Thursday, 21 May 2015

Capital III, Chapter 5 - Part 3

If wear and tear of machinery and other fixed capital is reduced, this reduces the price of commodities, because a part of that price is made up of the value of the wear and tear, and which is accumulated in depreciation funds, to replace that fixed capital. But, it also reduces the amount of capital that has to be advanced, and as seen previously, that raises the rate of profit. The cost of repairs are added to the initial cost of the fixed capital, so if those repair costs are reduced, because the fixed capital is more durable, again the capital advanced is reduced, increasing the rate of profit.

All of these savings are possible only because of production by co-operative, social labour, which itself is premised on production on a large scale. But, the savings are even greater, indeed only really achieved, when production takes place on an even larger scale.

“... the development of the productive power of labour in any one line of production, e.g., the production of iron, coal, machinery, in architecture, etc., which may again be partly connected with progress in the field of intellectual production, notably natural science and its practical application, appears to be the premise for a reduction of the value, and consequently of the cost, of means of production in other lines of industry, e.g., the textile industry, or agriculture. This is self-evident, since a commodity which is the product of a certain branch of industry enters another as a means of production. Its greater or lesser price depends on the productivity of labour in the line of production from which it issues as a product, and is at the same time a factor that not only cheapens the commodities into whose production it goes as a means of production, but also reduces the value of the constant capital whose element it here becomes, and thereby one that increases the rate of profit."(p 81)

In fact, that same principle is increasingly applied by capital to the most important element in the productive process – the labour power – itself. The more surplus value relies on technological development to drive up productivity to create relative surplus value, the more this relies on an educated and cultured working class. But, the more such a society invests in education to achieve that, the more it is also driven to produce all of the other things that go with it, including a reasonable level of healthcare, so that the quality and reliability of the labour-power meets these standards, set for the other machines and materials. That is one of the biggest drivers for capital to establish welfare states.

“The capitalist's fanatical insistence on economy in means of production is therefore quite understandable. That nothing is lost or wasted and the means of production are consumed only in the manner required by production itself, depends partly on the skill and intelligence of the labourers and partly on the discipline enforced by the capitalist for the combined labour.” (p 83)

Marx says that this attempt to minimise the costs of production is also conversely seen in the attempt to adulterate the output. So, on the one hand, capitalists attempt to only buy good quality inputs, whilst selling poor quality outputs, including to their capitalist brethren. He remarks sarcastically,

“This practice plays an essential part particularly in German industry, whose maxim is: People will surely appreciate if we send them good samples at first, and then inferior goods afterward.” (p 83)

But, Engels notes that this kind of cheating belongs really to the early stages of capitalist development. Big capital does not need these kinds of penny-pinching methods.

“Though not expressly stated in our recognised treatises, it is still a law of modern Political Economy that the larger the scale on which capitalistic production is carried on, the less can it support the petty devices of swindling and pilfering which characterise its early stages. The pettifogging business tricks of the Polish Jew, the representative in Europe of commerce in its lowest stage, those tricks that serve him so well in his own country, and are generally practised there, he finds to be out of date and out of place when he comes to Hamburg or Berlin; and, again, the commission agent who hails from Berlin or Hamburg, Jew or Christian, after frequenting the Manchester Exchange for a few months, finds out that in order to buy cotton yarn or cloth cheap, he, too, had better drop those slightly more refined but still miserable wiles and subterfuges which are considered the acme of cleverness in his native country. The fact is, those tricks do not pay any longer in a large market, where time is money, and where a certain standard of commercial morality is unavoidably developed, purely as a means of saving time and trouble. And it is the same with the relation between the manufacturer and his “hands.””

And the same thing is seen today. It is the inefficient, small scale capital that relies on this kind of cheating. Meanwhile, as Marxist economists noted in the 1980's, monopolistic competition has been led, on the contrary, by a drive to offer better quality commodities, new innovative commodities etc., and to drive up profits by increasingly innovative production methods. The increase in the rate of profit arises here, not from increasing the rate of surplus value, but by increasing the volume of surplus value, whilst reducing the value of the constant capital. Of course, this does not necessarily mean reducing the absolute value of the constant capital. In fact, it is partly because the total amount of constant capital employed, its physical amount, rises that these economies of scale arise. It is the unit cost that falls. But, that in itself is an indication and a result, of the fact that production is the result of socialised, co-operative labour.

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