Saturday, August 24, 2013

Smooth...And By the Numbers 3

[Again, all figures from, or derived from US Census Bureau's Quarterly Financial Report and the Bureau's Annual Survey of Manufacturers]

1.  Say hello to a not so little old non-friend, the petroleum industry.  Prior to the Great Recession, US petroleum producers accounted for, on average, about 20% of the total net property, plant, and equipment in the manufacturing sector.  The size of this investment is also characterized by the reduced value of living labor that engages, reproduces, expands this property plant and equipment.

The ratio of annual wages of production workers to the net PPE is approximately 1 to 4.5, $1 in wages for every $4.5 in net PPE, for the manufacturing sector as a whole.  The ratio measures about 1:69 in the petroleum sector (and coal manufacturing, as the industries are not separated in the NIPA tables).

Similarly, an examination the relation of production worker wages to total value of shipments shows that the petroleum sector ratio of 1:160, $1 of wages for every $160 of product shipped,  far "outperforms" the manufacturing rate of  1:17.  

Profitability, however, does not follow easily in the wake of this "super-productivity."    The size of the petroleum industry's investment creates a chronic (not permanent, not continuous, but chronic, an immanent condition, sometimes expressed in acute phases, sometimes expressed in its very remission) oscillation between two of capital's dynamics-- (1)that profits accrue proportionate to the size of the capitals employed and (2) the greater the mass of accumulated value in the means of production in relation to the living labor required to engage that mass, the greater the tendency for the rate of profit to decline.   

Achieving (1) is not always sufficient to offset (2).  The offset is essential to accumulation itself. The offset requires the transfer of portions of the total realized surplus value, the total social profit, to the petroleum industry.  The mechanism for this transfer is price, or more exactly, the differential between price and value.  

So for 2012, the petroleum sector's operating profits amounted to 14.1% of operating expenses.  However, the petroleum sector's operating profits amounted to 38% of the operating profits realized  in the manufacturing sector. Good for petroleum?  But not so good for the sector as a whole which experienced an overall decline in both the mass and rate of its profits.

The cost of product for the upstream (extraction) petroleum manufacturers has averaged around $10 per barrel of oil equivalent.  The price of product that the upstream manufacturers obtain in markets is usually between $91 and $100 per barrel of oil equivalent.  This disparity is the market distributive process at work. Only through the distribution and redistribution of value does capital tend to create an average rate of profit which offsets the declining rate in certain sectors by imposing that decline as a limit, a barrier, to the reproduction of all other sectors.

2. These processes, reproduction/disproportion/distribution, have taken their acute forms in the oil price spikes of 1999, 2001, 2003.  Of particular significance, however, is the US petroleum sector's performance in 2007 and 2008, years of the great oil price blowout culminating in....the Great Recession.  In both years, the sector's profits accounted for 25% of total manufacturing profits, in synch, in proportion (almost) to its 20% portion of net property, plant and equipment.  However in both 2007 and 2008, the ratio of operating income to operating costs in the sector was significantly below that ratio for manufacturing as a whole. 

In 2007,  the petroleum sector's ratio of operating income to operating expense measured 6.2%, while for manufacturing sector registered an 8.8% ratio.  In 2008, the petroleum sector registered a 4.2% ratio, while the manufacturing sector achieved a 7% ratio.  Capital is  incapable of  maintaining balance, proportion among the conflicting tendencies it itself spawns in the pursuit of value, in the need to accumulate, in the need to aggrandize greater ratios of surplus value. .

S. Artesian

Thursday, August 22, 2013

Smooth...And By the Numbers 2

1. You can tell how bad things are by what registers as good news.  So just the other day (14 August), we get this bit of good news from the Eurostat press office:
Flash estimate for the second quarter of 2013
Euro area and EU27 GDP both up 0.3%
-0.7% and -0.2% respectively compared with the second quarter of 2012

Dry your eyes my little European Union friend.  Jubilation in the European Land.  Francois get ready, Angela rock steady,  As Wolfgang strikes up the band.

Zero point three percent growth and the 18 month recession is over.  Just like that.  Acabado, finito, gatavas, críochnaithe, Ολοκληρώθηκε, fertig, lest, завършен, done and dusted, färdiga befejezett, gotov, hotový, færdig, готов, afgewerkt, valmis, päättynyt, terminé, pabeigts, gotowy, finisat, končano. Zero point three percent growth compared to the previous quarter.  Compared to the previous year, well, the churlish might think the Great Recession is a little ways away from being acabado.  

But 0.3% is close enough to growth for government work because the GDP in the first quarter 2013 was 1.1 % below the 2012's first quarter.  So things must be getting better, because it's not as bad as it was and as we expected it to be.   It's getting less worse more slowly.  That's good news.

Pointing out that EU GDP is still about 2% below its 2008 measure-- that's just being, well, churlish.  And don't even think about mentioning GDP per capita, you malcontent you.  

In the United States, an economy, and with a ruling class, less encumbered than the Europeans by the  notion that an economy is anything other than an ATM for a very select clientele, the good news was exactly that-- the ATM was spitting out money for a very select clientele only.   The Dow Jones Industrial Average was above 15,000 (operative word-- was).  Fracking shale was doing for oil production what fracking shale had done for natural gas production.  Petroleum imports were down, refinery profits were up.  

Earnings growth, expected to expand some 27 percent in the second half of the year, was being revised downward to 15 percent, but compared to Europe?

However, there were signs, indications that the churlish pointed the 3 month moving average of the rate of growth of exports had moved from 10% during 2012 to 0% in 2013 for the US....and for Germany and China and India and Brazil and Mexico...

...while the generous pointed to the same moving averages for the same period moving from -8% to +8% for Japan and from +10% to -4% to +7% for Great Britain.

Good news, bad news, generous, churlish, optimistic, pessimistic, bulls, bears... it's all the same; that is to say all this good and bad, best of times worst of times is nothing but taking a position in the markets.  It's the long and the short of it.  It's buying and selling.  

2. The determinant of capital, that relation of the labor process to the valorization process is based in the relation of necessary labor time to surplus labor time.  The determinant is manifested by labor organized as value-producing, as wage-labor, which has no use other than when engaged by the means of production organized as commodities. 

The determinant is oblivious to news good and bad; knowing nothing more than the need for the reproduction of itself; which is to say the accumulation of the means of production as a mass of expanded values which is the condition of labor, the condition of labor organized as a commodity, as value-producing.  The circle is complete, even as it breaks apart. 

3. Last time around, in the not-so-Great Recession of 2001-2003, the US bourgeoisie confronted, they though, too much.  Too much capital, too many fixed assets, too many works, too high wages.  So they took a short course in accelerated disaccumulation.

[All figures below either taken directly or developed from the US Census Bureau's Quarterly Financial Report and/or Annual Surveys of Manufacturers]

In the 1Q of 2001, the value of of the net property and equipment (PPE) in manufacturing peaked at $1.177 trillion.  By the 4Q  2003,  the PPE value had decline to $1.123 trillion.  This was not a paper devaluation, a "moral depreciation," but rather involved real consumption of capital; real restraint of capital expenditure; and real decline in the fixed asset replacement rate. 

Further, this decline in value was not due to a divergence between the technical composition of capital and its value composition, where the mass of the means of production employed continued to expand, while the value of the means of production declined due to improved efficiency, reduced costs of new fixed assets.   We're talking about recession remember.  We're talking about capitalism remember.  The "thing"-- actually the relation-- to keep in mind is that for capital, value and physical capability are fused, as use and exchange are fused in an antagonistic identity, and are indissoluble.  A generalized contraction of capital, generalized overproduction is exactly that antagonistic identity.  

The reaccumulation after the recession ended in 2003 was painfully slow, even under the whips of the devalued dollar, the oil price spikes, and the invasion of Iraq.  The old 2001 peak in net PPE was not exceeded until the 4Q 2006, after capital spending had to be resumed to replace the capital already consumed, and this itself correlates so neatly with a downturn in the rate of profitability for US manufacturing. 

The accumulation of fixed assets continued through the 4Q 2008, one year after the onset of the recession itself.  The "lag," this asynchronous aspect to capitalists response to the condition of capital is another expression of capital's tendency to becoming the immanent barrier to the further accumulation of capital-- with the further accumulation of capital being the expression of generalized overproduction.

Anyway, as asynchronous as the processes of accumulation appear to be,  sooner or later they all converge, and converge these did once Lehman Brothers was denied admission to the Fed's emergency medical insurance program.  

The devaluation of fixed assets in this iteration of generalized overproduction, in this "Great Recession" has been less severe, and of shorter duration than that of the 2001-2003 recession.    In that not so great recession the devaluation amounted to 6% of the estimated value or $69 billion.  In the Great Recession, the devaluation, 2008 peak to 2010 trough,  has been $45 billion; and while it took almost six year, 1Q 2001- 4Q 2006, for fixed asset accumulation to recover completely the value lost, it has taken only two years, 4Q 2008-4Q 2010 during this current period.  

