Monday, 9 February 2015

The Long Wave - Part 11

In previous parts, it was shown how the basis of a crisis of overproduction arises from extensive accumulation coming up against its limits. As Marx puts it,

“Given the necessary means of production, i.e. , a sufficient accumulation of capital, the creation of surplus-value is only limited by the labouring population if the rate of surplus-value, i.e. , the intensity of exploitation, is given; and no other limit but the intensity of exploitation if the labouring population is given.”

(Capital III, Chapter 15)

In other words, if we take the conditions of extensive accumulation, whereby we have more or less constant technology, providing a constant rate of surplus value, the production of surplus value, which, as Marx says, “is the immediate purpose and compelling motive of capitalist production” (ibid), is only limited by the size of the working-class, available to be exploited. But, as was demonstrated in Part 8, under these conditions of extensive accumulation, not only are the conditions for the falling rate of profit (rising social productivity) absent, but this extensive accumulation, by raising the rate of turnover of capital, and because of economies of scale, causes the annual rate of profit to rise, whilst profit margins are squeezed.

It encourages even more extensive accumulation on the back of this rising rate and mass of profit, which is the basis of the conjunctural shift from the Spring to Summer phase of the cycle (medium activity to precipitancy in Marx's terms). As this Summer phase proceeds, this limit, described by Marx, comes increasingly closer, as the available supplies of labour-power are used up. The consequence is a rise in wages, which thereby causes a fall in the rate of surplus value. At a certain point, no more labour can be employed profitably, because to do so would push wages up so much as to wipe out any additional surplus value.

“As soon as capital would, therefore, have grown in such a ratio to the labouring population that neither the absolute working-time supplied by this population, nor the relative surplus working-time, could be expanded any further (this last would not be feasible at any rate in the case when the demand for labour were so strong that there were a tendency for wages to rise); at a point, therefore, when the increased capital produced just as much, or even less, surplus-value than it did before its increase, there would be absolute over-production of capital; i.e., the increased capital C + ΔC would produce no more, or even less, profit than capital C before its expansion by ΔC.”


It should be emphasised that Marx is not referring here to the Law of the Tendency of the Rate of Profit to Fall, which he makes clear arises under conditions both of an increase, not a decrease in the rate of surplus value, and also of an increase not a decrease in the mass of profit, as described here. This constraint on the further accumulation of capital, as was demonstrated, is not caused by the law of falling profits, but is removed by it! The law of falling profits arises due to rising social productivity, during a period of intensive accumulation, and it is this intensive accumulation, i.e. the introduction of new technologies, that both raises the rate of surplus value, and the mass of surplus value, whilst causing a drop in the rate of profit. The other part of Marx's statement above, now comes into play, that production of surplus value has,

“no other limit but the intensity of exploitation if the labouring population is given.”

Having come up against the limit of the size of the labouring population, on the basis of the existing intensity of exploitation, capital is thereby forced to increase the intensity of exploitation, by moving from extensive accumulation to intensive accumulation, to invest in innovation, and the introduction of technologies that replace existing technologies rather than simply add to them. 

This demonstrates the power and complexity of Marx's method of analysis. A thing, considered purely as a thing, can only ever conform to the laws of the syllogism – A can only ever be A, and can never be -A. But, considered not as a thing but as a process, not only can A be -A, but it must be so. The thing here, a new technology, acts to raise productivity. In doing so, it removes a previous constraint to accumulation – the size of the labour force. The means by which it does this is by reducing the rate of profit, because it causes the organic composition of capital to rise – more material is processed by the same or less labour-power. As relatively less labour-power is employed, even if absolutely more surplus value is produced, relatively less surplus value is produced, compared to the capital advanced. The mass of profit rises, as a corollary of the fall in the rate of profit.

As described in Part 10, for old, mature industries, this process tends to lead to absolutely fewer workers being employed, but the capital released from these industries, then starts to be employed in new industries, which have the potential for large scale demand growth, and which also have high rates of profit, because their own organic composition of capital is low. As Marx says in Capital III, Chapter 14.

“Its propagation is inseparable from, and hastened by, the development of the productivity of labour as expressed by a fall in the rate of profit... On the other hand, new lines of production are opened up, especially for the production of luxuries, and it is these that take as their basis this relative over-population, often set free in other lines of production through the increase of their constant capital. These new lines start out predominantly with living labour, and by degrees pass through the same evolution as the other lines of production. In either case the variable capital makes up a considerable portion of the total capital and wages are below the average, so that both the rate and mass of surplus-value in these lines of production are unusually high. Since the general rate of profit is formed by levelling the rates of profit in the individual branches of production, however, the same factor which brings about the tendency in the rate of profit to fall, again produces a counterbalance to this tendency and more or less paralyses its effects.”

This is the point made earlier. In the 1930's, these “new lines” were in things such as car production, and the production of electronic consumer durables, which at first were “luxury” goods, but, which, as production expands, on the basis of intensive accumulation, increasingly come within the realm of a larger proportion of consumers, including workers. In other words, the “thing”, new technology, which was the means by which the constraints imposed by extensive accumulation are removed, when viewed not as a thing, but as a process, turns into its opposite. At first, the introduction of this new technology causes the rate of profit to fall, because it raises the organic composition of capital. This is the other side to the creation of a relative surplus population.

The fall in the rate of profit in the majority of the economy, is greater in its effect on the aggregate rate of profit, than is the higher rate of profit in these new industries. But, the very law of falling profits, which lies behind the process of formation of a general rate of profit, causes capital to migrate increasingly from these old, lower profit areas, towards the newer higher profit areas, and thereby the latter begin to have an increasingly greater effect on the aggregate rate of profit. I've set out, how this works here

At the same time, by creating a relative surplus population, it causes wages to fall, which increases the rate of surplus value. The more this new technology is introduced across the economy, the less it exists as a new technology, and the more it exists as the standard technology. The more it is rolled out on this basis, the more a process of intensive accumulation is metamorphosed into extensive accumulation. In place of a process whereby the new technology acts to cause the rate of profit to fall, the more that same technology becomes the basis of the rise in the rate of profit. But, for the same reason, the more that process continues, the more it comes up against the constraints encountered initially, that the available labour force is used up, on the basis of this given technology, and intensity of exploitation.

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