Effect of the Time of Turnover on the Magnitude of Advanced Capital
The effect
of different rates of turnover of capital has been touched upon
previously. In the next two chapters, Marx goes into the effects in
more detail. The consequences of changes in the rate of turnover is
often ignored by economists. That is a big mistake, as Marx
demonstrates. It is especially a mistake, today, when rapid
technological, and methodological, changes bring about significant
reductions in both the time of production and time of circulation.
Marx begins
with an example that includes several simplifying assumptions. So,
he takes a commodity where the wear and tear of fixed capital is
excluded, and where also surplus value is excluded. In other words,
the value of the commodity is made up entirely of circulating capital. That is a certain amount of constant capital, in the form
of raw and auxiliary materials, and a certain amount of variable capital, i.e. labour-power.
The time of
production is nine weeks, and each week £100 is consumed in constant
and variable capital. So, the value of the commodity is £900. It
doesn't matter whether this is a single commodity, such as a
carriage, or whether it is a batch of some identical commodities e.g.
10,000 metres of linen, provided it is sold in one bundle.
But, in
addition to the production time, this commodity also requires three
weeks time of circulation. It doesn't matter whether this is because
that is how long it takes to sell, on average, or because it is the
transit time, or because it is the time to receive payment.
What does
matter is that it requires this additional three weeks before money
is available from the sale to be used to buy replacement productive capital. So, the total turnover time is 12 weeks. The capital
required to ensure continuous production, therefore, is not £900,
but £1,200. Marx examines other alternatives.
Firstly, at
the end of nine weeks, production could cease for three weeks, until
payment was made and replacement productive capital bought. But,
capitalist production is based on continuous production. Money laid
out, on fixed capital, would lie fallow during this period, if
production was not occurring, and it would be depreciating in value.
Alternatively,
the firm could spread its £900 capital over the twelve weeks,
spending £75 a week, instead of £100. But, this reduction, in the
scale of production, may not be possible. Firstly, using existing
fixed capital for a shorter period of the day, or less intensively,
is not really any different from it lying idle for three weeks. It
will still be depreciating in value, because that is a function of
time not use. But, its productivity will fall because it will
produce a smaller output in a given time. Secondly, it may simply be
too inefficient to use the fixed capital on such a reduced basis.
Finally, it may not be possible to get round this by reducing the
fixed capital. In Volume I, it was demonstrated that a minimum size
of business is established, for each industry, below which production
cannot be efficiently undertaken. The more capital develops, the
larger that minimum size of business becomes.
Marx also
excluded, for the purpose of this simplifying example, other
extraneous circumstances. For example, if raw material prices rise,
after the commodity has been sent to market, its value will not
reflect that, and its sale will not make possible the reproduction of
the productive capital. So, less material and labour-power would
then be bought.
Similarly,
if markets are overstocked, market prices will fall below exchange values/prices of production, and so the productive capital will not
be reproduced. By contrast, in a boom, market prices may rise above
exchange value/price of production, and so there will be a surfeit of
circulating capital that will be used to cover employment of
additional workers, over-time, purchase of additional materials,
employment of spare fixed capital and so on.
For
simplicity, Marx assumes that production and circulation proceed on a
regular and uniform basis.
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