Imperialism Exposed in Roger & Me

Imperialism Exposed in Roger & Me

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"Black Thursday." The name itself sends shivers down your spine. October 24, 1929 the New York Stock Exchange crashed signaling the end of the Roaring Twenties and the start of the Great Depression. A depression can be defined as, "a prolonged deep recession." A recession is, "a period during which aggregate output declines." (Case 118) This was certainly quite a change, as in the twenties the economy seemed to be booming around the world. There was rapid increase in industrialization, and drastic improvements in technology. Wages, consumer spending, and stock prices were high and seemed to keep rising. In fact, as people kept buying on margin, (speculating that the upward trend would continue) billions of dollars were invested which did at first keep pushing the stock prices ever higher. People poured their life savings into the market, mortgaged their homes, etc… during this crazed time period. However, it soon happened that this buying craze was followed by an even wilder selling spree. On that fateful day in October prices dropped just about as low as they could get as investors tried selling their holdings. In fact, by the end of the day the New York Stock Exchange had lost $4 billion, taking the exchange clerks working straight until 5 AM the next day to clear all of the transactions that had taken place the previous day. Several days after this, panic occurred as people began to realize just what had happened. Thousands of people were now financially ruined. Many banks that had participated in speculative investments failed as well, and this caused many "run on banks." Each and every player contributed to the downward spiral that was sucking the world into the Great Depression. (Underwood)

However, there is more to the cause of depressions and recessions than just the role of the financial sector and speculative investments. Yet, why do I mention the ideas of a booming economy suddenly becoming a state of despair and perhaps even turning into a recession or depression? In watching the film Roger & Me I feel like Flint, Michigan experienced these events because of the decisions of General Motors. Flint was at first a booming economy, but it soon became one filled with much poverty.

I believe that Roger & Me deals, at least in part, with the issue of

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123helpme.com/search.asp?text=imperialism">imperialism. Therefore, we need to look a bit more at capitalism and what a driving force for this system is. (From a multitude of other class notes and ideas I have tried to put together a brief summary of the thoughts, ideas, and theories of one economist from the past-Karl Marx; I will start off with his ideas of Surplus Value and then move on to talk about profits). Karl Marx was one of the first economists to examine the actual relationship between laborers and the exploitation that they endure from the capitalists who employ them. Theories in general reflect, grow out of, and are based upon on-going social events and circumstances of a specific time, thus Marx's interest in the capitalist system seems in keeping with the time. Although I have chosen to discuss Marx, keep in mind that he is but one economist, and thus this is but one explanation for the occurrences in a capitalist society.

Marx felt that most of the economists before him failed to incorporate "historical perspective" into their theories. But due to the economic and social circumstances of the time, Marx became intrigued and interested in explaining the relationship between capitalists and laborers. He therefore chose to study and understand, as best as he could, the features necessary and unique to the production process in a capitalist society. This method of study and analysis led him to numerous conclusions, which in his opinion had previously been confused and distorted by other economists.

Marx objected to earlier economists' notions that production and distribution were separate. He believed that there were numerous forms of property; that each mode of production had its own forms of property; and that these forms of property determined distribution. Therefore, production and distribution are not independent of each other and are both necessary to understanding the capitalist society.

Understanding production and exchange are key. Marx believed that a commodity holds two essential characteristics: that it satisfy human wants and allow people to derive utility (giving the commodity use value); and that it have exchange value. Exchange value is the ratio of how much one can get of one commodity in exchange for a given amount of some other commodities. This idea, then, presupposes a common element. Marx argued that commodities not only have use value (hard to measure) but they are produced by human labor. It is this labor time required for production that Marx focused on-as it was quantitatively comparable between all commodities.

In a simple commodity market economy (C-M-C') a commodity is sold and money received from its sale. This money can then be used to purchase more commodities.

The first distinction between money as money and
money as capital is nothing more that a difference
in their form of circulation. The direct form of circulation
of commodities is C-M-C, the transformation of
commodities into money and the re-conversion of
money into commodities: selling in order to buy. (Marx 247)

In this "world" goods are exchanged with the final goal of consumption in mind. If one focuses solely on the acts of buying and selling commodities, then on a superficial level the system of exchange is a system of equality. If capitalism were to be viewed solely in this light then economic harmony would exist in a capitalist society. This can be seen from the conclusions Marx drew about exchange. He essentially concludes that exchange is the exchange of equivalents, equivalents require a common property, and that common property is labor.

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. (Marx 131)

{The greater the labor time needed, the greater the value of the commodity}. But Marx argued that accepting exchange as the only economic relation was incorrect.
What is interesting, and perhaps key to this point of Marx's theory, is that in analyzing his ideas closely, one can see that in this realm of circulation alone there would be no net gain in surplus-value. For even if the commodity were exchanged above its value, then the seller would gain in exchange, but the buyer would lose an equal amount of exchange value.

However much we twist and turn, the final conclusion
remains the same. If equivalents are exchanged, no
surplus-value results, and if non-equivalents are exchanged,
we still have no surplus-value. Circulation, or the
exchange of commodities, creates no value. (Marx 266)

Therefore, attention to the area of production and labor is necessary. Marx felt that in a capitalist society the circulation of capital is one with the goal of profits. Money is used to purchase a commodity, that commodity is then used and sold to produce more money then what had originally been used (M-C-M').

M-C-M, the transformation of money into
commodities, and the re-conversion of commodities
into money: buying in order to sell. Money which
describes the latter course in its movement is transformed
into capital, becomes capital, and, from the point of
view of its function, already is capital. (Marx 248)

It is this additional money that is referred to as surplus-value.

Buying in order to sell dearer… Since, however,
it is impossible, by circulation alone, to explain
the transformation of money into capital, and the
formation of surplus-value, merchants' capital appears
to be an impossibility, as long as equivalents are exchanged;
it appears, therefore, that it can only be derived
from the twofold advantage gained, over both the
selling and the buying producers, by the merchant who
parasitically inserts himself between them. (Marx 266)

The value of labor power (wage) is equal to the value of subsistence of a worker's family.

The value of labour-power is the value of the
means of subsistence necessary for the maintenance
of its owner… His means of subsistence must therefore
be sufficient to maintain him in his normal state as a
working individual. (Marx 274)

It is the value that is created beyond subsistence needs that creates value for the capitalist; that is to say, the amount of surplus labor (labor creating no value for the worker himself, but instead creating surplus-value for the capitalist) produced beyond the necessary labor (the labor that produces only the value of the laborer's labor-power-the value of the laborer's means of subsistence). When labor power is sold as a commodity, its use value is the performance of work and when the work is performed it becomes part of the commodity, giving it value. The only source of surplus-value is the difference between the value of the labor power as a commodity and the value of the commodity actually produced by the laborer. The labor power is purchased by the capitalist with the intention that its consumption will create value above and beyond its original value-yielding surplus-value. Again, this can happen because the capitalists have to purchase labor power at its value (determined by the price of subsistence and what is necessary and essential for survival) and once the capitalist owns the labor power they are able to "consume" it as they please. It is from this consumption which takes place outside of the exchange and into production that leads to the creation of surplus-value. As Marx puts it, "This increment or excess over the original value I call 'surplus-value.'" (Marx 251)

The capitalist is thus able to obtain a fund of money that is greater in value than the original fund and is in a position to start the process again-but on an expanded scale.

Value therefore now becomes value in process, money
in process, and, as such, capital. It comes out of circulation,
enters into it again, preserves and multiplies itself within
circulation, emerges from it with an increased size, and starts
the same cycle again and again… 'money which begets
money'… Buying in order to sell dearer, M-C-M… (Marx 256)

In this sense it would seem that capitalism represents a never ending, repetitive process where capital creates surplus-value, which is the source of more capital, which in turn lends itself to the creation of more surplus-value, and so on… "His (the capitalist's) aim is rather the unceasing movement of profit-making." (Marx 254) It is this quest for ever-greater surplus-value that is the motivating force behind the capitalist system and helps to keep it going. Therefore, it is evident why to Marx, the rate of surplus-value was seen to represent the degree of exploitation of labor power by capital-or the degree of exploitation of the laborer by the capitalist.

