Capital II, Chapter 9 - Part 3

“As the magnitude of the value and the durability of the applied fixed capital develop with the development of the capitalist mode of production, the lifetime of industry and of industrial capital lengthens in each particular field of investment to a period of many years, say of ten years on an average. Whereas the development of fixed capital extends the length of this life on the one hand it is shortened on the other by the continuous revolution in the means of production, which likewise incessantly gains momentum with the development of the capitalist mode of production. This involves a change in the means of production and the necessity of their constant replacement, on account of moral depreciation, long before they expire physically. One may assume that in the essential branches of modern industry this life-cycle now averages ten years. However we are not concerned here with the exact figure. This much is evident: the cycle of interconnected turnovers embracing a number of years, in which capital is held fast by its fixed constituent part, furnishes a material basis for the periodic crises. During this cycle business undergoes successive periods of depression, medium activity, precipitancy, crisis. True, periods in which capital is invested differ greatly and far from coincide in time. But a crisis always forms the starting-point of large new investments. Therefore, from the point of view of society as a whole, more or less, a new material basis for the next turnover cycle.” (p 188-9)

Kondratiev

Marx is dealing here with the normal business cycle, but, on a similar basis, Marx also did some preliminary analysis of the role of the much larger and longer-term investments in fixed capital, that affect a longer cycle that today we refer to as the Long Wave. At the same time, changes in the structure of capital, and the role today of technology, such as the microchip, means that a shorter 3 year cycle has developed, linked to the upgrade cycle for these base technologies.

As described previously, some of the circulating capital, in the form of raw material and auxiliary materials, has to be held in the form of a stock, in order that production can proceed continuously. So, although in a week, a workforce of 100 may transform 10,000 kilos of cotton into yarn, the capitalist may buy in 100,000 kilos, so a capital value equal to 10,000 kilos is advanced each week, whilst the balance of the 100,000 is held as a stock.

Marx describes how these differences of when payments were made for wages, materials etc. were confused by some economists, for turnover periods. It is not the different periods over which such payments are made that determines the turnover-time, however, but the time required for the advanced capital-value to be returned to its money form, and thence to the reproduction of the advanced productive capital. For example, workers may be paid monthly in arrears, but the goods they produce may be completed and sold on a daily basis.

This illustrates another mistake of the TSSI, which fetishises money-capital. The rate of profit, as Marx sets it out, is calculated on the advanced capital value of the productive capital, not as the TSSI proposes on the historical payment of monetary amounts. So, where here the workers are paid a month in arrears, no monetary payment has, in fact been made. Yet, an amount of capital-value has been advanced in the form of the variable capital, consumed in the production of commodities. If Variable Capital of £100 per day is advanced, then over a month a total of £3000 will have been laid out as variable capital, and will have been metamorphosed first into commodity-capital, and then into money-capital, possibly completing several such turnovers, even before any actual payment of wages is made at the end of the month!

The fact that a certain amount of cotton is held in stock does not change the turnover-time of the advanced capital-value, because that continues to proceed through the production process and circulation process as before. If £10,000 was advanced in the form of cotton, and is enough to last 10 weeks, then in the intervening 9 weeks, no capital for additional cotton is required. The advanced capital each week continues to be £1,000, and each week, that £1,000 is returned in money form as the yarn is sold.  As with the advance of variable capital, the advance of constant capital for the cotton here, Marx makes clear, is the advance of capital value, not the actual payment of money-capital. As with wages, the particular capitalist may only make actual payment for the purchased materials long after the capital value of those materials has been advanced in production, and gone through its turnover.

Similarly, where production requires that the product be left to mature, for example wine fermenting, the fact that labour is not being expended during this period does not mean that the labour expended on its production, is not still stuck in the production and circulation process. The turnover of the labour cannot be completed until the product itself is sold.

That is one reason why credit is introduced and plays an important role in removing those obstacles.

“The credit system, to which Scrope here refers, as well as commercial capital, modifies the turnover for the individual capitalist. On a social scale it modifies the turnover only in so far as it does not accelerate merely production but also consumption.” (p 192)

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