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John Passant

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December 2012



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My interview Razor Sharp 18 February
Me interviewed by Sharon Firebrace on Razor Sharp on Tuesday 18 February. (0)

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Boxing Day sales and Karl Marx

Marx never went to a Boxing Day Sale. He didn’t have the money. In recent years Boxing Day sales have become more popular as a way for retailers to recoup some money after flat or less than expected pre-Christmas revenue.

As an aside, for readers wondering what the hell I am talking about, Boxing Day is 26 December, the day after Christmas. It is a public holiday in Australia, the UK, Ireland and some provinces (states) in Canada. In those countries the holiday is now ‘celebrated’ by buying goods which are much cheaper than before Christmas. Wikipedia assures me it is like the day after Thanksgiving Day in the US in terms of low prices and a retail spending spree.

There are different arguments about the origins of Boxing Day itself, ranging from medieval and/or Church customs to servants receiving boxes with money in them or being allowed the day off after the lords and ladies have celebrated Christmas Day and been waited upon.

Because capitalism is a competitive system, if one group of retailers gets in early and wins more market share by offering cheaper goods on Boxing Day, the others will follow. They will have to if they want a share of that market too.

Boxing Day sales are big business. In the UK some shoppers queued overnight and large lines began forming from around 1 am in various shopping centres, if not earlier. Sales look to be up by as much as 20%, with tens, if not hundreds of thousands, going through mall after all across the country.

In Australia we had the same response – huge crowds turning up very early to grab some bargains. Some stores opened at 5 am. Some customers slept out overnight to be the first to get the bargains. The Australian Retail Association estimates sales on Boxing Day could be just under $2 billion – the busiest retail day of the year.

Although Marx never went to a Boxing Day Sale, he wrote a few things that might help us understand it. In the first few pages of Volume 1 of Capital, Marx introduces us to the commodity – those goods and services produced to be sold on the market.

Marx says commodities have a use value and an exchange value. You buy a cake because it has a use to you – for example it fills your belly, excites your taste buds and the sugar hit may give you a temporary feeling of euphoria.

Now one cake might be the same in value as a large box of Weetbix, also something useful to fill your tummy at breakfast time. Instead of working out the equivalence of each commodity (one cake equals one large box of Weetbix equals one five thousandth of a car) there is a universal equivalent which does the task for us. That universal equivalent is money. In other words the cake has an exchange value.

But what are we comparing when we compare cars and cakes and cereal in the market place? What is money the universal equivalent of? What is is that these commodities all have in common?

For Marx the answer was labour. It takes much longer to make a car than a cake, so, to put it crudely, they cost more. And all the machines required to make cars, cakes and cereal are in fact congealed labour – labour captured in the machine and passed on (depreciation is a rough guide to this) to the new commodity.

Marx draws a distinction between abstract labour – labour in general – and concrete labour, the actual labour involved in making different products. For those interested, here is what Marx says in volume 1 of Capital.

On the one hand all labour is, speaking physiologically, an expenditure of human labour power, and in its character of identical abstract human labour, it creates and forms the value of commodities. On the other hand, all labour is the expenditure of human labour power in a special form and with a definite aim, and in this, its character of concrete useful labour, it produces use values. […] At first sight a commodity presented itself to us as a complex of two things – use value and exchange value. Later on, we saw also that labour, too, possesses the same twofold nature; for, so far as it finds expression in value, it does not possess the same characteristics that belong to it as a creator of use values. I was the first to point out and to examine critically this twofold nature of the labour contained in commodities. […] this point is the pivot on which a clear comprehension of political economy turns.

So does abstract labour as the creator of value mean I could spend a day making a cake and sell it for more than say the capitalists who mass produce these cakes? No, of course not.

Let’s assume it takes me 5 hours to make a cake – it takes me an hour to break an egg so it is possible -whereas let’s assume the cakes in Woolworths are made in half an hour because unlike me the capitalists who make them have lots of fancy machinery and a skilled workforce competent at making cakes.

If I charged for my time I wouldn’t be able to sell my cakes on the market. They’d be roughly ten times more expensive than mass produced cakes. So I’d sell them for the going market price – in other words not a realisation for my labour time.

If I didn’t make the cake to sell but rather for my own enjoyment and satisfaction, then the cake isn’t a commodity. It has a use value but no exchange value.

