Thursday, 14 August 2014

The Law of The Tendency For The Rate of Profit To Fall - Part 31

Fall In the Value Of The Variable Capital (15)

The precondition for a fall in the value of variable capital, other than where it is due to a rise in absolute surplus value, is a rise in social productivity. That is true whether the fall in the value is due to a relative decline in the quantity of labour employed (rise in the technical composition of capital) or due to a fall in the value of labour-power (rise in the rate of surplus value). In fact, both of these, as Marx sets out, are simply different sides of the same coin. The means by which this is achieved is technological development. New machines and techniques are introduced, which raises the productivity of both fixed capital and labour, so that a greater quantity of use values are produced in a given amount of time.

In Part 28, a table was presented demonstrating the contradictory impact of this process. Up to a point, the rise in productivity causes the rate of surplus value to rise at such a rate as to more than offset the relative fall in the quantity of variable capital employed, so that the rate of profit rises, despite a rising organic composition of capital. However, at very high organic compositions, the rise in the rate of surplus value is no longer able to achieve this, and the rate of profit falls. This essentially is the point that Marx is making when he talks about,

“Two labourers, each working 12 hours daily, cannot produce the same mass of surplus-value as 24 who work only 2 hours, even if they could live on air and hence did not have to work for themselves at all.”

It is not that this rise in productivity brings this about by an actual decline in the quantity of labour employed, but that the increase becomes increasingly smaller relative to the increase in output. This illustrates another problem with the discussion on the “Rate of Profit”, mentioned at the start of this series of posts. That is the different definitions of “Rate of Profit”. In some ways its a bit harsh to criticise Marx for this problem, although the root of the problem resides with the different definitions used in Capital III itself. We should remember that Capital II, and III were compiled by Engels on the basis of the notebooks left by Marx. The material for Capital II, was fairly complete, and the analysis of the difference between the “real” rate of surplus value, and the annual rate of surplus value, is correspondingly extensive and robust. But, Engels points out that this was not the case with Capital III, which is why he had to provide a lot of the material himself, as well as correcting some of the mathematical mistakes in Marx's manuscripts.

Engels comments that, had Marx lived longer, he would undoubtedly have written far more extensively on a number of these important issues. But, Engels himself admits that by the time he was compiling Capital III, he was himself being hampered by failing eyesight, and an inability to concentrate for long periods of time. The result is that some of the analysis of these fundamental concepts is not pursued to the extent it should be, and so there are gaps and apparent contradictions between the use of terms like “Rate of Profit”, as its used in one place compared with how it is used in another.

For example, in describing the process of formation of a general rate of profit, Marx makes clear that the surplus value must be measured against the advanced productive-capital.

“The rate of profit must be calculated by measuring the mass of produced and realised surplus-value not only in relation to the consumed portion of capital reappearing in the commodities, but also to this part plus that portion of unconsumed but applied capital which continues to operate in production. However, the mass of profit cannot be equal to anything but the mass of profit or surplus-value, contained in the commodities themselves, and to be realised by their sale.”

Capital III, Chapter 13 

The advanced productive-capital is what is used in one turnover period. It includes, therefore, the total fixed capital, which must be present and advanced in its entirety, even though it is only its wear and tear that is transferred to the end product. But, although Marx makes this clear in relation to the fixed capital, which thereby turns over only partially during the year, he does not make this distinction in relation to the circulating capital, in these examples. The implication then is that the circulating capital turns over only once during the year, and so is equal to the laid-out capital. In that case, the “Rate of Profit” here is equal to the Annual Rate of Profit.

I will continue the explanation of why these differences in definitions of the “Rate of Profit” are important in Part 32.

No comments: