Tuesday, 20 May 2014

The Law of The Tendency For The Rate of Profit To Fall - Part 9

A Rise In The Mass Of Capital and Profit (2)

In Part 7, it was demonstrated how a rise in the organic composition, brought about by technological change, results in the creation of a relative surplus population. Improved machines, were able to process the same quantity of materials, with just one ninth of the previously employed workers, or put another way, if the same quantity of machines and workers are employed, then nine times the previous quantity of material is processed. But, this same process means that the rate of turnover of capital rises nine-fold, a given quantity of output is produced in a ninth of the time. Consequently, the circulating capital turns over faster, and it was seen that as a result of this process, £8,000 of advanced capital, equal to the variable capital of the eight workers replaced, was released.

But, as Marx says, particularly in periods of rapid technological change, new lines of production are being established all the time. And Marx comments,

“...new lines of production are opened up, especially for the production of luxuries, and it is these that take as their basis this relative over-population, often set free in other lines of production through the increase of their constant capital. These new lines start out predominantly with living labour, and by degrees pass through the same evolution as the other lines of production. In either case the variable capital makes up a considerable portion of the total capital and wages are below the average, so that both the rate and mass of surplus-value in these lines of production are unusually high. Since the general rate of profit is formed by levelling the rates of profit in the individual branches of production, however, the same factor which brings about the tendency in the rate of profit to fall, again produces a counterbalance to this tendency and more or less paralyses its effects.” (Capital III, Chapter 14 p 237)

Its precisely because in these new lines of production it is variable capital which makes up a considerable portion of the total capital, that any given quantity of capital employs a larger number of workers than would be the case were the capital employed elsewhere. That also means that in these new lines, this low organic composition of capital leads to a much higher than average rate of profit, which in turn impacts the aggregate social organic composition of capital, and rate of profit. But, this also impacts the further accumulation of capital.

The basis of this process is fairly straightforward, and flows from what Marx has already outlined. The tendency for the rate of profit to fall arises from the growing social productivity of labour, such that a given mass of labour processes a growing mass of material. But, within this process, a growing mass of profit leads to a growing total mass of capital, including a growing mass of variable capital. But, within each industry, there comes a point where the falling rate of profit creates strong incentives for its own expanding mass of profit to be used not for the further expansion of that industry, but to be utilised in the creation of some new industry. Marx described this centrifugal tendency of capital counteracting the tendency towards further concentration and centralisation in Capital I.

The process of reproduction within the industry ensures that it continues to be able to reproduce its own variable and constant capital, so that it is able to continue to produce on at least the same scale. But, suppose the percentage organic composition of capital in this industry is 80 c: 20 v. Then, each £1,000 of profit will employ four times the value of constant capital as variable capital, £800 to £200. But, suppose the available surplus value is used to invest in some new line of production, where the organic composition is instead 20 c : 80 v. Now, for every £1,000 of surplus value invested, £800 is invested in living labour, and only £200 in buying constant capital. In short the same amount of surplus value employs four times as much labour-power as if it was invested in the previous line of business. This is a powerful force, soaking up the relative overpopulation “freed” from the previous occupation. What is more, the surplus value produced in the original industry continues to be pumped out, in equally large masses each year, and is thereby available for investment in this new industry year after year. Moreover, in this new industry, with the same rate of surplus value, this lower organic composition of capital produces itself proportionately larger amounts of surplus value.

For every £1,000 invested in the old industry, only £200 of surplus value is produced, with a 100% rate of surplus value, But, in the new industry, £1,000 of investment produces £800 of surplus value. As Marx describes, this much higher rate of profit, in the new industry, thereby acts increasingly to raise the average rate of profit. This process, whereby the released capital employs the relative surplus population in these new industries, is also the process by which these new industries validate the capital in the old industries. This process by which ever new use values are being developed, also means that the living standards of workers must continually rise – taking into consideration temporary fluctuations. At the same time this process transforms the nature of labour itself, as will be described later. It it what Marx calls the “Civilising Mission of Capital”.

“On the other side, the production of relative surplus value, i.e. production of surplus value based on the increase and development of the productive forces, requires the production of new consumption; requires that the consuming circle within circulation expands as did the productive circle previously. Firstly quantitative expansion of existing consumption; secondly: creation of new needs by propagating existing ones in a wide circle; thirdly: production of new needs and discovery and creation of new use values. In other words, so that the surplus labour gained does not remain a merely quantitative surplus, but rather constantly increases the circle of qualitative differences within labour (hence of surplus labour), makes it more diverse, more internally differentiated. For example, if, through a doubling of productive force, a capital of 50 can now do what a capital of 100 did before, so that a capital of 50 and the necessary labour corresponding to it become free, then, for the capital and labour which have been set free, a new, qualitatively different branch of production must be created, which satisfies and brings forth a new need. The value of the old industry is preserved by the creation of the fund for a new one in which the relation of capital and labour posits itself in a new form. Hence exploration of all of nature in order to discover new, useful qualities in things; universal exchange of the products of all alien climates and lands; new (artificial) preparation of natural objects, by which they are given new use values. The exploration of the earth in all directions, to discover new things of use as well as new useful qualities of the old; such as new qualities of them as raw materials etc.; the development, hence, of the natural sciences to their highest point; likewise the discovery, creation and satisfaction of new needs arising from society itself; the cultivation of all the qualities of the social human being, production of the same in a form as rich as possible in needs, because rich in qualities and relations -- production of this being as the most total and universal possible social product, for, in order to take gratification in a many-sided way, he must be capable of many pleasures [genussfähig], hence cultured to a high degree -- is likewise a condition of production founded on capital. This creation of new branches of production, i.e. of qualitatively new surplus time, is not merely the division of labour, but is rather the creation, separate from a given production, of labour with a new use value; the development of a constantly expanding and more comprehensive system of different kinds of labour, different kinds of production, to which a constantly expanding and constantly enriched system of needs corresponds.”

No comments: