Tuesday, 27 August 2013

Capital II, Chapter 6 - Part 5

II. Costs of Storage

(a) Formation of Supply in General

Commodity-capital constitutes supply in the market. It appears in a dual role. Firstly, as commodity-capital, in the shape of end products waiting to be sold. But, for some other capital these end products may also be means of production.

“It is, indeed, possible that this last-named commodity-capital is not produced until ordered. In that event an interruption occurs until it has been produced. But the flow of the process of production and reproduction requires that a certain mass of commodities (means of production) should always be in the market, should therefore form a supply. Productive capital likewise comprises the purchase of labour-power, and the money-form is here only the value-form of the means of subsistence, the greater part of which the labourer must find at hand in the market.” (p 140)

The commodity-capital in the form of end products needs to be sold as quickly as possible because any delay represents an interruption in the conversion of this capital into money, and from there into the reproduction of productive capital. Moreover, as previously described, all commodities have a limited shelf life in circulation before they lose use value and with it exchange value.

At the same time, commodity-capital in the shape of means of production always needs to be available in the market or else it will cause a delay in the reproduction of productive capital.

“The abidance of the commodity-capital as a commodity-supply in the market requires buildings, stores, storage places, warehouses, in other words, an expenditure of constant capital; furthermore the payment of labour-power for placing the commodities in storage. Besides, commodities spoil and are exposed to the injurious influences of the elements. Additional capital must be invested, partly in instruments of labour, in material form, and partly in labour-power to protect the commodities against the above.” (p 141)

The importance of this was seen in the USSR. Its agriculture was frequently plagued by the fact that whereas large amounts of resources were devoted to producing tractors, fertiliser etc. not enough was spent on storage facilities, and transport. Consequently, large amounts of value was destroyed as crops rotted after being harvested.

These costs are not costs of production, but of circulation. Viewed from the standpoint of society, these costs do not crate additional social wealth i.e. they do not create additional value, but they are not the same as the costs of circulation previously described. They simply enabled commodity value in one form to be transformed from one form to another via exchange.

However, these costs of storage etc. do enter into the value of the particular commodities involved, to the extent that they increase their prices. In a sense they are like the waste cotton dust that is inevitably involved in producing yarn. In reality what this represents is that although social wealth has not been increased by the need to produce these storage facilities, by the expenditure of social labour-time, society has to compensate the capitalists that built them. It represents a transfer of value from other capitalists.

Marx gives the analogy of insurance. Where capitalists take out insurance against losses caused by fire, the insurance itself does not create one bit of additional value for society. However, if any particular capitalist does suffer a loss due to fire, the insurance compensates them for it. That compensation does not come out of nowhere. It is a transfer from other capitalists, who have paid out insurance premiums to cover themselves for such eventualities.

The same applies here. The grain supplier does not add value to the grain by storing it in a silo. But doing so is necessary insurance against it being destroyed. That necessary cost increases the price of the grain, and the addition is made possible by a transfer of value from other capitals.

“At all events the capital and labour-power which serve the need of preserving and storing the commodity-supply are withdrawn from the direct process of production. On the other hand the capitals thus employed, including labour-power as a constituent of capital, must be replaced out of the social product. Their expenditure has therefore the effect of diminishing the productive power of labour, so that a greater amount of capital and labour is required to obtain a particular useful effect. They are unproductive costs.” (p 141-2)

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