Wednesday, 26 February 2020

Theories of Surplus Value, Part III, Addenda - Part 78

Marx quotes extensively from Luther's An die Pfarrherrn wider den Wucher zu predigen. Vermanung, Wittemberg, 1540, dealing with “trading (buying, selling) and lending”, which shows that, unlike Proudhon, he was not confused by these different forms. In this tract, Luther illustrates that what was hitherto a vice had become normalised, and then conceived as a virtue, as the usurer promotes themselves as providing a service to the borrower. The same is seen today with payday lenders, but also from the capitalist employers, who would have workers believe they are doing them a favour by employing them so as to exploit their labour and thereby line their own pockets. 

Luther quotes Seneca

Deest remedii locus, ubi, quae vitia fuerunt, mores fiunt. (There is no remedy where that which was regarded as unvirtuous becomes the habit.” (p 533) 

In a different context, something similar could be said of the way Donald Trump normalised the use of racist and misogynistic language. 

Luther lists a series of such instances of “service”

“The poets write about the Cyclops Polyphemus, who said he would do Ulysses an act of friendship, namely, that he would eat his companions first and then Ulysses last. In sooth, this would have been a service and a fine favour. Such services and good deeds are performed nowadays most diligently by the high-born and the low-born, by peasants and burgesses, who buy goods up, pile up stocks, bring dear times, increase the price of corn, barley and of everything people need; they then wipe their mouths and say: Yes—one must have what one must have; I let my things out to help people although I might—and could—keep them for myself; and God is thus fooled and deceived… The sons of men have become very holy… So that now nobody can profiteer, be covetous or wicked; the world has really become holy, everyone serves his fellows, nobody harms anybody else…” (p 533) 

Marx notes that this description showed that usury increased considerably during Luther's time, and that the justification for it is already described as providing a “service”, which is the basis later used by Say and Bastiat. In Adam Smith, we have the concept of the market and competition, which follows a similar path that “everyone serves his fellows”, but driven not by any motives of altruism, only by individual self-interest. 

“In the world of antiquity, during the better period, usury was forbidden (i.e., interest was not allowed). Later [it was] lawful, and very prevalent. Theoretically the view always [predominated] that interest in itself is wicked (as was stated by Aristotle). 

In the Christian Middle Ages, it was a “sin” and prohibited by “the canon”.” (p 534). 

During this period, the role of money lending, therefore, becomes the function of non-Christian communities. As Marx explains in Capital, high rates of interest are prevalent under usury, because the number of lenders is small, whereas those that resort to borrowing do so out of desperation. The same applies with payday lenders. Those who resort to such borrowing do so because they have no savings or access to other cheaper forms of credit, whilst he high risk of default of such borrowers means that other lenders are not inclined to lend. 

Modern times. Luther. The Catholic-pagan view still [prevailed]. Usury became very widespread (as a result partly of the monetary needs of the government, [partly] of the development of trade and manufacture, [and the] necessity to convert the products into money). But its civic justification is already asserted.” (p 534) 

Holland was the first capitalist nation, but based primarily on commerce rather than production. 

“The first apologia for usury. It is also here that it is first modernised and subordinated to industrial or commercial capital.” (p 534) 

In England, in the 17th century, capitalism again takes hold, but again, as with Holland, primarily in the realm of commerce, rather than production. It is merchant capitalists, alongside the landed aristocracy, that provide the driving force of Mercantilism, and the establishment of colonies and colonial trade. It provides the material foundation for the theories of Mercantilism and the Money School, as explanations for profit, and the wealth of nations based on unequal exchange and profit on alienation. It is this merchant class, along with the town bourgeoisie, and an increasingly differentiated peasantry into capitalist Yeoman farmers, like Cromwell, who, together with sections of the landed aristocracy form the opposition to Charles I, in the Civil War. 

“The polemics are no longer directed against usury as such, but against the amount of interest, and the fact that it dominates credit. The desire to establish the form of credit. Regulations are imposed. 

Eighteenth century. Bentham. Unrestricted usury is recognised as an element of capitalist production.” (p 534) 

The Technical Composition of Capital - Part 4 of 5

Its not that the technical composition of fixed capital to labour rises, i.e. more factories, more machines per worker (actually this tends to fall, as individual factories employ more workers, more complex machines replace hand tools, or less complex machines), but that the complexity and size of the fixed capital rises, and along with it the value of this fixed capital rises relative to labour. 

“It is an incontrovertible fact that, as capitalist production develops, the portion of capital invested in machinery and raw materials grows, and the portion laid out in wages declines. This is the only question with which both Ramsay and Cherbuliez are concerned. 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.” 

(Theories of Surplus Value, Chapter 23) 

A machine with 50 spindles, might replace 5 machines with 10 spindles. Each of these machines employed a worker, so that now 4 workers are replaced. The requirement for this is that the new machine's additional cost is less than the wages of the 4 displaced workers, over its expected lifetime. In terms of output, and in terms of the ratio of material to labour, the share of labour has declined to approximately a fifth of what it was previously. But, in terms of the ratio of fixed capital to labour, the technical ratio has remained the same. Its still one machine to one worker. However, now, the machine has a value of, say, £250, whereas, previously, a 10 spindle machine had a value of £100. If wages are £100 per worker, £400 in wages has been saved, making it profitable to employ the machine, as it brings a £250 saving (it costs £150 more than the replaced machine), whilst output remains the same. But, previously, the value of machine to labour was 1:1, and it is now 2.5:1. In fact, because labour has been laid off, wages, which might previously have risen above the value of labour-power, because of a shortage of labour, will be reduced. If the machine reflects a general rise in technical development, and rising social productivity, then it means that the value of wage goods will fall, so that the value of labour-power, and wages will fall. In that case, if wages fall to £75, the ratio of fixed capital to wages rises to 3.3:1. 

The significance of this can be seen by comparing this with the situation in terms of the new value created, rather than as against wages. If we assume a 100% rate of surplus value as the starting point, then we had a fixed capital of £500, and new value created of £1,000, with £500 of this new value being returned to the worker as wages. Discounting raw material costs, and assuming that this is over the lifetime of the machine, fixed capital accounts for a third of the output value, with labour accounting for two-thirds, with wages accounting for a third, and profit accounting for a third. The rate of profit is 50%. With the new machine, if wages remained constant, this becomes £250 fixed capital, £100 wages, and £100 profits. Fixed capital now accounts for 55% of output value, with wages and profits each accounting for 22.5%. The rate of profit falls to 28.6%. 

It might be thought that, under these conditions, there is no reason for the capitalist to introduce the machine, because their profit falls from £500 to £100, and their rate of profit falls from 50% to 28.6%. However, there are two other factors, here. Firstly, unless this producer is an oligopolist, who determines the market value of this commodity, they will continue to sell their output at, or near to, its initial market price. In other words, they will sell all of their output for the original £1500. But, their cost of production is now only £350, so that their actual profit rises to £1,150, and their rate of profit rises to 328%. Secondly, although, when all other producers of this commodity introduce this machine, its market value will fall, eliminating this surplus profit, each producer is forced by competition to introduce the machine, because, otherwise, their own individual value of production will be greater than the market value, so that they will make less than average profits, or even losses, and will lose market share. 

Competition always forces producers to accumulate capital, and expand output, when the market itself is expanding, for this very reason, even if the increased accumulation of capital, results in a lower rate of profit. This is what drives the extensive accumulation of capital, up to the point when it creates a crisis of overproduction, because the accumulation of capital grows faster than the available labour supply/social working-day, so that absolute surplus value cannot be increased further, and the technical composition of capital/technological level of society, prevents any increase in relative surplus value. Indeed, the relative shortage of labour causes wages to rise, and surplus value/profits to be squeezed. 

As Marx puts it, 

“There would be absolute over-production of capital as soon as additional capital for purposes of capitalist production = 0. The purpose of capitalist production, however, is self-expansion of capital, i.e., appropriation of surplus-labour, production of surplus-value, of profit. 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.” 

(Capital III, Chapter 15) 

It is, in fact, this condition that leads individual capitals to engage in innovation so as to be able to find new machines, new technologies to replace the existing ones, so that labour can be replaced, and these higher wages saved. This is the point, when capital accumulation moves from being extensive to being intensive. The advantage for the individual producer, able to introduce such a machine, is obvious from the above example. But, in so far as the creation of a relative surplus population resulting from a more general introduction of such new technologies, results in a fall in wages, the benefits for capital are even more clear. The capital which comprised £250 fixed capital, £100 wages, and £100 profits produces a rate of profit of 28.6%, but if the rise in productivity, and creation of a relative surplus population causes wages to fall to £75, then profits rise to £125, and the rate of profit now rises to 71.4%, which is half as much again as the original position. Of course this does not include raw material, the quantity and value of which is unchanged. So, for example, if the value of raw material is £500, we have an initial rate of profit of 33.3%, and this becomes 15.15%. For the individual capital that first introduces the new machine, they continue to sell their output at a price of £2,000, their costs now being £825, giving them a profit of £1,175, or a rate of profit of 142%. 

This illustrates why, in order to overcome crises of overproduction, capital seeks to engage in such a technological revolution, so as to raise productivity, create a relative surplus population, and thereby drive down inflated wages, and push down the value of labour-power/raise the rate of surplus value. But, in doing so, it creates the conditions described by Marx that lead to his Law of the Tendency for the Rate of Profit to Fall. That is the proportion of total output value accounted for by fixed capital, and labour declines, whilst the proportion accounted for by raw materials rises. As it is only labour that creates new value, and, thereby surplus value, this means that, over the long-term, a tendency for the rate of profit to fall is created, even though it rises compared to the period of crisis and overproduction. However, as Marx describes, the same rise in productivity offsets this tendency. It reduces the value of fixed capital, it reduces the value of materials, it reduces the value of labour-power, and so raises the rate of surplus value. It also, brings about new more efficient means of using raw and auxiliary materials, so that the quantity of them used in production does not rise proportionate to the rise in output. That is most noticeable in relation to the use of new materials, and more efficient use of energy, for example. Finally, the rise in productivity, causes production and circulation times to be reduced, so that the annual rate of surplus value, and annual rate of profit rises. 

“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.” 

(Theories of Surplus Value, Chapter 23) 

As noted earlier, technological development means that, in fact, the material used in new types of fixed capital may be less than that in the fixed capital it replaces. A transistor uses less material than a valve, a microchip less than a transistor, a diesel tractor less than a steam tractor, and so on. The use of different materials may mean that, although the same quantity is used, it is more durable. Marx notes that far more durable steel rails replaced iron rails on railways, metal replaced wood in the construction of machines, and so on. The mainframe computer of the 1950's was built from valves, and occupied an entire room; the mainframe computer of the 1970's saw valves replaced by transistors, but it still took up an entire room, and required air-conditioning systems to cool the room due to the heat produced by the machine. Such a mainframe computer cost around £2 million. By the early 2000's, a personal computer, utilising microprocessors, and fitting on a desk, had more processing power than the 1970's mainframe, and cost only around £500. That meant that 4000 of them could be bought for the same price as a 1970's mainframe. Where the mainframe employed say 10 workers, as programmers, operators and data entry clerks, each PC employed an operator, meaning that the same amount of fixed capital now set in motion 400 times as much labour. 

The same fall in value that occurs for fixed capital also applies to raw material, as a result of rising social productivity, the development of new materials, and so on. Most importantly, however, this role of raw materials is only significant, in terms of the Law of the Tendency for the Rate of Profit to Fall, in economies such as that Marx was describing, which are based on manufacturing. In modern economies, where 80% of new value and surplus value is created in service industry, raw material processing is not significant, and so its role in relation to the fall in the rate of profit disappears.

Tuesday, 25 February 2020

Coronavirus - A Typical Moral Panic

The world is seizing up, and being closed down due to a moral panic over coronavirus.  Moral panics can be summed up as occurring when some very real phenomenon is focused upon, and turned into what appears to be a widespread threat to life, liberty and property, way beyond the actual threat that is posed.  Moral panics are often deliberately generated by vested interests either to promote some particular meme, or else to distract attention from other events.  They take hold because no one wants to be seen to be at odds with the general consensus of opinion of the nature of the threat, and because large numbers of people simply absorb the general image of threat presented to them by the mass media, for whom such moral panics, and the attention they generate are meat and drink, for selling papers, and expanding audiences.

We are all prone to falling prey to such moral panics.  I remember that not long after I got married, and when we were living in an upstairs flat, the news was full of the stories about the Black Panther.  My brother in law was actually taken in for questioning by the police, because he was a building worker who had worked on the Bathpool Park reservoir reconstruction, which is where Leslie Whittle had been imprisoned in a one of the large drains.  It was ironic, because he actually looked a lot more like the later Yorkshire Ripper than his resemblance to Nielson.  Anyway, particularly as all of this was rather close to home, its not surprising that there was a sense of heightened fear and suspicion at the time.

So, when a single male tenant moved into the flat beneath us, and we heard strange noises during the night, and witnessed his erratic movements at all times of the day and night it aroused our suspicions.  Of course, it was totally unfounded, and irrational.  The likelihood that a murderer had just moved in beneath us was extremely unlikely, as inevitably turned out to be the case.  In fact, he was a teacher at the local comprehensive, who also wrote on sports for the local newspaper.

But, there has also been all of the moral panics that led many older people to fear leaving their homes during both day and night for fear of being mugged, or set upon by young people.  I remember one day being at my mother's house, when she lived in a council house on the main road, and her twitching the curtains, and being concerned at a group of young people innocently congregated on a corner on the other side of the road.  "Why is there so many of them?", she asked.  I pointed out that there was less than a dozen, and that when I was a teenager, there would frequently be up to 50 of us running around the streets playing Rallyo.

The racists, of course, have liked to spread the meme that the country is being "overrun" by immigrants, that the country is full up, and overcrowded, even though residential property accounts for only 1% of the land mass in Britain, which is only half what is taken up by Golf Courses!  Incidentally, that fact also shows why any suggestion that new houses have to be built on flood plains for lack of other sites is so ridiculous.  The same racists and hang 'em and flog 'em brigade are happy to spread the ridiculous idea that if you walk out of your front door you are almost bound to be mugged, and your mugger is likely to be an immigrant, even though the chances of that happening are about the same as that the Black Panther had just moved into the flat beneath me.