So Marx said the labour embedded in a commodity that goes into the exchange process is the socially necessary labour time. This is the average labour time at the average level of productivity that will sell on the market.

As Marx points out in the quote from him above, labour too is a commodity. It has an exchange value. Marx said that capital paid for labour power, the ability to work, and then in the production process had to extract labour from us. The price of the labour power (its exchange value) was the socially necessary labour time required to regenerate the worker (enough to buy food, clothes, housing, heating, transport, rest, relaxation etc) and the next generation (the kids) plus perhaps some ‘extras’ (say Friday night drinks) that arise because of custom and class struggle or what Marx calls the moral and historical element.

Labour is where profit, and rent, and interest come from. Let me explain. The cake manufacturer pays you enough to cover your necessaries and to bring up your kids. That might take 5 hours of an 8 hour day in terms of the value you create. The other 3 hours is the time you spend working for the boss for free. In that time you create surplus value for your boss which when the cake is sold on the market becomes a money form and goes to the producer as profit, to the bank as interest, to the landlord as rent and so on. That is the use value workers have for bosses – they create surplus value.

Let’s assume you are making Christmas cakes. Part of the use value of Christmas cakes is that they satisfy a socially constructed need – to celebrate Christmas with family and others in joy, which usually translates among other things as ‘with food’, and often in Australia ‘with booze’.

After Christmas Day, unsold Christmas cakes in the supermarkets and elsewhere aren’t so popular. Demand falls for them because they are only really useful as Christmas cakes on Christmas Day. So on Boxing Day they are on special at a discounted price.

The producer of Christmas Cakes has made her profit by selling the cake to Woolworths. Woolies sells the cake to cover costs, i.e. the cost of buying it from the producer, shipping it to stores etc and then putting a mark up on it, around the average rate of profit. Otherwise their cakes might be too expensive to sell if the mark up is much higher, especially if it is much higher than their competitor, i.e. Coles.

However the run up to Christmas for retailers is like minerals for mining companies but only for a short period. Christmas demand is, during OK economic times, so high that retailers can sell above the cost of production and above the average rate of profit. They make ‘Christmas’ super profits.

So in this unusual market time they can sell a number of cakes before Christmas at high prices because of demand. But they don’t often sell all of them. Because capitalism is unplanned, producers, anticipating bumper sales at high prices, are likely to make too many Christmas cakes. But they will they hope have recouped their costs and at least the average rate of profit on all the cakes Woolies and Coles and the other retailers purchase from them for resale.

So Woolies and Coles and the other retailers can now sell the left over stock below the price of production – at below average rates of profit on the cost, and sometimes even below cost.

Similarly with Christmas gifts. The demand for many toys for example goes up exponentially at Christmas time. The use value to you in buying a Christmas present is the love and joy it engenders. In other words capitalism has commercialised love.

But your use value doesn’t transfer over to your relative who will have little use for the twenty pairs of socks or 30 handkerchiefs you and others give them, on top of the dozens they already have, or for the new puppy. Animal shelters and recycle bins, as well as human shelters, runneth over during the Christmas period with unwanted gifts and people.

I mentioned that Boxing Day Sales appear to have had an upsurge recently. This is no accident.

Another of Marx’s ideas was that because of the way production is organised under capitalism there is a tendency of the rate of profit to fall. This occurs because competition forces capital to invest more in machines than in humans. Yet if human labour is the source of surplus value then over time this means, all other things being equal, profit rates will fall.

Of course not all other things are equal. Bosses can make us work longer. Instead of working for 5 hours to pay for our own costs and 3 hours for the boss in an 8 hour day, the boss could get us to work 9 hours a day, giving her an extra hour of surplus value extracted from us. Working hours across the developed world have been increasing over time. But there are only so many hours in a working day that can profitably be exploited.

Increased productivity, and the lessening of the costs of feeding, clothing and housing us etc, also act as countervailing tendencies, as do cutting our wages and conditions.

But the tendency shines through, and according to a raft of left wing writers, the rate of profit today in the developed world is up to half what it was in the 50s and 60s.

As the tendency of the rate of profit to fall re-asserted itself after the post war boom, the ruling elite abandoned Keynesianism and adopted neoliberalism as its main economic ideology. A reader recently asked what I mean by neoliberalism. Here is a brief response.

