'The Wealth of Nations'

(Photo courtesy of the Monthly Review 10.08.09)


The Wealth of a  Nation is really the amount of commodities, in whatever form ( financial commodities such as derivatives. Labour power is also a commodity hence the emphasis on education), produced for exchange in the market within its national boundaries. The less commodities produced for the basis of exchange the poorer is the nation. Marx accurately defined it thus in Capital Vol 1. The process is Production -Circulation- Production on an expanded scale (P-C-P) or Money- Commodity- Money (with profit). The money is then used again to purchase the materials necessary to continue the production of commodities. It is the commodity that is produced during the production process that is circulated through the market for consumption. This is why the extent of production of the commodity is the most important element in wealth creation. The accumulation of capital necessary to begin the production process where money capital is used to purchase the commodity capital necessary does not belong here.  With the growth of the world market dominated by capital the wealthy nations are capable of penetrating the poorer ones with their commodities and flooding them with their products particularly when the goods cannot be absorbed within its own boundaries. The growth in the world market, dominated by capital, means that wealth becomes less a matter of national boundaries but wherever capital  can sink its claws. It is national once it is taxable by the country from which it originated. The basis for the expansion of capital outside its boundaries comes with an understanding that the nation itself was primarily responsible for the accumulation of capital through the exploitation of wage labour which generates surplus value for the capitalist.This accumulation of capital and with it the expanded scale of production allows for this movement beyond the national shores. With the accumulation of capital the constant/fixed capital increases tremendously i.e. technology/machinery takes over the work of the variable element represented by wages. Workers are constantly dismissed and form the relative surplus population as improvements in the mode of production makes workers redundant although there is an absolute increase in the amount employed regardless of the relative decline. The absolute increase is on the basis of the expansion of a particular capitalist enterprise. An absolute increase is also determined by the growth in population numbers however the proportion of the fixed capital to the amount of workers increases. One worker, with the aid of machinery, will eventually be able to do the work that 20 men did before.If capital wishes to increase beyond the average rate of profit it must find new markets to exploit or set up shop in countries where the variable element is abundant and cheap  thereby exploiting the market at home more efficiently by selling the products at a cheaper price.    National relics are regularly swept aside in favour of improving commerce with wealthier nations. Poorer countries increasingly fall within the sphere of circulation as their imports exceed their exports. It is difficult for them to compete with advanced capitalism because most of them rely primarily on a semi industrial foundation which struggles with the more archaic modes of production such as the petty commodity producer associated with the peasantry or small farming communities. Gutter nations watch in horror as their archaic modes of production disintegrate as the capital of the wealthy nation pumps out the commodities and floods its shores. With the deluge on the market an acculturation process takes place whereby the wealthy nation is elevated to a high standing within the international community. This acculturation process gets underway as a result of the extent of production of the wealthy nation. This acculturation process brings with it monetary values as that wealthy nation becomes increasingly relevant as a trading partner for the other countries even those that are relatively wealthy. This monetary value brings with it the rise of the moneyed/financial class that dictates how this money flows in and out of the various companies that provide the commodities. The growth of industrial capital brings with it the growth in the services industry that appropriates the revenues of the productive classes. The dominant service providers are financial services and those petty bourgeois classes that are primarily responsible for the circulation of the commodities produced within the national boundaries of the wealthy nations. Even if a company is located overseas the basis for its wealth is still coloured by its national character. The monetary values extend to the poor, gutter nations that pride themselves on receiving the currency of the wealthier nation (s). The poorer nation is also delighted when a company from the rich nation decides to invest in its territory. This investment by that company will perhaps offset an  increase of productivity on the part of the variable element within the gutter nation and so educate the populace on the technical requirements to carry out the enterprise and so offset a boom in production.

The Wealthy nations of the world increasingly become world leaders because the  capital accumulated becomes a lever for the dominance of poorer nations that are unable to out produce their advanced counter parts. Only those poor nations that can make that sacrifice and take on the challenge of being world beaters in the production of commodities will join the  ranks of the elite. It is an international hierarchy  The advances in technology and research become important in the increase of capital accumulation and become basic requirements for being considered a wealthy nation. This is based on a standard already set by the production of commodities in the wealthy nations already in existence.  

The importance for capital to constantly revolutionize the means of production as evidenced by the expected expansion of oil and natural gas production in the US

According to reports by the International Energy Agency the USA is expected to be the world's largest producer of oil by 2017 and therefore overtake Saudi Arabia. This is significant because the US is expected to  be producing over 10 million barrels of oil per day by then and by 2020 this will supposedly increase to 11.1 million barrels. The US is then expected to be a net exporter by 2030 thereby reestablishing the dominance it held from the mid nineteenth century through to the mid  twentieth century. It will supposedly be self sufficient by 2035. It currently imports 20% of its oil.  Natural Gas production is also expected to increase. All of this is speculation and will help to stabilize the markets particularly investment prospects in Americas national economy. This is not based on the extent of its reserves now in existence but on a new method of production where by oil and gas are extracted from shale rock which would allow the US oil companies to expand the amount of oil in reserve particularly those reserves that can be reached. New techniques, according to the New York Times, such as hydraulic fracturing and   horizontal drilling have allowed them to access these new reserves. Obama, in the 2nd  presidential debate, foolishly tried to attribute this development to policies associated with his government.

This is good for American capitalism and capital as a system that dominates the world because this system can only survive by constantly revolutionizing the means of production. In other words improvements in scientific methods associated with technology and the growth in the extent that machinery can enhance itself with the capability of expert wage labourers (engineers etc). This is a victory for capital because technology and the extraction of raw materials for a cheap cost will delay the expected fall in the rate of profit particularly for industrial capital that relies significantly on oil to keep the engines turning. Oil forms a significant part of its constant capital. The cheap cost will make it more likely for a capitalist to invest within America and make the rate of profit higher than it currently would be because of the high prices that exist today. The report never considered that demand will probably triple by then with a world population increase being inevitable and so it never considered the extent that this increase in production will be relative particularly as the poor, gutter countries come more in line with the principles of industrial capital. This is still an example of how capital continues to delight its followers and sycophants that believe in its eternal conception as a system of production.A new method of production puts brakes on those that predict its impending collapse as a system. This is why people are so blinded by improvements in the means of communication through the internet, smartphones, tablets, blogging sites, Facebook  systems for interface etc. All improvements are supposed to improve the turnover of capital from the sphere of production to circulation where goods are exchanged in the market and then back to production. P-C-P. Improvements in technology are what keep the system moving onward or else it will stagnate with the inevitable result being a contraction in the economy. The constant valorization of capital is the goal here and only the oil companies stand to benefit from the profits however more jobs should be had for those out of work engineers who are compelled to sell their labour power.Without constant valorization  or the increase in production then capital stagnates and falls and devalorisation makes the system crumble with the result being anarchy among the citizenry.   If this improvement in the oil industry of America did not occur then increases in demand without an increase in the means of producing to meet that demand would mean that the  US would have to continue being a net importer. Within the context of the world economy that is increasingly becoming dominated by capital this development is not particularly significant because oil is there to be consumed. Wherever oil is there to be produced capital will attach itself to it i.e the exploitation of wage labour which provides the surplus value for capital. The US is not the world's only producer; if it was then this would be truly a significant development. This is only significant for the American economy and investment opportunities within its borders. The more significant issue is how capital continues to revolutionize itself so as to accumulate profit by revolutionizing how it produces for consumption in the market and therefore keeping the system going. The current mode of production has then been enhanced so as to expand market share for capital located within America.

This only delays the inevitable.

An excerpt from David Ricardo's 'Principles of Political Economy and Taxation'

I am no Ricardian  by any stretch of the imagination but David Ricardo is a significant figure in political economy particularly with his publication Principles of Political Economy and Taxation. In this post I am presenting an excerpt from this seminal work, which has its deficiencies, which speaks of the accumulation of capital within poor countries. This excerpt is significant because it does help to explain why some  poor countries find it difficult to accumulate capital. The excerpt is taken from pages 69-70 of the Prometheus edition. Here it goes:

‘In those countries where there is an abundance of fertile land, but where, from ignorance, indolence, and barbarism of the inhabitants, they are exposed to all the evils of want and famine, and where it has been said that population presses against the means of subsistence, a very different remedy should be applied from that which is necessary in long settled countries, where, from the diminishing rate of the supply of raw produce, all the evils of a crowded population are experienced. In the one case, the evil proceeds from bad government, from the insecurity of property, and from a want of education in all ranks of the people. To be made happier they require only to be better governed and instructed [In the bourgeois mode of production] as the augmentation of capital, beyond the augmentation of the people, would be the inevitable result. No increase in the population can be too great, as the powers of production are still greater. In other cases, the population increases faster than the funds required for its support. Every exertion of industry, unless accompanied by a diminished rate of increase in the population, will add to the evil, for production cannot keep pace with it.

                With a population pressing against the means of subsistence, the only remedies are either a reduction of people or a more rapid accumulation of capital. In rich countries, where all the fertile land is already cultivated, the latter remedy is neither very practicable nor desirable, because its effort would be, if pushed very far, to render all classes equally poor [rich nations tend to grow at a slower rate than poor countries in the process of accumulating capital. Compare the US with annualized growth of 2% and China’s annualized growth of 7.5-8%]. But in poor countries, where there are abundant means of production in store, from fertile land not yet brought into cultivation, it is the only safe and efficacious means of removing the evil, particularly as its effect would be to elevate all classes of the people [this is inaccurate based on bourgeois principles unless he is advocating the rise in peasant farming which represents the genesis of capitalist ground rent].

             The friends of humanity cannot but wish that in all countries the laboring classes should have taste for comforts and enjoyments [while brutally extracting surplus value/unpaid labor time from them], and that they should be stimulated by all legal means in their exertions [for the bourgeois class]  to procure them [this does not happen as a lot are sent into the ranks of poverty as their labour power becomes increasingly devalued]. There cannot be better security against a superabundant population. In those countries where the laboring classes have the fewest wants, and are contented with the cheapest food, the people are exposed to the greatest vicissitudes and miseries. They have no place to refuge from calamity; they cannot seek safety in a lower station; they are already so low that they can fall no lower. On any deficiency  of the chief article of their subsistence there are few substitutes of which they can avail themselves and dearth to them is attended with almost all the evils of famine.’

Is the Apple Inc. bubble about to burst? Of course

Apple Inc. is the wealthiest company in the world by market capitalization currently with a value of around $626 billion for the year 2012. Market capitalization is determined by the stock price. A single stock in apple cost around  $700 in september. The revenues of Apple however were only $108 billion at the end of the year 2011. 2012 is not finished as yet but it is fair to say that it will remain between $100-200billion. These figures do not seem to add up and it is clear that there is a difference of $500 billion between the market capitalization value and the actual revenues earned by the company through its generation of surplus value from its workers whether in America or China. Apple has truly recovered from its decline during the 1990s. People tend to attribute this to the return of Steve Jobs to the company. Under Jobs apple came out with some innovative and well designed products such as the I phone, I pod and I pad; all were touch screen devices.  There is also the I tunes store that allows you to purchase music etc. Apple seems to exist in 2 worlds however because there are the numbers reflecting  actual production and the stock market vultures that have inflated the stock value by such a remarkable amount who hope to cash in on the 2.65 per share. The sales of Apple products are not vastly superior to its competitors such as Samsung and Nokia in the mobile phone and tablet market and Hewlett Packard and Lenovo in the PC market.  Apple benefits from its exorbitant prices which it can afford to charge because of its inflated stock value and the mania associated with its brand however with a difference of $500 billion eventually the idealists will be brought down to reality. The reality that the rate of profit will fall particularly as investment in the constant capital or the machinery that aids in the conduct of operations will take over more of the labour. I am not aware of the investments in its means of production and its labour however based on various reports particularly one done by the New York Times there seems to be the high quality engineers that design the product in or around Silicon valley and the workers in China that turn out the products cheaply so that Apple can meet the demands in the market particularly as it concerns a launch of a new product.  When the workers in the production process are cast out then growth will be retarded because a company like Apple must invest significantly in technology and raw materials to keep its operations going particularly in the US. The company has  production outlets for its products in China as it benefits from cheap labour however based on current production Apple will need to increase the amount of products it generates so as to be able to have them consumed in markets across the world and so increase its revenue. Moving to China is a logical step because it is home to 1.3 billion. They have also decided to release the I pad mini which is not necessarily much cheaper than the I pad. It seems as if Apple caters chiefly to high income individuals at the moment that are bamboozled by their product or the brand of the company but eventually it will not be enough if it intends to expand revenue in line with that inflated stock price. Further devaluation will be necessary; devaluation in this case being increased production and cheaper products. Apple still refuses to compromise the quality of its products however while they stay high handed others will eventually adapt to the new technologies and create even better models  at cheaper prices and this competition alone will make inroads into Apple’s dominance as a brand on the market which is reflected in market capitalization.

