14.3 – Intersectoral Struggles over the Surplus
Learning Objectives
By the end of this section, you will be able to:
- Analyze, using the corn model, the impact of a sector raising prices
- Apply the reasoning of intersectoral struggles over the surplus to the inflation caused by the oil crises of the 1970s
So far, we’ve assumed that the surplus that an economy produces goes entirely to the profits of the companies doing the production. For the sake of simplicity, we’ve assumed that workers are only paid a subsistence income, which we wrapped into the outlays of each sector, and implicitly we ignored other groups like government, charities, and so on. Now we can start to understand how the surplus is distributed between the various groups in the economy. We begin here by only considering the distribution between different sectors. In the next section, then, we’ll look at the distribution between classes. In each of these sections one of the most important things to understand is that who gets how much of the surplus is ultimately determined through power struggles between different groups–businesses, workers, and all the rest. Prices, profits, wages, and other dollar values are, in part at least, reflections of these contests.
Let’s use the previous section’s hypothetical economy, where steel was priced at $30 per ton, corn at $10 per ton, and each sector earned a profit rate of 93.75%. With these numbers in hand, we can rewrite the equations we’ve been working with just a little differently.
For the corn sector:
[latex](30 \text{ corn} \times $10 + 150 \text{ steel} \times $30)(1 + 0.9375) = 930 \text{ corn} \times $10[/latex]
And for the steel sector:
[latex](225 \text{ corn} \times $10 + 5 \text{ steel} \times $30)(1 + 0.9375) = 155 \text{ steel} \times $30[/latex]
These equations give us the incomes and revenues of each sector in dollar terms. Check for yourself that the left-hand side of each equation adds up to the right-hand side.
The left-hand sides of the two equations above give the sectors’ outlays multiplied by 1 plus the profit rates, expressed as decimals rather than percentages. That is to say, for each sector’s equation, the left-hand side shows the money invested times the amount of money the businesses in that sector brought in over and above their investment. The right-hand sides simply show the amount of money the sector generated by sale of its output. The two sides come out equal because prices are such that the output of each sector in dollar terms will be sufficient to earn those businesses the 93.75% rate of profit we calculated previously. We can write these equations more generically as:
[latex]\text{Total Costs} \times (1 + r) = \text{Total Revenues}[/latex]
Where r gives the markup over cost, which means the same as the profit rate. Now, it’s important to remember four points made previously before we begin to use this equation.
First, the total costs of a sector are determined in part by technology (for example, how