Wednesday, 8 October 2014

The Law Of The Tendency For The Rate of Profit To Fall - Part 47

The Creation Of New Industries (1)

The tendency for the rate of profit to fall is based on the rise of social productivity, which means that a given quantity of labour can process an increased volume of material. This is made possible due to continued technological development. For so long as this results in an increasing supply of use values that find available markets, this process can continue to result in an increased mass of capital, that grows the more rapidly as this rising productivity creates rising masses of profits, that are accumulated. The relative proportion of labour-power falls, but its absolute mass rises. This relative fall in labour-power means that despite countervailing forces, such as a higher rate of surplus value, a reduction in the value of constant capital and so on, there is an overall tendency for profit margins to fall. However, because the rise in productivity means that the rate of turnover of capital rises, the general annual rate of profit rises, because increasing masses of surplus value are produced, whilst the advanced capital grows by a smaller proportion than the growth in the mass of surplus value, produced by a rapidly growing mass of laid-out capital.

However, there necessarily comes a point, for any industry, where finding additional markets, for the volume of use values produced, becomes increasingly problematic. Where this happens, for any industry, in conditions where the expansion of production has already reduced profit margins, within it, to very low levels, this creates the potential for crises to erupt; where it exists across a number of major industries, it creates the potential for a generalised crisis of over production. This is only an extension of the process that occurred, in the transition from feudalism, by which capital first engaged in production in those industries with low organic compositions of capital, and where, therefore, higher rates of profit were possible, and as a steadily increased supply of these commodities gradually resulted in lower rates of profit, then saw capital move on to some new industry that offered the prospect of higher profits.

In this initial process of industrialisation, capital faced virgin territory everywhere, but in the shape of existing commodities whose production it could simply take over. As it entered each new industry, the revenues produced, in that industry, formed demand for the supply of existing industries, thereby acting to validate the capital employed within them. But, when capital has already taken over all existing commodity production, it can only continue with this process, by bringing more economic activities into the realm of commodity production, by developing new types of commodity to be produced, and by expanding the geographical area over which capitalist production takes place. By these means new capital validates existing capital. This is the point that Marx was making in his comment in the Grundrisse, cited earlier, where he says,

“On the other side, the production of relative surplus value, i.e. production of surplus value based on the increase and development of the productive forces, requires the production of new consumption; requires that the consuming circle within circulation expands as did the productive circle previously. Firstly quantitative expansion of existing consumption; secondly: creation of new needs by propagating existing ones in a wide circle; thirdly: production of new needs and discovery and creation of new use values. In other words, so that the surplus labour gained does not remain a merely quantitative surplus, but rather constantly increases the circle of qualitative differences within labour (hence of surplus labour), makes it more diverse, more internally differentiated...The value of the old industry is preserved by the creation of the fund for a new one in which the relation of capital and labour posits itself in a new form.” (loc.cit.)

In all previous modes of production, the gradual progress of social productivity makes it possible to devote released social labour-time, to new forms of production. As Marx points out elsewhere, it was the fact that the basic requirements of life were so easily produced in the Nile Valley that enabled social labour-time to be devoted to the building of the pyramids, for instance. But, it is only under Capitalism that this release of social labour-time, which is manifest both in the relative surplus population, and in the release of advanced capital which are opposite sides of the same rise in social productivity that results in the falling rate of profit margins, which must result in this development of the production of new use values as commodities.

It must be so, for the reasons Marx sets out in the quote from the Grundrisse, and those he sets out in Capital, which is that it is only by expanding into these new lines of production that capital can continually provide for itself new activities from which it can both produce surplus value, and also realise that surplus value.

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