Operaciones de las Variables

This study draws attention to consumer credit as a complex area of inquiry and that an analysis of how it is integrated into the daily lives of individuals necessitates taking several factors into account. To have an accurate understanding of the phenomenon, one needs to move beyond the neoclassical understanding of consumer preference based on aggregated rational individual behaviour. Consumer behaviour needs to be analysed by considering economic and political conditions, social norms, cultural trends, and institutional structures.

Only by drawing these different aspects together can new insights be gained into the social content of consumer credit. Moreover, only such a comprehensive analysis can provide the foundation for an understanding of how borrowing has become integral to the daily lives of wage earners.

This section builds a theoretical framework to understand consumer credit, and it benefits from the Marxist political economy approach. As discussed in section 2.3.1, money and credit are analysed with reference to social relations inherent to them in the Marxist approach. Credit, in relation to money’s function as a means of payment, expresses these relations. This study argues that in the political economy literature, the social content of credit relations is mostly analysed in the context of internal mobilization of idle money between capitalists (Itoh & Lapavitsas, 1999; Lapavitsas, 2003). This analysis needs to be broadened to include the social content of consumer credit.

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To date, there has not been a comprehensive analysis of consumer credit from a Marxist approach. Marx himself did not examine consumer credit explicitly in his writings.

There are two main reasons for this. First, his main concern was a general analysis of the capitalist mode of production. In this context, he prioritised an examination of lending and borrowing within different fractions of capital (Harris, 1976). Second, until the mid-20th century, consumer credit was negligible. Although there was consumer credit in the 19th century, it was available mostly to the middle and upper classes. Their involvement in the credit system was primarily considered in relation to accumulation of their savings in financial institutions in return for interest payments. The form of borrowing for the poor was usury, as characterised by the appropriation of incomes of the poor by moneylenders. Marx did mention this kind of borrowing, but was mainly referring to the practice of pawn broking in England which was common at the time of his writing.

This study argues that although Marx did not examine consumer credit explicitly, important insights can be derived from his approach. This, however, necessitates going beyond a pure economic determinist approach to Marxism. In reality, understanding Marx’s analysis only as economic determinism/reductionism is misleading. Marx’s main intention was to reveal the interaction between the economic and non-economic factors in aggregated social relations (Sweezy, 1970). In the Marxist framework, a social phenomenon is treated as a part of the totality, as the product of social and economic relations. This methodological approach provides a framework to conceptualise consumer credit not just as an economic category but as embedded in a set of social relations. More specifically, a Marxist analysis enables us to see how social relations, in part, determine the increased use of consumer credit.

Furthermore, Marx’s writings on predatory lending give insights into an examination of consumer credit in the modern capitalist economy, as elaborated in Chapter 3.

Consumer credit is a claim on future income and its repayment depends on the potential of labour to produce future value. To understand this, one needs to consider the contradictory relationship between capital and labour in a capitalist economy. Capitalism is based on one class—capitalists—owning the means of production and another class—

workers lacking these means. Lacking the means of production, workers are obliged to sell their labour power that is the ability to work, in return for wages. There is a unique role of labour power in Marxian analyses because it is the only commodity that can produce more than what is required to produce and reproduce it. Appropriation of surplus value is the key feature of the capitalist system which provides capitalists with the opportunity of expanding capital. What labour produces in the process of production is divided between surplus value

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and the value that paid for the labour power. The determination of the value of labour power is a complex area of inquiry that is hotly debated in the literature, to which I now turn. The key point in analysing the value of labour power within the scope of this dissertation is to show that the production and reproduction of labour power is not determined by purely capitalistic relations. There is the role of the state, civil society, and, particularly, households in the reproduction of labour power, and the contributions of each historically change. The important thing is that the non-capitalistic dimensions of the reproduction of labour power create room for the partial appropriation of wages, as will be discussed further in the remainder of this section.

In Marx, labour power is treated like any other commodity that is bought and sold in the market. Based on this line of reasoning, the value of labour power is assumed to be determined in the same manner as all other commodities: “by the labour-time necessary for the production and consequently also the reproduction, of this specific article” (Marx, 1976, p. 274). In other words, under this assumption, the value of labour power is determined by the value of a bundle of goods required for its reproduction. However, there are difficulties in

“the application of the labour theory of value to commodity labour power” (Meek, 1973, p.

184) because labour power has some peculiar characteristics. First, as Marx himself stated, unlike in the case of other commodities, there enters “a historical and moral element” into the determination of the value of labour power (Marx, 1976, p. 275). In this sense, a labourer’s means of subsistence varies according to “the climatic and other physical peculiarities of his country” and depends on “the level of civilization attained by a county; in particular they depend on the conditions in which, and consequently on the habits and expectations with which, the class of free workers has been formed” (Marx, 1976, p. 275). This implies that the value of labour power can only be understood in relation to its specific historical and social conditions. However, Marx also said that, “in a given country at a given period, the average amount of the means of subsistence necessary for the worker is known datum” (Marx, 1976, p. 275).