In today's world, these moral panics spread because of 24 hour news channels, and because of social media.  Everybody jumps on to the bandwagon, and no one wants to be seen challenging the consensus view.  And, so it is with coronavirus, or COVID 19, as it has now been given its own special name, as if to further emphasise its sinister nature.  Yet, what is the truth about it.  Of the thousands of people who have contracted the virus, 80% suffer no symptoms or only minor effects.  In other words, it has less impact on those that contract it even than the common cold epidemics that we suffer each year, and for which there is also no effective treatment, other than ameliorating the symptoms and waiting it out.  For the other 20%, the chance of actually dying from it, or suffering from life long debilitation are extremely small.  In China, the latest data suggests that only around 0.7% of those that contract the virus have died from it, and many of them are people who died early on, before any treatment for it was given to them.

If we look at the situation globally, at the time of writing, 2,600 people have died from the virus, most of them in China.  But, to put that in context, in 2018, 17,000 people died of flu in Britain alone.  The difference between flu and corona virus is that we have vaccines against many strains of flu, and if like me you have had flu jab every year, you will have built up some resistance.  But, the flu jab only gives you protection against the variants contained in the cocktail of four different strains put into the jab for that year.  Come down with a different strain, and you are still susceptible, and once you have it, there are no effective treatments.

Yet, Britain did not come to a standstill in 2018 having suffered 17,000 flu deaths.  The average mortality rate for flu is around 0.1% of those that contract the virus, which is much lower, relatively than for coronavirus, but the mortality rate for coronavirus is still pretty low in absolute terms, and is likely to fall, as patients are likely to be diagnosed and treated much sooner, now that its recognised.

You can see why authorities want to stop the spread of the virus, so that those that become ill from it can be minimised, but given that 80% of people suffer no or little symptoms that seems almost impossible to achieve.  But, also, it begs the question, if 80% of those that contract the virus suffer no serious ill effects, let alone all of those that do not contract it, why on Earth is the global economy, and normal life being brought to a standstill because of it?  There are likely to be far greater ill effects, and even deaths as a result of bringing the global economy to a standstill, by telling people who have no symptoms to self-isolate, and presumably that applies to their families too, than there would ever likely be even if it turned into a pandemic.

When a few years ago there was a panic over Ebola there was every justification in trying to prevent its spread, because its mortality rate was between 83-90%.  But, that isn't true about coronavirus.  Instead of closing down the global economy, it would be far better to be spending time and resources developing a vaccine.  But, also, what data released today demonstrates is that you are far more likely to die from the effects of a Tory government, and its imposition of austerity over the last ten years, particularly if you are elderly and live in one of those decaying northern towns that elected Tory MP's last year, than you are from coronavirus.  Indeed, you are far more likely to suffer ill-health and an earlier death as a result of Brexit, and the inability to recruit foreign health and care workers than any chance of dying from corona virus.

Perhaps that is why the Tories, and the Tory media are likely to try to get you to look over here, at coronavirus, rather than over here, at the devastating effects of ten years of austerity, and the potentially catastrophic effects to come were Britain to accidentally collapse into a No Deal Brexit, under the ramshackle government of Boris Johnson, and his collection of xenophobes, bigots, fruitcakes and loons that every day looks more and more like Farage's second eleven.

With Trump having capitulated to China in his global trade war, and so the potential for global trade to have increased, the potential also existed for a repeat of 2018, when increasing economic activity caused global interest rates to rise, which in turn caused a 20% drop in US stock markets.  Trump's global trade war from 2018, slowed global economic growth, and created the opportunity for central banks to again engage in QE, so as to inflate stock markets and other asset prices.  Given that the top 0.01% hold all their wealth in the form of this fictitious capital, its no wonder they began to panic in 2018, when that 20% sell-off occurred.  But, with the end of that trade war, and the potential for a pick up in economic growth, they must have worried that the path of rising interest rates would again slash the value of their assets.  Already, we see demands for more QE and lower official interest rates, even though its obvious that this can have no effect on the real economy, if its coupled with demands that the world and their dog, stay in doors!!!

Theories of Surplus Value, Part III, Addenda - Part 77

As Marx describes in The Communist Manifesto, class struggle does not necessarily result in a progressive transformation of society, but may also result in “the ruination of the contending classes.” There is nothing progressive in “Anti-Capitalism”, as Marx also describes in The Communist Manifesto, in relation to the reactionary forms of Socialism, such as Sismondism, Feudal Socialism, and German True Socialism. Capitalism itself is progressive compared to these reactionary forms, because it acts to develop the forces of production required for Socialism. It develops capitalism on an international and global scale, creating a world market and world economy, smashing down national borders and creating a global working-class, whilst enabling the intellectual and cultural development of the working-class, required for it to become the ruling class. 

“It is only in an epoch where the other conditions for capitalist production exist—free labour, a world market, dissolution of the old social connections, a certain level of the development of labour, development of science, etc.—that usury appears as one of the factors contributing to the establishment of the new mode of production; and at the same time causing the ruin of the feudal lords, the pillars of the anti-bourgeois elements, and the ruin of small-scale industry and agriculture, etc., in short, as a factor leading to the centralisation of the conditions of production in the form of capital.” (p 531-2) 

The usurers and merchants as a result of the circuits M – M`, or M – C – M`, accumulate money and commodities in their hands. When capitalist production becomes possible, this means that some of the usurers and merchants may themselves become capitalist producers. In the “Putting Out System”, for example, it was merchants that turned former independent producers into wage workers, whilst maintaining the outward appearance of a continuation of cottage industry. But, as capitalist production begins to be established, the capitalist producer must themselves struggle against it. They must struggle against the high profit margins that the merchant guild monopolies impose as well as against usurious rates of interest, which raise the cost of capital to unsustainable levels. 

“With the establishment of capitalist production the domination of the usurer over surplus labour, a domination which depends on the continued existence of the old mode of production, ceases. The industrial capitalist collects surplus-value directly in the form of profit; he has also already seized part of the means of production and he appropriates part of the annual accumulation directly. From this moment, and especially as soon as industrial and commercial wealth develops, the usurer—that is, the lender at interest—is a person who is differentiated from the industrial capitalist only as the result of the division of labour, but is subordinated to industrial capital.” (p 532) 

The Technical Composition of Capital - Part 3 of 5

In the same way that a large scale factory replaces many manufactories or workshops, so machines replace many hand tools, and, later, improved single machines replace several older machines. The handicraft worker uses a series of hand tools relevant to their particular craft. The carpenter uses hammers, mallets, chisels, saws, planes, screwdrivers, for example. A detail woodworker, in a manufactory, might be employed only to cut wood, in which case they only need to use a saw. Another might plane the wood, and so on. Already, then, the quantity of tools (fixed capital) per worker is reduced, though the quantity of fixed capital/tools per labour hour might remain the same, because the worker who cuts wood, now uses the saw for 10 hours per day, whereas previously they may have used it for only one hour, spending the rest of the day, using planes, chisels and so on. Moreover, because the manufactory employs more labour, in total, the total number of tools may also rise. In the large scale woodworking factory, machines replace these tools and functions. Now, there is just one machine to one worker, but the complexity of the machine is much greater. 

However, like the factory building, the cost of the fixed capital/machine does not increase in proportion to the increase in the volume of output it brings about. As Marx sets out in Theories of Surplus Value, a spinning wheel costs more to produce than the spindle used by the hand spinner, but the spinning wheel produces, say, 100 times as much yarn as a hand spinner, using a spindle. The spinning wheel does not cost 100 times as much as the spindle, nor does it consist of 100 times as much material. 

“If one worker can spin as much cotton as 100 [workers spun previously], then the supply of raw material must be increased a hundredfold, and this is moreover brought about only by the spinning-machine which enables one worker to control 100 spindles. But if simultaneously, one worker produces as much cotton as 100 workers did previously and one worker produces a spinning-machine whereas previously he produced only a spindle, then the ratio of value remains the same, that is, the labour expended in the spinning, [in the production of] the cotton and the spinning-machine remains the same as that expended previously in spinning, the cotton and the spindle.” 

(Theories of Surplus Value, Chapter 23) 

In other words, although the technical composition of capital, here, has risen, the value composition of capital has fallen by a proportionate amount, so that no change in the organic composition results, and so, there is no change in the rate of profit. In the short-term, at least, its not likely that the value of a spinning machine with 100 spindles, would fall to that of a spinning wheel, though it may do in a relatively short-time, depending on technological development, and rises in social productivity. 

“There can be no doubt that machinery becomes cheaper, and this for two reasons: [1] The application of machinery to the production of raw materials from which the machinery is made. [2] The application of machinery in the transformation of these materials into machinery.” 

(ibid) 

But, 

“If one worker is in charge of 1,800 spindles instead of driving a spinning-wheel, it would be quite ridiculous to ask why these 1,800 spindles are not as cheap as the single spinning-wheel. The productivity in this case is brought about precisely by the amount of capital employed as machinery.” 

(ibid) 

And, 

“... the capital which the former laid out on the spinning-wheel was larger relative to the size of the product, than that which the capitalist lays out on the spinning-machine.” 

(ibid) 

In other words, as previously described in relation to buildings, so too with machinery. The complexity of the machine (and its place as part of a wider complex of machines in the factory) increases, and along with it, the absolute value of the machine increases. But, this increase in value is not proportionate to the increase in the output resulting from the introduction of the machine, so its value as a proportion of total output value falls. This is reflected in the proportion of wear and tear it contributes to the value of the commodity. But, for the reasons Marx describes above, the value of machinery itself falls, because rises in social productivity means that the materials used in its production become cheaper, and the use of machines to produce machines, means that less living labour is required to produce the machine. These two ways in which the value of the machine falls 1) relative to the increased output it produces, and 2) as a result of falls in its own value due to rising social productivity, are the basis of moral depreciation

Finally, 

“Further, one factor in the cheapening of machinery apart from that of its elements, is the cheapening of the source of the motive power (the steam-boiler, for example) and of the transmission mechanism. Economy of power. But this results precisely from the fact that to an increasing extent the same motor can drive a larger system of machines. The motor becomes relatively cheaper (or its cost does not grow in the same ratio as the increase in the size of the system in which it is employed; the motor becomes more expensive as its power grows, but not in the same degree in which it grows); even when its cost increases absolutely, it declines relatively. This is therefore a new and important motive, quite apart from the price of the individual machine, for increasing the capital that is laid out in machinery and confronts labour. One element—the increasing speed of machinery—increases productivity enormously but it does not affect the value of the machinery itself in any way.” 

(ibid) 

But, of course it does, because it means the materials used to produce machines become cheaper, and the labour required to produce machines is reduced.  Marx actually, misses a further element, here, which is that, as the efficiency of the engine/motor increases, it also requires less fuel, as auxiliary material, and also, rises in social productivity reduce the value of the fuel consumed. But, also, Marx misses the point that new types of motor replace older types. These new motors are not only more powerful, and more efficient in the use of fuel, but they frequently use less material than the older motors, and are cheaper, even in absolute terms. For, example, a diesel engine tractor is much smaller than the steam driven tractors it replaces. The steam driven tractor required a huge boiler to create steam, consisting of huge amounts of iron. They had huge metal wheels to support the weight of the boiler, and so on. The diesel tractor uses a fraction of the metal for its engine, and because it is smaller and lighter, it uses smaller wheels and axles, and uses much cheaper rubber tyres. And, as well as being much cheaper to produce than the steam driven tractor, it uses much less fuel, now in the form of more effective diesel, rather than vast amounts of coal, whilst producing more effective power, higher speeds, and greater manoeuvrability etc. 

A similar thing can be seen with other forms of power and motor. Electrical equipment, for example, originally used valves made from blown glass, and containing filaments. These were the equivalent of the motor that drove the function of the electrical equipment, the electricity being the fuel. But, in the 1960's, transistors began to replace valves. The transistor is a semiconductor made of a small amount of relatively cheap material. Not only did it use less material than a valve, and was cheaper to produce, but it was far more powerful, and used less electric. In turn, transistors were replaced by microchips, which are made from silicon which had an even greater revolutionising effect. 

For all these reasons, as capital expands, although more fixed capital (buildings, machines, tools) is employed in total, and the total value of this fixed capital increases in absolute terms, its value falls as a proportion of total output value, as a result of the increase in productivity it brings about, and because rising productivity and technological development, brings about a fall in its own cost of production. It is not just the labour/new value that falls as a proportion of the total output value, but also that of fixed capital. Even though the unit value of materials falls as a result of rising productivity, the increased mass of these materials consumed in production, as a result of that rising productivity is greater, so that the proportion of total output value accounted for by materials rises, and this is the basis of Marx's Law of the Tendency for the Rate of Profit to Fall. 

“Further, the quantity and value of the employed machinery grows with the development of labour productivity but not in the same proportion as this productivity, i. e., not in the proportion in which this machinery increases its output. In those branches of industry, therefore, which do consume raw materials, i. e., in which the subject of labour is itself a product of previous labour, the growing productivity of labour is expressed precisely in the proportion in which a larger quantity of raw material absorbs a definite quantity of labour, hence in the increasing amount of raw material converted in, say, one hour into products, or processed into commodities. The value of raw material, therefore, forms an ever-growing component of the value of the commodity-product in proportion to the development of the productivity of labour, not only because it passes wholly into this latter value, but also because in every aliquot part of the aggregate product the portion representing depreciation of machinery and the portion formed by the newly added labour — both continually decrease. Owing to this falling tendency, the other portion of the value representing raw material increases proportionally, unless this increase is counterbalanced by a proportionate decrease in the value of the raw material arising from the growing productivity of the labour employed in its own production.” 

(Capital III, Chapter 6)

Monday, 24 February 2020

Theories of Surplus Value, Part III, Addenda - Part 76

As soon as capitalist production becomes sustainable, therefore, usury no longer has the effect of simply pauperising the producers and forcing them into slavery. Instead, it simply provides the basis for the primary accumulation of capital

“Usury centralises property, especially in the form of money, only where the means of production are scattered, that is, where the worker produces more or less independently as a small peasant, a member of a craft guild (small trader), etc.” (p 530) 

It does not change this mode of production, but is only parasitic upon it. But, once capitalist production becomes sustainable, usury can no longer operate in that way. 

“This kind of usury rests on this particular basis, on this mode of production, which it does not change, to which it attaches itself as a parasite and which it impoverishes. It sucks it dry, enervates it and compels reproduction to be undertaken under constantly more atrocious conditions. Thus the popular hatred of usury, especially under the conditions prevailing in antiquity, where this form of production—in which the conditions of production are the property of the producer—was at the same time the basis of the political relationships, of the independence of the citizen. This comes to an end as soon as the worker no longer possesses any conditions of production. And with it the power of the usurer likewise comes to an end.” (p 531) 

Usury was despised, because political and individual freedom was always a function of property ownership. In Antiquity, the Freemen were distinguished from slaves. In the Middle Ages the Yeomen and free-holding peasants were distinguished from serfs and vassals, and, in the towns the independent artisans and members of guilds enjoyed political and individual freedoms based upon their ownership of their means of production. Usury was hated not just because it deprived the producers of their means of production, but also because, in doing so, it deprived them of their political and individual freedom. 

“... insofar as slavery predominates or [insofar as] the surplus labour is consumed by the feudal lord and his retainers and they fall prey to the usurer, the mode of production also remains the same, only it becomes more oppressive. The debt-ridden slave-holder or feudal lord squeezes more out because he himself is being squeezed dry. Or, finally, he makes way for the usurer, who becomes a landowner, etc., like the eques, etc., in Ancient Rome. In place of the old exploiter, whose exploitation was to some extent a means of political power, there appears a coarse, money-hunting parvenu. But the mode of production itself remains unchanged.” (p 531) 

There is a valuable lesson, here, for the “anti-capitalists”. Each mode of production persists because it reproduces itself, and its conditions of existence. In Antiquity, the slave owner reproduces their slaves, in the same way that a stock breeder reproduces their stock. Their slaves produce a surplus product, so that the slaves themselves are reproduced from their own output – either directly or via the exchange/sale of that output for other products – whilst providing the slave owner with their own means of reproduction. Under feudalism, the land is passed down via primogeniture, into the hands of the next generation, and the peasants hand over their surplus product as rent, from which the landed aristocracy reproduces themselves. 

Usury undermines and breaks apart these kinds of reproduction, because it strips wealth from the slave owner and landlord. But, its disruptive and destructive role in doing so is not progressive. It does not, by this disruption, bring about any progressive or revolutionary transformation of the mode of production. Quite the opposite. 

“The usurer in all pro-capitalist modes of production has a revolutionary impact only in the political sense, in that he destroys and wrecks the forms of property whose constant reproduction in the same form constitutes the stable basis of the political structure. [The usurer] has a centralising [effect] as well, but only on the basis of the old mode of production, thus leading to the disintegration of society—apart from the slaves, serfs, etc., and their new masters—into a mob. Usury can continue to exist for a long time in Asiatic forms of society without bringing about real disintegration, but merely giving rise to economic decay and political corruption.” (p 531) 

The Technical Composition of Capital - Part 2 of 5

In practice, the technical composition is this relation between the quantity of raw material and quantity of labour that processes it. If a machine with 50 spindles replaces a machine with 10 spindles, the relation is still 1 machine to 1 worker, if the normal working day is 10 hours, it is still 1 machine to 10 labour-hours, but, in the former case, the relation is 5 times as much material processed by 1 worker, i.e. a rise in the technical composition. What changes, here, is not the number of machines per worker, or per labour hour, but the size and complexity of the machine. If we take buildings, then, in fact, the technical composition falls, because one large factory building will employ more workers than a smaller factory building or workshop. 

When capital began to formally subordinate labour, it brought handicraft workers together in workshops. The handicraft workers continued to use their own tools, being supplied with materials by the master, who took the finished product to sell. The price paid for the product to the labourer was essentially just a wage, the difference between this wage and the new value created by the worker constituting the surplus value/profit appropriated by the capitalist. Such a workshop might employ, say, 10 workers. As capital accumulated, and capitalists increased the division of labour, they brought larger numbers of workers together in a manufactory. The workers continued to work with the same hand tools, but, now, each worker became a detail worker concentrating on a different aspect of the production process. Such a manufactory might employ 100 workers. Finally, when machine production begins, the hand tools are replaced by machines, with each worker now minding a machine that performs various functions. Such a factory might employ 1,000 workers. 

In each case, here, the technical composition is 1 building, but to 10, 100 and 1,000 workers respectively. Again, its not the number of buildings to workers that is determinant, here, but the size and complexity of the building. However, a manufactory employing 100 is not ten times bigger, and does not cost ten times as much to build, as a workshop employing 10 workers. Similarly, a factory employing 1,000 is not ten times bigger, and does not cost ten times as much to build, as a manufactory employing 100. In other words, measured in terms of the size and value of the buildings, although it rises in absolute terms, it falls relative to the number of workers employed, and relative to the new value created by those workers. If a workshop costs £100, and its 10 workers create £100,000 of new value in its lifetime, the workshop represents 0.1% of that new value, or 1:1000. A manufactory costs, say, £500, but its 100 workers produce £1 million of new value, so that the ratio is 1:2000. Finally, a large factory that costs £1,000, but whose 1,000 workers create £10 million of new value produces a ratio of 1:10,000. 

This is all the more significant when looking at the ratio of the value of this fixed capital to the total output value. Suppose that the workshop produces 100,000 kilos of yarn, using 100,000 kilos of cotton, and the value of cotton is £1 per kilo. In that case, the total value of output is £100 workshop, £100,000 cotton, £100,000 new value created by labour = £200,100. The ratio of fixed capital to total output value is 1:2,001. The manufactory, represents a higher stage of production, due to a more developed division of labour, and higher productivity. It produces, 2 million kilos of yarn, using 2 million kilos of cotton. Its total output value is 3,000,500. The ratio of fixed capital here is 5:30005, or 1:6,001. Finally, the machine factory produces 50 million kilos of yarn. The total value of its output is 60,001,000. The ratio is 1:60,001. 

This demonstrates Marx's point in Capital III, Chapter 6 that, as production expands, and productivity rises, although the absolute mass of fixed capital increases, its value, as a proportion of total output value, falls. Moreover, as Marx describes, in relation to this fixed capital, its actual value also falls rapidly, as more of it is produced. A large part of the value of a new type of factory, for example, is the labour of the architects and designers. But, this cost is a fixed cost. Once it has been expended to design the factory, and or the machines to go in it, it does not need to be expended again. The next identical factory or machine, simply uses the blueprints from the first. Moreover, having dealt with any snags in the first construction, the actual construction costs of further factories and machines fall, as greater expertise in construction is achieved. 

Marx notes, 

“The astonishing expedition with which a great cotton factory, comprehending spinning and weaving, can be erected in Lancashire, arises from the vast collection of patterns of every variety from those of gigantic steam engines, water wheels, iron girders and joists, down to the smallest member of a throstle or loom in possession of the engineers, mill-wrights, and machine makers. In the course of last year Mr. Fairbairn equipped water wheels equivalent to 700 horses power and steam engines to 400 horses power from his engineer factory alone, independent of his mill-wright and steam-boiler establishment. Hence, whenever capital comes forward to take advantage of improved demand for goods, the means of fructifying it are provided with such rapidity, that it may realise its own amount in profit, ere an analagous factory could be set a-going in France, Belgium or Germany” (Andrew Ure, [Philosophy of Manufactures, London, 1835, p. 39,] Philosophie des Manufactures etc., tome I, Paris, 1836, pp. 61-62).” 

(Theories of Surplus Value, Chapter 23) 

The new value created by labour, here, also falls as a proportion of total output value. In the workshop it is 100,000:200,100, or 1000:2001, or more or less 50%. In the manufactory it is 1,000,000:3,000,500, or approximately 33%. Finally, in the large industrial factory it is 10,000,000:60,001,000 or approximately 16%. By contrast, the proportion of raw material value to total output value rises from 50% to 67%, to 84%. This is the basis of Marx's Law of the Tendency for the Rate of Profit to Fall, because what this shows is that, even if the rate of surplus value rises, so that the mass of surplus value rises, it tends not to rise fast enough to compensate for the declining share of new value in total output value. 

We assumed a rate of surplus value of 100%, so that wages were £0.50 per hour. That means that, in the workshop, of the total new value created of £100,000, £50,000 is paid as wages. That means that surplus value is also £50,000. The rate of profit is then 50,000/(100 + 100,000 +50,000) = 33.3%. In the manufactory it is 500,000/(500 + 2,000,000 + 500,000) = 20%. And, finally, 5,000,000/(1,000 + 50,000,000 + 5,000,000) = 9.1%. Now, even if we assume that the rising social productivity, reflected in these figures, causes the value of labour-power to fall, and rate of surplus value to rise, we still get a falling rate of profit. So, if the rate of surplus value, in the manufactory, rises to 150%, so that surplus value amounts to 600,000, and wages fall to 400,000, we get a rate of profit of 25%. If we assume that, in the large-scale factory, the rate of surplus value rises to 300%, so that we have surplus value of £7.5 million and wages fall to £2.5 million, we have a rate of profit of 15%. Even if the rate of surplus value rose to 500%, reflecting the same rise in productivity as in yarn production, so that surplus value rises to £8.3 million, and wages fall to £1.7, the rate of profit still falls to 16%.