Friday, 16 May 2014

The Law of The Tendency For The Rate of Profit To Fall - Part 8

A Rise In The Mass Of Capital and Profit (1)

In Part 6, it was demonstrated how the very process that lies behind the rise in the organic composition of capital, and the tendency for the rate of profit to fall, the rise in social productivity, consequent upon technological change, causes fixed capital to fall as a proportion of the laid-out capital, but to rise as a proportion of the advanced capital, and this is a reflection of the increase in the rate of turnover of capital, which this same process brings about. That very same process, brings about not a fall, but a rise in the annual rate of profit, and the process also releases advanced capital. In the example, given £8,000, of the original £27,000 of advanced capital, was released, or 29.63% of the original advanced capital. This released advanced capital is then free to be invested either in further accumulation in existing lines of production, or else in new lines of production. Either way, the consequence is to increase the mass of capital mobilised during the year. It is this process that Marx outlines as a necessary corollary of the tendency for the rate of profit to fall, which thereby produces not just an increase in the mass of capital, but also an increase in the mass of profit itself. In turn, this increased mass of profit facilitates accumulation, on an even more extended scale, and this, in turn, also raises the level of social productivity.

“The fall in commodity-prices and the rise in the mass of profit on the augmented mass of these cheapened commodities is, in fact, but another expression for the law of the falling rate of profit attended by a simultaneously increasing mass of profit.” (Capital III, Chapter 13, p 231)

Some of this new investment, particularly by capital in new lines of production, will be in new types of technology, not generally adopted, and this capital will enjoy above average profits, in the period before these new methods are adopted, and before additional capital has entered these new lines, so as to bring about an average rate of profit.

Those capitalists who operate with the latest technology and techniques, but which have not yet been widely adopted, as was seen in Capital I, are able to sell at a market price above their individual price of production, and thereby to obtain a profit above the average until such time as competition reduces it.

“During this equalisation period the second requisite, expansion of the invested capital, makes its appearance. According to the degree of this expansion the capitalist will be able to employ a part of his former labourers, actually perhaps all of them, or even more, under the new conditions, and hence to produce the same, or a greater, mass of profit.” (Capital III, Chapter 13, p 231) 

The basis of this, as was suggested earlier, is that the increased productivity of the new machine, reduces the turnover period for the particular capital. That results in a release of capital. But, if the released capital is used to buy additional machines, or simply to replace the existing number of machines with their improved equivalent, this can be achieved without any rise in the advanced circulating capital. All that happens, as will be shown later, is that the circulating capital, advanced for materials and labour-power, is advanced for a shorter period of time, due to the rise in the rate of turnover. The capitals that adopt this technique earlier, capture more market share, so that any subsequent over-production, affects those capitals worst that had not adopted the new technique. They are the ones who go bust, and whose capital then gets reallocated to other activities.

The rise in the mass of profit even as the rate of profit is falling was described earlier.

“The number of labourers employed by capital, hence the absolute mass of the labour set in motion by it, and therefore the absolute mass of surplus-labour absorbed by it, the mass of the surplus-value produced by it, and therefore the absolute mass of the profit produced by it, can, consequently, increase, and increase progressively, in spite of the progressive drop in the rate of profit. And this not only can be so. Aside from temporary fluctuations it must be so, on the basis of capitalist production.” (Capital III, Chapter 13 p 218) 

In fact, the process of capitalist production is inconceivable without this growing mass of capital, and of profits, i.e. without accumulation. But, this very process of accumulation is also filled with dialectical contradictions. The mass of use values, be they means of production or means of consumption, that need simply to be reproduced, in order that society should maintain its current level of production and consumption, continues to grow larger.

In order that capital can be accumulated, additional labour-power must be employed. Given any existing technical composition of capital, the quantity of labour to be employed, is not determined by the value of the means of production, but only by its physical quantity.

“And the additional labour, through whose appropriation this additional wealth can be reconverted into capital, does not depend on the value, but on the mass of these means of production (including means of subsistence), because in the production process the labourers have nothing to do with the value, but with the use-value, of the means of production.” (ibid p 218)

But, the value of the means of production and consumption continue to fall, because of that same law of the increasing productivity of social labour that stands behind the fall in the rate of profit. As the value of means of production falls, so any given amount of surplus value can accumulate more of them, and so the demand for additional labour-power rises. As the value of means of consumption falls, so the rate of surplus value rises, so that more surplus value is available for accumulation.

“Accumulation itself, however, and the concentration of capital that goes with it, is a material means of increasing productiveness.” (ibid p 218)

“It therefore follows of itself from the nature of the capitalist process of accumulation, which is but one facet of the capitalist production process, that the increased mass of means of production that is to be converted into capital always finds a correspondingly increased, even excessive, exploitable worker population. As the process of production and accumulation advances therefore, the mass of available and appropriated surplus-labour, and hence the absolute mass of profit appropriated by the social capital, must grow.” (ibid p 218-9)

This conclusion is the same as that developed in Capital I, that as productivity rises, which brings about increased accumulation, which in turn brings about increased productivity, so capital must, other things being equal, expand by increasing amounts in order to employ the same quantity of labour-power.

“Consequently, the possibility of a relative surplus of labouring people develops proportionately to the advances made by capitalist production not because the productiveness of social labour decreases, but because it increases. It does not therefore arise out of an absolute disproportion between labour and the means of subsistence, or the means for the production of these means of subsistence, but out of a disproportion occasioned by capitalist exploitation of labour, a disproportion between the progressive growth of capital and its relatively shrinking need for an increasing population.” (ibid p 222) 

But, its precisely because this process of creating a relative surplus population arising from the growth of social productivity arises as the other side of an equivalent release of advanced capital, that enables new lines of production, as well as accumulation to proceed. The consequences of the development of this relative surplus population will be addressed separately later, but its worth looking briefly at some of them.

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