Thursday, 7 March 2013

Capital I, Chapter 25 - Part 1

The General Law of Capitalist Accumulation

1) The Increased Demand for labour power that Accompanies Accumulation, the Composition of Capital Remaining the Same

Marx here develops his analysis, from earlier, of the organic composition of capital i.e. the proportion between constant capital and variable capital. This proportion can be viewed from two angles. Firstly, from the perspective of the values of constant and variable capital, and secondly from the perspective of the physical amounts of constant and variable capital. For example, two identical capitals can represent significantly different relations. Suppose,

C 10,000 + V 2,000 + S 2,000 = E 14,000.

On the one hand, this capital could represent a jewellery business, which buys a small number of very expensive materials, which are worked up by a small number of highly skilled and paid workers. On the other, it could be a pottery firm that buys a large amount of cheap materials, processed by a large amount of low skilled, low paid workers.

To make the distinction, Marx calls the merely value relation, between constant and variable capital, the “Value Composition of Capital”, and calls the physical relation between them the “Technical Composition of Capital”. However, its clear that although these are two different things, there is a close correlation between the two. The technical composition is itself a determining factor in the value composition.

To express this, I call the value composition of capital, in so far as it is determined by its technical composition and mirrors the changes of the latter, the organic composition of capital. Wherever I refer to the composition of capital, without further qualification, its organic composition is always understood.” (p 574)

Some firms like Apple, and even entire industries like high
 technology production, operate with very little in the way
of Constant Capital (either raw materials or instruments of labour)
but require significant amounts of very high skilled, highly paid
In any branch of production, there are many individual capitals (more so when Marx was writing). Each of these “many capitals” will vary one from another, in their organic composition, as a result of the fact that some will be larger or smaller (thereby enjoying, or not, economies of scale), will be more or less established, and may, therefore, have more skilled workers. Some will have other natural benefits from their location. Some may be new entrants that were able to start production with the latest machines and techniques, and so on.

But, if we total up the constant capital and variable capital across the entire branch, we can calculate the average composition of capital for an industry. Some individual capitals will operate above, and some below the average. Likewise, if we totalled up for all industries across the economy, we could calculate the average composition for the economy. Not only would some firms operate above or below the average, but entire industries would also operate above or below the average.

Again, contradicting the view of some proponents of the Temporal Single System Interpretation (TSSI), who emphasise the Value Composition of Capital as against the Technical Composition of Capital, Marx writes,

Growth of capital involves growth of its variable constituent or of the part invested in labour power.” (p 575)

The massive rise in demand for labour-power during the current
 Long Wave Boom has meant that even with the huge reserves of
labour in China, workers position there has strengthened.  It is manifest
in sharply rising real wages over the last decade, and increased
And, since, as Marx has pointed out, the quantity of labour-power employed is a function of the technical composition, not the value composition of capital, i.e. the quantity of labour-power to be employed is determined by the quantity of means of production it has to set in motion, it is clear that for Marx, it is this physical expansion of capital, and not merely the increase in its value that truly constitutes the expansion of capital. That is so for two other fundamental and related reasons. Firstly, Marx can never divorce from his analysis of capital, the effect it has on the working class, the force in history he recognises as the agent of change. It is only a physical increase in the amount of constant capital employed that can bring about an increase in the number of workers employed. That is important not just for the actual size of the working class as a social force, but is also important for its relative strength, and ability to defend its living standards i.e. a higher demand for labour-power creates the conditions for higher wages.

But, there is a further point. Marx is concerned with the expansion of capital, which can only arise through greater masses of surplus value. But, as he showed earlier, the value of constant capital is irrelevant in that respect. In fact, its effect is if anything an inverse. A single worker, working with £1 million of constant capital creates no more surplus value than the same worker working with £100 of constant capital. The constant capital only transfers its value to the final product.

Yet, a capitalist that has to spend a large proportion of their available capital, buying constant capital – for example a jeweller buying diamonds – has less capital remaining to buy labour-power. All things being equal, then they are able to buy less of the value creating substance – labour – and so the amount of surplus value they can produce is less. In turn, that means they are able to expand their capital more slowly. Marx resolves this apparent problem for capital in Volume III. However, it remains the case, looked at from the perspective of Capital in General, that the more constant capital costs in value terms, the less of it physically that can be bought, which means with a given technical composition of capital, the less labour-power is required, which in turn means the less surplus value is produced, and consequently the less accumulation there will be.

