The Law Of The Tendency For The Rate Of Profit To Fall - Part 22

Fall In the Value Of The Variable Capital (6)

The value of the variable capital may fall because workers face a pay cut. In Capital III, Chapter 14, Marx writes,

“This is mentioned here only empirically, since, like many other things which might be enumerated, it has nothing to do with the general analysis of capital, but belongs in an analysis of competition, which is not presented in this work. However, it is one of the most important factors checking the tendency of the rate of profit to fall.” (p 235)

The reason Marx makes this comment is that, as set out elsewhere, the basis of the analysis is an assumption that exchanges occur on the basis of values/prices of production, so that the actual day to day cheating etc., that explains the particular profits of this or that capital is ignored, in providing an overall theoretical understanding of the workings of the system.

Moreover, as with any other market price, falls below the market value at one point are compensated by rises above it at another. Its possible to depress wages below the value of labour-power for a time, but not persistently. If wages fall below the value of labour-power, for prolonged periods, the supply of labour-power will decline, either quantitatively or qualitatively. Workers will emigrate, work less productively (either intentionally or because they have been intellectually and/or physically degraded), and so on. Capital may have to expend more resources on supervision etc. and the end result will be falling rates of surplus value. In addition, if low wages for a time result in higher rates of surplus value, this may result in increased accumulation, leading to increased demand for labour-power, pushing wages higher again.

Wages will tend to fall below the value of labour-power during periods of stagnation, when the mass of profit is not rising rapidly, and when the reserve army presses down on the employed workers. In periods of rapid growth, and technological change, the demand for labour-power will cause wages to rise above the value of labour-power.

On the other hand, wages may fall, because the value of labour-power is reduced. As set out earlier, the fall in the value of labour-power is itself a necessary corollary of the same process, which creates a tendency for the rate of profit to fall. In other words, the same process of a rise in the social productivity of labour causes the value of wage goods to fall. This fall in the value of labour-power then acts to increase the rate of profit in two ways. Firstly, the rate of profit is measured by s/c+v. If v falls, therefore, then s/c+v must rise. Secondly, both s and v are components of the new value created by labour. A rise in one involves a fall in the other. But, then a fall in v causing a rise in s, means that s/c+v rises.

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