[Marxism] Foreign Direct Investment and globalisation

["Jurriaan Bendien" <andromeda246@xxxxxxxxx>]

I wrote:

In the final analysis, though, the relative strength and bargaining power of
nations in the capitalist world market is always based on relative
labor-productivity and their degree of control over strategic resources.

John  <Scotlive@xxxxxxx> replies:

Not necessarily so, I contend. Relative labor-productivity is an empty
phrase with no material basis. It's not productivity which matters - ie use
value - but exchange value in the final analysis. For only through access to
new and existing markets is any capitalist economy, or power, able to grow.
Perpetual growth is the first requirement of any industry within a
capitalist economy less that industry stagnates, decays and dies. US
increased reliance on military strength is in large part an effort to force
access to just such new markets and sources of raw materials. China and
India's emergence and rapid growth is a threat to US hegemony, spawning a
new battle for markets and limited natural resources around the globe.
Productivity without markets in which to sell goods produced leads to
overproduction, unemployment, inflation and recession.

My reply:

Thanks for your poetic critique, but relative labor productivity to which I
referred is not an "empty phrase", thank you very much. It refers to a
comparison between different countries, of the rate of increase in average
output per worker, with a given stock of tools & technology, in specific
industries, using either a physical volume measure or a measure of monetary
value for output and real labor costs.

In Marx's theory at least, this "increase of productive force of
labour-power" is an absolutely central concept, and is analysed in terms of
the "organic composition" of capital and the "rate and mass of
surplus-value". Indeed this productive force is the material basis for the
whole economic edifice.

The organic composition of capital is a unity of the technical composition
of capital and its value composition. It refers to both use-value and
exchange-value (see further http://homepage.newschool.edu/~AShaikh/pal4.pdf
or http://en.wikipedia.org/wiki/Organic_composition_of_capital or
http://www.marxists.org/glossary/terms/o/r.htm or
http://www.artpolitic.org/marx/glossary/terms/o/r.htm for a brief
explanation).

The reason why labor-productivity is important is both because it affects
profit expectations and the propensity to invest capital, and because it
affects the ability to sell products in a competitive market. That is,
productivity affects both profit margins and real unit production-costs, and
thereby it is the most basic condition influencing the ability to compete
for consumer's market demand.
If market demand stagnates, productivity becomes even more crucial in the
competition for that market demand.

It might not be possible to enter a particular market, because of legal
restrictions, distance or because the required capital outlays are
prohibitively large, but even if one is able to enter a market, business
success depends on the ability to sell output at a price which obtains the
anticipated income & profit, and that in turn depends in large part on unit
production costs.

Globally, one of the ways competitive processes work is not just through
utilising exchange-rate differentials but through utilising productivity
differentials between countries and regions. Wages might be lower here,
working hours longer there, and so on.

If we look at the economic "bargaining power" of nations, this is in the
long term based on labor-productivity. In turn, labor-productivity is both
based on technological advances, and on actual hours worked per interval of
time, and per worker. The ability of labour-productivity to increase is
however not simply a technical matter, but also a question of a cultural
infrastructure and the social fabric, since we are talking about the
creative activity of human beings.

China and India aren't as yet a great economic "threat" to the US economy,
and to the extent that they are, it would be because of their ability to
undersell and thus outcompete US enterprises. But why would that be ?
Basically, because of superior productivity, or privileged access to
resources. Even so, the US also benefits from the import of cheap Chinese
consumer goods and Indian services because it enables a standard of living
to be maintained in the US without raising wages.

You might argue that military superiority is ultimately more important than
economic superiority, however, military superiority doesn't drop out of the
air, it requires economic resources to sustain an army, which cannot be used
for other purposes. Hence, the long-term capacity to sustain military
superiority also depends on labor productivity in the end. That was a big
factor in the breakup of the USSR.

J.


_______________________________________________
Marxism mailing list
Marxism@xxxxxxxxxxxxxxxxxxx
http://lists.econ.utah.edu/mailman/listinfo/marxism