Monday, 21 July 2014

The Law Of The Tendency For The Rate of Profit To Fall - Part 25

Fall In the Value Of The Variable Capital (9)

As Marx sets out in Capital I, there are two ways in which the introduction of new technology and techniques result in a rise in relative surplus value. Firstly, for an individual capital, if it introduces such new methods, ahead of others, it sells into the market at prices below the market price but above its own individual price of production. It thereby obtains an additional surplus value. It is as though the value of the product of an hour of its workers' labour represents more than the product of an hour of the labour of its competitors' workers, i.e. it is as if this labour stood in the same relation as does complex to simple labour. As Marx points out, this applies also when comparing the capital of a developed and developing economy. This is a point important for further discussion.

The second way that relative surplus value is produced is that the value of wage goods is reduced, by the rise in productivity, so the value of labour-power falls, leaving a greater portion of the working day available as surplus labour. It is this process which reduces the value of commodities in general and which also reduces the quantity of surplus value in each individual commodity, whilst increasing the mass of surplus value.

“Everything that promotes the production of relative surplus-value by mere improvement in methods, as in agriculture, without altering the magnitude of the invested capital, has the same effect. The constant capital, it is true, does not, in such cases, increase in relation to the variable, inasmuch as we regard the variable capital as an index of the amount of labour-power employed, but the mass of the product does increase in proportion to the labour-power employed. The same occurs, if the productiveness of labour (no matter, whether its product goes into the labourer's consumption or into the elements of constant capital) is freed from hindrances in communications, from arbitrary or other restrictions which have become obstacles in the course of time; from fetters of all kinds, without directly affecting the ratio of variable to constant capital.” (Capital III, Chapter 14, p 233)

In other words, these means raise the rate of surplus value without requiring that more fixed capital is employed to raise productivity or resulting in more materials being processed by a given quantity of labour. The clearer example that Marx gives is the repeal of the Corn Laws. By removing such restrictions, the price of food was reduced, which, in turn, reduced the value of labour power, which meant the rate of exploitation could rise. The same amount of labour continued to process the same amount of material as before, but the surplus value was higher resulting in a higher rate of profit.

Anything such as the creation of the EU, or removal of other barriers, which improve free trade, and thereby reduce the cost of wage goods, equally act to raise the rate of surplus value and of profit. As Marx pointed out, with the repeal of the Corn Laws, a lot of other tariffs were abolished , which reduced the prices of other imported materials that constituted constant capital.

“The rise in the rate of surplus-value is a factor which determines the mass of surplus-value, and hence also the rate of profit, for it takes place especially under conditions, in which, as we have previously seen, the constant capital is either not increased at all, or not proportionately increased, in relation to the variable capital. This factor does not abolish the general law. But it causes that law to act rather as a tendency, i.e., as a law whose absolute action is checked, retarded, and weakened, by counteracting circumstances. But since the same influences which raise the rate of surplus-value (even a lengthening of the working-time is a result of large-scale industry) tend to decrease the labour-power employed by a certain capital, it follows that they also tend to reduce the rate of profit and to retard this reduction.” (Capital III, Chapter 14, p 234-5)

The mass of surplus value always tends to rise because the number of workers employed always tends to rise absolutely, even if it declines relative to the total capital, and also because even with a constant number of workers, the rate of surplus value tends to rise. But, whether this rising mass of surplus value results in a rising rate of profit depends upon its relation to the total capital employed.

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