Thursday, 17 October 2013

Capital II, Chapter 8 - Part 7

2) Components, Replacements, Repairs and Accumulation of Fixed Capital

The various degrees of fixed capital, even employed in the same factory, have different turnover periods, because they each have different lifespans. On a railway, the track and rolling stock wear out most quickly, whereas the station buildings, viaducts, tunnels etc. will last centuries provided they are maintained and repaired.

“Originally in the construction of modern railways it was the prevailing opinion, nursed by the most prominent practical engineers, that a railway would last a century and that the wear and tear of the rails was so imperceptible that it could be ignored for all financial and other practical purposes; 100 to 150 years was supposed to be the life of good rails. But it was soon found that the life of a rail, which naturally depends on the speed of the locomotives, the weight and number of trains, the diameter of the rails, and on a multitude of other attendant circumstances, did not exceed an average of 20 years. In some railway terminals, great traffic centres, the rails even wear out every year.” (p 172-3)

Capital then seeks means of extending this lifespan, particularly where technological change has shortened it via increase of wear and tear. For example, iron rails were replaced by more durable steel rails.

In addition to the reduction in use value, caused by wear and tear, the fixed capital could also experience a reduction in its use value as a result of depreciation. For example, wooden sleepers could rot due to exposure to the elements irrespective of the amount of use. Fixed capital, in particular, suffers from the moral depreciation described in Volume I. That is that even when it has suffered no actual diminution in its original use value, its relative use value can be diminished as a consequence of new better versions of itself being introduced. In addition, it can suffer such moral depreciation where the exact same machine can be produced at a significantly lower cost as a result of increases in productivity.

“The instruments of labour are largely modified all the time by the progress of industry. Hence they are not replaced in their original, but in their modified form. On the one hand the mass of the fixed capital invested in a certain bodily form and endowed in that form with a certain average life constitutes one reason for the only gradual pace of the introduction of new machinery, etc., and therefore an obstacle to the rapid general introduction of improved instruments of labour. On the other hand competition compels the replacement of the old instruments of labour by new ones before the expiration of their natural life, especially when decisive changes occur. Such premature renewals of factory equipment on a rather large social scale are mainly enforced by catastrophes or crises.” (p 174)

For some forms of fixed capital, such as horses, their duration is more or less fixed by nature. You cannot replace a horse bit by bit. But, other forms of fixed capital are similar. For example, you can replace bits of a bridge that have worn out, but, if developments in bridge technology have occurred, you cannot generally replace a worn out piece of a bridge of one type with a replacement piece of a new type.

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