Thursday, 28 February 2013

Capital I, Chapter 24 - Part 4


The proportion in which surplus-value breaks up into capital and revenue being given, the magnitude of the capital accumulated clearly depends on the absolute magnitude of the surplus-value. Suppose that 80 per cent. were capitalised and 20 per cent. eaten up, the accumulated capital will be £2,400 or £200, according as the total surplus-value has amounted to £3,000 or £500. Hence all the circumstances that determine the mass of surplus-value operate to determine the magnitude of the accumulation. We sum them up once again, but only in so far as they afford new points of view in regard to accumulation.” (p 561)

The rate of surplus value is determined primarily by the degree of exploitation of labour. Assuming workers are paid the value of their labour power, this can only be increased by lengthening the working-day, making the working day more intensive (both of which we have seen have limits), or else by reducing the value of labour-power, thereby increasing relative surplus value.

But, in practice, the lowering of wages below the value of labour-power, also plays an important part.

It, in fact, transforms, within certain limits, the labourer’s necessary consumption fund into a fund for the accumulation of capital.” (p 562)

As a consequence, all other things being equal, (which we know they are not) capital will always seek to lower wages to the minimum. Today, that means that capital will seek to locate its activities to where the labour it requires can be had at the lowest price e.g. China, Vietnam, India, Indonesia and Africa. That means this presses down on wages elsewhere, as Marx pointed out.

Today, thanks to the competition on the world-market, established since then, we have advanced much further. “If China,” says Mr. Stapleton, M.P., to his constituents, “should become a great manufacturing country, I do not see how the manufacturing population of Europe could sustain the contest without descending to the level of their competitors.” (Times, Sept. 3, 1873, p. 8.) The wished-for goal of English capital is no longer Continental wages but Chinese.” (Note 2, p 563)

In order to achieve these reductions, all sorts of methods were adopted by capital, particularly in its youth. It led to all those abuses discussed earlier, as workers sought to compensate for their scant and reduced wages, by buying the cheapest food, thereby encouraging the supply of cheap but adulterated food. Today, workers are led into the grasp of the usurers, charging 4000% interest on pay day loans, to make up for the fact that in competition with Chinese wages, their own wages have remained stagnant.  The other effect has been the continuation of the process of adulteration of food, as with horse meat, to cheapen it, once again illustrating the important role that Co-operative production, distribution and consumer testing continues to have in protecting workers.

Today, also, as in Marx’s day, the bad employers get away with reducing wages below the value of labour power, and force other workers to make up the difference, in transfers through the tax and benefits system.

At the end of the 18th and during the first ten years of the 19th century, the English farmers and landlords enforced the absolute minimum of wage, by paying the agricultural labourers less than the minimum in the form of wages, and the remainder in the shape of parochial relief.” (p 563-4)

Marx then looks at the effect on constant capital. The instruments of labour have to be efficient for the number of workers to work with them. But, increased production resulting from accumulation does not necessarily mean they have to be increased in the same proportion.

In a factory, suppose that 100 labourers working 8 hours a day yield 800 working-hours. If the capitalist wishes to raise this sum by one half, he can employ 50 more workers; but then he must also advance more capital, not merely for wages, but for instruments of labour. But he might also let the 100 labourers work 12 hours instead of 8, and then the instruments of labour already to hand would be enough. These would then simply be more rapidly consumed. Thus additional labour, begotten of the greater tension of labour-power, can augment surplus-product and surplus-value (i.e., the subject-matter of accumulation), without corresponding augmentation in the constant part of capital.” (p 565)

If two workers are employed simultaneously to operate milling machines
two machines are needed.  But, if the same worker simply works more hours,
 or if two workers work the same machine on a shift system, only the
one machine is needed, reducing the amount of capital that has to be laid out.
The additional use will mean the machine wears out more quickly but not
at a proportional rate.
Being picky this could be challenged. Suppose we take a three year period. Assume 100 tools which last 1.5 years, so over 3 years, 200 tools are required. If the number of workers rises to 150 then the number of tools is 300 over three years. If the workers remains at 100, but they work 50% longer then, other things being equal, the tools will wear out 50% quicker. Instead of lasting 1.5 years, they will last only 1 year. So, over 3 years, once again 300 tools have to be provided.

In practice, Marx is right, however, because for most tools, being used 50% more will not mean they wear out proportionately quicker. This is particularly significant in the extractive industries like mining where increased production does not involve the purchase of additional raw material to be worked up. Here, almost all the constant capital is made up of the instruments of labour. So, the hours of labour can be increased, labour intensity can be increased, shift systems can be introduced, which result in increased output, but involve no significant increase in constant capital, either in the form of raw materials, or instruments of labour.

A similar thing applies in agriculture. Increased output requires additional constant capital in the form of raw materials (seed, fertiliser etc) but no additional instruments of labour. The workers can simply work with the existing implements for longer or work more intensively.

Finally, in what is called manufacturing industry, every additional expenditure of labour presupposes a corresponding additional expenditure of raw materials, but not necessarily of instruments of labour. And as extractive industry and agriculture supply manufacturing industry with its raw materials and those of its instruments of labour, the additional product the former have created without additional advance of capital, tells also in favour of the latter.” (p 565-6)

When the Corn Laws were abolished a whole range of
other tariffs on imported raw materials like cotton were
also abolished.  The fall in food prices meant less had to be
spent on wages, as the Value of Labour Power fell, but the fall
in the price of Constant Capital, meant that more of it could be
bought for less money, still leaving over Capital to employ more
Labour Power to process it.  This raises the Rate of Profit, and
the volume of profit, and thereby Accumulation.
The point here is not that the saving in additional constant capital produces more surplus value. We have established that constant capital only transfers its value to the end product. Whether capital has to lay out a lot or a little for constant capital does not affect the amount of surplus value. But, the extent to which capital has to expend surplus value in replacing or adding to constant capital does have an important consequence for the rate of profit, and, therefore the rate at which capital can expand! The less capital has to expend on constant capital, the larger the proportion of surplus value, capital can expend on additional labour-power, which does determine the amount of surplus value produced.

A further factor is the rising productivity of social labour. The more productive labour becomes, the more use values are produced, and the cheaper each of these use values becomes. If the rate of surplus value remains the same, the total amount of surplus product increases. So, in terms of physical quantities, of use values, the capitalist could both consume more luxury goods, and yet still be able to accumulate more capital.

As Marx sets out, the Technical Composition of Capital
determines the amount of Labour Power required to
process or work with a given physical amount of
 Constant Capital.  With any given Technical Composition
 of Capital then, the volume of Surplus Value can only
 rise if more labour-power is exploited, which in turn means
 the physical amount of constant capital must also increase.
  If the Value of Constant Capital e.g. cotton falls, more
 can be bought for the same amount, leaving capital
left over to buy more labour-power.  In Value terms,
 Constant Capital could fall, whilst accumulation rises.
  It only makes sense to understand
 accumulation in physical rather than Value terms.
Incidentally, this deals, in part with the arguments of the proponents of the TSSI, which seeks to define accumulation in value rather than physical terms.

By the same token, the capitalist could increase their consumption without accumulation falling and vice versa.

Moreover, even if the rate of surplus value is falling, this can still be the case provided the productivity is rising faster than the rate of surplus value is falling.

For example,

C 1000 + V 1000 + S 1000 = E 3000 = 3000 units.

Suppose these units of output can be equally consumed by the capitalists or used for accumulation. Suppose productivity rises by 50%, so 4500 units are produced, whilst the rate of surplus value falls from 100% to 75%.


C 1000 + V 1000 + S 750 = E 2750 = 4500 units.

If capital divides the surplus equally between consumption and accumulation, then previously the surplus product was 1000 units, divided into 500 consumption and 500 accumulation. Now, however, the surplus product amounts to 750 x 1.5 = 1125 units, divided 562.5 consumption, and 562.5 accumulation.

Things don't stop there. Along with the rise in productivity goes the reduction in the value of labour power, as the workers necessaries are cheapened. That means that the rate of surplus value rises through Relative Surplus Value.