Second, there are unpaid resources which enter into the value of labour power, something that is not considered in Marx’s analysis. In Marx’s analysis, the reproduction of labour is presumed simply to be dependent on the purchase of commodities such as bread and cloth. From this point of view, a link can be made between the value of labour power (bundle of use values for the survivor of labour) and wages (exchange value of commodities within that bundle), as the former would be equal to the latter (Harvey, 2006). However, this analysis does not shed light on the complex relationship between the value of labour power

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and the social reproduction of the labour force. There is the fact that not all of the use values necessary for the reproduction of the labour force are provided as commodities. As Fine (1998) states:

The value of labour power as such, only provides one necessary condition for the reproduction of labourer–the payment of wage. In principle, this secures, at least in part, the material reproduction of the work-force through the consumption that it allows. But even this primarily takes place outside the direct control for the capitalist employer in social relations which are separate, if not detached, from the accumulation and circulation of capital. In short, even if the value of labour power does support the reproduction of the labourer, there are other social relations which are essential for this to occur which are not directly or primarily economic—those through civil society, the state and the household. (p. 187)

The key fact here is that labour power is not produced capitalistically but within the family.²¹ In this context, the essential point to consider is the role of domestic labour such as cooking, cleaning, and child care which are fundamental to the reproduction of the labour force.²² Domestic labour “is a whole sector of production central to, but existing entirely outside, capitalist relation of production” (Himmelweit & Mohun, 1977, p. 15). Although domestic labour has a crucial role in the determining the value of labour power, it is unpaid and therefore not included in the price of the value of labour power, or in other words, wages.

On that basis, seeing the value of labour power as entirely determined by the exchange of commodities in the market is problematic. It would be more realistic to understand the

“commodity producing” labour time necessary to reproduce the family as the determinant of the average level of household income rather than as the determinant of the value of labour power (Himmelweit, 1991). According to Wells (1992), the total cost of the reproduction of labour power can be thought of as the money cost of reproduction of labour power, including the value of those commodities purchased to sustain it, plus the unwaged household labour.

The money cost of reproducing labour power is related to the patterns and nature of consumption, which, because they are socially constructed, need to be analysed in historical

21“It (labour power) is produced by a social process in which the working class family has had and still has a fundamental role to play in the context of social institutions and cultural traditions which may be influenced by the bourgeoisie and hedged around by all manner of State interventions but which in the final analysis are always within the domain of working class life” (Harvey, 2006, p. 163).

22 For an in-depth discussion of domestic labour in relation to the value of labour power, see Dunn (2011), Himmelweit & Mohun (1977), and Vogel (2000).

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contexts.²³ This necessitates acknowledging the different forms that consumption takes in different modes of production. A distinguishing key aspect of consumption under capitalism is that it has become detached from the production process. This is different from consumption under slavery, for instance, where workers’ consumption is indistinguishable from other inputs to production (Fine, 2002). This point can be better understood by considering the distinction Marx (1976) made between productive and individual consumption. The former includes consumption of means of production and capitalists’

consumption of use value of labour power. The latter refers to the consumptions of the worker for himself. Individual consumption under capitalism lies outside the process of production and therefore is not tied to the internal logic of capital. As such, it can be argued that the separation of workers’ labour from the final product and the increased commodification of goods paradoxically provide workers with the freedom to choose among available consumption goods. As Fine (2002, p. 66) puts forward, under capitalism consumption has “a simple and undifferentiated relation to economic agents as purchasers”, although this does not mean that such class relations in their broader context are irrelevant to consumption. In other words, consumption ultimately depends on income level; however, there is no given consumption patterns attached to class positions. This point has become more apparent with the rise of mass consumerism, starting in the 19th century. With greater consumerism, the necessary base for the social reproduction of labour has widened as the consumption of goods and services become more available, conditioned by the different socio-cultural and economic processes that create these goods and services.

Before returning to the analysis of consumer credit, it is important for clarity to point out another distinguishing characteristic of labour power. Unlike other commodities, labour power is not produced first and exchanged later. “In order to be sold as a commodity in the market, labour must at all events exist before it is sold” (Marx, 1976, p. 677). It is not reasonable to assume that labour power will be bought and sold at its value, like other commodities. Marx admitted that wages and the value of labour power are not always equal.

There might be occasions when wages are higher than the value of labour power. However, there are economic forces (such as unemployment) “which are sufficiently powerful, if not to keep the price of labour power constantly in conformity with its value, at least to keep it (the

23 Marx is often criticised for making little significant contribution to our understanding of consumption in a capitalist society. The main reasons given for this are his prioritisation of (1) production over consumption and (2) exchange value over use value. For a critical discussion of these views, see Fine (2002) and Fine and Leopold (1993).

