For example, in the 1930's, productivity in the car industry increased substantially as new techniques and technologies were introduced as part of the Taylorist drive for scientific management, alongside the introduction of Fordist mass production techniques. As described above, less labour-time was required to produce any given quantity of cars, so that both labour and capital was thereby released. But, this did not result in labour and capital moving to the production of some other form of commodity. Instead, the total mass and value of capital employed in motor car production increased rather than shrank.
The reason for this was that very few people at that time had cars. They were the preserve of the rich. However, as productivity in motor car production rose, this meant that the value of each motor car fell, because each car required less labour-time for its production. As the value of each car fell, so its market price fell, and this meant that it came within the reach of wider social layers of consumers. Members of the middle class were able to buy cars, so demand for cars rose. Instead of the released labour and capital, resulting from the higher productivity, going into some other type of production, it was simply employed in motor car production to meet this additional demand.
If we consider some other type of commodity, however, this may not be the case. Looking at Marx's comments earlier in relation to agriculture that is most clear. For the vast majority of Man's history on the planet, the problem was to be able to produce enough food. Primitive tribes of humans, which existed on the basis of hunting and gathering, continually lived on the edge of existence, whereby they might die out, as a result of not being able to obtain sufficient food. Only when human societies passed to the stage of civilisation, with the development of settled agriculture, about 10,000 years ago, does this begin to change, and the potential for producing a surplus of food begin to arise.
Because, generally speaking, humans have a limit to how much food they can consume, let alone how much they choose to consume rather than to consume some other product, when food production reaches this basic limit, any rise in agricultural productivity results not in a further expansion of food production, but in labour and means of production being used for the production of other products.
When the agricultural revolution occurred in Britain, in the 18th century, therefore, it meant that, even allowing for the increase in population, the amount of food required could be produced with a fraction of the labour previously employed. Part of that revolution, which caused such a sharp rise in productivity, and release of labour, was the very fact of throwing the peasant direct producers off their lands, by the process of outright land thefts by the aristocracy, and the legalised thefts imposed via the Enclosure Acts.
By this process, thousands of inefficient small producers, who essentially only produced the food required for their own families, were replaced by large efficient farms, which, due to their greater efficiency, were able to produce all the food required, with a fraction of the labour, thereby releasing that labour, which flooded into the towns, where it could be exploited by industrial capital. This same process has been seen over the last two or three decades in China, and can be seen also in Africa.
A look at Britain, shows the extent to which this rise in social productivity can cause the amount of labour and capital required, in any particular sphere, to fall significantly, where the requirements for consumption have largely been fulfilled. Between 1851 and 1921, the agricultural workforce fell from 1.7 million to under 1 million; the current figure being below 200,000, or less than 1% of the total workforce. That is not to say, that this might not change. Marx wrote about the overproduction of yarn that arose from a massive rise in productivity caused by the introduction of spinning machines, so that far more was produced than could be consumed given the conditions of demand for yarn at the time.
“(When spinning-machines were invented, there was over-production of yarn in relation to weaving. This disproportion disappeared when mechanical looms were introduced into weaving.)”
In other words, the overproduction of yarn arose because the potential for weaving it into cloth was limited by the state of technology in weaving at the time. To have absorbed all of the yarn, in weaving, would have required a huge expansion of weaving capital, the building of additional factories, and the employment of huge numbers of hand loom weavers, whose wages would then have soared due to the sharp rise in demand for their labour-power. But, even after this had happened, it would have been impossible to have sold all the finished cloth, because its price would have been too high, despite the much lower value of yarn, because the cost of weaving it would have been prohibitive. Only when power looms were introduced, that replaced the hand loom weavers, did this cost of weaving the yarn fall enough that it was possible to produce cloth in vast quantities, at a much lower price, that could then be sold profitably, and which thereby not only was able to soak up the previous overproduction of yarn, but required even more of it!
The fact that the value of a commodity falls, therefore, as a result of a huge rise in productivity, does not mean that the increased mass of commodities can be absorbed by the market, even at much lower prices. As Marx puts it,
“The same value can be embodied in very different quantities [of commodities]. But the use-value—consumption—depends not on value, but on the quantity. It is quite unintelligible why I should buy six knives because I can get them for the same price that I previously paid for one.”
(TOSV 3, Chapter 20)
The demand for agricultural products, therefore, might rise substantially if they become demanded for other reasons, than simply as food. In other words, as with the situation with yarn, if the conditions of demand change. For example, with oil prices at very high levels, large areas of land, were given over to the production of corn and other crops to be used as feedstock for the production of ethanol. The demand for corn as food might be limited, at prices that enable profits to be made, which thereby limits the extent to which capital and labour are employed in its production, but if that demand is supplemented by the use of corn for other purposes, that situation is changed.
In a similar way, the demand for oil rose after WWII, because of the development of the petrochemicals industry, as oil is the raw material used for a range of plastics, fertiliser and so on. The growth of new markets, such as in China, has also created new conditions of demand, over the last 30 years, both for use in industry, as well as a consumer good, required as fuel for the massively growing Chinese car market, which is now the largest in the world. As a result, although productivity in the oil industry rose, this continued rise in the demand for oil meant that the output of oil also had to rise, and so absolutely more capital and labour was therefore, required for its production, even as the relative quantities declined.
The rise in productivity in oil production, unlike in agriculture, was not, therefore, marked by a growing absolute release of capital and labour, from its production, to other forms of production, during this period. It was instead marked only by a relative release of capital and labour, as output continued to rise sharply. In fact, between 2007 and 2013, employment in oil and gas extraction in the US rose by 40%. According to the ILO, global employment in oil production peaked only in the last decade at around 4 million. Moreover, although from the 1980's onwards, in response to previous oil price rises, a considerable rise in the efficiency of oil use took place, (oil consumption rose by only a seventh of the rise in global GDP between 1980 and the early 2000's) the increase in demand for oil after the start of the new long wave boom in 1999, was such that demand continued to outstrip the rise in supply, so that global oil prices rose sharply.
As set out earlier, the current fall in price reflects the fact that this situation has now ended. Although global oil demand continues to rise, so the fall in price cannot be said to be due to “underconsumption”, the rise in the supply of oil, has now grown so much that it exceeds that demand, i.e. as with Marx's comment about the supply of yarn, there is an overproduction. Market prices, are falling not just because the value of a barrel of oil has fallen, due to higher levels of productivity, but because there is over-supply, and so the market price is set at a level below the general price of production. The consequence is then that the oil producers whose individual price of production is higher than this market price, will make losses, and some will go out of business, thereby removing the overproduction.
I will examine this further in Part 9