Notes on Ha Joon Chang Economics
Ha Joon Chang’s book Economics presents many economics principles in a way that is easier to understand than Keynes, in other words, without essentially redefining the whole language of political economy to overshadow and conceal concepts like profit and surplus value. These concepts, although not much mentioned by Chang when discussing the production process, are part of his description of financial capital, which he is talented at.
“Money is what others in your society owe you, or your claim on particular amounts of the society’s resources.
P.18 Ha- Joon Chang Economics 2014 Bloomsbury Press
Which places money as a commodity, a special one capable of representing other commodities. The commodity represents social labour, done by the worker not for himself or his own enjoyment, rather for society, although mediated by the capitalist, who owns the means of production. It is this disconnection that forms the basis of capitalism, the worker does not own the means of production he is labouring on, and the product he is producing is a commodity, it is labour for society, not his personal enjoyment as a particular object he has created,
Here we see money as commanding commodities, a claim on societies resources, social labour as “ societies resources”, rather than individual desires.
“So what is the capitalist economy, or capitalism? It is an economy in which production is organized in pursuit of profit, rather than your own consumption (as in subsistence farming) or for political authorities (here comes his dig against socialism, in parentheses here)- as in feudal or socialist economies where political authorities, respectively aristocrats and the central planning authorities tell you what to produce.”
Ha – Joon Chang Economics p. 27
Well we must remember Chang is a Cambridge professor, so this should not surprise us (at least the misrepresented account of what socialism represents). The part about production being organized to create profit is right. But to compare feudalism, whose labourers were often slaves or serfs, basically chained to the land, without earning money, which would have been contrary to their status as slaves, to socialism neglects that if nothing else slavery no longer exists, rather it was removed in cooperation with socialists, in 1863 when Karl Marx was involved in the Civil War, which emancipated the slaves, and with it the last vestiges of feudal society whose economic system was still prevalent. Incidentally at this point in 1867 the right to participate in universal suffrage was extended to freed black male slaves, a direct result of socialist cooperation with Abraham Lincoln.
Ha Joon Chang seems to think central planning is a repressive process, but look at agriculture under capitalism, with its more than 10 billion dollars worth of yearly farm subsidies, controlled by massive bureaucracies in the capitalist state with billion dollar budgets,, and you see central planning is a real part of collectivized agriculture, and is not feudalism. The land is not rented, the landlord is not part of late capitalism, at some point he became redundant in the late 18th and early 19th centuries, and was replaced by large scale capitalist farmers, whose only goal was profit.
The ethical argument for collectivized agriculture, that it ends rural backwardness by allowing for the once farmers to move to the city, where they will be more culturally advanced, as there are museums, theaters, libraries, etc. in the city that are not present in the country is a strong one. Given the pull of rural society, backwards Republican bourgeois strongholds, compared to the urban proletariat, literate and industrialized more heavily, especially as of late with computers and the internet, it is hard to see any alternative to large scale collectivized agriculture.
To make it worse, to even be able to compete with a large farm vs a small one, requires money for tractors, harvesters, trucks, etc. Unless you are a small organic farm, with a following in the cooperatives or Whole Foods organic food stores, competition with capitalists is difficult.
But what differentiates feudal from socialist agriculture is not central planning, it is the farmer owns his own land under socialism, individually or collectively. Either he outright owns a farm, with no landlord, rent or profit, or he labours in a collective farm with employee ownership of some sort, which differs from slavery obviously, that should be clear to our economist, who disparages the worker who has had the audacity to question the capitalist control the means of production.
Chang seems to dis socialism anytime the world profit or profits comes up. He never spells out exactly what profit is, instead goes right into financial capital and an average rate of profit. He also does not square off with what a community represents, no less a concept like surplus value. It’s just more and more defense of profit, and financial capital.
About the only thing valuable about his “beginners guide to economics” is he does point out there is more financial capital today than previously. But he does not see interest is a subdivision of surplus value, like taxes. Consumed by the fetish of interest bearing capital, profit removed from the factory, he displays the many ways financial capital in form of bonds, stocks, derivatives, etc. make a profit for their owners.
If it seems too complicated don’t worry, he even says himself of the myriad financial transactions he discusses they are all too difficult to understand, even to him. It is abstraction basically, and Chang is caught up in it.
He takes the vulgar view here:
“Capitalists own the means of production either directly or, more commonly these days, indirectly by owning shares(or stocks) in a company- that is , proportional claims on the total value of the company- that owns those means of production. Capitalists hire other people on a commercial basis to operate these means of production. These people are known as wage labourers, or simply workers. Capitalists make profits by producing things and selling them to other people through the market, which is where goods and services are bought and sold.
Ha Joon Chang Economics p. 27
His view of profits being made by people selling things in markets shows the vulgar view of profit, namely it does not occur in production, rather when the commodity is exchanged for money. First and foremost, the value of a commodity is the amount of labour time contained in it, regardless of whether or not it is paid for. David Ricardo showed us this on the first page of his book Principles of Political Economy and Taxation in 1817. Surplus value is the amount of unpaid labour contained in the commodity, its value (the commodity) is the amount of labour time required to produce it. Its exchange value is how much money it is worth, which does not determine how much labour time is required for its production, it is a measure of it. The unpaid labour, essentially profit, is not created by exchange, it is already present in the commodities value, realized by being sold at its price of production in the market.
Indeed goods and services are bought and sold in the market, but this is not the cause of profit. It is the relationship with the wage labourers he identified who “operated on a commercial basis to operate these means of production” with the capitalist that is the source of the unpaid labour, the profit. Just what the “commercial basis” that makes one man owners of these means of production, that are “more commonly these days” owned by more than one capitalist, and wage labour, remains a mystery not solved by Chang. This influences his views later of financial capital and interest.
He then proceeds to show that much has changed since Adam Smith wrote Wealth of Nations. Banking, stock exchanges, corporate bonds, are all touched on. Things have changed, and Chang grudgingly accepts that the goal of production is the same, the quest for surplus value. Adam Smith, however limited he was, is still further along than this fellow as he recognized the value of a commodity is the amount of labour required to produce it, whether or not it is paid for. He saw surplus value as part of the cost of production, not as coming from exchange, which our vulgarian just suggested.
He does acknowledge the quest for profit is the same as in Adam Smith’s time on page 33, when he says
“…competition among profit- seeking firms may still be a key driving force of capitalism, as in Smith’s scheme.”
Chang p. 33
Which is as close as he gets to looking at how Adam Smith viewed profit, and how surplus value is created in production.
“But it is not between small, anonymous firms which, accepting consumer tastes, fight it out by increasing the efficiency in the use of given technology. “
Chang p.33 ibid.
Smith understood technological changes driving profits as, for example, the power loom was making its introduction felt around his time. His example of the needle making factory also fits in with a basic knowledge of commodity production and what Marx referred to as an increase in relative surplus value when a company invests in better machinery to remove a competitor, or create a profit windfall. The needle example shows although Smith did not spell this out exactly like Marx, he still understood what changes in the means of production represented.
These are just a few takes from his Economics book, which claims to explain for the beginner economics, which he also suggests is simply a political concept. In other words, political economy is not a science. Fitting words to a man who cannot use the word “profits “without disparaging workers.
Nicholas Jay Boyes
MIlwaukee Wisconsin
American Democratic Republic
4 2 2024
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