This is an important factor for economies in determining their growth strategies, and paths for economic development. Marx details this, and comments,

For Marx, "Accumulation of capital is...
increase of the proletariat."  Expansion
of capital is expansion in physical not value
... the requirements of accumulating capital may exceed the increase of labour power or of the number of labourers; the demand for labourers may exceed the supply, and, therefore, wages may rise. This must, indeed, ultimately be the case if the conditions supposed above continue. For since in each year more labourers are employed than in its predecessor, sooner or later a point must be reached, at which the requirements of accumulation begin to surpass the customary supply of labour, and, therefore, a rise of wages takes place. A lamentation on this score was heard in England during the whole of the fifteenth, and the first half of the eighteenth centuries.” (p 575)

He continues,

The reproduction of a mass of labour power, which must incessantly re-incorporate itself with capital for that capital’s self-expansion; which cannot get free from capital, and whose enslavement to capital is only concealed by the variety of individual capitalists to whom it sells itself, this reproduction of labour power forms, in fact, an essential of the reproduction of capital itself. Accumulation of capital is, therefore, increase of the proletariat.” (p 575-6)

The point had been so well grasped by Political Economy, Marx says, that Smith and Ricardo had made the mistake of seeing accumulation only in terms of the addition to variable capital. Marx quotes from John Bellers and Bernard de Mandeville, who wrote explaining in different ways the fact that the wealth of the rich was dependent on having a sufficient number of poor to do the work. For this reason, Mandeville wrote,

It would be easier, where property is well secured, to live without money than without poor; for who would do the work? ... As they [the poor] ought to be kept from starving, so they should receive nothing worth saving. If here and there one of the lowest class by uncommon industry, and pinching his belly, lifts himself above the condition he was brought up in, nobody ought to hinder him; nay, it is undeniably the wisest course for every person in the society, and for every private family to be frugal; but it is the interest of all rich nations, that the greatest part of the poor-should almost never be idle, and yet continually spend what they get.... Those that get their living by their daily labour ... have nothing to stir them up to be serviceable but their wants which it is prudence to relieve, but folly to cure.” (p 576)

If the technical composition of capital remains the same, then accumulation simply means that more labour-power is employed. The natural increase in population, therefore, means that, alongside the expansion of constant capital, goes an equivalent increase in variable capital. The expansion of the working class is simply an aspect of the expansion of capital. If the population does not increase fast enough to keep pace with the accumulation of capital, then the increased demand brings about a rise in wages.

The Long Wave Boom from 1949-74 saw workers
 real wages rise considerably.  On the one hand,
the Long Wave Boom, and Fordism brought rapidly
 rising productivity, which reduced commodity prices
 for both Constant and Variable Capital, increasing
 Relative Surplus Value, and to begin with the Rate
 of Profit.  On the other, demand for labour-power
rose faster than the rise in population, as family sizes
 shrank.  That pushed up the price of Labour.
  Capital responded by encouraging women to join the
 workforce which both reduced the Value of Labour Power,
 and increased the Supply of Labour, thereby
 reducing the Price of Labour, whilst household
 wages rose (due to women working),
which created additional demand for the new
 ranges of consumer durables.  In addition, Capital
 responded by encouraging immigration to increase
 the supply of labour.
A larger part of their own surplus-product, always increasing and continually transformed into additional capital, comes back to them in the shape of means of payment, so that they can extend the circle of their enjoyments; can make some additions to their consumption-fund of clothes, furniture, &c., and can lay by small reserve funds of money. But just as little as better clothing, food, and treatment, and a larger peculium, do away with the exploitation of the slave, so little do they set aside that of the wage worker. A rise in the price of labour, as a consequence of accumulation of capital, only means, in fact, that the length and weight of the golden chain the wage worker has already forged for himself, allow of a relaxation of the tension of it.” (p 579-80)

But, capitalists do not buy labour-power for its ability to create commodities. They do so for its ability to produce surplus value. If wages rise to a level where that is not possible, then capital will not demand labour-power. As demand falls, so will wages.

Altogether, irrespective of the case of a rise of wages with a falling price of labour, &c., such an increase only means at best a quantitative diminution of the unpaid labour that the worker has to supply. This diminution can never reach the point at which it would threaten the system itself. Apart from violent conflicts as to the rate of wages (and Adam Smith has already shown that in such a conflict, taken on the whole, the master is always master), a rise in the price of labour resulting from accumulation of capital implies the following alternative:

Either the price of labour keeps on rising, because its rise does not interfere with the progress of accumulation. In this there is nothing wonderful, for, says Adam Smith, 'after these (profits) are diminished, stock may not only continue to increase, but to increase much faster than before.... A great stock, though with small profits, generally increases faster than a small stock with great profits.' (l. c., ii, p. 189.) In this case it is evident that a diminution in the unpaid labour in no way interferes with the extension of the domain of capital. — Or, on the other hand, accumulation slackens in consequence of the rise in the price of labour, because the stimulus of gain is blunted. The rate of accumulation lessens; but with its lessening, the primary cause of that lessening vanishes, i.e., the disproportion between capital and exploitable labour power. The mechanism of the process of capitalist production removes the very obstacles that it temporarily creates. The price of labour falls again to a level corresponding with the needs of the self-expansion of capital, whether the level be below, the same as, or above the one which was normal before the rise of wages took place. (p 580-1)

It is the movement of capital that determines here.

It is not too many workers that leads to a relative
 surplus population Marx says, but too little Capital.
  That seems contradictory to the idea of 1930's
 unemployment being caused by a "crisis of
 overproduction" of Capital.  It isn't.  For Marx,
 Capital is only Capital if it can create surplus
 value.  In the Long Wave downturn of
 the 1920's and 30's, production of Capital
 had reached a point whereby no increase
of production of the existing range  of commodities
 could bring about an increase in profits.
  So, increases in investment slow down,
 stop or become negative.  New workers are
 not needed, some existing workers are laid off,
 demand falls, leading to a further retrenchment.
 That situation ended towards the latter part
 of the 1930's, as whole new ranges of
 commodities (cars, consumer durables,
 pharmaceuticals, houses) began to be
produced, which could be sold profitably.
 They provided the basis of the post
 war Long Wave Boom.
In the first case, it is not the diminished rate either of the absolute, or of the proportional, increase in labour power, or labouring population, which causes capital to be in excess, but conversely the excess of capital that makes exploitable labour power insufficient. In the second case, it is not the increased rate either of the absolute, or of the proportional, increase in labour power, or labouring population, that makes capital insufficient; but, conversely, the relative diminution of capital that causes the exploitable labour power, or rather its price, to be in excess. It is these absolute movements of the accumulation of capital which are reflected as relative movements of the mass of exploitable labour power, and therefore seem produced by the latter’s own independent movement.” (p 581)

In other words, as in so many other cases, appearance is in fact the mirror image of reality.

Thus, when the industrial cycle is in the phase of crisis, a general fall in the price of commodities is expressed as a rise in the value of money, and, in the phase of prosperity, a general rise in the price of commodities, as a fall in the value of money. The so-called currency school concludes from this that with high prices too much, with low prices too little money is in circulation. Their ignorance and complete misunderstanding of facts are worthily paralleled by the economists, who interpret the above phenomena of accumulation by saying that there are now too few, now too many wage labourers.” (p 581)

In the end, it comes down to the relation between paid and unpaid labour, provided by the worker, the relation between necessary labour and surplus labour, between the value of labour-power and surplus value. The workers do unpaid labour that creates surplus value, which is accumulated as capital, and thereby employs additional labour-power. Wages move according to whether this causes an excess of demand over supply of labour-power.

Within Capitalism, the very working of the system
 ensures that workers can only ever hope to lessen
 their degree of exploitation, and then only
for limited periods, when the conditions of
 supply and demand are favourable  to them.
  The fact, that the degree of their exploitation
continually rises, may be disguised by the fact
 of rising real wages, but that greater affluence
 is only the thickening of the velvet chain that ties
them more securely to the source of their oppression.
It is therefore in no way a relation between two magnitudes, independent one of the other: on the one hand, the magnitude of the capital; on the other, the number of the labouring population; it is rather, at bottom, only the relation between the unpaid and the paid labour of the same labouring population. If the quantity of unpaid labour supplied by the working class, and accumulated by the capitalist class, increases so rapidly that its conversion into capital requires an extraordinary addition of paid labour, then wages rise, and, all other circumstances remaining equal, the unpaid labour diminishes in proportion. But as soon as this diminution touches the point at which the surplus labour that nourishes capital is no longer supplied in normal quantity, a reaction sets in: a smaller part of revenue is capitalised, accumulation lags, and the movement of rise in wages receives a check. The rise of wages therefore is confined within limits that not only leave intact the foundations of the capitalistic system, but also secure its reproduction on a progressive scale. The law of capitalistic accumulation, metamorphosed by economists into pretended law of Nature, in reality merely states that the very nature of accumulation excludes every diminution in the degree of exploitation of labour, and every rise in the price of labour, which could seriously imperil the continual reproduction, on an ever-enlarging scale, of the capitalistic relation. It cannot be otherwise in a mode of production in which the labourer exists to satisfy the needs of self-expansion of existing values, instead of, on the contrary, material wealth existing to satisfy the needs of development on the part of the labourer. As, in religion, man is governed by the products of his own brain, so in capitalistic production, he is governed by the products of his own hand.” (p 581-2)

Back To Chapter 24

Forward To Part 2

No comments: