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Book Reviews: 'Money and Totality', & 'Dirty Secrets - How Tax Havens Destroy the Economy'

'Money and Totality'. By Fred Moseley. (Haymarket Books, 2017. 400 pages)

The subtitle sums up what the book is about: A Macro-Monetary Interpretation of Marx's Logic in Capital and the End of the 'Transformation Problem'.

We sometimes say that universities neglect Marx on economics. This is not strictly true as there is a sub-section which does look at Marx's views here, from an academic point of view. One of their fields of study is the so-called 'transformation problem'.

In Volume I of Capital Marx assumes, for explanatory purposes, that 'commodities', as items of wealth produced for sale, exchange at their 'value', determined by the amount of necessary labour expended to produce them from start to finish. In Volume III, published after Marx's death by Engels in 1894, he has commodities selling at their 'price of production', defined as their monetary cost + the average rate of monetary profit; which is what tends to happen in practice.

Marx-critics immediately cried 'contradiction' and one of the more mathematically-minded of them used algebra to try to demonstrate that it was impossible to 'transform' values into prices of production without dropping the assumption that total profit = total surplus value; in which case, the labour theory of value was wrong, or at least useless and irrelevant. This became what Moseley calls the 'standard' interpretation and criticism of Marx. Over the years it has provided academics, both those who consider themselves Marxists and those who don't, with plenty to argue about.

Moseley's argument is that, if you understand properly what Marx meant by 'capital', there is no such problem. Marx, he says, meant 'money capital' as 'money that becomes more money', i.e., as Moseley puts it, 'money advanced into circulation in order to extract more money from circulation'.

Capital is not something physical, not 'capital goods' (machinery, buildings, raw materials) but also not labour time. In both Volumes I and III, argues Moseley, capital is assumed to be the same given sum (any sum) of money used to buy physical goods and labour power, whose use leads to the creation of a given amount of surplus value. Volume I explains where this comes from (the unpaid labour of the working class). Volume III explains how this same amount is distributed amongst the various competing capitals (in proportion to size). There is no period of time during which values need to be 'transformed' into prices of production. The basic assumptions in both volumes are the same. There is no 'transformation problem.'

Moseley identifies the false problem as having arisen from a misunderstanding of what Marx meant by 'value' and 'capital'. Capital is a sum of values but value (the amount of necessary labour embodied in a commodity) cannot be measured directly but only via the market as price, i.e. only as money. So capital is in practice a sum of money, one that seeks to grow larger. Like value, capital is a social relation rather than a thing. Contradictions only arise if you assume that it is something physical.

Another valid point made by Moseley (Andrew Kliman disagrees) is that by 'price of production' Marx meant the same as Adam Smith and David Ricardo meant by 'natural price', ie a long-run price around which market prices oscillate (Moseley calls it the 'long-run centre of gravity price') consisting of cost + a mark-up for profit.  Smith and Ricardo just accepted the mark-up as a fact of life. Marx provided an explanation of where it came from and that it wasn't just an arbitrary addition to costs.

Moseley's book, although clearly written, is rather technical, but it does provide a comprehensive guide to all the arguments, for and against, the so-called 'transformation problem'

ALB

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Haven Your Cake

'Dirty Secrets: How Tax Havens Destroy the Economy'. By Richard Murphy. (Verso £12.99)

A tax haven is a place that provides tax advantages for someone who does not live there. Some are further described as secrecy jurisdictions, as they also enable secrecy for those who utilise these tax arrangements. Tax havens rely on the notion of an offshore transaction, which is recorded in one place even though all the parties to it reside elsewhere. As one, admittedly extreme, example discussed here of the use of a tax haven, in 2013 Barclays Bank had nearly 55,000 employees in the UK, where on paper the company lost over £1.3bn, but in Luxembourg it had just fourteen employees and made a slightly larger profit.

Tax havens are not just places such as Jersey and the Cayman Islands, for the US and the UK are enormous tax havens too. The US state of Delaware was perhaps the first tax haven, in 1898, and nowadays over half of US corporations have their legal home there. Clearly one consequence of the use of tax havens is that vast amounts of tax that ‘should’ be paid to governments are in fact not paid; estimating the extent of such tax avoidance and evasion is extremely difficult, but Murphy suggests it may be as much as £120bn a year in the UK.

He argues, however, that loss of tax revenue is not the only problem resulting from the existence of tax havens. Since they also involve a great deal of secrecy relating to ownership, accounts and profits, they undermine the workings of the market, as people do not have the open and accurate information needed to act rationally, allocate resources properly and estimate risk. As a result tax havens reduce productivity, growth and profits, and so prevent the ‘proper’ working of capitalism. Doing away with tax havens would mean, as Murphy puts it, ‘saving capitalism from itself’.

Tax havens are used not just by companies but by super-rich individuals as well. One estimate is that in 2010 nearly half of all offshore wealth was owned by the world’s richest 91,000 people (0.001 percent of the global population). These people owned at least a third of the world’s private financial wealth. Tax havens contribute to increasing inequality and the continuance of ownership of massive amounts of wealth by the privileged few.

Murphy is associated with the Tax Justice Network (taxjustice.net), and his proposal is to do away with tax havens, thus reducing inequality, making countries more democratic and improving the rule of law. It would also, supposedly, make markets fairer and more efficient. Perhaps this signals one of the problems with tax havens from a capitalist point of view: with their secrecy and lack of transparency, they make it harder for smaller firms to compete and for companies to enter a new market. This is hardly an issue for workers, though: taxes are a burden on the capitalist class, and arguments about tax havens are in reality disputes as to how much of this burden different capitalists should bear.

Murphy’s book gives a broad coverage of various points relating to tax havens, but is overly-optimistic about what abolishing them would lead to. The book could also have done with an extra round of proof-reading, as there are rather too many typos (including an unfortunate reference to ‘on pubic record’).  

PB