Tuesday, June 15, 2004

A Definite Stage in Development


“A definite stage in the development of agriculture whether in the country concerned or in other countries forms the basis for the development of capital.”
Marx, Theories of Surplus Value, Part 1

1. When George Bush signed the Farm Security and Rural Investment Act of 2002, economists expressed surprise at this intervention into the operation of free markets. While the economists speculated about the extravagant final tab for the countercyclical supports in the legislation, perhaps $180 billion, the reality was that since 1990 direct payments to US farmers had already reached that mark. In fact the average direct payments increased from the 1990-1997 level of $8.8 billion per year, to more than $20 billion per year since 1998. Leave it to economists to find something new in an action that was already old, always borrowed, usually blue.

That definite stage necessary for the development of capital is not simply a technical factor, a quantity of products and a level of productivity required to sustain a nonagricultural population. It is first and foremost a social development, a formation of private property for the production of commodities; of values to be exchanged for other commodities essential for the expanded re-production of the property form and its offspring, agricultural commodities. So if in the secret to primitive accumulation there is the separation of the producers from the means of production, then the secret to the secret is the transformation of the land itself from a source of subsistence into an engine of surplus; from production for consumption into production for exchange; from a self-contained unit of use into a dependent, useless article, having no value other than the value realized in social exchange; into a commodity to be more than bought or sold-- to be accumulated, and destroyed. The development of agriculture forms the basis for the development of capitalism precisely to the extent that agriculture becomes capital. The transformation from subsistence to subsidy in agricultural production measures the advance of capital, and at its most advanced, capital comes up short. Agriculture’s capitalization cannot produce profits quickly enough to sustain its own reproduction.

2. Agriculture steps forward as the primogenitor of capitalism only to find every moment thereafter determined by its industrial offspring. It’s not so much a case of Doctor Frankenstein and his monster as it is the fact that the monster now has the doctorate, the shingle, the license and the practice.

The demands of capital for profit and production, the contradiction of the two is embedded in both city and countryside. In fact the conflict of these demands constitutes the totality of relations between rural and urban areas.

Directly after Word War 2, annual US farm sector capital expenditures dramatically increased. Between 1945 and 1949, farm purchases of machinery and equipment doubled while total expenditures, including structures, tripled. Expenditures on machinery and equipment were five times the expenditures preceding the depression.

The intrusion of this capital intensive agriculture into the US South disrupted the preexisting relations of landed property and labor. The preexisting landed estate system, legitimate heir to the plantation; bastard offspring of agricultural slavery and industrial capital; corporation of reaction, compromise, and cowardice; product of incomplete destruction and defeated Reconstruction; resting upon the tenant-share system, was dependent upon black labor, parceled black labor. The fragmentation, isolation, dependence of this parcel labor upon land parcels, created an immiserated self-sufficiency. Within this social relation, neither labor nor land could be made available, could make each other available, for expanded reproduction.

It is the separation of labor from the means of production, particularly the primary means of production-- land, that determines, defines, the existence of capital. The separation of these two, the power and the means to labor, propels capital forward into expansion of the latter through the employment, expropriation, and ultimately expulsion of the former. It is not poverty, nor wealth, that distinguishes of capitalism, it is detached, insufficient, useless labor that constitutes its past and its future. It is detachable, exchangeable, expanded value that constitutes its currency.

And so the mechanization of agriculture, disrupting the archaic organization of the South, reproduced its need for accessible, free labor in the civil rights movement, a movement centered in the cities, where labor expelled had already become labor power employed; a movement already an aftershock of black labor moving collectively into industrial production in Detroit, Cleveland, Buffalo, and Birmingham. A definite stage in the development of capital demanded a definite stage in the development of agriculture.

3. The US recovery from the depression of the 1930s was outpaced by the recovery in agriculture. Between 1940 and 1950, nonresidential fixed asset values employed in agriculture grew 225 percent, five times the rate of that growth in the overall economy. Capital expenditures were twice capital replacement costs during this period. Expenditures continued to exceed replacement costs throughout the 1950s and 1960s.

The fire applied to the US economy by the OPEC price increases burned brightly in the farm sector. In 1973, net farm income exceeded $34 billion, 80 percent over the 1972 level. The 1973 mark was not exceeded until 1987. But in the period after 1973, annual farm sector capital expenditures soared. Annual capital expenditures doubled between 1973 and 1979. Real expenditures exceeded replacement costs by 22 percent.

The increase in income, the growth in fixed asset capital stock, were predicated upon the recycling of petrodollars through US money center banks and into the farm economy. This process is the domestic market for capital investment. This process is debt driven, and the debt in its origins was a world market phenomenon. Debt creates the domestic market in the image of the world market. Production for exchange, of exchange values, is necessarily production for export. Between 1973 and 1980, the value of US agricultural exports nearly tripled to $43 billion.

Production costs, operating costs, diminish, relatively, in size and importance. Capital costs are paramount, and realization of a return on the investment is transformed from producers’ income into interest. In 1985 farm debt equaled 30 percent of total farm equity. Farm interest payments, which had never exceeded six percent of gross income before 1970, always exceeded six percent after 1970, exceeding between 1980 and 1986. This ratio did not decline to the six percent level again until the 1990s.

By 1983, the farm sector net capital stock had grown to $466 billion. And in 1983, net farm began a sustained and dramatic slide, falling one-third that year. The 60s were really over, the Beatles weren’t betting back together, and the farmers’ friends, OPEC, petrodollars, money center banks, weren’t. Nearly one quarter of all farms were experiencing debt repayment problems.

