Friday, 31 August 2012

Capital I, Chapter 8 - Part 2

The quote provided by Marx at the end of Part 1 highlights the difference between wear and tear of the means of production, whose value is transferred to the product of which they become a part i.e. their participation in the Labour Process, and process of valorisation, and depreciation, which occurs outside it. In the former, the means of production are reduced in value in proportion to how much is transferred to the product. How does this affect the Rate of Profit? The fact that a portion of Value of Constant Capital is transferred to the final product does not change the amount of Surplus Value.  In setting out the basis for calculating the Rate of Profit, much later, Marx makes the point that the Rate of Profit is calculated on the whole capital advanced, not just that which is transferred to the product.  However, because the total Constant Capital is reduced by the amount transferred to the final product, this does affect the Rate of Profit in each subsequent year.   The Constant Capital advanced to the final product does not, and cannot, as Marx has just demonstrated, affect the quantity of Surplus Value produced, which is solely a function of the exploitation of the living labour. So, assume a Capital made up:

c 900 + v 100 + s 100 = e 1100, r' = 10%.

Now, assume that there is a similar capital, but which, purely for the sake of illustration uses no circulating constant capital, and where 10% of the value of its fixed capital is transferred into the final product in any one year. So:

K the total fixed capital = 900, but d, the wear and tear = 90.

K 900, d 90 + v 100 + s 100 = e 290, r' = 10%.

Although, the total exchange value (e) of the output has fallen dramatically, the rate of surplus value s/v, s', remains at 100%, and because the rate of profit, r', is calculated on the total capital advanced K + v, it remains at 10%. However, in year 2, because a portion of K, i.e. the 90 of d, has been used up we will have:

K 810, d 90 + v 100 + s 100 = e 290, r' = s/K+v = 100/810 = 10.99%.

The increase in the rate of profit is due to the fact that the value of the constant capital has fallen, as a consequence of a portion being consumed in the final product. However, this apparent good fortune of the capitalist does not really help him. Assuming everything else remains constant, at the end of Year 10, all of the value of K will have been used up in wear and tear, and transferred to the final product. The £90 of d transferred into the end product, and thereby recovered, by the capital, in the price of the end product, will have been accumulated, to an amount of £900, which is just enough to replace the now worn out K. Moreover, this amortisation fund, as it accumulates, is really advanced capital value, stored in the form of a money hoard. If this value of capital is included, the rate of profit remains the same. Its one reason that capital seeks to use this money hoard, for other productive purposes, in the intervening period.

Depreciation, however, occurs outside the Labour Process, outside the valorisation process, as Marx described in the quote at the end of Part 1. In fact, it appears to occur not because of wear and tear, or because the means of production take part in that process, but because they do not! Yet, as Marx says, no Use Value can transfer more Value to the final product than it possesses. The loss of value of Constant Capital due to depreciation, therefore, does not reappear is not recovered in the Value of the final product, in the way that wear and tear is. In fact, quite the opposite. Because, the Value of the Constant Capital declines as a result of depreciation, the value it is able to transfer to the final product is likewise reduced! So:

If we have this capital with K = 900, of which 10% is transferred as d each year, i.e. it is worn out after ten years, then:-

K 900, d 90 + v 100 + s 100 = e 290, r' = 10%. However, if K loses 20% of its value due to depreciation then in year 2:

K has been reduced to 720 by depreciation. If it loses 10% of this as a consequence of wear and tear, during the next year, the amount lost to wear and tear, i.e. transferred to the final product is now only 72, rather than 90. That has to be the case, or else it would, after ten years have transferred more value to the final product than it possessed. If, in Year 3 K has been depreciated by a further 50%, possibly due to moral depreciation, as a new machine is introduced, its value falls to 360, meaning only 36 is transferred in wear and tear and so on.

The rate of profit would then be:

K 360, d 36 + v 100 + s 100 = e 236, r' = 100/460 = 21.74%.

The rate of profit is rising faster than where there was no depreciation, because the value of the capital is being reduced. However, where the capitalist reproduces the value of d transferred to the final product, due to wear and tear, they cannot recover the value of K, lost by depreciation, in the same way. It represents a capital loss, outside the process of production, just as would be the case if a machine was broken, or material stolen. If the depreciation is due to natural factors such as age, rusting, or other natural deterioration, it represents a capital loss to the capitalist, and is indeed a loss to the whole capital stock. Capitalists simply have to suck it up, and introduce additional capital to cover it, or accept that their capital has shrunk. On the other hand, if another capitalist bought the firm, they would do so on the basis of these current valuations, and would make the higher rate of profit on it accordingly. In that respect it represents a capital loss to the particular capitalist, not to capital as a whole.

If, the Depreciation is what Marx terms Moral Depreciation that is it is a result of a rise in productivity that makes producing the particular machines, or material cheaper, or else is a result of an existing machine becoming obsolete, because of the introduction of some new better machine, the situation is somewhat different. In the case, of the first type of depreciation, when the Capitalist comes to replace their machine or material, they have to pay its original undepreciated price, for which they have not been compensated in the price of the final product. However, in the latter case, their loss due to moral depreciation is offset precisely by the fact that they now buy the replacement machine at the now lower price. So assume that all of the Constant Capital is consumed in one year.

C 900 + V 100 + S 100 = E 1100, R = 10%.

Now, C is morally depreciated by 50% due to a rise in productivity in its production.

Although, the capitalist paid £900 for it, it now becomes worth £450, so

C 450 + V 100 + S 100 = E 650, R = 18.18%.

This seems like wonderful news to the capitalist, in fact as he says in discussing this later in Vol III, the Capital loss that he suffers in the fall in value of his Capital is compensated for by the rise in his rate of profit, and vice versa. If the capitalist invests his Surplus Value, it is good news, because the Surplus value will now buy twice as much C, but if they consume all their Surplus Value the situation does not seem so good. In that case, when they come to reproduce the capital used up they will find that they only have enough to buy as much as they had before. That is because the fall in the Value of C was passed through into the price of the final product, which fell from 1100 to 650. They still only have enough to buy C 450 and V 100.

