c 1000 + v 1000 + s 1000; r' = 50%, s' = 100%.
Suppose the 1000 v buys 1000 units of wage goods whose value falls by 50%, so that now they could be bought with £500. Wages could fall to £600, but real wages rise.
c 1000 + v 600 + s 1400; r' = 87.5%, s' = 233%.
But, now 600 v buys 1200 units of wage goods, a 20% rise in real wages. This was the basis of Fordism.
Variable capital could also be released if a rise in productivity occurred so that less labour-power was employed. Similarly, capital would be tied up if a drop in productivity meant more labour-power had to be employed. If less labour-power was used but the released capital was used to buy additional constant capital, for instance, workers were replaced by a machine, then there would be no overall release of capital, only its redistribution. Such a change would have some consequence for the rate and amount of surplus value and profit.
The fact that less labour-power was employed would mean less surplus value was produced, so the rate of profit would fall. But, the employment of a machine might also increase productivity so the rate of surplus value might rise, and so the amount of surplus value and rate of profit would rise. If productivity rises and the same quantity of variable capital is employed, this necessitates a tie up of capital, because it means more material is processed, so more capital has to be laid out to buy it. But, the same may occur if productivity decreases. For example, in agriculture, if there are adverse conditions, the crop may be reduced for the same amount of labour expended. It may require more seed, manure and so on as a result. In reverse, if improved drainage or other such improvements raise the fertility of the soil, more may be produced for the same amount of labour so that less in the way of seeds, manure etc. and other constant capital is required.
So long as fixed capital is not in need of replacement, the amount of its wear and tear, transferred to the value of the commodity, can appear in the books only nominally. In other words, the actual money-reserve built up for its replacement, can be tapped for other purposes, if required, so long as it is replenished later. But, that cannot happen with the circulating capital. The wages, as well as the raw and auxiliary materials, are continually having to be replaced, and so their equivalent value in the end commodity continually has to be realised, so that the capital can be reproduced. To that extent, violent fluctuations in material prices can be very disruptive of the reproduction process.
“Violent price fluctuations therefore cause interruptions, great collisions, even catastrophes, in the process of reproduction. It is especially agricultural produce proper, i. e., raw materials taken from organic nature, which — leaving aside the credit system for the present — is subject to such fluctuations of value in consequence of changing yields, etc. Due to uncontrollable natural conditions, favourable or unfavourable seasons, etc., the same quantity of labour may be represented in very different quantities of use-values, and a definite quantity of these use-values may therefore have very different prices.” (p 117-8)
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