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labour power) rising so far above its value as to absorb the whole of the surplus” (Meek, 1973, p. 185). According to Marx (1976):

As soon as this diminution touches the point at which the surplus value that nourishes the capital is no longer supplied in normal quantity, a reaction sets in: a smaller part of revenue is capitalized, accumulation slows down, and the rising movement of wages comes up against an obstacle. The rise in wages therefore confined within the limits that not only leave intact the foundations of capitalist system, but also secure its reproduction on an increasing scale. (p. 771)

Marx’s argument is that although wages might rise above the value of labour power, there is a limit to the amount enforced by the nature of the capitalist production. Furthermore, Marx argues that there is a general tendency for a downward movement of wages towards the value of labour power resulting from the decline in the demand for labour and the secular increase in the organic composition of capital (the ratio of constant capital to variable capital, in other words, the ratio of capital invested in plant, equipment, and raw materials to capital invested in the purchase of labour power) (Meek, 1973).

Based on this analysis of the value of labour power, how can one conceptualise the interest payment on consumer credit? It can be argued that consumer credit has an influence on the standard of living. As Bryan et al. (2009, p. 463) wrote, “interest commitment occurs independent of the receipt of wages, [and] the household’s standard of living is determined by the extent of the wage residual”. Workers can buy in excess of their means by using credit.

However, then future wages must be used to make interest payments. The interest charged on consumer credit lent to workers thus represents partial appropriation of the wages paid to the labour power. This analysis above regarding the value of labour power allows us to see how it is possible to appropriate a part of wages even if the wages are equal to the value of labour power (related to the forces which drive wages down). It is the existence of non-commodified goods and services entering into the value of labour power that makes this possible. If workers take care of their own and their families’ reproduction to some extent, there is room for wages to become lower than the value of labour power. In other words, workers and their

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families can compensate for a reduction in the value of wages by working harder at home (Dunn, 2011).²⁴

The interest on the money borrowed by wage earners is not as easily followed as the interest on the money borrowed by industrial capitalists. The source of interest owed on wage earners’ consumer credit can be understood by considering the nature of the relationship between lenders and wage earners, which is fundamentally different than between lenders and capitalists, as argued by Dos Santos (2009). Borrowing enables capitalists to shorten the turnover of capital and gives them access to money for expanding production. Hence, capitalists borrow money and put it to use as capital. They then recover the money by selling the commodities produced and pay interest out of the value that is generated during the course of production. In the case of borrowing by wage earners, the borrowed money is used for consumption and, hence, not used in a way that generates value. The debt accumulated is on future income and the interest on it comes from wages, not surplus value. In other words, when workers pay interest for consumer credit, a share of wages is paid back to the capitalists.

This form of lending to workers has an exploitative feature. Insights on this argument can be driven by considering Marx’s writings on usury in pre-capitalist relations, which resembles borrowing by non-capitalists in the modern credit system. In pre-capitalist societies, moneylenders lent money with interest to small-scale producers, including peasants and artisans who had access to means of production and used their own labour. These moneylenders were called usurers. A usurer’s capital is a form of interest-bearing capital and used as a means of payment, not as capital. “Yet the proper, principal and specific terrain of usury is still the function of money as a means of payment. Any monetary obligation — rent, interest, tribute, tax, etc. — that falls due at a certain date brings with it the need for a payment” (Marx, 1981, p. 734).

A typical feature of usurer’s capital is the exceptionally high interest rates charged on loans. In pre-capitalist societies, usury functioned in a way that drew producers heavily into debt and deprived them of the means necessary for their reproduction. In this way, usurers played a role in impoverishing the pre-capitalist mode of production and destroying productive forces. As usury had a potential of separating the producers from the means of

24 Along a similar line, Bryan et al. (2009) stated that the interest payment on consumer credit can be seen as appropriation of surplus produced by unpaid domestic labour, though they also mention the difficulty of proving this theory.

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production, it stimulated the creation of a class of proletariat with nothing to sell but its labour power.

Modern credit systems have emerged as a reaction to usury (Marx, 1981). With the rise of capitalist production, the credit systems became subordinated to the needs of capitalism. In the capitalist mode of production, interest-bearing capital is an essential element of the system, but it differs fundamentally from usurers’ capital. This is because, as mentioned in section 2.3.1.3, as capitalist modes of production become dominant in a society, the conditions under which the capital functions changes, as does the characteristics of the borrower. “Even where a man without means obtains credit as an industrialist or merchant, it is given in the expectation that he will function as a capitalist, will use the capital borrowed to appropriate unpaid labour. He is given credit as a potential capitalist” (Marx, 1981, p. 735).

That said, Marx (1981) draws attention to an important point by noting that interest-bearing capital retained the form of usurer’s capital in certain circumstances.

In the modern credit system, interest-bearing capital becomes adapted on the whole to

In the modern credit system, interest-bearing capital becomes adapted on the whole to