                There are missteps however such as the televisions that never took off, the death of Steve Jobs which many fear will precipitate the Apple bubble, the faulty maps released earlier on the new Ipads which forced Apple to tell their customers to use those of their competitors (Two of the executives responsible for the maps have been dismissed) and lastly the patent lawsuits with Samsung have dented confidence. Apple reportedly won a case in California against Samsung about patent infringement and won the case as Samsung were ordered to pay $1 billion however Samsung intends to appeal. There was also a turnaround against Apple where a judge overturned a decision that stated Samsung had infringed on apple’s patents and so Apple was forced to issue an apology. I have also heard that the new I pad is not radically different and is only an enhanced version of its predecessor. The I phone 5 seems to be doing well however but all of these events points to the inevitable decline because it is clear that Apple cannot keep up this mystique forever.  Apple always releases a new product ever so often and so once you buy its predecessor you are compelled to buy the current edition. This is how Apple keeps its goods in circulation at these high prices because people are not given time to settle with the product they currently have. This keeps their revenues up but always at the same level because when you count their market it caters primarily to middle and upper income groups. Their market share will not radically expand on that basis for even the I pad mini is much more expensive than the Google nexus 7 and the kindle fire.  Apple will never reach $600 billion in revenue on this basis. In the long term it is possible but it is safe to say that competition has caught up with them. The Apple mystique has not bamboozled some because when it comes to revenue Samsung and Hewlett Packard are wealthier companies and so all the hype about Apple has not translated into greater revenues because it is still behind its main competitors. What the hype has translated into is the market cap a little over $600 billion which is based on the possibility that Apple will soar into the future and create all these magic products that will dazzle the world. The fallacy is in the expectation because there is no guarantee that apple will be the next great innovator. I heard that they are working on a television now to make up for the mishap under Steve jobs. This is all good but it will not get them increased market share simply because they rely mostly on high income earners whereas Samsung and Nokia for instance have the expensive phone as well as the cheap phone for the man who will never buy a tablet much less an iPhone. 

                The market cap will be reduced eventually in line with revenues and the world will come to realize that Apple is not as great as once thought. Apple cannot hope to grow at such proportions estimated by the market. That has only been fueled by speculation on the stock market and so the bubble will burst particularly if it exclusively targets high income groups. Apple seems not to have understood that the majority of the world’s  7 billion population  is poor and lives in the gutter created by capitalist companies such as Apple and its competitors regardless of their sanitized brands that bamboozle, dazzle, befuddle and corrupt the minds of those people that have raised this company as if revering a god head but in time they will realize their folly. Apple even intends to buy up some of its own stock over a 3 year period which is a clear realization of the bubble in the making. Also a report on CNBC discussed this issue and Robert Van Batenburg  from St. Louis capital markets said that according to guidelines that regulate investment in stock on the S&P 500 there is 5% limit for investors in the particular stock of a company. With Apple’s inflated stock price that 5% limit in the S&P 500 will soon be reached and so people will soon be forced to sell their stock and then a devaluation of price will occur because according to Robert although there are many people buying into the stock  seeking cash payments there are not many sellers and so when the 5%limit is reached a lot of people will be forced to sell and so the stock will naturally devalue because it  has been cheapened. He was challenged on the basis that others will wish to buy the stock such as pension funds seeking annuity like payments but Robert countered by saying that 75% of the investors are mutual funds,  and trust endowments and the hedge fund owners are but a ‘small sliver’ and so the majority are buying in now to cash in on the high stock price. This means that these people are regulated by the extent that they can earn dividends on their stock so that they can earn cash payments. When the cash payment ceases, having reached the 5% limit, they will have to sell and invest elsewhere. They are getting returns on their shares right now on the basis of the revenues generated and so the issue still is how will Apple close the $500 billion gap even though it will still be one of the richest companies in the world by revenue should it pass the $200 billion mark.

The good thing about the inflated stock price is that it gives apple a lot of available capital to invest in research and development. This means that there is still the hope that they can come up with the next magical product however unless they increase market share all that money being invested in R&D will begin to evaporate as sales do not radically skyrocket.  As a publicly traded company therefore Apple relies on its brand to keep the money coming in but the reality is that revenues will never reach that high mark for even Exxon which is the richest company in the world by revenue, with over $400 billion in sales, has not reached that level. Apple will never close that $500 billion gap because it is close to reaching the extent of its market share which will be eroded by competition. This is not anything dramatic however for with the decline in the stock price at least Apple will not be pressured to please investors and will be able to spend more time on innovation as opposed to worrying about increasing sales which has led to the mishaps during the year 2012. What has made Apple great will eventually make it relatively small i.e. in line with its revenue base which is not mind blowing by any stretch of the imagination. A lot of people will lose money but as long as it remains a corporate issue then no feathers outside the exclusive Apple circle will be ruffled when the bubble bursts and things return to normal. The idealists who still believe in Apple’s promise will no doubt disagree.