Elizabeth Martinez and Arnoldo Garcia identify five main elements of economic neoliberalism – the rule of the market, cutting public expenditure for social services, deregulation, privatisation and eliminating the concept of public good or community and replacing it with individual responsibility. For me the essence of neoliberalism is also captured by Eddie Cimorelli when he says:

Neoliberalism is a particular organisation of capitalism. Its most basic feature is the use of the state to protect capital, impose market imperatives on society and curb the power of labour.

The first neoliberal government was the Pinochet dictatorship in Chile. The neoliberal onslaught was led politically by Margaret Thatcher in the UK and Ronald Reagan in the US and their elections in 1979 and 1980 respectively opened the way for the adoption of the ideology of neoliberalism in various guises across the globe. It was for example the Hawke Labor Government in Australia in 1983 which began the process of neoliberalisation of the Australian economy.

For a time these policies seemed to work and profit rates began to climb again until the mid 90s. They have been in decline more or less ever since in the developed world, apart from Australia.

So as profit rates decline and neoliberal governments come to power, one seeming way to increase sales and hence profits for retail capital is to free up the labour market (for example abolish penalty rates) and at the same time remove restrictions on holiday opening hours. This entails an assault on shop workers’ holidays, holiday pay, starting times and the like.

So a combination of monopoly like exploitation of Christmas, declining profit rates and neoliberal governments, and in Australia at least, weak unions such as the Shop, Distributive and Allied Employees Union, combined to allow ‘entrepreneurial’ retailers to offer massive cut price Boxing Day sales. Those retailers who did this first reaped a benefit, until all retailers followed suit.

By the way, these groundbreaking ‘entrepreneurs’ often first had to force governments to remove restrictions on hours, times and pay and conditions before they could in fact open on Boxing Day.

However because the advantage of selling on Boxing Day is only temporary as more retailers join in, the pressure to outwit competitors and gain some shallow sales advantage is still there.

In Australia consumers, by and large workers, have been reluctant to spend up big since the Global Financial Crisis. So retailers haven’t been making the sales before Christmas that they had in the past. Their Christmas monopoly is dying, if not dead.

So now what we find is that some retailers are beginning to offer post-Christmas sales on Christmas day, or even post Christmas prices before Christmas (I kid you not) to entice workers to buy. But that of course cuts the ‘Christmas’ super profits the retailers are making. The monopoly is undone.

This is just one indication that Australian capitalism is in trouble.

An alternative would be for workers to reclaim holidays as holidays and in doing that realise their own strength and the fact that we don’t need bosses. Then production could be carried out to satisfy human need, ie for use values, not to make a profit, ie not for exchange values. If that were done democratically we’d have socialism and every day would be Christmas, a day of love, joy and happiness in which we are at last truly human.

Comments (see the link under the heading) close after 7 days. The hype around Christmas and the Boxing Day sales might see another article trying to explain the fetishism of commodities.



Comment from Dave
Time December 27, 2012 at 10:17 pm

Hey John, firstly hats off for trying to write about value in a clear and concise way. This is both really necessary and also very hard. However, and seriously I am trying not to be pedantic here, you make a common error, or at least it reads this way to me. You seem to be saying that that actual concrete labour time of production determines value( you do wisely point out that it is the social average), but as Marx points out the concrete labour is actually incomparable. Making a chair and backing a cake are very different tasks. Therefore what is being compared is the abstract labour objectified in a commodity. Unfortunately Marx gives us two contradictory definitions of abstract labour: one is a generic human capacity; the other is a quality produced by the commodity-form itself. That is to say by placing a commodity for sale it comes into contact with all the other commodities ( and thus all the other forms of labour) in that society, and through the complex fluctuations of the exchanges, which do reflect both levels of productivity and social desire, its value is determined. Thus it might literally take one hour to make two different things but their value might be different – especially if it doesn’t sell then it has no value, the labour that produced it isn’t socially necessary.
There are some great debates about this is Capital & Class which you should check out. Also at the start of Capital Marx is talking about a fictional situation called ‘simple commodity production’ – which is an abstraction from actually existing capitalism. In reality with the establishment of an average rate of profit (or better yet the tendency towards its establishment) everything gets more complex.
Sorry if this sounds harsh, hopefully my criticism is constructive.