Marx, like Smith and Ricardo before him, came to the ultimate conclusion that the accumulation of capital produced a tendency for the rate of profit to fall over time. But while they all concluded the same trend, they each had "divergent approaches" to the final solution. Labor is the secret to capital getting bigger; it's the source of surplus value. While it was stated that the trend for the rate of profit is to fall, it is necessary to note that a falling rate of profit does not mean a fall in total profit, for Marx believed that total profit would still increase even if the rate of profit was decreasing. Furthermore, usually when capitalists feel downward pressure on the rate of profit, they take great pains to reverse the trend. Therefore, according to Marx, although the tendency of the falling rate of profit is present, it is not generally realized in totality.

Why does the rate of profit decline? Looking at the definition and the formula of the rate of profit established by Marx, one can see that either a decrease in the rate of surplus-value would have to occur or an increase in the composition of capital must take place. Yet remembering that Marx concluded that the tendency for the rate of surplus-value is to increase, then the cause for the decline in the rate of profit must be due to an increase in the composition of capital that is bigger and at a faster rate than the increase in the rate of surplus-value. It is the change in technology that causes both surplus-value to increase and the composition of capital to increase. Technological changes take place because of the on-going quest and desire of capitalists to increase the surplus labor by decreasing the amount of necessary labor required. In order to decrease the necessary labor then, technology must change. With the decrease in necessary labor that occurs the surplus value can in turn be increased.

In other words, according to Marx, the rate of profit has a tendency to decline because the composition of capital (means of production) increases faster than the rate of surplus-value-as a consequence of technological changes. This means then, that more capital is invested than labor employed-and this reduces the value produced. (Remember, labor power is highlighted as the real source of surplus-value, and surplus-value is a necessary component of the rate of profits). If the rate of surplus-value remains constant then the decrease in value produced will result in less surplus-value produced per unit capital invested, as well. All of this translates into a declining rate of profit, as Marx said that profit varies inversely with the organic composition of capital and directly with the rate of surplus-value.

…then the gradual growth of constant capital in relation to
variable capital must necessarily lead to a gradual fall of
the general rate of profit, so long as the rate of
surplus-value, or the intensity of exploitation of labour
capital, remain the same… The progressive tendency of
the general rate of profit to fall is, therefore, just an expression
peculiar to the capitalist mode of production of the social
productivity of labour. This does not mean to say that the
rate of profit may not fall temporarily for other reasons…Since
the mass of the employed living labour is continually on the
decline as compared to the mass of materialized labour set in
motion by it, i.e., to the productively consumed means of
production, it follows that the portion of living labour,
unpaid and congealed in surplus-value, must also be continually
on the decrease compared to the amount of value represented
by the invested total capital. Since the ratio of the mass of
surplus-value to the value of the invested total capital forms
the rate of profit, this rate must constantly fall. (Marx 212)

As previously mentioned, usually capitalists will attempt to reverse the trend of falling profits once they realize what is occurring. They are able to counteract the falling rate of profits a number of ways. Marx mentions that capitalists might increase their power of exploitation by lengthening the working day and or providing incentives to make labor more intense. This would raise the profit rate because of the effects that such things as good management, better technology, more efficiency, etc… would have in increasing the overall surplus-value in the end as they would be able through these means to increase the surplus labor by decreasing the necessary labor. Increasing surplus labor and decreasing necessary labor is thus one way to reverse the trend.
Second, Marx mentions that a "depression in wages below the value of labor power" would also help. He mentions that an overpopulation of workers could increase profits only if wage rates were decreased. (Hunt 205)

A third method to reversing the trend of the falling rate of profit is if the element of constant capital were cheapened. This might be achieved by changes in technological methods of production. Such capital saving innovations might include things as: improvements in technology, recycling waste products to be reused, and or producing more durable machines to begin with. (Blaug 270)

A final possible solution to the falling rate of profits that Marx makes mention of is allowing foreign trade to take place. Exports of capital counteract the decreasing rate of profits by "draining off excess savings," and imports provide cheaper wages goods and cheaper raw materials. (249 Blaug) Interestingly, it is this final idea that led many future economists to base their ideas and theories of imperialism and the need of ever-expanding markets for capitalists. Many economists emphasize how expanding abroad (imperialism) can provide cheap labor, cheap raw materials, access to markets, and the ability to utilize excess capital, all while helping to avoid getting a glut or overproduction. Thus in the opinion of many economists, expanding abroad is necessary to keep a capitalist system going well, and that a capitalist society by its very nature needs to expand. They must expand to stay in business and remain powerful. Of course many economists have differing opinions on this issue, and not everyone agrees with Marx's theory and the cause for the ups and downs that a capitalist society experiences and the causes for the struggles that laborers and capitalists endure and have with one another. However, Marx at least offers much explanatory power and one possible explanation.

With the previous ideas in mind, one can perhaps rationalize a bit why General Motors did what it did. The movie Roger & Me is a documentary film taking place in Flint, Michigan-the birthplace of General Motors. The inhabitants of Flint used to believe that "Everyday was a great day." While Flint was at one time prosperous, busy, and flourishing economically, the viewer sees how it is easily turned into a desolate, poverty-stricken, place of violence when General Motors decides to close down a series of factories set up in Flint and to move to Mexico where inexpensive labor can be purchased-$0.70 an hour. It demonstrates what can sometimes occur when imperialism takes place. The greedy, profit-making capitalists can abuse their powers and make the laborers and citizens of one country, state, city, etc…worse off-30,000 workers were laid off as 11 older plants were closed, while not necessarily improving the lives of people in other countries very much (of course it all depends on the rules, laws, and regulations that are in place). One man, Ben, had been laid off five times within the five years that he worked at one of the GM factories in Flint. Ben could take this uncertainty no longer and was now in a mental hospital. Flint was quite literally going to the rats, as the rat population became 50,000. People tried to keep their spirits up as best as possible, but it was hard. Flint even paid for a preacher to said such things as, "Tough times don't last but tough people do."

Yet despite all these negative effects that closing down the factories was having, Tom Kay supported Roger Smith's actions of building factories abroad by stating such things as, "If GM were to go bankrupt it wouldn't do anyone any good. Roger must do this because of the economic climate and to stay competitive, even if it means laying off all workers." Some (the rich and well-off families) felt that there were actually more opportunities with the absence of the factories than before. For example they justified the lay-offs of the less fortunate people by saying that if they had stayed in the plant they could only have gone so far and never progressed or acquired new skills. This might have been true, but it appeared that most individuals were unhappy with the loss of their jobs, as their comments and graffiti all around showed, "Assholes drive imports." It certainly seems horrible that so many people would have to suffer because of the "inherent nature" of capitalism and its need to keep expanding and creating profits. In this case, imperialism was at least in part responsible for turning this once prosperous place into the "worst place in the country to live" (according to Money Magazine). As we can see, then, capitalism is a system that, like other systems, has its good and bad points. It would just be nice if the "bad" points could be mitigated a little and made a bit less sever.

References

Blaug, Mark (1). Economic Theory in Retrospect. (Fifth Edition). United Kingdom:
Cambridge University Press, 1996.

Case, Karl E. and Fair, Ray C. Principle of Macroeconomics. (Fifth Edition). New Jersey: Prentice Hall. 1999. P. 118.

Class Notes.

Hunt, E.K. History of Economic Thought. Belmont, California: Wadsworth Publishing
Company, Inc., 1979.

Marx, Karl (1). Capital. (Volume One). New York: Random House, Inc. 1976.

Marx, Karl (2). Capital. (Volume Three). Chapters 9 and 13.

Moseley, Fred (1). "Marx's Theory of the Falling Rate of Profit." (An Encyclopedia
Entry).

Underwood, Mark. "Thursday, October 24, 1929." May 1996.
http://sac.uky.edu/~msunde00/hon202/p4/
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