Tuesday, 22 October 2013

Capital II, Chapter 8 - Part 8

The repair and replacement of worn out capital is not the same as accumulation of capital. The value of the former has been passed into the end product, and is thereby reproduced in a fund to cover the repair or replacement. The accumulation of capital arises out of the surplus labour, provided by the workers.  But, because fixed capital wears out gradually, and the value it transfers to the end product becomes accumulated in a reserve fund, the money in this fund, clearly can be used for other purposes in the intervening period, before it is required to replace the fixed capital. In other words, it can be used to buy additional machines etc., thereby expanding production.

The value of wear and tear of fixed capital is transferred
gradually into the commodities they help produce.  That
value accumulates in money form as a depreciation fund.
But, in the meantime, such funds can also be used to buy
instead additional equipment, particularly where newer, cheaper
equipment becomes available.  So, production can be expanded
even without the re-investment of surplus-value.
“This part of the value of the fixed capital transformed into money may serve to extend the business or to make improvements in the machinery which will increase the efficiency of the latter. Thus reproduction takes place in larger or smaller periods of time, and this is, from the standpoint of society, reproduction on an enlarged scale — extensive if the means of production is extended; intensive if the means of production is made more effective. This reproduction on an extended scale does not result from accumulation — transformation of surplus-value into capital — but from the reconversion of the value which has branched off, detached itself in the form of money from the body of the fixed capital into new additional or at least more effective fixed capital of the same kind.” (p 175)

To what extent this can occur depends upon the type of business, and type of fixed capital. For example, a business that has a lot of very durable fixed capital will not want to allow increasing amounts of money-capital to lie fallow, perhaps for decades, waiting for the day when it is needed to replace that fixed capital. It can be seen why the development of banking, of an efficient credit system, and particularly of limited liability companies, is useful, for capital, in this respect, because these money funds can then be more effectively used, as capital, in a range of productive functions.

But, prior to the development of these socialised forms of capital, the individual private capitalist, in such circumstances, is led to use such funds to extend their own operations. That applies, for example, to buildings.

In Bangladesh, the desire to use available money to
invest in productive-capacity, led to workers being killed
by the collapse of an inadequate building.  This kind
of event is typical of capital in its early stages.
“This depends largely on the available space. In the case of some buildings additional storeys may be built; in the case of others lateral extension, hence more land, is required. Within capitalist production there is on the one side much waste of material, on the other much impracticable lateral extension of this sort (partly to the injury of the labour-power) in the gradual expansion of the business, because nothing is undertaken according to a social plan, but everything depends on the infinitely different conditions, means, etc., with which the individual capitalist operates. This results in a great waste of the productive forces. 

This piecemeal reinvestment of the money reserve fund (i.e., of that part of the fixed capital which has been reconverted into money) is easiest in agriculture. A field of production of a given area is here capable of the greatest possible gradual absorption of capital. The same applies to where there is natural reproduction as in cattle breeding.” (p 176)

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