Anti-Duhring, Part III – Socialism, II – Theoretical - Part 11

Even within the laws of capital, however, it can be seen how, if workers exercised control over their collective property/socialised capital, this would be modified. Marx and Engels explain, in Capital III, Chapter 15, that the private industrial capitalists only introduce machines where the cost of the machine is less than the wages they save from its introduction. If the new value created by labour is, say, equal to £100, but resolves into £20 wages and £80 profit, the machine must cost less than £20.

Marx and Engels note that, in the worker cooperatives, this is not the case. For the worker, the criterion for introducing a new machine/technology is only that its value is less than the labour-time it saves. If an hour's labour is equal to £10, so that the £100 of new value, above, is equal to 10 hours of labour, a machine can be introduced if its value is less than £100. This is the difference between the private cost of production, and social cost of production, which is the basis of profit. The social cost of production of the commodity is £100/10 hours labour, but its private cost of production for the capitalist is only what he pays in wages, i.e. £20/2 hours labour.

For society, anything that reduces the social cost of production is an advantage, but it does not appear that way to the private capitalist. So, rather than waiting until a crisis of overproduction of capital arises, before engaging in innovation, a cooperative commonwealth would, from the start, have an incentive to be continually innovating, so as to reduce the burden of labour, raise productivity, and, thereby, increase real social wealth. Marx points out that that was seen in the Lancashire textile cooperatives, and Connolly noted the same with the agricultural cooperative at Ralahine.

What is true of the worker cooperative is, also, true of the other forms of socialised capital. In the joint-stock company/corporation, the workers within it, as the collective owners of that capital, have the same motivation for innovation as those in the worker cooperative. The difference is that the ruling-class deny that right to them, deny them the right to control their own collective property and, instead, place it in the hands of shareholders, whose interests are quite different. Shareholders see things in the same way as the private industrial capitalist, in so far as the use of machines/technology is concerned, but, as the size of fixed capital has become so astronomical, also, understand that the investment time-horizon has become significantly extended.

Marx, also, refers to this in, Theories of Surplus Value, Chapter 23.

“Thus there can be no doubt that in the case of all capitals employing a great deal of fixed capital—provided the scale of production remains unchanged—the rate of profit must rise in proportion as the value of the machinery, the fixed capital, declines annually, because wear and tear has already been taken into account. If the coal producer sells his coal at the same price throughout the ten years, then his rate of profit must be higher in the second year than it was in the first and so forth...

“This extra profit may be equalised also as a result of the fact that—apart from wear and tear—the value of fixed capital falls in the course of time, because it has to compete with new, more recently invented, better machinery. On the other hand this rising rate of profit, which results naturally from wear and tear, makes it possible for the declining value of the fixed capital to compete with newer, better machinery, the full value of which has still to be taken into account. Finally, the coal producer sold his coal more cheaply [at the end of the second year], on the basis of the following calculation: 50 on 100 means 50 per cent profit, 50 per cent on 95 comes to 47½ ; if therefore he sold the same quantity of coal [not for 105 but] for 102½—then he would have sold it more cheaply than the man whose machinery, for example, began to operate only in the current year. Large installations of fixed capital presuppose possession of large amounts of capital. And since these big owners of capital dominate the market, it appears that only for this reason their enterprises yield surplus profit (rent). In the case of agriculture, this rent derives from working relatively fertile land, but here we are dealing with a case where relatively cheaper machinery is utilised.}”

(Theories of Surplus Value, Chapter 23, p 388-389)

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Anti-Duhring, Part III – Socialism, II – Theoretical - Part 10

With privately owned industrial capital, such conditions enable the capitalists to gradually expand their business. They expand, at first, by replacing their older machines, as they wear out, with the newer, more productive, machines/technology. That is intensive accumulation, and leads to rising levels of productivity and rates of profit. In addition, the existence of cheap labour-power, and low rates of interest encourages new entrepreneurs to chance their arm, often in new types of production.

Over time, the majority of the old machines/technology, gets replaced by the new machines/technology, so that the rise in productivity slows down. To increase production, now, each firm must not juts replace the worn out machines, but invest in additional machines, and additional workers to operate them. This is now extensive accumulation. The demand for labour rises until again a relative shortage is created, wages rise – itself leading to a more rapid rise in the demand for wage goods, and consequently in aggregate demand, as firms scrabble to capture their share of the growing market – and, eventually, profits are squeezed.

More of the profit must be retained for accumulation, proportionally less is thrown into the money market, and, indeed, firms must enter the money market, themselves, to borrow. They must take out bank loans, issue bonds and debentures etc. The demand for loanable money-capital relative to its supply rises, interest rates rise, asset prices fall.

Eventually, wages rise to a level where a new crisis of overproduction of capital relative to labour arises. The rate of profit drops sharply. The less efficient firms cannot even make profit. They must borrow now, not to invest but simply to pay their bills. The rate of interest reaches its highest level. They go bust and lay off their workers so that a surplus of capital is now accompanied by a surplus of labour. The firms and their workers no longer appear in the market as consumers of commodities. There is under-consumption, so that there is now an overproduction of commodities, as well as capital and labour. The cycle begins again.

To overcome the overproduction of capital, capital, as a whole, engages in a new technological revolution. Productivity and profits, and the rate of profit rise. The long-wave cycle, now witnessed five times, applies, also, to socialised capitals. A new, long-wave uptrend began around 1890, as socialised capital began to supplant the monopoly of private capital. During this period, after 1890, we also see the rapid expansion of the organised labour movement, on the basis of social-democracy.

It is, of course, in workers' interest, as Marx sets out in Wage-Labour and Capital, for capital to continue to accumulate, because it is under those conditions that the demand for labour is high, and so wages rise. As, objectively, the collective owners of that socialised capital, they have every reason to want to ensure such continued expansion. But, so long as those means of production exist as capital, so long as production and distribution is determined by the market, by exchange-value, rather than use-value, the same laws of capital will continue to repeat this cycle.

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Anti-Duhring, Part III – Socialism, II – Theoretical - Part 9

Marx was only led even to this conclusion, in relation to the value of the materials, because he saw the reduction in its value, being limited by its nature as derived from agriculture.

“... some kinds of raw materials, such as wool, silk, leather, are produced by animal organic processes, while cotton, linen, etc., are produced by vegetable organic processes and capitalist production has not yet succeeded, and never will succeed in mastering these processes in the same way as it has mastered purely mechanical or inorganic chemical processes. Raw materials such as skins, etc., and other animal products become dearer partly because the insipid law of rent increases the value of these products as civilisation advances. As far as coal and metal (wood) are concerned, they become much cheaper with the advance of production; this will however become more difficult as mines are exhausted, etc.”

(ibid)

But, as I have set out elsewhere, not only does Marx set out some of the factors that contradict that conclusion, such as the reduction in waste, the use of new materials, improved use of auxiliary materials (particularly energy), but the introduction of synthetic materials, changes in the types of commodities and so on, mean that even this argument for a rising organic composition does not hold. Still less does it hold, in economies where the main production of value and surplus value, has moved to service industries rather than manufacture.

So, there is, really, no basis for arguing that c rises relative to v + s, in the long run, and so no basis for any significant tendency for the rate of profit to fall. However, there is, for these same reasons, a very good basis for there being a regular cycle in which the rate of profit rises and falls, because it is squeezed by a rise in relative wages, as industrial capital grows faster than the supply of labour/social working-day, a crisis of overproduction of capital relative to labour, as Marx describes it in Capital III, Chapter 15.

“As soon as capital would, therefore, have grown in such a ratio to the labouring population that neither the absolute working-time supplied by this population, nor the relative surplus working-time, could be expanded any further (this last would not be feasible at any rate in the case when the demand for labour were so strong that there were a tendency for wages to rise); at a point, therefore, when the increased capital produced just as much, or even less, surplus-value than it did before its increase, there would be absolute over-production of capital; i.e., the increased capital C + ΔC would produce no more, or even less, profit than capital C before its expansion by ΔC. In both cases there would be a steep and sudden fall in the general rate of profit, but this time due to a change in the composition of capital not caused by the development of the productive forces, but rather by a rise in the money-value of the variable capital (because of increased wages) and the corresponding reduction in the proportion of surplus-labour to necessary labour.”

If we go back to Marx's analysis of relative surplus value in Capital I, the first form, as set out, has limited life, because other producers adopt the same machine/technology. However, Marx explains that relative surplus value has a second form. If the value of wage goods fall, as a result of the rise in productivity, a smaller portion of the working-day is taken up as necessary labour. A larger proportion is, now, surplus labour. The rate of surplus value rises. For this to resolve a crisis of overproduction of capital, relative to labour supply it must be a generalised technological revolution, not just a piecemeal change in one or two industries. That is what happens with the introduction of steam engines, electric motors, internal combustion engines, assembly lines, and with microchips.

After each of these generalised technological revolutions, the crisis of overproduction of capital, relative to labour, reverses. It becomes a crisis for labour, which is, now, again, overproduced relative to capital. A relative surplus population. The surplus or net product rises, relative to the gross product, creating a period of relatively slower growth. As profit, the money equivalent of the surplus product, rises, whilst gross output grows at slower pace, the rate of interest falls (because the supply of this loanable money-capital, thereby, rises, relative to the demand for it for capital accumulation). It causes asset pries and speculation to rise, leading to asset price bubbles.

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SNNS 61

 

Northern Soul Classics - Reach Out, I'll Be There - The San Remo Strings

 

Anti-Duhring, Part III – Socialism, II – Theoretical - Part 8

But, did this crisis that industrial capital faced then mean that there was no way out for it, and that the mass of profit must fall, as Smith and Hodgskin believed? Would it mean that, even if it escaped this immediate crisis, it would only lead to a bigger crisis and more rapid series of crises, leading to its collapse, as many modern catastrophists have argued? No, Marx explains.