Value can only be transferred to the final product from means of production to the extent that their Use Value is transferred. That can only happen as a consequence of it being consumed by Labour Power in the production process. That does not happen with depreciation. No Use Value is transferred as a result of depreciation. Nor is it like the case of necessary waste referred to earlier. There waste, sawdust, metal shavings, “Devil's Dust”, increases in proportion to the amount of material consumed, the amount of time machines are run etc. But, as Marx describes, depreciation occurs whether material is consumed, machines are run or not. In fact, as Marx describes later in Vol III, where capitals face Moral Depreciation, they try to mitigate it by using existing machines more intensively. This is one reason that Capital has sought to introduce things such as “Just In Time”, which means that they do not suffer from depreciation, because necessary material is only brought in to be used, as and when it is required. It takes part in the Labour Process without any delay during which it could be depreciated. The main reason for JIT, however, is so that Money Capital is not tied up unproductively in holding stock.

Marx, however, makes clear that this is a consequence that affects individual capitalists not Capital itself. He says that where one Capitalist loses out another gains. The capital is bought up at its current value by some other Capitalist. An indication of the difference between Capital Gains/Losses and Profits/Losses from production can be given by the different treatment for Tax. Individuals and companies pay some form of Income Tax on their earnings from selling their commodities (workers wages, companies profits). But, they pay Capital Gains Tax on any Gain they make as a result of the revaluation of their assets.

Things are different with Labour Power compared to Constant Capital. The means of production can only, at most, transfer their own Use Value to the product, and as has been described, as a consequence of depreciation, not even all of that can be transferred. But, every minute that labour-power is working, it is creating a new use Value, and with it new value.

NB. We should insert the proviso here that Marx set out in the previous chapter, which is that the worker is actually creating new Use Values, and is working to the average standard. If the worker produces faulty products then these are not Use Values, and are not Values either. Rather than creating new value, the worker has destroyed existing Value embodied in the means of production. This is why the employer has supervisors, Quality Control, and penalties for poor workmanship. It is why, also, as Marx describes, slave labour is so inefficient.

This is one of the circumstances that makes production by slave labour such a costly process. The labourer here is, to use a striking expression of the ancients, distinguishable only as instrumentum vocale, from an animal as instrumentum semi-vocale, and from an implement as instrumentum mutum. But he himself takes care to let both beast and implement feel that he is none of them, but is a man. He convinces himself with immense satisfaction, that he is a different being, by treating the one unmercifully and damaging the other con amore. Hence the principle, universally applied in this method of production, only to employ the rudest and heaviest implements and such as are difficult to damage owing to their sheer clumsiness. In the slave-states bordering on the Gulf of Mexico, down to the date of the civil war, ploughs constructed on old Chinese models, which turned up the soil like a hog or a mole, instead of making furrows, were alone to be found. Conf. J. E. Cairnes. “The Slave Power,” London, 1862, p. 46 sqq. In his “Sea Board Slave States,” Olmsted tells us: “I am here shown tools that no man in his senses, with us, would allow a labourcr, for whom he was paying wages, to be encumbered with; and the excessive weight and clumsiness of which, I would judge, would make work at least ten per cent greater than with those ordinarily used with us. And I am assured that, in the careless and clumsy way they must be used by the slaves, anything lighter or less rude could not be furnished them with good economy, and that such tools as we constantly give our labourers and find our profit in giving them, would not last out a day in a Virginia cornfield – much lighter and more free from stones though it be than ours. So, too, when I ask why mules are so universally substituted for horses on the farm, the first reason given, and confessedly the most conclusive one, is that horses cannot bear the treatment that they always must get from negroes; horses are always soon foundered or crippled by them, while mules will bear cudgelling, or lose a meal or two now and then, and not be materially injured, and they do not take cold or get sick, if neglected or overworked. But I do not need to go further than to the window of the room in which I am writing, to see at almost any time, treatment of cattle that would ensure the immediate discharge of the driver by almost any farmer owning them in the North.” (Note 1, p 191)

If the worker produces products that are not wanted these are also not Use Values and have no Value.

However, setting all of the provisos aside, the worker can work and continue producing new value beyond the point at which the cost of reproducing their labour power has been met and this new value over and above that constitutes Surplus Value.

The surplus of the total value of the product, over the sum of the values of its constituent factors, is the surplus of the expanded capital over the capital originally advanced. The means of production on the one hand, labour-power on the other, are merely the different modes of existence which the value of the original capital assumed when from being money it was transformed into the various factors of the labour-process. That part of capital then, which is represented by the means of production, by the raw material, auxiliary material and the instruments of labour does not, in the process of production, undergo any quantitative alteration of value. I therefore call it the constant part of capital, or, more shortly, constant capital.

On the other hand, that part of capital, represented by labour-power, does, in the process of production, undergo an alteration of value. It both reproduces the equivalent of its own value, and also produces an excess, a surplus-value, which may itself vary, may be more or less according to circumstances. This part of capital is continually being transformed from a constant into a variable magnitude. I therefore call it the variable part of capital, or, shortly, variable capital. The same elements of capital which, from the point of view of the labour-process, present themselves respectively as the objective and subjective factors, as means of production and labour-power, present themselves, from the point of view of the process of creating surplus-value, as constant and variable capital.” (p 202)

The definition of constant capital given above by no means excludes the possibility of a change of value in its elements. Suppose the price of cotton to be one day sixpence a pound, and the next day, in consequence of a failure of the cotton crop, a shilling a pound. Each pound of the cotton bought at sixpence, and worked up after the rise in value, transfers to the product a value of one shilling; and the cotton already spun before the rise, and perhaps circulating in the market as yarn, likewise transfers to the product twice its, original value. It is plain, however, that these changes of value are independent of the increment or surplus-value added to the value of the cotton by the spinning itself. If the old cotton had never been spun, it could, after the rise, be resold at a shilling a pound instead of at sixpence. Further, the fewer the processes the cotton has gone through, the more certain is this result. We therefore find that speculators make it a rule when such sudden changes in value occur, to speculate in that material on which the least possible quantity of labour has been spent: to speculate, therefore, in yarn rather than in cloth, in cotton itself, rather than in yarn. The change of value in the case we have been considering, originates, not in the process in which the cotton plays the part of a means of production, and in which it therefore functions as constant capital, but in the process in which the cotton itself is produced. The value of a commodity, it is true, is determined by the quantity of labour contained in it, but this quantity is itself limited by social conditions. If the time socially necessary for the production of any commodity alters — and a given weight of cotton represents, after a bad harvest, more labour than after a good one — all previously existing commodities of the same class are affected, because they are, as it were, only individuals of the species, and their value at any given time is measured by the labour socially necessary, i.e., by the labour necessary for their production under the then existing social conditions.” (p202-3)

Marx then goes on to demonstrate that not only does the raw material have to be revalued according to its current reproduction costs, but the same applies to the machinery and other equipment costs, buildings and so on.

If in consequence of a new invention, machinery of a particular kind can be produced by a diminished expenditure of labour, the old machinery becomes depreciated more or less, and consequently transfers so much less value to the product. But here again, the change in value originates outside the process in which the machine is acting as a means of production. Once engaged in this process, the machine cannot transfer more value than it possesses apart from the process.” (p 203)

That reaffirms the point I made earlier in respect of moral depreciation. In other words, the point that Marx is making here in respect of these changes in Capital Values, is that I have made elsewhere in relation to the TSSI. It is that these changes occur outside the labour process – though they may well occur within some other labour process – and consequently have nothing to do with the process of creation of Surplus Value. They are in truth to be analysed as Capital Gains or Losses, which even bourgeois Economics and Accountancy is able to distinguish from trading Profits and Losses.

These kinds of “profits” are the stock in trade of Neo-Classical economics, which as Mandel said often bases its examples on the Bond and Stock Markets, where changes in Capital Values are frequently described as a Profit or Loss.

Changes in the proportion of Constant to Variable Capital does not affect their functions only the quantitative relation is altered.

Thursday, 30 August 2012

Capital I, Chapter 8 - Part 1

Constant Capital And Variable Capital

The Labour Process involves both Means of Production and Labour Power. The latter creates new value as a consequence of the expenditure of additional labour, the value of the former is transferred to the new product.

..the values of the means of production used up in the process are preserved, and present themselves afresh as constituent parts of the value of the product; the values of the cotton and the spindle, for instance, re-appear again in the value of the yarn.” (p 193)

Labour itself preserves the value of the means of production by converting them into the new product, and by adding his own new value. The two-fold result of his labour – preserving the value of means of production and adding new value – is explained by the two-fold nature of his labour. It is the particular nature of the Labour as Use Value, which transfers the Value of the means of production, to the new product. It is only the labour of the spinner which can transfer the value of the cotton, and of the spindle to the yarn. The labour of a joiner, for example, cannot do that!

Hence, the labourer preserves the values of the consumed means of production, or transfers them as portions of its value to the product, not by virtue of his additional labour, abstractedly considered, but by virtue of the particular useful character of that labour, by virtue of its special productive form. In so far then as labour is such specific productive activity, in so far as it is spinning, weaving, or forging, it raises, by mere contact, the means of production from the dead, makes them living factors of the labour-process, and combines with them to form the new products.” (p 194)

It is only the second aspect of Labour as Abstract Labour, Value creating substance, which enables it to add new value as opposed to preserving old value. It is the time it spends, engaged in this labour, which then determines how much new value is added – with all the provisos previously made about complex labour, socially necessary and so on.

These two aspects are clearly different and opposite.

On the one hand, then, it is by virtue of its general character, as being expenditure of human labour-power in the abstract, that spinning adds new value to the values of the cotton and the spindle; and on the other hand, it is by virtue of its special character, as being a concrete, useful process, that the same labour of spinning both transfers the values of the means of production to the product, and preserves them in the product. Hence at one and the same time there is produced a two-fold result.

By the simple addition of a certain quantity of labour, new value is added, and by the quality of this added labour, the original values of the means of production are preserved in the product. This two-fold effect, resulting from the two-fold character of labour, may be traced in various phenomena.

Let us assume, that some invention enables the spinner to spin as much cotton in 6 hours as he was able to spin before in 36 hours. His labour is now six times as effective as it was, for the purposes of useful production. The product of 6 hours’ work has increased six-fold, from 6 lbs. to 36 lbs. But now the 36 lbs. of cotton absorb only the same amount of labour as formerly did the 6 lbs. One-sixth as much new labour is absorbed by each pound of cotton, and consequently, the value added by the labour to each pound is only one-sixth of what it formerly was. On the other hand, in the product, in the 36 lbs. of yarn, the value transferred from the cotton is six times as great as before. By the 6 hours’ spinning, the value of the raw material preserved and transferred to the product is six times as great as before, although the new value added by the labour of the spinner to each pound of the very same raw material is one-sixth what it was formerly. This shows that the two properties of labour, by virtue of which it is enabled in one case to preserve value, and in the other to create value, are essentially different. On the one hand, the longer the time necessary to spin a given weight of cotton into yarn, the greater is the new value added to the material; on the other hand, the greater the weight of the cotton spun in a given time, the greater is the value preserved, by being transferred from it to the product.” (p 195)

In other words, the more productivity rises, the less labour-time is taken to process a given amount of material, so, in a given period, more material is processed, more wear and tear on machines occurs, more ancillary materials are consumed, and so more of the value is transferred into the new product. But, by the same token, the higher productivity means that, in this given period of time, only the same amount of new value is created, because it is its duration that counts. Because this new value is now spread over a much larger quantity of the new product, the amount of new value contained in the new product has fallen proportionately.

If 6 lbs of cotton are spun in 6 hours, and a pound of cotton equals £1, and 1 hour of labour equals 25p: then, in the yarn, we have £6 + £1.50 = £7.50. The new value comprises 20%. If, however, 6 lbs is spun in 3 hours, then in 6 hours: 12lbs cotton is consumed = £12, plus £1.50 of new value = £13.50. Now, the new value equals just 11%.

Suppose that the productivity of this labour remains the same as it was, but the Exchange Value of the cotton changes. So:-

6 lbs Cotton @ £1 = £6 + 6 hours labour = £1.50. Yarn = £7.50, new value = 20%.

6 lbs Cotton @ £2 = £12 + 6 hours labour = £1.50. Yarn = £13.50, new value = 11%.

6 lbs Cotton @ £0.50 = £3 + 6 hours labour = £1.50. Yarn = £4.50, new value = 33.3%

The same is true if there are changes in the Exchange Value of the other means of production such as the machines, buildings or ancillary materials.

By the same token, if everything remains constant, the worker transfers twice as much value in two weeks as he does in one week, just as he creates twice as much new value in two weeks as in one week.

Although it is labour-time that gives products their value, value only resides in Use Values, articles of utility. If an article loses its utility it also loses its Value. But, when a use value is consumed in production, they only lose the form of their Use Value, assuming a new form in the product. Marx makes this point, in Theories of Surplus Value, against Colonel Torrens. Marx shows that 100 quarters of corn when planted does not magically become transformed into 120 quarters of corn. A Use Value of 1 does not magically become a Use Value of 1.2! The additional Use Value already exists in the soil, in the water absorbed by the growing plants, in the sunlight which provides energy for the plants, in the fertiliser absorbed by the original seed corn in the production (growing) process. All of these additional Use Values merely change their form in order to become a part of the end product (Use Value) of 120 quarters of corn.

120 quarters of corn are most certainly more than 100 quarters. But—if one merely considers the use-value and the process it goes through, that is, in reality, the vegetative or physiological ||787| process, as is the case here—it would be wrong to say, not indeed, with regard to the 20 quarters, but with regard to the elements which go to make them up, that they do not enter into the production process. If this were so, they could never emerge from it. In addition to the 100 quarters of corn—the seeds—various chemical ingredients supplied by the manure, salts contained in the soil, water, air, light, are all involved in the process which transforms 100 quarters of corn into 120. The transformation and absorption of the elements, the ingredients, the conditions—the expenditure of nature, which transforms 100 quarters into 120—takes place in the production process itself and the elements of these 20 quarters enter into this process itself as physiological “expenditure”, the result of which is the transformation of 100 quarters into 120.

Regarded merely from the standpoint of use-value, these 20 quarters are not mere profit. The inorganic components have been merely assimilated by the organic components and transformed into organic material. Without the addition of matter—and this is the physiological expenditure—the 100 qrs. would never become 120. Thus it can in fact be said even from the point of view of mere use-value, that is, regarding corn as corn—what enters into corn in inorganic form, as expenditure, appears in organic form, as the actual result, the 20 quarters, i.e., as the surplus of the corn harvested over the corn sown.”

In the process of transferring their Use Value to the product, the means of production also transfer their Exchange Value. That is not changed by the fact that this takes various forms.

The coal burnt under the boiler vanishes without leaving a trace; so, too, the tallow with which the axles of wheels are greased. Dye stuffs and other auxiliary substances also vanish but re-appear as properties of the product. Raw material forms the substance of the product, but only after it has changed its form. Hence raw material and auxiliary substances lose the characteristic form with which they are clothed on entering the labour-process.” (p 196-7)

But, tools and machines although subject to wear and tear, have to basically keep their original shape, in order to continue fulfilling their function.

The corpses of machines, tools, workshops, &c., are always separate and distinct from the product they helped to turn out.” (p 197)

Its clear that the lifetime of a tool or machine is a function of its use. The more it is used, the quicker it is worn out, the quicker it transfers its value to the end product, though by the same token, the amount transferred to each unit of production remains the same.

If we know the average usage of a machine, then we can calculate how long, on average it will last. If, on this basis, we calculate that it will last 100 days, then each day it will lose 1% of its value to the product. If it is used at twice the average rate – producing 2000 widgets a day instead of 1000 – it will give up 2% per day, the amount per widget remaining constant. If it is used to produce only 500 widgets a day, it will lose only 0.5% of its value per day, and so on. This transfer of Use Value and Exchange Value arising from usage and wear and tear is not the same as depreciation, which is a function of time itself, or Moral Depreciation arising from changes in the way it is produced or the development of some new replacement. I set that out in “Chapter 7 Part 2”.

It is thus strikingly clear, that means of production never transfer more value to the product than they themselves lose during the labour-process by the destruction of their own use-value. If such an instrument has no value to lose, if, in other words, it is not the product of human labour, it transfers no value to the product. It helps to create use-value without contributing to the formation of exchange-value. In this class are included all means of production supplied by Nature without human assistance, such as land, wind, water, metals in situ, and timber in virgin forests.” (p 197)

Moreover, as Marx made clear earlier, if a Use Value loses its utility (which it does bit by bit through depreciation) it also loses its Value, but this process occurs not as part of the labour-process, but outside it. The more a piece of Constant Capital – be it a machine, a building, a piece of material etc. – suffers depreciation, the less value it has to transfer to the product. A machine that is worth £1,000 transfers 10% of its value each year to the widgets it produces i.e. £100. If as a result of moral depreciation its value falls to £500, it does not transfer this £500 reduction to the product. That occurs outside the labour process. In fact, now it only transfers 10% of its new value to the widgets i.e. £50 per year.

By contrast, the whole of the Exchange Value of some products may be transferred to the product whilst a portion of their Use Value is destroyed. Such is the case of all those products where a certain amount of waste is unavoidable, and where that waste cannot itself be utilised. The Exchange Value of all these means of production which can be transferred to the new product is then limited by their own Exchange Value.

In the labour-process it only serves as a mere use-value, a thing with useful properties, and could not, therefore, transfer any value to the product, unless it possessed such value previously.” (p 199)

The property therefore which labour-power in action, living labour, possesses of preserving value, at the same time that it adds it, is a gift of Nature which costs the labourer nothing, but which is very advantageous to the capitalist inasmuch as it preserves the existing value of his capital. So long as trade is good, the capitalist is too much absorbed in money-grubbing to take notice of this gratuitous gift of labour. A violent interruption of the labour-process by a crisis, makes him sensitively aware of it.” (p 200)

Marx quotes an article in the Times, which shows the consequences of not having workers employed.

In The Times of 26th November, 1862, a manufacturer, whose mill employed 800 hands, and consumed, on the average, 150 bales of East Indian, or 130 bales of American cotton, complains, in doleful manner, of the standing expenses of his factory when not working. He estimates them at £6,000 a year. Among them are a number of items that do not concern us here, such as rent, rates, and taxes, insurance, salaries of the manager, book-keeper, engineer, and others. Then he reckons £150 for coal used to heat the mill occasionally, and run the engine now and then. Besides this, he includes the wages of the people employed at odd times to keep the machinery in working order. Lastly, he puts down £1,200 for depreciation of machinery, because “the weather and the natural principle of decay do not suspend their operations because the steam-engine ceases to revolve.” He says, emphatically, he does not estimate his depreciation at more than the small sum of £1,200, because his machinery is already nearly worn out.” (Note 2, p 200)

Wednesday, 29 August 2012

Capital I, Chapter 7 - Part 2

2) The Production Of Surplus Value

The product of the consumption, by Labour, of the means of production i.e. of the labour process, is a Use Value. But, under Capitalism, the aim is not the production of Use Values, as it is under all previous modes of production. Where the petit-commodity producer produced a commodity, sold it for money and then bought some other commodity they desired (C-M-C), the capitalist only lays out money to buy commodities if they can be subsequently sold for an additional sum of money, M-C-M1. But, money cannot simply expand itself via exchange. Capitalists only produce Use Values because they are also Exchange Values, and because through the process of production, the capitalist can extract Surplus Value. To do that, he must produce a commodity whose Exchange Value is greater than the sums of the Exchange Value he has laid out for its production, or more precisely, than it would cost him to reproduce it.

The Value of a commodity is determined by the labour-time socially necessary for its production. That is true of the product now appropriated by the capitalist. If this is 10 lbs. of yarn, the labour-time required for its production can be calculated. Given that this is now a capitalist economy, and, therefore, a money economy, in which money represents the value of commodities we can use money amounts to represent this labour-time, and assume that the capitalist pays the full value of all he buys.
So, the yarn may comprise 10 lbs of cotton worth 10 shillings (50p); wear and tear of machinery 2 shillings (10p). That is a total of 12 s. (60p) in means of production. Put another way, as Marx describes it, if it takes 24 hrs or 2 days to produce the gold that is equivalent to 12 shillings, then the labour-time incorporated in the yarn so far = 2 days.

It doesn't matter that all of the cotton is used up, and can be seen in the yarn whereas only a portion of the spindle and other equipment is used up, and its material cannot be seen in the end product. Both contained Value, i.e. labour-time, and that value was transferred to the final product in proportion to how much of it was used up.

It is important to distinguish here this transfer of value from the means of production due to wear and tear, which increases in proportion to how much they are used, and depreciation which in contrast is a function of time and obsolescence. A machine used 24 hours a day will transfer value to the final product at twice the rate as one used 12 hours a day, and will likewise be used up twice as fast. Depreciation proceeds whether a machine is used or not. In fact, Marx sets out that depreciation occurs even more as a result of non-use than of use. Equipment left unused rots and rusts, material rots and deteriorates. Moral depreciation arises where a machine is made obsolete as a result of some new better machine being introduced, or as a result of a new method of producing an existing machine, so that its current value is reduced. The same is true in respect of other means of production. The value of machines and means of production is transferred to final production in production to their wear and tear i.e. in proportion to their participation in the production process.

But, depreciation occurs outside the production process, it proceeds whether production is occurring or not. As such it is not value transferred to the final product. Any changes in the Value of Means of production that occur outside the production process cannot be attributed to the Production process, and the process, therefore of valorisation. They constitute merely Capital Gains or Losses for the Capitalist not for Capital. Depreciation has the same effect as though, someone stole a part of the machine, or stole an amount of raw material. Or put another way, it is as if, someone picked the capitalists pocket, burgled his house, or as if he lost money at the gaming table. It has nothing to do with the formation of Value or Surplus Value, because it occurs outside the Labour Process outside the valorisation process. In fact, not only is it not a consequence of the labour process, it is as Marx sets out a consequence of a NON-LABOUR process, a consequence of not being consumed by Labour. Could it have been consumed immediately by Labour, there could have been no depreciation. This distinction between the production of Value and Surplus Value within the Labour Process, and the accrual of Capital Gains or Losses by Capitalists outside that process is one of the things that the TSSI does not grasp, and is important for later discussion.

All of the labour-time used in the production of these means of production may have occurred a long time ago. This does not matter, and it is measured according to current standards. As Marx says,

If a definite quantity of labour, say thirty days, is requisite to build a house, the total amount of labour incorporated in it is not altered by the fact that the work of the last day is done twenty-nine days later than that of the first. Therefore the labour contained in the raw material and the instruments of labour can be treated just as if it were labour expended in an earlier stage of the spinning process, before the labour of actual spinning commenced.” ( p 182-3)

In order that the cotton and spindle do become part of the value of the final product, both the cotton and spindle must come together and be needed in the production of some Use Value. In addition, no more of either than is socially necessary must be used to that end.

Though the capitalist have a hobby, and use a gold instead of a steel spindle, yet the only labour that counts for anything in the value of the yarn is that which would be required to produce a steel spindle, because no more is necessary under the given social conditions.” (p 183)

When we consider the living labour, and come to measure its value, things are different. We saw earlier that although as Use Value, as the source of Abstract Labour, and, therefore, Value, each concrete labour is different and specific, in being the essence of value, it is only the nature of Labour in the Abstract that is significant, and so in this sense, it only differs quantitatively.

It is solely by reason of this identity, that cotton planting, spindle making and spinning, are capable of forming the component parts differing only quantitatively from each other, of one whole, namely, the value of the yarn. Here, we have nothing more to do with the quality, the nature and the specific character of the labour, but merely with its quantity. And this simply requires to be calculated. We proceed upon the assumption that spinning is simple, unskilled labour, the average labour of a given state of society.” (p 184)

If its assumed that this labour works under the average conditions then it may be that 10 lbs of yarn will require 6 hours of living labour to produce.

Not only the labour, but also the raw material and the product now appear in quite a new light, very different from that in which we viewed them in the labour-process pure and simple. The raw material serves now merely as an absorbent of a definite quantity of labour. By this absorption it is in fact changed into yarn, because it is spun, because labour-power in the form of spinning is added to it; but the product, the yarn, is now nothing more than a measure of the labour absorbed by the cotton. If in one hour 1 2/3 lbs. of cotton can be spun into 1 2/3 lbs. of yarn, then 10 lbs. of yarn indicate the absorption of 6 hours’ labour. Definite quantities of product, these quantities being determined by experience, now represent nothing but definite quantities of labour, definite masses of crystallised labour-time. They are nothing more than the materialisation of so many hours or so many days of social labour.” (p 184-5)

Above, we assumed that 12 shillings = 24 hours labour-time. In that case, the 6 hours now expended is equal to 3 shillings (15p), bringing the total value of the yarn to 15 shillings (75p). But, we also assumed earlier that the value of a day's Labour Power was also equal to 3 shillings or 6 hours labour-time. In that case, the total value of the yarn is 75p and the amount laid out by the capitalist is also 75p. No Surplus Value has been created, and no new capital has been formed.

