 Good day, it's Professor Resnick again. I wanted to extend what we have done here before to something the Marxian tradition has been very interested in, which is that of colonialism and imperialism or the world economy. It's something that Marx intended to do. And unfortunately, he died before he could write his work on this. But this is something that he mentioned in the critique of political economy, where he outlined what he intended to do. This was a book that he was going to write on, if I remember correctly, he said, the world economy. That is to extend the value and the surplus value analysis that we have discussed in this course to international trade and international capital flows. So I just wanted to begin a little bit of that, since I think I find it interesting and I hope you will as well. So let me go back to something that we recently discussed. And the numbers are exactly the same. Everything is the same, except I'm just going to change who is competing. So on the blackboard, and it also would be a nice review for us, on the blackboard, I'm going to do the following. I'm going to put this table that we have discussed. Over here, I'm going to put Britain, Germany, and France. So in this column over here, we have different national capitals competing with one another. That is, British capitalists are competing with German capitalists competing with French capitalists. So I'm assuming that all the capitalists in Britain are the same, which is not accurate, but I'm going to assume that they're all the same in Germany. They're all the same in France, but they differ across these different nations. So reading this way, this would be the nations. That is the capitalists in these different nations. And I'm going to talk about the particular industry that people were analyzing at the time of Marx, which is the textile industry. So this is the textile industry, or the cotton cloth industry, textile and cotton cloth. That was kind of the high-tech industry of the day after the 1850s. So I want to go textile industry roughly 1850s to the World War I, 1914, 1850 to 1914. So that period of time. And I want to talk about over here, of course, the value flows, the C, the V, the S, the W. I hope that this is clear what this is. And what I'm going to assume here is that we have a world market. We have been talking here before about the national market. Now I want to extend this to a world market. World market in what? In cotton cloth. In cotton shirts. So these national capitals are competing in an international or a world market. And let's have our same numbers, because it's easy to deal with. Number of shirts, 1, 1, 1. Let's put everything down here. Composition of capital is 4 over 6, 2 thirds, 2 thirds, 2 thirds. And the price is 24 divided by 3. So the price of a shirt on the international market is 8. 8 pounds, whatever the case may be. Let's do one more. Rate of profit here, 2 over 6, 1 third, 1 third, 1 third. So I start there all alike. Suppose now German capitalists do something which the French and the British are not aware of. So this is private enterprise in the international market. And the German capitalists take a particular kind of strategic action, which is to raise the composition of their capital. This becomes 8 for them. And hence, this number becomes 8, 10 is 12. And they produce not one, but they produce two products. And so if we add up, what happens to the world market of shirts? This has become now 28. This has become 4. So the world, the price, has fallen from 8, previous price, now to 7. So the new price in the world market, I'll put new here, is then 7 per shirt. Because the Germans have increased the supply of shirts by raising their composition of capital. So Germany is becoming more cap, in the language of economics, the Germans are employing the same labor, working the same hours. But with more capital, the index of mechanization has gone up. So this is now 8 over 10. This is 0.8. And the productivity of German labor has gone up. And that's reflected in the world market, one market, by the price of a shirt falling from 8 to 7, because the productivity of labor has risen. And I'm assuming for the moment that the British and French don't do anything. They don't know about this. Well, there is a new revenue and there's a new cost. Because everybody comes to market and sells their shirts. Now, no longer at 8, the new price is 7. It's a competitive market. So they sell for 7. The French sell for 7. The Germans sell two shirts. 7 plus 7 is 14. Costs are 6. Costs are 10. Costs are 6. And hence, the new profits, as a result of this, would be 1 for 1. Well, let's look at this. Where are we? The question is, what does the world market, the global economy, do to those national capitals which have not innovated? And you can see from the whiteboard what it does is kill the British and the French capitalists and expand the German capitalists. So the reward, the incentive to the German capitalists, is they're getting two more, let's use dollars because it's easier for me, they're getting two more dollars, which they take away from the British and the French capitalists. And the market redistributes that super profit, that two extra dollars to the Germans. And you can see what's going to happen. If this continues, then the British and the French capitalists in the textile industry are going to go out of business. They're going to go bankrupt. And historically, this is fascinating because the British were the first. They were the innovators. Now the newcomers, the Germans, are going to out-compete, drive out of business the British, unless the British do something, the same with the French. It's a very powerful story, then, of what's happening in this world market. Lennon comes along. Later on, he's going to talk about what we just did here. And he's going to say, OK, a kind of imperialism is when these countries are competing with one another over super profit. And that competition can take a variety of different forms. Here, I'm discussing it in terms of a loss of surplus on the part of Britain and France to the offensive Germans. Now, this is in the 1850s to the war, but we can easily change this. We could have today. I could put over here US, Japan, Europe, and this could be the auto industry starting in the 1970s. So if I did this, you could see the offensive Japanese, the Honda, Toyota, and so forth, et cetera, would raise their composition of capital and take surplus away from the Europeans and the Americans. And if it continued, the American and the European automobile industries would be driven out of business. You can extend this to the computer industry today. Here, you could put US over here. You could put the newcomer on the block, China, Japan. And as the Chinese raised their organic composition of capital, raised the productivity of labor in China, and so forth, et cetera, if that just continues, then the American and the Japanese, in this case, computer industries, would be driven out of business by the more efficient Japanese. So it's a powerful way of trying to explain what might happen as a result of global competition. Now, let's not stop. Let's continue with this. What might then be some reactions to this on the part of the British and French capitalists in Britain, in the UK, and in France, or the American capitalists in the automobile industry, the European capitalists in the automobile industry over the last 35 years, or the American and Japanese capitalists in the computer industry, or the high-definition television industry today? So let's just talk about some of the reactions in order once again to avoid being killed, going out of business. So let me erase this. First, to stay in business, to stay in business, and this is not an order of importance. Capitalists can do all of these. To stay in business, the capitalists have to work on, that is their subsumed-class managers, have to work on driving down average costs. We've talked about this. So the British capitalists in the cotton industry have to raise the productivity of labor in Britain. So this one is increasing the productivity of labor where, in UK, to what? To withstand the withering competition from the Germans. Americans, the American capitalists in Detroit have to increase the productivity of labor in Detroit. Why? To withstand the competition from the Japanese. That's the denominator, the numerator, to reduce C and V. So it's not just one or the other. The capitalists in these affected industries are going to provide portions of their surplus, distribute them to the managers, and perhaps even others, to come up with all kinds of different corporate strategies to raise the productivity of labor in the denominator. And now you're ready? Search the world for cheap C and V. I want to come back to that. Secondly, you now have a reason for why a country or state in a country might put on a tariff. End or a quota. What does that do? Well, that's going to increase. That's going to make it more difficult for the Germans to compete in England and or France. So it may be the case that the capitalists that are being affected, they may be doing all this, but they need, they go to the state and they say to the parliament or the US Congress, look. It's going to take us a few years to raise the productivity of labor because we have to deploy new kinds of machines to do this and so forth. We're searching the world for cheap C and V, but that's going to take time. Searching the world for cheap V, that means we're going to plant someplace else with cheaper labor. In the meantime, give us a tariff.