Thursday, 5 September 2013

Capital II, Chapter 6 - Part 8

These characteristics of capitalist circulation are then a consequence of the nature of capitalist production itself.

But, as previously described, all societies need to set aside some social labour-time, not just to producing commodities, but to preserving them after production. It does not add to the value of social production, but is a necessary cost to it. Capitalist production, because it so massively increases output, and because a greater portion of this output is held in the form of commodity-capital, waiting to be sold, increases in absolute terms, the need for such expenditure. On the other hand, because capitalism so massively increases output, the relative costs of storage etc. can fall. It can fall also because greater numbers of consumers are packed together in towns and cities, creating large accessible markets. Finally, the same increases in productivity that capitalism brings about in production generally, brings about the same kind of benefits in reducing the costs of providing buildings and other forms of storage.

“If the capitalist has converted the capital advanced by him in the form of means of production and labour-power into a product, into a definite quantity of commodities ready for sale, and these commodities remain in stock unsold, then we have a case of not only the stagnation of the process of self-expansion of his capital-value during this period. The costs of preserving this supply in buildings, of additional labour, etc., mean a positive loss. The buyer he would ultimately find would laugh in his face if he were to say to him: 'I could not sell my goods for six months, and their preservation during that period did not only keep so and so much of my capital idle, but also cost me so and so much extra expense.' “Tant pis pour vous!” the buyer would say. 'Right here alongside of you is another seller whose wares were completed only the day before yesterday. Your articles are shop-worn and probably more or less damaged by the ravages of time. Therefore you will have to sell cheaper than your competitor.'” (p 148)

The capitalist, therefore, has an incentive to minimise these costs by minimising the time the commodities are in circulation. That reduces the costs of storage etc. and speeds up the time that can be reproduced as productive capital.

It doesn't matter whether this supply, in the form of a stock of commodity-capital is voluntary or involuntary, in this respect. A voluntary supply arises because the seller recognises the need to keep on hand a certain level of stock to meet anticipated demand. An involuntary supply arises when actual demand is less than anticipated demand. So, when economic data shows an increase in inventories occurred, this can be either a sign of economic health or weakness. It can reflect producers and sellers anticipating an increase in demand – voluntary supply – or it can reflect the fact that commodities were left unsold – involuntary supply.

If we take potatoes being sold on a market stall, the seller knows that they will not all be sold at once when they open the stall. They expect the number of buyers to accumulate over the course of the day. So, their supply for the day must be sufficient to last the whole day. A proportion of the supply remains stagnant through the day until it is sold, whilst another and increasing part becomes fluid as it is sold and converted into money.

The stall holder also has to have a supply for the day which is larger than the average day's demand, because otherwise they will not have sufficient supply to cover those days when demand is above average, which would mean losing income.

So, a stagnant supply is also a necessary condition for sale. But, the sales from that supply must also be replaced so that sales can continue on another day. It doesn't matter where these replacements come from, but its obvious that their origin can only be in production. The stall holder might obtain them from another retailer, a wholesaler, from nearby or from the other side of the globe, but they can only arise because they have been produced. The fact that they are in the hands of another retailer or wholesaler only means they have passed through additional hands.

But, as indicated previously, different commodities have different times of production. Some commodities take minutes to produce and others years. In order to ensure that these different types of commodities are continuously available, in the market, different levels of supply are needed.

“The producer tries to keep a stock corresponding to his average demand in order not to depend directly on production and to ensure for himself a steady clientele. Purchase periods corresponding to the periods of production are formed and the commodities constitute supplies for longer or shorter time, until they can be replaced by new commodities of the same kind. Constancy and continuity of the process of circulation, and therefore of the process of reproduction, which includes the process of circulation, are safeguarded only by the formation of such supplies.” (p 150)

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