There is in reality nothing very strange in this result. The value of one pound of yarn being eighteenpence, if our capitalist buys 10 lbs. of yarn in the market, he must pay fifteen shillings for them. It is clear that, whether a man buys his house ready built, or gets it built for him, in neither case will the mode of acquisition increase the amount of money laid out on the house.” (p 186)

Marx then goes through all the traditional arguments put forward by the apologists of capital to explain profit, in order to dismiss them. The capitalist bemoans that he had risked his capital to make profit. “The road to hell is paved with good intentions.” He could have bought the commodity rather than produced it. But, if all capitalists did that who would produce them? He had been abstinent in order to acquire profit. But, in return for that abstinence he is “now in possession of good yarn instead of a bad conscience.” Had he not provided the worker with the means of producing and thereby done society a service? “Well, but has not the labourer rendered him the equivalent service of changing his cotton and spindle into yarn?” Have I not performed labour myself? The capitalist asks, in overlooking and superintendence? “His overlooker and his manager try to hide their smiles.”

But, then Marx says, having gone through all the arguments for the source of profit, the capitalist smiles.

He himself is a practical man; and though he does not always consider what he says outside his business, yet in his business he knows what he is about.” (p 187)

What the capitalist realises is that the value of the Labour Power he has bought, and the Value that the worker can create during the day he has bought that Labour Power, are two different things. The Value of the Labour Power was 15p = 6 hours labour-time or the amount required to produce that Labour-Power for a day. But, there is no reason that the capitalist should then limit himself to only demanding 6 hours work from the worker. He has bought a day's Labour Power, and is entitled to receive it, be that Day, 6 hours, 12 hours, or even 24 hours.

It is this capacity of Labour that the capitalist is interested in, its ability to create Value over and above the Value of Labour Power, not whether that Labour can produce boots rather than boats, or any other kind of commodity. All the capitalist is interested in is the capacity to produce Surplus Value.

NB. Its important to pick up a point here in reference to the comment Marx made earlier in reference to buying a Day's Labour Power being no different to hiring a horse for a day. His point was that having hired it the capitalist is entitled to use it for the day. However, as pointed out previously, there is a difference between hiring a horse for a day, and hiring a wage labourer for a day. The former does not produce Surplus Value, the latter does. The horse like a slave is merely an instrument of labour. It does not produce Surplus Value. A horse could be doing exactly the same work as a wage labourer, for example turning a mill stone grinding oats. If it grinds 10 bags of oats in a day, but only consumes 1, it has produced a Surplus Product = 9 bags, just the same as a wage worker might do. But, this is a Surplus Product not a Surplus Value. Yet, it is not the fact that it is a horse rather than a human that accounts for the fact that Surplus Value is not created. The same would be true if it had been a slave rather than a horse. The reason no Surplus Value is created is because in the case of the slave and the horse, neither appear in the market to buy the oats. The oats are bought by the owner of the horse or the slave, who will only pay for them what they cost him to produce i.e. the equivalent of 1 bag of oats. But, the wage worker does appear in the market to buy their own means of subsistence. They have to pay for them at the rate not of what it costs the capitalist to produce them, but at the rate determined by the amount of labour-time required for their production. That is why Marx sets out in the Grundrisse, that it is only when Wage Labour becomes widespread, and indeed only when wage workers form the bulk of consumers, that Exchange Value can take its fully developed form.

For a fuller discussion of this point see: Labour Power v Horse Power

The circumstance, that on the one hand the daily sustenance of labour-power costs only half a day’s labour, while on the other hand the very same labour-power can work during a whole day, that consequently the value which its use during one day creates, is double what he pays for that use, this circumstance is, without doubt, a piece of good luck for the buyer, but by no means an injury to the seller.” (p 188)

The capitalist provides the worker with sufficient means of production, therefore, to work for not 6 hours, but 12 hours. In this 12 hours, 20 lbs of cotton will be consumed.

There is now materialised in this 20 lbs. of yarn the labour of five days, of which four days are due to the cotton and the lost steel of the spindle, the remaining day having been absorbed by the cotton during the spinning process. Expressed in gold, the labour of five days is thirty shillings. This is therefore the price of the 20 lbs. of yarn, giving, as before, eighteenpence as the price of a pound. But the sum of the values of the commodities that entered into the process amounts to 27 shillings. The value of the yarn is 30 shillings. Therefore the value of the product is 1/9 greater than the value advanced for its production; 27 shillings have been transformed into 30 shillings; a surplus-value of 3 shillings has been created. The trick has at last succeeded; money has been converted into capital.” (p 188-9)

The capitalist has bought all of the commodities at their full value, including Labour-Power, and has only sold the final product at its Value, and yet a Surplus Value has been produced.

This metamorphosis, this conversion of money into capital, takes place both within the sphere of circulation and also outside it; within the circulation, because conditioned by the purchase of the labour-power in the market; outside the circulation, because what is done within it is only a stepping-stone to the production of surplus-value, a process which is entirely confined to the sphere of production.” (p 189)

Comparing the production of Value and Surplus Value, the latter is essentially the continuation of the labour process beyond the point where the cost of replacing the Labour Power has been met. In the Labour Process pure and simple the aim is the production of Use values, and means of production are employed to assist Labour to that end. In Capitalist Production, however, the aim is to produce Exchange Values and the utility of the means of production utilised is secondary to the fact that they are representations of Value, of labour-time, whose only measurement is quantity not quality.

Having said that, the necessity arising from competition, determines that the quantity of the means of production, and of labour-power must be of the average for production of that type.

If a self-acting mule is the implement in general use for spinning, it would be absurd to supply the spinner with a distaff and spinning wheel.” (p 190)

This is why, as I've pointed out elsewhere, Capital is not free to simply “Make The Workers Pay” for its crises, because that impacts the quantity and quality of the labour-power available, a consequence of the fact that capital is a social relation, with Capital and Wage Labour forming a contradictory unity.

The process of production, considered on the one hand as the unity of the labour-process and the process of creating value, is production of commodities; considered on the other hand as the unity of the labour-process and the process of producing surplus-value, it is the capitalist process of production, or capitalist production of commodities.” (p 191)

Marx concludes by demonstrating that the employment of skilled complex labour at higher wages does not change things. Complex Labour simply counts as a multiple of simple labour. So, if the worker worked for the same 12 hours, but was paid 6 shillings (30p), rather than 3 shillings, they would still create Surplus Value. If 1 hour of their complex labour = 2 hours of simple, abstract labour, then their 12 hours is equal to 24 hours. They would thereby have created 24 hours of new Value = 12 shillings. The capitalist has then paid out 6 shillings for the Labour Power, creating a Surplus Value of 6 shillings. Its as though they employed 2 workers and extracted Surplus Value from both.

Whatever difference in skill there may be between the labour of a spinner and that of a jeweller, the portion of his labour by which the jeweller merely replaces the value of his own labour-power, does not in any way differ in quality from the additional portion by which he creates surplus-value. In the making of jewellery, just as in spinning, the surplus-value results only from a quantitative excess of labour, from a lengthening-out of one and the same labour-process, in the one case, of the process of making jewels, in the other of the process of making yarn.” (p 192)

Tuesday, 28 August 2012

Capital I, Chapter 7 - Part 1

The Production Of Absolute Surplus Value

1) The Labour Process or The Production Of Use Values

The Capitalist buys labour-power from the worker as a commodity. As with every other commodity, it is bought at its full Exchange Value i.e. the labour-time required for its production. In this case, the labour-time required to produce all of the food, clothing, shelter, health, education, entertainment etc. required to produce a sufficient quantity, and quality of workers to meet the needs of Capital. That is sufficiently healthy, strong, skilled, educated and so on.

The capitalist buys this commodity, labour-power, from the worker for the same reason they buy any other commodity. In other words, for its Use Value. The Use Value of Labour-power is Labour itself, the ability to produce other Use Values, that themselves have Value.

Labour-power is consumed productively by being set to work. As set out previously, in order for this work to actually produce Value, it must be in the production of a Use Value, i.e. an article of utility for someone. Marx says, the fact that this is carried on under the control of the capitalist, “does not alter the general character of their production”, and so he begins by examining the labour process outside any particular social form it might take.

The labour process is one in which both Man and Nature participate. Indeed, Man is himself “one of her own forces”, but opposes himself to it, in order “to appropriate Nature's productions in a form adapted to his own wants.” He does this by using his own forces, be they of mind or body, to “regulate and control the material reactions between himself and Nature.” That means manipulating Nature to bring about material changes in the world about him.

By thus acting on the external world and changing it, he at the same time changes his own nature.” (p 173)

As a result of this process, Man also develops his own intellectual and productive powers. What distinguishes this kind of human labour from most instinctive animal labour is the fact that the human labourer has created an image of the object of his activity prior to undertaking it. We know that although humans have existed for around 5 million years, it is only from around 100,000 years ago that the first modern humans or thinking humans have existed, demonstrated in their production of artwork containing patterns.

He not only effects a change of form in the material on which he works, but he also realises a purpose of his own that gives the law to his modus operandi, and to which he must subordinate his will. And this subordination is no mere momentary act. Besides the exertion of the bodily organs, the process demands that, during the whole operation, the workman’s will be steadily in consonance with his purpose. This means close attention. The less he is attracted by the nature of the work, and the mode in which it is carried on, and the less, therefore, he enjoys it as something which gives play to his bodily and mental powers, the more close his attention is forced to be.” (p 174)

The elementary factors of the labour-process are 1, the personal activity of man, i.e., work itself, 2, the subject of that work, and 3, its instruments.” (p 174)

Nature provides, in the first instance, the “universal subject of human labour.” It can take two forms. Firstly, it can take the form of virgin soil (and water) and all those things that are on or in it (plants, animals, fish etc.) or which can be simply extracted from it such as ores. All of these things require human labour before they can be consumed, but they require nothing more than this. For example, fish can be eaten once caught. However, Marx says raw material is, on the other hand, any of these products which has gone through a further process of labour upon it.

All raw material is the subject of labour, but not every subject of labour is raw material: it can only become so, after it has undergone some alteration by means of labour.”

So, an ore extracted may not constitute raw material if, after extraction it is used, e.g. a flint, whereas ore extracted, and being prepared for smelting, would be raw material.

An instrument of labour is a thing, or a complex of things, which the labourer interposes between himself and the subject of his labour, and which serves as the conductor of his activity. He makes use of the mechanical, physical, and chemical properties of some substances in order to make other substances subservient to his aims. Leaving out of consideration such ready-made means of subsistence as fruits, in gathering which a man’s own limbs serve as the instruments of his labour, the first thing of which the labourer possesses himself is not the subject of labour but its instrument...

As the earth is his original larder, so too it is his original tool house. It supplies him, for instance, with stones for throwing, grinding, pressing, cutting, &c. The earth itself is an instrument of labour, but when used as such in agriculture implies a whole series of other instruments and a comparatively high development of labour.” ( p 175)

This development of instruments, including things such as domesticated animals, arises quickly, once human labour itself develops. From early on we see the special development of stone tools, weapons for hunting etc. As Marx says,

Relics of bygone instruments of labour possess the same importance for the investigation of extinct economic forms of society, as do fossil bones for the determination of extinct species of animals. It is not the articles made, but how they are made, and by what instruments, that enables us to distinguish different economic epochs.” ( p 175)

So, we have the Stone, Bronze and iron Ages, for example. But, the instruments of labour are also “indicators of the social conditions under which that labour is carried on.”

Of these, Marx distinguishes two types. First, there are those he describes as the “bone and muscle of production.” That is the things of a mechanical nature used for digging, crushing, grinding, cutting etc. Second, is what he calls the “vascular system of production.” That is those things like pipes, tubs, baskets, jars etc., which contain and help transport the materials of production. This comparison is reminiscent with the way Thomas Hobbes, who also identified the nature of reality as being based on movement rather than inertia, and in 'Leviathan' compared the human body to the movement of a machine, and the body politic to the human body.

In addition to those instruments of production that take part in this process, there are those which are needed for the process to take place. The earth itself is one of these, because without something to stand on no process is possible. But, also things such as “workshops, canals, roads” and so on come under this heading. Mostly, they are things we would refer to as infrastructure or fixed capital.

In the labour-process, therefore, man’s activity, with the help of the instruments of labour, effects an alteration, designed from the commencement, in the material worked upon. The process disappears in the product, the latter is a use-value, Nature’s material adapted by a change of form to the wants of man. Labour has incorporated itself with its subject: the former is materialised, the latter transformed. That which in the labourer appeared as movement, now appears in the product as a fixed quality without motion. The blacksmith forges and the product is a forging.” (p 176)

Both the instrument and the subject of labour constitute the means of production and the labour itself is productive labour i.e. it creates new value. However, Marx is quick to point out,

This method of determining, from the standpoint of the labour-process alone, what is productive labour, is by no means directly applicable to the case of the capitalist process of production.” (Note 2, p 176)

That is because his definition of Productive Labour under Capitalism is quite different and specific, being defined in terms of productive not of Value, but of Surplus Value.

Though a use-value, in the form of a product, issues from the labour-process, yet other use-values, products of previous labour, enter into it as means of production. The same-use-value is both the product of a previous process, and a means of production in a later process. Products are therefore not only results, but also essential conditions of labour.” ( p 176-7)

Apart from the extractive industries, all industry is involved in the manipulation of raw material, i.e. products of Nature that have already been the subject of labour to extract it. Even with agriculture this is the case. Current domesticated livestock is the product of millennia of purposeful human labour to breed into it specific characteristics. Today, with the introduction of even greater scientific advances in genetics and bio-engineering that is even more the case. The same is true with seed and plant selection in arable farming. Of course, the products derived from this raw material may themselves form raw material for some further products. For example, wool can be spun into yarn, which is then weaved into cloth, which is made into a coat.

Raw material may be the main component or substance of a product, or it may be just an accessory to a process. For example, oil may be required to lubricate the workings of a machine, that is itself part of the productive process. Coal may be required to fuel a boiler that provides a steam engine with its power, to keep other machines working; or it might be mixed with the main substance to bring about some chemical change, e.g. “chlorine into unbleached linen”; or it could simply assist in enabling work to take place, e.g. providing heating and lighting in a workshop. As Marx says,

The distinction between principal substance and accessory vanishes in the true chemical industries, because there none of the raw material re-appears, in its original composition, in the substance of the product.” (p 177)

As described in Chapter 1, products have a range of Use Values. Corn can be an end product, or it can be raw material “for millers, starch manufacturers, distillers and cattle breeders. It also enters as raw material into its own production in the shape of seed; coal, too, is at the same time the product of, and a means of production in, coal-mining.”

Cattle are both raw material and a provider of manure. Other products may only be usable as raw material i.e. they only have any Use Value as substance of some other product. Marx cites “cotton, thread and yarn”.

Hence we see, that whether a use-value is to be regarded as raw material, as instrument of labour, or as product, this is determined entirely by its function in the labour-process, by the position it there occupies: as this varies, so does its character.” (p 178)

What is a product for one labour process and producer appears as substance or instrument of labour for another. The more Division of Labour develops, the more this is the case.

In the finished product the labour by means of which it has acquired its useful qualities is not palpable, has apparently vanished.” (p 178)

All of the means of production are useless unless they are acted upon by living labour, and will in fact deteriorate without it.

Iron rusts and wood rots. Yarn with which we neither weave nor knit, is cotton wasted. Living labour must seize upon these things and rouse them from their death-sleep, change them from mere possible use-values into real and effective ones. Bathed in the fire of labour, appropriated as part and parcel of labour’s organism, and, as it were, made alive for the performance of their functions in the process, they are in truth consumed, but consumed with a purpose, as elementary constituents of new use-values, of new products, ever ready as means of subsistence for individual consumption, or as means of production for some new labour-process.” (p 178)

Marx adopts a slightly different emphasis in Capital to that he took in the Grundrisse. In the Grundrisse he describes Production as consumption, and Consumption as production. So, for example, the worker in consuming food, shelter etc. at the same time produces his own labour-power. Labour in consuming the means of Production, produces new Use values. Whereas in Capital, he writes,

Labour uses up its material factors, its subject and its instruments, consumes them, and is therefore a process of consumption. Such productive consumption is distinguished from individual consumption by this, that the latter uses up products, as means of subsistence for the living individual; the former, as means whereby alone, labour, the labour-power of the living individual, is enabled to act. The product, therefore, of individual consumption, is the consumer himself; the result of productive consumption, is a product distinct from the consumer...

The labour-process, resolved as above into its simple elementary factors, is human action with a view to the production of use-values, appropriation of natural substances to human requirements; it is the necessary condition for effecting exchange of matter between man and Nature; it is the everlasting Nature-imposed condition of human existence, and therefore is independent of every social phase of that existence, or rather, is common to every such phase. It was, therefore, not necessary to represent our labourer in connexion with other labourers; man and his labour on one side, Nature and its materials on the other, sufficed. As the taste of the porridge does not tell you who grew the oats, no more does this simple process tell you of itself what are the social conditions under which it is taking place, whether under the slave-owner’s brutal lash, or the anxious eye of the capitalist, whether Cincinnatus carries it on in tilling his modest farm or a savage in killing wild animals with stones.” (p 179)

There are two characteristics of the labour process now under the capitalist that can be observed. Firstly, the worker works under the control of the capitalist not himself. The control of the capitalist ensures the work is done properly, that the means of production are used intelligently, that there is no waste and undue wear and tear etc. Of course, such control and supervision is not necessary where the worker directly owns the means of production themselves.

Secondly, although the worker is the producer of the product, he is not its owner. It belongs to the capitalist. The capitalist has bought the commodity labour-power for a day, and has the right thereby to use it for a day, just as if they had hired a horse for a day. For the capitalist, the labour process is “nothing more than the consumption of the commodity purchased, i. e., of labour-power; but this consumption cannot be effected except by supplying the labour-power with the means of production. The labour-process is a process between things that the capitalist has purchased, things that have become his property. The product of this process belongs, therefore, to him, just as much as does the wine which is the product of a process of fermentation completed in his cellar.” (p 180)