What has made the Great Recession "great," is its severity, persistence, expansiveness.. and the ability of the US bourgeoisie to shift almost the entire burden, the entire costs, the entire "loss" of value unto the living component of capitalist reproduction, labor.  

Production workers' wages declined 17%,  2007 peak to 2009 trough. Production worker wages in 2011 were still 11% below the 2007 peak.  The peak to trough (2000-2003) decline in the previous cycle was 9 percent. Most significantly, that 2000 peak for production workers wages in the US has never been exceeded.  As a result the rate of growth of value added to production has declined.  Between 1990 and 2000, that growth was 46.5% or about 4% annually.  Between 2000 and 2011 that growth measures 16% or about 1.2% annually

What characterizes the contraction in the US is what has characterized the recovery in the US and accounts for the tenuous and shallow nature of the recovery-- the rapid recovery and expansion of fixed assets; or... the failure to devalue enough capital quickly. 

What characterizes the contraction in the US is the continuity of that contraction with the overall trend since 2000, the convergence of capitalist recovery and capitalist contraction.  In every sense, capital is still grappling with the changes brought about by the applications of advanced technology in the 1992-2001 period; to the changes this has brought to the relations of necessary to surplus labor-time; to the expulsion of labor from the valorization process; to relations between the value components of capital.  


Next:  Smooth...And By the Numbers 3.

Friday, August 16, 2013

Interlude: Radio Nowhere

It all, and mall, makes me wonder.  I feel it myself, this urge, to put every thing in its place, in a row like ducks, assigning ordinal numbers.  Putting things in order, order being a market position, putting things in order being a marketing strategy-- this better than that;  this even better; and this being best, or close to, until a new product, a new advert emerges.

First, second, third... we get caught up in it.  Who doesn't have a list of the "top ten greatest rock and roll tunes" playing pretty much 24 hours a day in his or her head?  Whoever you are, I feel sorry for you if you don't.  Maybe you feel sorry for me because I do.

But I do.  Listen, when Indeep released "Last Night a DJ Saved my Life" (1981 Sound of New York Records), it may have been the worst song with the greatest tag line ever. See?  There I go again.   Number 1.  Number zero.  And with a bullet.  Nevertheless, look me straight in the eye and tell me you never felt that way?  That all that was standing between you and the bottomless pit of despair brought on by hormones, high school, pimples, parents, siblings, relatives of all sorts, drill sergeants, jobs, lack of jobs, girlfriends, boyfriends, lack of either/both, lack of money-- pick one or more--wasn't something on the radio, something beamed out that did the screaming, or the whispering, or the jumping (up, or out the window) for you.  And since you could count on it being played once more in an hour, and the filler songs weren't too terrible, you decided to give it, and yourself, another hour and a half.

Maybe you did that everyday for years.  I know I did.  Maybe you still do that.  I know I do.  Now of course, I'm my own DJ, with my own list.

That's where the marketing hits home.  You, or I have a need.  Capital puts it in a package.  I get my hands on some money, by any one of a number of ways which, in the end, all come down to ...some sort of labor, either my own or somebody else's.  I exchange the money for my need in a package.   That, basically, is the "surface loop" of capital's circulation, that's M-C-M'.  The magnitudes of M, and C, and M' are determined in the production process, through accumulation as a whole, through the iterations of these exchanges. 

Capital needs to expand?  The VP of Sales wants more money?  Time to poke deeper into needs, time to reproduce, materialize those needs faster, and in bigger quantity.  And when that doesn't do the trick? Time to fragment the market for needs.  Create niche markets.  Every individual a DJ.  Every phone a radio station.

So my list goes like this, and I'll leave the numbers out-- except for the song I consider to be the single greatest ever, forever, never to be duplicated again in the history and future of rock and roll:

"River Deep, Mountain High" --Tina Turner

After that....well after that I suppose some would say or could say, "who cares?"  I do.

So there's:  "You're Gonna Miss Me"-- 13th Floor Elevators;  "Since I Lost My Baby"-- Temptations;  "I Never Loved a Man the Way I Love You"--Aretha;  "I Can't Explain"--The Who; "Willie and the Hand Jive"--Johnny Otis; "One Nation Under A Groove"--Funkadelics; "Heard It Through The Grapevine"-- Marvin Gaye; "Say You"-- Monitors;  "Tallahassee Lassie"-- Freddie 'Boom Boom' Cannon;  "Are You Lonely For Me Baby"--Freddie Scott;  "Jumpin' Jack Flash"-- Rolling Stones (pains me to admit it-- that I like the music of the group I hate, but hell, that's rock and roll);  "We Got the Beat"--Go-Gos; "God Save the Queen"--Sex Pistols; "Just Like Romeo and Juliet"--Reflections. 

What?  That's more than ten?  Who's counting?


Sunday, August 11, 2013

Smooth.....And By The Numbers, Part 1

1.  When Marx speaks of "monopoly," he is speaking of the monopoly of capital, the monopoly by capital of the means of production.  He is speaking of the organization of those means as private property of the capitalists.   His critique of capital applies to that monopoly.  Whether there is one capital or 101 capitals is immaterial to Marx's critique as it is immaterial to the inherent dynamics of capital accumulation.

There is, and is always, the monopoly by capital.  There is almost never monopoly capital.  And where and when there is, it isn't for long, and it doesn't matter.  Competition is the external expression of capital's internal compulsion to expropriate surplus value; to accumulate, accumulate, accumulate; to exchange as much as itself with labor-power for as little as possible.

Monopoly by capital, producing concentration and centralization of capitals can no more supersede or suspend the dynamics, forces of its own reproduction, its own laws of value than a human can jump over his or her own head while firmly grasping both ankles. 

2.  The "vulnerability" of capital, the limit to its reproduction, is not that capital becomes incapable of  "expanding the means of production;" that it can no longer amplify the productivity of human labor.  "Historical limits" are not time-clocks, or "sell-by" dates.  Historical limits are the boundaries of a specific social organization of labor.  Historical limits are posited, absorbed, repeated, reproduced throughout capital's existence.

These limits do not suddenly appear when capital has "fulfilled its purpose, its so-called historic mission" because indeed capital has only had a single purpose, the expansion of value through the expropriation of surplus value.  It's only historical mission has been the reproduction of capital.  "Progress" is an ideological obfuscation of value, and has no meaning to capital apart from value.    

Because capital does not lose its need for self-expansion, the limit to that expansion must be in its origin-- in the accumulation of the means of production as expanded value; as the condition of labor in opposition to labor itself.  The historical limits of capital move through its history, erupting at the moments, during the periods when the very expansion of the means of production as capital has impaired their continued valorization.  The labor process and the valorization process, the labor process as the valorization process becomes the mode of destruction.

"Progress," "stages," "development" have no meaning apart from this conflict between the labor process and the valorization process, a conflict where each recognizes itself in the other as loss..

Capital is  at the very least not necessarily more "progressive" or more "productive" than the modes it demolishes. 

Value is more destructive, of that there is no doubt.

3. It's the real accumulation of real assets that provokes, excites the conflict between means and relations of production, between production and valorization, not the proliferation of securities; not some explosion of speculative debt instruments; not asset-backed securities.  The movements in these markets are derived, derivative, from the revalorization of accumulated capital.  Assets, after all, maintain their value only to the extent that they give their value up incrementally, transfer it, in the valorization process; in the expansion of production.  Assets maintain value only to the extent that profitability outpaces devaluation. 

The original, the mother, the grand-daddy of all asset-backed securities is.....the bank.

4. "Things" are beginning to look up for capital, according to the reports in the bourgeoisie's favorite journals.  Industrial production is recovering, even in Europe, although overproduction in the auto industry has hardly been remedied.

"Getting better" can mean the rate of deceleration has slowed; it can mean the rate of deceleration has gone to zero; it can mean some sectors see some improvement; it can mean some countries have seen some improvement.

It can also mean the attacks on wages, on living standards, on employment, liquidating the savings and assets of the once and now again poor have produced a revenue stream, a cash flow, just capable of re-floating, just for the moment, the good ship Lollipop.

It can mean that 2014 is going to be a very important year; when the debt embodied in commercial real estate mortgage backed securities cannot be repaid, not refinanced.  It can mean that the decline in commodity prices, providing a bit of boost to industrial production, becomes a collapse in prices.  It can mean the expansion of oil and gas production which has driven energy prices down becomes yet another threat to the rate of return on production and investment for the major petroleum companies... and we know what happens after that. 

It can mean that 2014 is the year when the overproduced chickens come to their underwater homes to roost.

It can mean, The Shirelles to the contrary notwithstanding, that the darkest hour is just after the hint of dawn.

S. Artesian