The Law Of The Tendency For The Rate of Profit To Fall - Part 54

Effects On The Rate of Industrial Profit (3)

There is another consequence of the rise in the social productivity of capital, which although it does not increase the general annual rate of profit, does increase the amount of industrial profit available for reinvestment. In Capital II, Marx emphasises that within expanded reproduction of capital, simple reproduction continues to constitute the major part. That is, the majority of the reproduction must necessarily be the reproduction of the existing constant and variable capital. The addition of new capital to it, is only ever a fraction of this existing capital-value.

But, simple reproduction remains important for another reason. That is that the capitalists themselves have to consume in order to survive. Although, the process of concentration and centralisation of capital, means that the number of capitalists relatively falls, Marx also sets out that, particularly during certain periods, the absolute number of capitalists increases. An increased number of capitalists means that the quantity of their unproductive consumption necessarily rises. Moreover, Marx notes that although industrial capitalists were initially marked by their tendency to minimise their unproductive consumption, in order to maximise their accumulation, and in Capital III, he again emphasises that the point of capitalist production is the generation of surplus value and accumulation, not increased consumption by capitalists, increasingly capitalists become torn by this need, and their desire to emulate the conspicuous consumption of previous ruling classes. Even if the proportion of surplus value they devote to accumulation rises compared to that devoted to unproductive consumption, therefore, as the mass of surplus value rises, so the absolute amount of surplus value devoted to unproductive consumption rises inexorably.

The figures provided by Thomas Picketty, and others, recently, in respect of the vast disparity in inequality of wealth and income, are an indication of the extent to which that has occurred. The wealth of the super rich today is so vast that their unproductive consumption, on things such as luxury yachts, aeroplanes, private islands etc., is way in excess of that of any previous ruling class in history, and yet barely touches even their income let alone their wealth.

As Marx points out, therefore, to the extent that the rise in social productivity reduces the value of all those commodities bought by the capitalists, be they essentials or luxury commodities, the smaller the proportion of the surplus value do they have to expend to obtain any given quantity of these commodities. They can maintain or extend their living standard, at lower cost, and thereby retain a larger proportion of the realised surplus value for accumulation.

Back To Part 53

Forward To Part 55