Comment from John
Time December 28, 2012 at 6:55 am

I am writing for an audience to introduce them to the ideas. I don’t think the abstract/concrete distinction is something that needs to be gone into. Yes, Marx was dealing with simple commodity production but this is an intro, not a treatise. And I do try to introduce the readers to something beyond simple commodity production, eg prices of production, but gently. In fact I am not actually saying the comparison is between concrete labour, am I? But hopefully there is enough there to whet the appetite of those interested in a few of Marx’s ideas.

Comment from Dave
Time December 28, 2012 at 7:46 am

Hi John, I will try to write a little more later, but have a read of this

Comment from Hasbeen
Time December 28, 2012 at 9:16 am

Of course we have a couple of choices.

We can have a capitalist system, with all these cheap cakes on boxing day, or we can have a Marxist system, where there are no cakes, as every one, [but the elite] are too poor to buy them.

Comment from Dave
Time December 28, 2012 at 9:39 am

Hasbeen what is a Marxist system? As Marx made a critique of capitalism and never designed a system. Do you mean the party-states of ‘really existing socialism’? I doubt you will find anyone here who is a supporter of them.
And whilst I disagree with the core argument in this article here you will find an interesting discussion of the reasons for their failings.

Comment from John
Time December 28, 2012 at 9:58 am

Not sure what Marxist system you are talking about Hasbeen. Do you mean the state capitlaism of the old USSR and its captive nations? Cuba? North Vietnam? North Korea? Stalinism was a form of capitalism. I have written about this innumerable times. In looking at Stalinism you are perhaps looking at the future of capitalism in the Western world. Yes, I want everyone to be well fed. There is more than enough food currently produced to feed everyone adequately. Yet one billion are starving and another one billion malnourished. Why? Because these people are too poor to buy food and it is not profitable to give it to them. Isn’t capitalism wonderful? The first task of a truly international socialist revolution would I think be to feed the world from the food that is currently produced. And to house and clothe everyone, to provide fresh running water, eradicate entirely preventable diseases and the like. All easily done if we move away from a society based on profit to one based on satisfying human need.

Comment from John
Time December 28, 2012 at 9:59 am

Ta. I am re-reading volume 1 of capital at the moment so that is my priority right now. But keep hammering away at me.

Comment from Mary
Time December 28, 2012 at 1:53 pm

I avoided shops just went to one and did it all. Made most presents never go to sales. Commodities are disposable once their use value has been exchanged for something else – a newer model maybe of even different colour! To resell or exchange something takes a lot of effort and value decreases so it is often disguarded. Some are recycled but most end up on the rubbish tip. This also takes more energy and creates some low paid labour and further cost to bureacratics who plan the disposal industry. The value of labour deminishes as it goes through the cycle from a new product to a disguarded one. In the recycling process labour is done by volunteers or cheap disabled workers. This leads to the importance of volunteers to the neoliberal capitalis economy based on volunteerism. Another story!

Comment from Hasbeen
Time December 28, 2012 at 7:45 pm

Come on John, it’s been tried many times.

China, is the most recent attempt at “to each according to their needs” & they starved wholesale. It was only imported food that kept them alive.

They had to go to a capitalist economy, with what ever you chose to call their political system, to produce enough food to feed themselves. Now they are major exporters of food.

Good will to all men does not motivate most into getting up each morning to produce food, or anything else for others. This is particularly the case when the system has to supply their needs anyway. Just look at the burgeoning welfare bills in our welfare society. With a large percentage, once the system guarantees a certain minimum standard of living, many chose cit down money, particularly when working provides nothing more.

It is only when hard work returns something more to the worker, that the motivation actually works. Dreaming about something doesn’t make it so, except in some computer games.

Comment from John
Time December 28, 2012 at 8:48 pm

Thanks Hasbeen. China’s revolution was a group of intellectuals leading a peasant army. Nothing working class or Marxist about it at all. Yes, unlike Gina and Twiggy and Clive and Nathan, all those 1 billion starving people in the world just don’t work hard enough. If only the 21000 kids who die every day of poverty just worked harder they’d all live. But of course they are all on the sit down and die money aren’t they?

Comment from Dave
Time December 29, 2012 at 10:29 am

Actually Hasbeen, whilst the GLF was a horrific failure, China saw the worlds largest increase in life expectancy under Mao and before the Deng reforms. Not that it was a fun place to be, but historical accuracy in all things.

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