Fixed asset growth, capital stock expansion, expanded reproduction of the material basis of output, by its very organization as capital, had been transformed into a means, an object, and a need for devaluation. The devaluation itself was contained inside the ongoing processes of concentration and centralization of production. Absolute concentration and relative disaccumulation of fixed assets became the mutually inclusive contradictions of advanced agricultural production.

4. Between 1983 and 1999, agriculture’s net capital stock declined 32 percent. Real replacement rates remained below one through the 90s. However, no decline in agricultural productivity has accompanied this reduction in capital stock. Between 1980 and 1999, total farm output (in constant dollars) increased 50 percent, farm output per unit of input increased 66 percent. Output per labor unit increased 28 percent. Relative “consumption” of durable equipment in production has declined by half.

Between 1980 and 2003 the number of operating farms declined by 12 percent while the acreage in farming decreased nearly 14 percent. The actual harvested acreage however has increased ten percent. Productivity has been maintained through the processes of concentration and centralization, eliminating “redundant” fixed assets, utilizing remaining capital and operating inputs at near-capacity levels.

In 1992, farms with annual production valued greater than $1 million represented 0.58 percent of total US farms. These mega-farms accounted for 25 percent of total farm production value and 44.5 percent of net farm income. By 2002, these mega-farms were 1.39 percent of the total, accounted for 38 percent of total production value and 79.8 percent of net farm income.
In the same year, all farms with production valued at greater than $250,000, 8 percent of the total enterprises, accounted for 68 percent of total production and 99 percent of net farm income.

For 2003, net farm income increased more than 50 percent from the 2002 level. Production costs, paced by the 21 percent rise in fuel and oil expenses, increased 5.7 percent, the largest single year increase since 1979. Capital’s whispering of “2,3, Many OPECs,” is, like Coltane’s definition of the clarinet, an ill wind that nobody blows good.

5. The linkage between exports and farm income is precisely that certain stage of development that reflects the level of development of capital as a whole. Exports and farm income in the 90s peak together in 1996, 1997, and decline together with first, the financial collapse of the emerging Asian economies. The decline continued with the European Union’s action banning imports of genetically modified soybeans and corn.

At the certain stage in the development of agriculture, the stage reflecting the advanced development of capitalist production, that stage of the expansion of capital stocks, the costs of the production of the agricultural values are not recovered in the prices received for the products. This parity gap was described as a “scissors crisis ” by Preobrazhensky in his works on the Soviet economy. The gap is a specific manifestation of overall rates of profit to fall with the development of the capitalism, as the mass of labor is expelled from the production process and replaced by masses of machinery, and raw and processed materials. That Preobrazhensky, the Bolshevik “specialist “ in economic development, should confront this problem is no surprise. The problem confirmed the compressed, nested, nature of the Russian Revolution, where Russian in its specific circumstances of underdeveloped agriculture coexistent with developed industrial production, reflected the general conditions of capitalism. The revolution takes over from capitalism not just its the means of production, but all its inadequacies, contradictions, and conflicts.

The scissors first “opened,” the parity gap first appears in the period directly prior to World War.
The US Department of Agriculture’s Economic Research Service uses the 1910-1914 period as the baseline for parity analysis, with prices received and prices paid for that period at the 1:1 ratio. Since then, the parity ratio of prices received to prices paid has declined to 40 percent. The disparity is the transfer of income from agriculture to industry. It is in this disparity ratio that the “progress” of capital from expanding value creation to decelerating profit realization is made tangible. Price supports, production subsidies, discount loans are mechanisms to control that rate of deceleration.

From 1998 through 2001, the price per bushel of wheat averaged $2.59. The USDA ERS has calculated that at the average price, 85 percent of US farms are capable of covering their operating costs. At the average price, 82 percent of corn producers and 96 percent of soybean producers covered their operating costs. Asset costs, the costs of ownership, are not recovered with the average prices. Only half of the US corn and wheat producers, and 25 percent of the soybean recovered operating and ownership costs during this period.

ERS analysis of US hog and milk production revealed similar patterns. Eighty seven percent of milk producers recovered operating costs at the average prices, but less than half were able to recover operating and asset ownership costs. Fifty nine percent of hog farmers recovered their operating costs, but less than 25 percent recovered operating and asset costs.

6. The fact that the annual returns decline in proportion to the capital advanced if there is an increase in that part of auxiliary capital which consists of fixed capital, that is, if its turnover period extends over several years-- its value only entering into production annually in the form of depreciation--is not a phenomenon peculiar to agriculture, but a general one.

Karl Marx, Theories of Surplus Value, Vol 3, Chapter 24, “Richard Jones.”

At this stage in its development, representing just two percent of US GDP, capitalist agriculture represents the history and the future of the remaining 98 percent: the accelerating production of value creates a declining rate of return. In agriculture, and in industry, capital sees a remedy in reduction of the fixed asset base, achieving recovery in concentration, centralization, and in increased application of circulating inputs, i.e. seed, fertilizers, pesticides. It is at that point, however, that expanded production is no longer expanded reproduction. In fact, the domestic market, which is nothing but the relation between city and countryside, agriculture and industry, declines. The development of production is, in general, a decline in annual returns. The re-absorption and reproduction of the productive powers of labor in agriculture is the limit and the end to the realization of profits.

S. Artesian

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