Monday, 6 October 2014

The Law Of The Tendency For The Rate of Profit To Fall - Part 46

The Rise In The Rate of Turnover (11) 

Merchant capital produces no surplus value, it only shares in the surplus value produced by productive capital. This seems to create a contradiction in relation to the labour-power employed by commercial capital. If merchant capital produces no surplus value, how can it extract surplus value from the labour-power it employs?

The answer was given by Marx in the quote cited in Part 45. Merchant Capital does not produce surplus value, but it does realise it. The commercial worker's labour is the means by which that surplus value is realised on behalf of the merchant capital. If the general annual rate of profit is 10%, and Merchant Capital of £10 million is advanced, then £1 million of profit is available to be realised. It cannot be realised without the expenditure of labour-power. If the capital advanced to employ this labour-power is say £100,000, then it will have realised surplus value ten times what it has cost the merchant capital to achieve it.

But, as with the rate of turnover of variable capital in general, the more rapidly the capital turns over, the more labour-power is actually employed, for any given quantity of variable capital advanced. As the quantity of commodity-capital to be circulated expands exponentially, the commercial capital required to circulate it expands greatly in absolute terms, but much less in relative terms. On the one hand, the economies of scale typical of all capital come into play, but secondly, the massive increase in the volume of circulation, brings with it an increase in the velocity of circulation. The individual shop worker in a 1950's corner shop, would typically have to work all week, before the volume of sales brought about the reproduction of their labour-power. By contrast, the shop worker in TESCO, probably reproduces the value of their labour-power within a matter of one or two hours at most. In other words, the variable capital that TESCO has to advance is a fraction of that which previously would have been the case, because the volume of sales, and revenue obtained, is so great, that every few hours enough money is taken in to cover wages, so this does not have to be advanced out of capital.

The consequence of this high rate of turnover of the variable capital, is that the annual rate of surplus value is raised considerably. Unlike, the productive-worker, this high rate of surplus value does not result in an increased volume of surplus value for the reasons described earlier. The total volume of surplus value is limited by the general annual rate of surplus value, and the mass of merchant capital advanced. The higher the rate of turnover, therefore, as stated earlier, the greater the volume of commodities circulated, and consequently the lower the profit margin per commodity unit. But, for that very reason, this huge absolute expansion of merchant capital, which at the same time results in a relative reduction in the capital advanced, has the effect both of reducing final product prices, because of lower profit margins, and of raising the general annual rate of profit, because it brings about a relative reduction in the total capital advanced.

But, merchant capital, is not just about the selling of commodities. It is also about money-dealing capital, because the circulation of money-capital also imposes costs on capital in general. As with the circulation of commodities, although this activity does not create any additional surplus value, it does act by reducing necessary costs etc. to increase the realised surplus value as profits. Ultimately, it is the profit that capital can actually realise, not the surplus value that has only been theoretically produced that is determinant for capital. Although, the vast expansion of the financial services industry over recent decades, does not create any additional surplus value, by reducing the costs of financial transactions, by providing a range of financial products that increase the profits actually realised and so on, the effect is the same.

If I am involved in some business that has various risks, for example, shipping where the ship may sink, it doesn't really matter to me whether my profit rises, because more surplus value has been produced by some means, or whether it rises, because the cost of insuring against those risks has been reduced, for example. Nor, indeed, does it matter for the total social capital. The greater the surplus value actually realised, the greater the value available for accumulation, the greater the actual rate of profit.

With global financial transactions running into trillions of dollars, it is obvious then why although this money-dealing capital does not produce additional surplus value, it can increase the amount of realised profit massively, and thereby increase the rate of profit. The amount of surplus value that can be realised by such means is huge compared to the variable capital that has to be advanced to realise it. As with many other similar such activities, this explains why very high salaries for some can still be combined with high rates of annual surplus value, and high rates of profit.

But, as Marx makes clear, these high wages are one reason that capital introduces various means to reduce the value of this labour-power. The welfare state was one such means, as it introduces Fordist mass production techniques into the production of the kind of educated labour-power that capital increasingly requires for these functions. As Marx puts it,

“The commercial worker, in the strict sense of the term, belongs to the better-paid class of wage-workers — to those whose labour is classed as skilled and stands above average labour. Yet the wage tends to fall, even in relation to average labour, with the advance of the capitalist mode of production. This is due partly to the division of labour in the office, implying a one-sided development of the labour capacity, the cost of which does not fall entirely on the capitalist, since the labourer's skill develops by itself through the exercise of his function, and all the more rapidly as division of labour makes it more one-sided. Secondly, because the necessary training, knowledge of commercial practices, languages, etc., is more and more rapidly, easily, universally and cheaply reproduced with the progress of science and public education the more the capitalist mode of production directs teaching methods, etc., towards practical purposes. The universality of public education enables capitalists to recruit such labourers from classes that formerly had no access to such trades and were accustomed to a lower standard of living. Moreover, this increases supply, and hence competition. With few exceptions, the labour-power of these people is therefore devaluated with the progress of capitalist production. Their wage falls, while their labour capacity increases.” 

(Capital III, Chapter 17)

No comments: