surplus value”), to be “revolutionary” in that they help expose the “irrational and deeply exploitative character of accumulation at the center of the world economy.” 4

Foster goes on to state, “surplus… is incorporated in the real wages of the workers in the center of the world economy (as well as some relatively privileged workers in the global South). But this mainly compels workers to purchase the products of unproductive labor embodied in their wage goods (e.g., the plastics around the loaf of bread), the costs of which are mainly associated with the penetration of the sales effort into the production process.” 5

At this point it might be suitable to point out that none of these essays contain a complete theory nor do any claim or aim to. Rather, each are devoted to particular, highly relevant aspects of the global economy and all are written from a perspective of critical opposition. While all are highly illustrative, it is up to the audience to induce reasonable, revolutionary practices or to continue such dialogue in positive ways and with a wider scope.

Some Theoretical Implications” was the title of one of the two chapters omitted from the final 1966 publication of Monopoly Capital: An Analysis of the American Economic and Social Order. 6 Though the book was a product of the joint work of Paul Baran and Paul Sweezy, this missing chapter mainly reflected the ideas of the former, who died before its publication. Rather than going into a full history of why the chapter did not make the final cut, this particular essay will deal strictly with the ideas it presented.

Baran’s missing chapter centers in part around the concept of “economic surplus.” Throughout their book, Baran and Sweezy set out to demonstrate the qualitative differences between ‘competitive capitalism’ as described by Karl Marx and ‘monopoly capitalism’ which had developed to full force by the 1960s. In many ways, this missing chapter and the corresponding notion of surplus formed the keystone of their argument regarding this difference.

Some Theoretical Implications” opened with the question of when exactly capitalism ceased to be a progressive force and its social relations became a fetter. According to Baran, this meant not that growth and innovation of the productive forces halt, but rather the extent to which possibilities for growth and development are allowed to be realized within the given framework of social relations. 7 This is as salient today as when it was written. Humanity has the productive means to ensure a reasonable quality of life for every person, yet such is prevented from taking root due to a system predicated on the search for profit. This gap between could be and what is grows over time according to Baran. 8

Though Baran stated “the precise timing of any such transformation of an economic and social order [from progressive to reactionary] is hardly possible,” 9 he nonetheless located this change in the 1870’s.10 In the United States this decade marked the end of Reconstruction, and world-wide this period marked the “beginning of the powerful wave of trustification and monopolization of the capitalist economies of a number of countries, the bourgeoisie of those countries not only shed what was left of the progressive, iconoclastic posture of its revolutionary youth, but joined forces with its still powerful former feudal… adversaries.” 11 This is the period of transition between the classical stage of mature ‘competitive’ capitalism to the monopoly capitalist or imperialist stage of today. 12

It was in this period, Baran suggested, that “what has now come to be called ‘economics’ turned rapidly in apologetics for a more and more retrograde social and economic order.” 13 Drawing from Immanuel Wallerstein, I might add that such bourgeois apologetics is a major if not the main component of most humanities fields, and that the very division of knowledge into categories such as economics, political science, sociology, history, international relations, ethnic studies, philosophy, et. al. is itself an obfuscation and hence means by which such apologetics and justifications of capitalist-imperialism occur. 14

One apologia for capitalism Baran quoted is from John Bates Clark: “where natural laws have their way, the share of income that attaches to any productive function is gauged by the actual product of it. In other words, free competition tends to give labor what labor creates, to capital what capital creates, and to entrepreneurs what the coordinating function creates.” 15

It is foundational within Marxist doctrine that a) labor is the source of all value and b) that under capitalism workers generally receive less in remuneration than the value of the product of their labor power. Historically this has been understood as the difference between the value of labor power (wages) and the value of labor (price at which the product of labor power is sold) and termed “surplus value.”

While this is common knowledge within Marxism and need not be expounded more fully here, it is worth noting that many Marxists today are under similar misconceptions as Bates Clark when it comes to incomes of ‘national’ economies. The assumption is frequently made even by ‘left-wing’ critics that the income of a given country corresponds to value generated within its borders. By implication of this argument, capitalism structures wages in a given country according a fixed rate of exploitation mediated through technological productivity, not through historically-constructed social privileges and structural economic functions which belie any accounting on the narrow basis of national GDP. In reality, just as a capitalist does not create the wealth he receives as income nor does the worker’s income fully reflect the value she creates, a given country’s GDP, though representing a share of the social product captured, does not necessarily reflect the proportion that was created through labor applied within its borders. 16

According to Baran, the era of monopoly capitalism, which is qualitatively different than the ‘competitive’ capitalism of Marx’s time, coincides with the raising of the value of labor power for some workers consistently above “an irreducible magnitude,” and that under such conditions profits can be made “by deduction” in arenas that occur not within the production process but increasingly in the process of circulation. 17

In a nutshell, insofar as a majority of Amerikan workers are ‘exploited,’ it is because they spend their wages on overpriced rents, superfluous consumer products, and other luxury items (and thus allowing this surplus included in their wages to be recaptured through realization), not because they are paid a wage that is less than the abstract value of labor. Moreover, this sort of ‘exploitation’ is an integral part of today’s world-economy and is a means by which capital is further concentrated in the monopolistic First World.

Backing up a bit, the advent of monopoly capitalism corresponds with series of shifts in the manner in which the world-economy operates.

Under monopoly capitalism, the sales effort becomes an increasingly integral part of the production process. Wants, often perfunctory, are more and more created via the sales effort rather than simply satisfied by the produced process, and the physical qualities of products are increasing adapted to this sales effort. 18 While the generation of surplus value or realization or profit under earlier competitive capitalism corresponded to the satisfaction of some human want, under monopoly capitalism “the satisfaction of wants tends to bear a diminishing relation to the requirements of human welfare” and “a large and growing share of total human efforts [becomes] directed towards waste and destruction.” 19 According to Baran, “as an important proportion of the total human effort is devoted to the production of goods the demand for which is artificially generated by profit-seeking corporations, the rationality and productivity of the effort itself can no longer be taken for granted.” 20 Under monopoly capitalism investment is increasingly geared not towards the development of productive forces but instead “towards advertising and the build up of trade-marks, towards construction of sumptuous palaces housing the executive offices of giant corporations, towards the development of marketing and production variety,” as well as “ever new factories producing the means of mass destruction.” 21 Monopoly capitalism is not just directly against the class interest the proletariat but gradually becomes a system increasingly at odds with the long-term interests of humanity in general- and the very conception of humanity set forth under capitalism, that of individual free agents.

Under the pre-monopoly capitalism that Marx devoted his life to studying, we could speak of aggregate surplus value as being the difference between the socially necessary cost of production (the price of wages valued at the cost of reproduction of labor) and the price of sales (which corresponds to the total value of product of labor applied in the same period). Under this system, things such as policing, state budgets, rents, personal services to the capitalist class, and merchant costs were necessary operating costs or deductions of surplus value from profit towards social maintenance. Under monopoly capitalism as Baran described, these fields of economy activity have taken on lives of their own. 22

Services which once existed merely within the context of bourgeois privilege (i.e., haircuts, massages, etc), various state functions, and aspects of the sales effort have increasingly become enlarged, commodified, and integrated as a manner in which monopoly capitalism realizes value at its core. This system is not only set against the masses of exploited workers (most of which reside in peripheral or semi-peripheral countries or live as ‘precarious’ members of First World societies) but is also increasingly against the basic well-being of humanity in general. The fact that retailers in core-zone countries can sell enough shoes and clothes to the point where many workers in these countries end up purchasing and owning multiple, often unused such items does nothing to advance society at any level. Or to provide another example, grocery stores in the First World typically stock more produce that they expect to sale and in fact anticipate throwing away a significant portion of it. This is done because consumers are more likely to purchase food when there is an appearance of abundance and selection. Of course, selling more fresh vegetables to First World consumers and counting the waste as part of necessary cost does little to feed people generally. In fact, one could argue it accomplishes the opposite since hunger, malnutrition, and starvation continue today as endemic problems. This level of irrationality, Baran noted, is specific to monopoly capitalism. 23

The irrationality of monopoly capitalism also corresponded with growth of “economic surplus” and its importance in the world-economy. As Baran stated, the “difference between what we call ‘economic surplus’ and aggregate surplus value is the result of the ascendancy of monopolistic enterprises and of the historical rise in the level of wages, leading to the incorporation in wages of a ‘surplus’ element.” 24 That is to say that surplus is larger than aggregate surplus value. Whereas surplus is the difference between the necessary cost of reproducing productive labor for a given period and the product which such labor produces in the same period, surplus value relates to the difference between the price of labor power and value captured through its application.

During capitalism’s competitive phase (and in regards to the capitalist economies of many Third World countries), wages were paid at levels which maintained reproduction of labor and little else. In this case, the economic surplus of the social product was almost entirely captured by the ruling classes and could simply be treated as surplus value. Under monopoly capitalism, an increasing proportion of surplus find its way into the wages of core-zone workers, whose wages are at once far above a global comparison and artificially depressed through “profits by deduction” made by sales of consumer products and over-valued basic commodities.

Under monopoly capitalism and as it relates to surplus, less and less labor is devoted towards producing the basic requirements of reproducing labor. Baran termed waged work which occurs outside of basic production as “surplus labor,” or that whose employment does not raise the product of social labor but instead is a draw from the product of social labor. This surplus labor is often directed towards circulation and employed to realize a portion of this surplus as surplus value for individual firms. Whereas these workers may be integral to realizing a surplus value for their employers, they themselves are not the producers of value and hence neither surplus value. 25

To illustrate this phenomenon, Baran had earlier laid out the following numerical sketch in The Political Economy of Growth and reproduced it in the footnotes of “Some Theoretical Implications,”

Assume that in a period I, 100 bakers produce 200 loaves of bread, with 100 loaves constituting their wages (one loaf per man), and 100 loaves being appropriated by capitalists as surplus (the source of his profits and his payment on rent and interest). The productivity of the worker is two loaves per man: the share of the national income is 50 percent, and so is the share of labor. Now consider period II in which the productivity of the baker has increased by 525 percent to 12.5 loaves and his wage has risen by 400 percent to five loaves per man. Assume further that only 80 bakers are employed in baking, producing altogether 1,000 loaves while the remaining 20 are engaged as follows: five men are commissioned to continually change the shapes of the loaves; one man is given the task of admixing with the dough a chemical substance that accelerates the perishability of the bread; four men are hired to make up new wrappers for the bread; five men are employed in composing advertising copy for bread and broadcasting same over the available mass media; one man is appointed to watch carefully the activities of other baking companies; two men are kept abreast of legal developments in the antitrust field; and finally two men are placed in charge of the baking corporation’s public relations. All of these individuals also receive a wage of five loaves per man. Under these new circumstances, the total output of 80 bakers is 1,000 loaves, the aggregate wage of the 100 members of the corporation’s labor force is 500 loaves, and profit plus rent plus interest are 500 loaves. It might seem at first that nothing has changed between period I and II except for the increase of the total volume of output. The share of labor to national income has remained constant at 50 percent, and the share of surplus does not appear to have varied either. Yet such a conclusion, though self-evident from the inspection of customary statistics, would be wholly unwarranted and in fact would serve to demonstrate how misleading such statistical inferences can be. For the statistical fact that the shares of labor and capital have not changed from period I to period II is irrelevant so far as our problem is concerned. What has happened, as can be readily seen, is that a share of the economic surplus, all of which in the earlier period was available to the capitalist as profit and for payment of land rent and interest, is now used to support the costs of a non-price-competitive sales efforts, is- in other words- wasted.” 26

According to Baran, the wages of the 20 non-productive workers (in this case 100 loaves of bread) are part of the economic surplus, whilst its function is to realize the full value of the 500 loaves into surplus value for the capitalist. These worker are engaged in selling costs disguised as productive activities and are not, according to Baran, “productive workers who produce surplus value.” 27 Even blue collar workers engaged in producing superfluous consumer products or that with no value for humanity (such as manufacturing weapons or constructing lavish corporate offices) themselves receive wages drawn from this “economic surplus” while realizing surplus value for this or that parasitic enterprise at the core. For Baran, this amounted to a contradiction “between rational utilization and waste, between productive and destructive employment.” 28

Baran also tied economic surplus to the growth of militarism. Those engaged in economic activity geared towards maintaining structural dominance through standing armies and weapons of mass destruction produced nothing of use for humanity generally. Therefore, those in engaged military-tied economic activity are involved in the circulation and re-appropriation of surplus, not the production of value. Today this point has growing salience. For example, the US ‘defense’ budget, the largest in the world by an excessively wide margin, stands at nearly 690 billion US dollars. From this vast sum, various wages are paid out not just to military personnel but also to private contractors engaged in a wide variety of duties. This sum also covers the wages of people who work in munitions factories and as military engineers, just to offer two examples. However, no one employed with this $690 billion is engaged in productive labor and hence no one produces surplus value. Rather, the wages which are necessarily part of this vast sum of money are necessarily drawn from surplus and are in multiple senses a hindrance towards society at large. For Baran, such irrational and destructive labor was both a drain on society and that which would be better not expended at all. 29

While Baran’s notion of surplus sheds light on its destructive misuse of under capitalism-imperialism, it also helps us conceptualize socialist and communist futures. The same productive technologies which have enabled monopoly capitalist to extend the social and temporal scope of its parasitism can also be used to liberate the masses of people. Rationally directed for the democratic, equitable allocation of use values, the productive forces generated under monopoly capitalism can be utilized for the collective betterment of humanity, freeing the proletariat from perpetual toil and allowing for a reasonable, sustainable, and notably better lifestyle for the 80% of humanity which currently finds itself on the brink of poverty.

Furthermore, not every wage drawn from surplus need be abolished. Teachers and other school faculty, for example, are paid through surplus. Yet one could imagine the continuation or reintegration of educational institutions into post-revolutionary society even though almost no value is actually produced on a school campus. In many ways, socialism is the expansion, democratization and socialization of the allocation of surplus in a way that promotes the reproduction of a system based on equally and abundance. Thus, only parasitic economic activity which occurs at schools need be abolished. For example, financial aid counseling, negotiating contracts with vending machine operators, or those jobs related to the marketing of the school to potential students would all find no place in a socialist society.

While mainstream Marxism since Marx (with some exceptions) has been unable to keep up with the development of capitalism through today, Baran’s missing chapter of Monopoly Capital offers those who understand the importance of the question of global class an interesting and rich analysis on which to build. Analyses like those presented by Baran not only illuminate new difficulties and old problems which revolutionaries will likely encounter, they help reveal what is at stake and what is to be gained through class struggle itself.

The intellectual and activist community around Anti-Imperialism.com has long questioned the a priori belief held by the ‘left’ that Amerikan workers deserve more. We have been among the few that have declared that as part of the struggle against imperialism, a large portion if not majority of First World workers are functionally part of the forces of reaction rather than revolution, and that they operate as net-exploiters within the world-economy and not exploited producers of surplus value. “Some Theoretical Implications” add another bit of efficacy to this analysis. Baran’s notion of economic surplus provides an additional way of looking into these questions, illuminating not only the existence of a large propertyless First World petty-bourgeoisie class but also demonstrating more precisely its role within the world-economy.

Though monopoly capitalism- imperialism- is increasingly decadent, parasitic, irrational, destructive, and illegitimate, these facts alone will not bring it to an end. Nor will awareness of these facts among academics provide immediate impetus for the creation of a new system.

Instead, it is up to revolutionary parties, organizations, and movements, informed with the best understandings possible, to develop effective strategies which enable humanity to bridge past this wasteful and detrimental system and towards a new one based on the rational, sustainable, and equitable distribution of the world’s social product.

Notes:

1Monthly Review. Vol. 64, No. 3. July-August 2012.

2Baran, Paul A. & Sweezy, Paul M. Monopoly Capital: An Essay on the American Economic and Social Order. Monthly Review Press. 1966.

3Cope, Zak. Divided World Divided Class: Global Political Economy and the Stratification of Labor Under Capitalism. Kersplebedeb. 2012.

4Bellamy Foster, John. “A Missing Chapter of Monopoly Capital.” Monthly Review. Vol. 64, No. 3. July-August 2012. p 20.

5Ibid. p 21.

6Baran, Paul. “Some Theoretical Implications.” Monthly Review. Vol. 64, No. 3. July-August 2012. p 24-59.

7Ibid. p 26.

8Ibid. p 27.

9Ibid. p. 26.

10Ibid. p 28.

11Ibid.

12Cope, Zak. Divided World Divided Class: Global Political Economy and the Stratification of Labour Under Capitalism. 2012. Kersplebedeb. p.43.

13Baran. P 29.

14Wallerstein, Immanuel. World-Systems Analysis, An Introduction. Duke University Press. 2004.

15Baran, p. 29

16This specific topic will be dealt with in more fully in part three of this series in a review of John Smith’s essay, “The GDP Illusion: Value Added versus Value Captured.”

17Baran. p 54.

18Ibid. p 41.

19Ibid. p 42.

20Ibid.

21Ibid. p 44.

22Ibid. p 57.

23Ibid. p 43.

24Ibid. p 55.

25Ibid. p 57.

26Ibid. p 57.

27Ibid.

28Ibid. p 43.

29Ibid p 58.