Ricardo noted that when wages rise so that it is no longer cheaper to use women to pull canal barges, industrial capital turns to the use of horses, which are, in fact, more efficient, especially when barges become bigger and heavier, as more freight is moved around. Industrial capital does not engage in major technological revolutions, which involve it in greater immediate expense, unless it becomes worthwhile to do so. But, this introduction of technology/machines shows again why the idea of a relatively fixed labour supply, leading to falling profits, whilst valid in the medium term, is false in the long-term. If labour productivity rises, less labour is required, or put another way, its as though one worker is now equivalent to 2, 3 or more workers. In Capital I, Marx explains the way this higher productivity results in the creation of relative surplus value in two ways.

Firstly, if one producer introduces some new machine that raises the productivity of the labour they employ, it has this effect of making their labour like complex labour. In other words, it is as though the new value they create in an hour is equivalent to 2,3 or more hours labour of workers employed by other producers of that commodity. That is so because they produce 2,3, or more times the quantity of those commodities, all of which sell at the market value. Its the same as where a farmer has the benefit of more fertile land.

But, this particular advantage disappears when other producers of the commodity introduce the same machine – just as when the use of drainage and irrigation etc., raises the fertility of all land. Now, all of that labour reverts back so that it all produces an hour of new value in each hour worked. However, far more commodities are now produced in that hour so that the unit value of each commodity falls. This, in fact, is central to Marx's explanation of the real basis of the long-term tendency for the rate of profit to fall.

In other words, the value of a commodity is comprised of the value of the constant capital (materials and wear and tear of fixed capital) consumed in its production, plus the new value created by labour in its production. The latter resolves into variable capital (the value of the commodities required to reproduce labour-power) and surplus-value/profit. So, if this new value falls, as a proportion of the value of each commodity unit, as a result of the rise in productivity, but the value of constant capital (c) remains the same, then the value of constant capital rises relative to the new value created (v + s). Unless s rises relative to v (a higher rate of surplus value), s falls relative to c, and to c + v, i.e. the rate of profit falls, even if the total mass of profit rises.

But, in Theories of Surplus Value, Chapter 23, Marx points out, again, that this effect is, also, grossly overstated. Firstly, he points out that where there is a generalised technological revolution, the rise in productivity reduces the value of all those commodities that comprise the constant capital.

If “one worker produces a spinning-machine whereas previously he produced only a spindle, then the ratio of value remains the same...”

A spinning machine, spins much more yarn than a spinning wheel, so the value of the machine is much less per unit of output. What increases is the amount of material spun, in terms of its physical quantity/use value, but, as he noted, it is not these physical quantities that ultimately count, but the relationship of their respective values.

“For us, however, the main thing is: does this fact explain the decline in the rate of profit? (A decline, incidentally, which is far smaller than it is said to be.) Here it is not simply a question of the quantitative ratio but of the value ratio.”

The technical composition of capital is what lies, objectively, behind the rise in the organic composition required to drive the long-run tendency for the rate of profit to fall, i.e. rising productivity means that the physical quantity of material processed rises relative to both the labour required to process it, and the fixed capital which brings about the higher productivity. But, that ignores the role of that rise in productivity in relation to the value of that material itself.

“The cheapening of raw materials, and of auxiliary materials; etc., checks but does not cancel the growth in the value of this part of capital. It checks it to the degree that it brings about a fall in profit.”

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Let Piddington Go

I wrote a while ago that the logic of nationalism leads to a break-up of the nation state.  In the last few days that has been born out.

On the one hand, we have the nationalists in Scotland, Wales and Northern Ireland, demanding that the British nation state be broken up, reversing the main progressive development of the 18th/19th century, largely now driven by the reality imposed by the reactionary English nationalism that led to Brexit.  In England itself, that same failure of Brexit leads to a similar drive towards regionalism, provincialism and parochialism, as seen in the attempts to create regional and metropolitan fiefdoms in the guise of elected mayors.

The ultimate idiocy of that has now come in the form of the referendum in Piddington, again driven by the inevitable failure of Brexit to "bring back control", leading the reactionary bigots, and racists to put forward such a solution rather than have refugees housed in their midst.  The well-healed of the area, of course take the same attitude to many other issues, wanting all the benefits of their rural idylls, without any of the attendant infrastructure.

Well, we should let them go, as they claim to want.  The sooner the better.  Let them then have to pay for their own infrastructure, energy supplies, water supplies, waste services, NHS and so on.  And, of course, they would have no rights to employment outside their borders, or even right to cross that border.  Brexit proved a disaster within weeks, and continues to be so.  The proponents of a Passport to Piddington, would not even get that project off the ground.