Monday, 8 September 2014

The Law Of The Tendency For The Rate of Profit To Fall - Part 37

The Rise In The Rate of Turnover (2)

Changes in productivity continuously operate to improve the speed of circulation of capital, just as they operate to improve the speed of production. As in production, those changes are not smooth, and do not affect all areas of circulation at the same time. Circulation covers, both the transport (although transport is itself a productive activity) of goods and services to consumers, be they productive or unproductive consumers, as well as the receipt of payments. Circulation may be speeded up by improvements in transport or in payments systems, for instance.

In the last few decades there has been continual changes in both areas, as well as revolutionary changes in both. Take, for example, in the transport of commodities. A major shift was the introduction of containerisation. Like many such innovations, containerisation was not new. It goes back, at least, to late 18th century coal mines in Britain. But, like the take up of any such innovation, it really only takes off, when other economic factors come together, to make it a suitable solution, to resolve the existing problems. Containerisation slashed the cost of transport, and, at the same time, massively increased the speed of shipments.

According to this World Bank Report , using data from the McKinsey Report, the productivity in 1965 of dock labour (prior to containerisation) was 1.7 tons per hour. Post containerisation, in 1970, that had risen to 30 tons per hour. The average ship size went from 8.4 GRT to 19.4 GRT, insurance costs fell from £0.24 to £0.04, and capital tied up in transit halved from £2 per ton to £1 per ton. Today, 90% of goods are transported by container, in an integrated road, rail and sea system. As the report suggests, the reduction in cost and increase in speed has also had a significant effect in stimulating the circulation of commodity-capital in the process.

This is perhaps one of the most notable increases in transport productivity, but it should not be missed that alongside it many more such improvements continually occur, for example, in increasing the size of carriers, improvements in speeds of carriers, development of additional road and other transport networks and so on. Moreover, alongside these physical improvements in transport speed, through technological development come others. For example, the development of common markets across the globe has speeded up the movement of goods and services by the removal of various legal barriers. The introduction of the Shengen Agreement in Europe, means that time spent at border crossings has been slashed. Even, things such as the introduction of Satellite Navigation systems, has acted to speed up deliveries.

But, changes in production have also acted to speed up circulation. The introduction of flexible specialisation systems, alongside the introduction of Just In Time, means that the suppliers of the large companies operating such systems, have themselves to introduce similar systems, in order to be able to provide the guarantees to customers that they will be able to provide the inputs of the right type, quality, and in the necessary quantity, at short notice, to be delivered precisely when required. This means that the quantity of commodity-capital at any one time lying fallow is reduced.

The point made by Engels, about the effect of faster circulation times to the US and India, reducing the explosive potential for crises, is multiplied, in the speed up of circulation, which these systems imply, and these are just part of a much larger planning framework, to ensure that outputs are geared closely, to match changing consumer requirements, and that inputs are geared to match the needs of those changing outputs. The system runs from the modern EPOS systems, used by retailers, which link immediately to their huge warehouse systems, which, in turn, are increasingly connected to the computer systems of their suppliers, to automatically generate new orders for re-supply. The huge evolution in ICT systems, and in the Internet means that this has moved on significantly even from when Simon Clarke wrote in 1990,

“Indeed it would be fair to say that the sphere of planning in capitalism is much more extensive than it is in the command economies of the soviet bloc. The scope and scale of planning in giant corporations like Ford, Toyota, GEC or ICI dwarfs that of most, if not all, of the Soviet Ministries. The extent of co-ordination through cartels, trade associations, national governments and international organisations makes Gosplan look like an amateur in the planning game. The scale of the information flows which underpin the stock control and ordering of a single Western retail chain are probably greater than those which support the entire Soviet planning system.”

Capital and Class, Winter 1990

But, it is probably in the realm of the Internet, where the effect on speeding up the circulation period is greatest, in this respect.  An indication of that is again provided in this report by McKinsey.

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