In the 1950's and during the Long Wave Boom,
 the Value of Labour-Power fell, as Fordism raised
 the productivity of labour massively.  Each year
 wages were able to buy more, cheaper (in real
 i.e. inflation adjusted terms) commodities.
  So real wages rose.  But, the percentage rise
 in wages was less than the increase in productivity,
 so surplus value increased relative to wages,
 bringing about an increased Rate of
 Surplus Value, and for a time, increased
 Rate of Profit.
But hand-in-hand with the increasing productivity of labour, goes, as we have seen, the cheapening of the labourer, therefore a higher rate of surplus-value, even when the real wages are rising. The latter never rise proportionally to the productive power of labour. The same value in variable capital therefore sets in movement more labour-power, and, therefore, more labour. The same value in constant capital is embodied in more means of production, i.e., in more instruments of labour, materials of labour and auxiliary materials; it therefore also supplies more elements for the production both of use value and of value, and with these more absorbers of labour. The value of the additional capital, therefore, remaining the same or even diminishing, accelerated accumulation still takes place. Not only does the scale of reproduction materially extend, but the production of surplus-value increases more rapidly than the value of the additional capital.” (p 566)

By the same token, this rise in productivity has an effect on the instruments of labour. That is the constant capital that is fixed capital being consumed only gradually over a period. Every so often, a portion of these machines wear out and have to be replaced. From the time these machines were originally bought, increases in productivity mean that the replacement machine will be cheaper than the original. Frequently, also, the replacement machine will not only be cheaper, but will be better and more productive than the original because of technological improvements incorporated in it.

Every advance in Chemistry not only multiplies the number of useful materials and the useful applications of those already known, thus extending with the growth of capital its sphere of investment. It teaches at the same time how to throw the excrements of the processes of production and consumption back again into the circle of the process of reproduction, and thus, without any previous outlay of capital, creates new matter for capital. Like the increased exploitation of natural wealth by the mere increase in the tension of labour-power, science and technology give capital a power of expansion independent of the given magnitude of the capital actually functioning. They react at the same time on that part of the original capital which has entered upon its stage of renewal. This, in passing into its new shape, incorporates gratis the social advance made while its old shape was being used up. Of course, this development of productive power is accompanied by a partial depreciation of functioning capital. So far as this depreciation makes itself acutely felt in competition, the burden falls on the labourer, in the increased exploitation of whom the capitalist looks for his indemnification.” (p 567)

As the productivity of labour rises, the new value created by it in a given time remains the same, but the volume of constant capital in raw material it processes increases. If the value of each unit of this raw material remains constant, the proportion of value accounted for by the constant capital compared to labour rises. That is true even though the intensity with which the workers work remains the same or may even fall.

An English and a Chinese spinner, e.g., may work the same number of hours with the same intensity; then they will both in a week create equal values. But in spite of this equality, an immense difference will obtain between the value of the week’s product of the Englishman, who works with a mighty automaton, and that of the Chinaman, who has but a spinning-wheel. In the same time as the Chinaman spins one pound of cotton, the Englishman spins several hundreds of pounds. A sum, many hundred times as great, of old values swells the value of his product, in which those re-appear in a new, useful form, and can thus function anew as capital.

In 1782,” as Frederick Engels teaches us, “all the wool crop in England of the three preceding years, lay untouched for want of labourers, and so it must have lain, if newly invented machinery had not come to its aid and spun it.”

Labour embodied in the form of machinery of course did not directly force into life a single man, but it made it possible for a smaller number of labourers, with the addition of relatively less living labour, not only to consume the wool productively, and put into it new value, but to preserve in the form of yarn, &c., its old value.” (p 567-8)

As the physical quantity of capital increases with the accumulation of capital, labour acts both to preserve its value, and to enhance it.

With the increase of capital, the difference between the capital employed and the capital consumed increases. In other words, there is increase in the value and the material mass of the instruments of labour, such as buildings, machinery, drain-pipes, working-cattle, apparatus of every kind that function for a longer or shorter time in processes of production constantly repeated, or that serve for the attainment of particular useful effects, whilst they themselves only gradually wear out, therefore only lose their value piecemeal, therefore transfer that value to the product only bit by bit. In the same proportion as these instruments of labour serve as product-formers without adding value to the product, i.e., in the same proportion as they are wholly employed but only partly consumed, they perform, as we saw earlier, the same gratuitous service as the natural forces, water, steam, air, electricity, etc. This gratuitous service of past labour, when seized and filled with a soul by living labour, increases with the advancing stages of accumulation.” (p 569)

The bourgeois economists are quick to praise the power of capital embodied in physical equipment, but they fail to point out that this capital is only the result of past labour and that in two senses. Firstly, that it was produced by living labour, and secondly that the capitalist is only able to accumulate it as a result of the surplus value created by his own workers.

Yet, despite the fact that this capital is the product of workers they are so in awe of this capital that “... according to the Scotch genius MacCulloch, ought to receive a special remuneration in the shape of interest, profit, etc.” (p 569)

In other words, the productive assistance, to current living labour that the product of past labour affords it, in the shape of machines and other instruments of labour, is not assigned to the labour that made it possible, but to capital.

With a given degree of exploitation of labour-power, the mass of the surplus-value produced is determined by the number of workers simultaneously exploited; and this corresponds, although in varying proportions, with the magnitude of the capital. The more, therefore, capital increases by means of successive accumulations, the more does the sum of the value increase that is divided into consumption fund and accumulation fund. The capitalist can, therefore, live a more jolly life, and at the same time show more “abstinence.” And, finally, all the springs of production act with greater elasticity, the more its scale extends with the mass of the capital advanced.” (p 570)

Back To Part 3

Forward To Part 5


Unknown said...

Hi Boffy. Just been doing chapter 24 in our Capital 1 reading group. I think your critique that Marx might be wrong about the device of making workers work longer instead of hiring more workers means not as much constant capital (basically because each worker only needs 1 shovel etc) proportionately is misplaced- the point is that should the tools wear out quicker that means they will have transferred their value to the finished product quicker- and the capitalist would have recouped that in sales. So there is no extra outlay on capital in buying the new shovel etc. Is that right?

Boffy said...

Hi Martin,

Thanks for the query. If the constant capital wears out in proportion to the time it is used - which is the base line that Marx assumes even though both he and I state that in practice, of course it never does - then for the reasons I have set out, the amount of constant capital laid-out has to be the same in both cases.

However, for reasons I set out later including in my recent post on "Advanced Capital", the capital laid out, i.e. consumed, is not the same as the Capital Advanced.

So, for the reason you state Capital Advanced, i.e. the productive-capital actually consumed in the production process, of one turnover is always much smaller than the capital laid-out, because as you state, the advanced capital is fully consumed in the production process of the turnover period, and thereby returned once the commodity-capital is realised, and the money-capital from the proceeds used to reproduce the consumed productive-capital.

But, generally speaking, instruments of labour are fixed capital not circulating-capital. In other words they are not fully consumed in the production process, and only a portion of their value is transformed, and realised in the sale of the end product.

In fact, in theory, because of this, the money equivalent of this capital-value then has to be held in a stagnant form as a money hoard, until such time as the fixed capital is completely worn out, and has to be replaced.

The effect of reducing the amount of constant capital advanced is not to affect the amount of produced surplus value - though as Marx sets out in Capital III Ch. 6, and in Theories of Surplus Value, it can affect the amount of realised surplus value, because where rising costs cause rising market prices, elasticity of demand can cause market resistance cutting demand, so sellers have to cut market prices, thereby absorbing some of the higher cost of materials etc. out of surplus value - but is to affect the Rate of Profit, because p' is calculated on the basis of advanced capital not laid out capital.

However, as Marx sets out in Capital III, the calculation of p' is made not just on the value of capital advanced to production - circulating capital - but also the fixed capital which must be present for production to take place.

In effect, the value of the fixed capital is advanced each time it is replaced in toto. If the fixed capital would normally have been replaced after 6 years, but as a consequence of increased use it has to be advanced after 4 years that is the same as if more capital had been advanced.

The way to visualise that would be to take the time for the fixed capital to be completely worn out as being the turnover period, and calculate the rate of profit over that period.

Boffy said...


It occurred to me later that in trying to provide you with a more comprehensive answer, I might have made it more confusing.

The point I was making in the original post was that "If you wanted to be picky", Marx's comment about less tools being required is wrong. Over a given period, the quantity of tools worn out is the same, as I set out.

This is the quantity of physical capital - and therefore, its value - laid out (consumed).

The question of whether capital obtains a benefit from wearing out the tools faster is a different question. In essence it is determined by the rate of turnover, which is the point you were making, and as I said, which I have covered later in separate posts, and which I cover in dealing with Capital II, and III.

If more intensive use goes along with raising the rate of turnover then because, as you say the advanced capital returns faster this raises the rate of profit.

Its prompted me, however, to do a post with some worked examples of the effect on the rate of profit of various scenarios with more tools used, faster wear, the same and different turnover periods etc., because as Marx found out sometimes when you do the maths, you get different results from those you were expecting.

Can't say when the post will appear, because I am snowed under with things to write at the minute, but hopefully not too long.

I hope all these pots are helping with your Capital reading group.