## Monday, 19 May 2014

### 3) The Turnover of the Variable Capital from the Social Point of View

Suppose A and B each employ 100 workers. They are paid £1 per week, making up the £100, laid out as capital by both. The workers work 10 hours a day, 6 days a week, for 50 weeks, making 300,000 hours worked for both A and B, 600,000 hours in total for society.

However, A's workers were paid £500 out of A's capital. Moreover, as stated previously, in order to use these wages, to buy means of subsistence, the latter must exist. If, as in the case previously cited, where the workers produced and consumed potatoes, the workers are paid in advance, the capitalist would need to have a store of potatoes available to give them, before they started work. If they are paid a week in arrears, they must produce enough, in that week, to cover their consumption, or else again the capitalist must have a sufficient stock to meet their needs.

The fact that they are paid in money rather than potatoes does not change this fundamental requirement. If 100 workers work 6,000 hours in the week, and are paid £100, they will, in this time, produce an output worth £200, which is, let us say, 200 kilos of potatoes. They require 100 kilos per week, to reproduce their labour power. They spend their £100 of wages buying these 100 kilos of potatoes, leaving the other 100 kilos, worth £100, in the hands of the capitalist.

In the case of capitalist A, he must have a money-capital of £500 available to pay as wages, because his product requires, not 1 week, but 5 weeks, to produce and sell. But, once the second 5 week turnover period begins, what the worker receives, in wages, is not new capital, advanced by capitalist A, but only his own value returned to him.

To return to the potato example, the capitalist advances 100 kilos of potatoes, to the workers, for the first week, as wages, to sustain them. But, during that week, they produce 200 kilos of potatoes. What the capitalist provides them with, in week 2, therefore, is only 100 kilos of the very same potatoes the workers had themselves produced the previous week! That 100 kilos was the value of their labour-power, expended during that week, and reproduced in the value of their output, alongside the surplus value. What they have received back is only their own value.  Its important to understand, however, the difference between the position of the variable capital and the constant capital here, and not to understand the value of the variable capital, reproduced in the value of the end product, as in some way simply a transfer of the value of the labour-power.  The labour-power does not transfer its value to the product, in the way that the constant capital does.  In determining the value of the commodity, it is not comprised of the value of the constant capital, plus the variable capital plus the surplus value. That was the mistake that Adam Smith made, in viewing the value of the commodity back to front, as made up of these factor costs.  It is rather comprised of the value of the constant capital transferred to it, plus the new value created by labour.  The factor costs, revenues, are then derived out of this value.

The labour-power creates NEW value, equal to the labour it performs.  It is conceivable, therefore, under some exceptional conditions, that, if the value of labour-power is very high, the new value created could be less than the value of the labour-power, used in its production, resulting in negative surplus value, i.e. losses. For example, suppose workers work for 10 hours per day, and thereby create 10 hours of new value. However, because of a crop failure, for example, the price of the food they require soars, so that it requires 12 hours of labour per day to cover the subsistence needs of the worker.  The worker will continue to be creating 10 hours of new value per day, but the value of their labour-power will have risen to 12 hours, leaving the employing capital with a daily loss equal to 2 hours.  The capitalist will see at the end of the period that their capital has shrunk rather than grown.

Suppose, a farmer has constant capital in the form of seeds equal to 10 tons.  They are planted by his workers, who as with the potatoes above, are also paid in kind, with 10 tons of grain held as variable capital by the capitalist.  The workers undertake a year's labour, but due to a crop failure, only 15 tons of grain is harvested.  Whilst the capitalist started out with a capital of 20 tons of grain, at the end of the year, he has a capital of only 15 tons.  Their commodity was not sufficient, to reproduce the constant capital of 10 tons, and the variable capital of 10 tons, consumed in its production. Although the workers had produced new value, this new value was not enough, because of the crop failure, to reproduce the value of their labour-power, leaving the capitalist with a loss equal to 5 tons of grain.  He would either have to inject additional capital, to buy additional grain, or else would have to reduce the scale of his operation.  Instead of his capital self-expanding, it would have contracted.

Marx does not generally analyse such a situation, because the condition for capital as a whole is that workers not only produce this positive new value, but this positive new value is greater than the value of their labour-power, so that it also produces a surplus value on top of it.

The same is true where the worker is paid money wages. After the first turnover period, the value of their labour-power is realised in the value of the commodity they produce. The money form of that value, simply returns to them as wages.

But, for B, the turnover period is a year. After 5 weeks, the labour-power has created new value that has been transferred into commodity-capital, but has not been realised. So, when B's workers receive their wages after week 5, it is not a return of their own value, but the advance of new additional capital. B's workers cannot receive a return of their own value until the end of the year, when the product is sold. Then, its sale reproduces the value of the labour-power consumed in its production, so that the variable capital then exists to pay wages for the next year.

“The shorter the period of turnover of capital — the shorter therefore the intervals at which it is reproduced throughout the year — the quicker is the variable portion of the capital, originally advanced by the capitalist in the form of money, transformed into the money-form of the value (including, besides, surplus-value) created by the labourer to replace this variable capital; the shorter is the time for which the capitalist must advance money out of his own funds, and the smaller is the capital advanced by him in general in proportion to the given scale of production; and the greater comparatively is the quantity of surplus-value which he extracts during the year with a given rate of surplus-value, because he can buy the labourer so much more frequently with the money-form of the value created by that labourer and can so much more frequently set his labour into motion again.” (p 317)

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