Tuesday, 16 June 2015

Capital III, Chapter 8 - Part 1

Different Compositions of Capitals in Different Branches of Production and Resulting Differences in Rates of Profit 

The preceding chapter demonstrated that even with many things held constant, such as the rate of surplus value, wages, length of working day, productivity etc., different rates of profit still arise, because of different organic compositions of capital. The importance of viewing that in terms of different rates of profit between different capitals is highlighted in this chapter, in looking at the way these different rates of profit themselves result, under capitalism, in a tendency towards an average rate of profit.

As with the rest of Marx’s analysis, this is placed firmly within an historical as well as logical context. As Engels points out, in his Appendix, the period during which commodities are traded at their exchange values, extends from around 7,000 B.C. up to the 15th. century. During all of this period, commodities are produced essentially by direct producers, who produce primarily for their own consumption. Commodities are just surplus production, or at best a minor part of production sold in order to obtain money to pay taxes etc. or to obtain goods the peasant could not produce themselves.

But, the main point is that these direct producers owned the means of production themselves. The labour-time required for production was always equal to the labour-time they expended themselves – including that expended for the production or purchase of means of production. Consequently, there could be no production of surplus-value, in the capitalist sense. The value obtained in exchange was always equal to the cost of production. For the same reason, there could be no profit, or rate of profit.

When the peasant producer exchanges their surplus product – only surplus in the sense that they do not need to consume it – they do so to obtain other use values they do want to consume. Those with whom they exchange do so on the same basis, and as both parties know fairly accurately how much labour-time is required for different types of production, exchange can be undertaken on that basis.

The peasant producer only seeks to sell a commodity with the same amount of exchange value as they obtain from the sale, and buyers will only offer that. In fact, in many places, laws imposed sanctions on both buyers and sellers if they did not abide by such relations. The idea that there could be a relation between the value of their surplus product, and the cost of producing that surplus, i.e. the labour-time required to produce or buy means of production, and the labour-time required to produce their means of consumption, would not only have been quite alien to such a direct producer, but would not even have occurred to them. Such a relation only arises under capitalism, and only under capitalism does that material relation find its reflection in the realm of ideas. Once that is established, the idea that it is important to maximise your rate of profit naturally follows, and as we will see, the consequence of that idea, to move your capital always to where the most profit can be made, is the mechanism by which a tendency towards an average profit operates.

The assumption that a more or less general rate of surplus-value exists, i.e. all groups of workers tend to be exploited to the same degree, is a reasonable one, Marx says, because Adam Smith had shown comprehensively that,

“... the numerous differences in the exploitation of labour in various spheres of production balance one another by means of all kinds of existing compensations, or compensations accepted as such on the basis of current prejudice, so that they are merely evanescent distinctions and are of no moment in a study of the general relations. Other differences, for instance those in the wage scale, rest largely on the difference between simple and complicated labour mentioned in the beginning of Book I (p. 19), and have nothing to do with the intensity of exploitation in the different spheres of production, although they render the lot of the labourer in those spheres very unequal.” (p 143) 

In other words, Marx is under no illusion that the rate of surplus value is the same for all workers. In fact, in Volume I, looking at relative surplus value, and the role of machinery, he points out that the introduction of a machine by a particular firm raises its productivity above its competitors. The labour it employs then becomes like complex labour, in the sense that the value of the product of an hour of this labour will be a multiple of the value of the product of an hour of the labour employed by their competitors. However, the wages paid by this firm to its workers will be no higher necessarily than those paid to other workers. Consequently, it will have a much higher rate of surplus value.

But, the tendency will be for other firms to adopt the same technology so such a situation will only be temporary. Where actual complex labour is employed, it may or may not be the case that the value of the labour-power itself reflects its nature.

“For instance, if the labour of a goldsmith is better paid than that of a day-labourer, the former's surplus-labour produces proportionately more surplus-value than the latter's.” (p 142)

However, although the wages of a goldsmith may be higher than those of a day labourer, there is no reason why the value of their labour-power will be higher. It may be the case due to them requiring more training etc. but there is no necessary relation between the value of the product of labour and the value of the labour-power that produced it. The only way in which such a relation could be argued would be on the basis of scarcity of that specific labour-power, and the high cost, therefore of reproducing it.

For example, the value of David Beckham's labour-power is not much different from that of most other workers, in terms of requirement for clothing, shelter, food etc. However, few other workers have the degree of particular skill he has had in the past, in producing his particular product on the football pitch. How much is required to search out and find other workers, probably while they are still young children, and provide them with the amount of training etc. to be able to replicate those skills and so on?

So, it could be argued, as Marx does in relation to the goldsmith, that even someone as highly paid as a Beckham, Rooney, or Robbie Williams, still only faces the same rate of surplus value as any other worker, because their complex labour creates a product whose value is thousands of times that of simple labour, a fact verified by the high prices and revenues that their labour produces, and the high profits those who employ them still make!

Marx says,

“And although the equalizing of wages and working-days, and thereby of the rates of surplus-value, among different spheres of production, and even among different investments of capital in the same sphere of production, is checked by all kinds of local obstacles, it is nevertheless taking place more and more with the advance of capitalist production and the subordination of all economic conditions to this mode of production.” (p 142-3)

That was undoubtedly true, at the time he was writing. But, in the 150 years since then things have moved on. The very processes Marx analysed of how capitalism revolutionises production have since then reduced the production of many manufactured goods to the kind of level of significance that agricultural products were being reduced to in his day.

In developed economies, for example, food has become so cheap that the average household is estimated to throw away a third of the food it buys. Basic requirements, such as clothing, have become so cheap that most consumers throw away their clothes and buy replacements, not because they are worn out, but simply because some new fashion has arisen. In fact, a large amount of the value of this consumption resides not in the materials required for production, but is attributable solely to the complex labour that stands behind the designer label.

A similar situation exists with the designer chefs and so on, and all of the other forms of complex labour that dominate today's economy, whose central dynamic is based around production of services rather than material production. 

Of course, there are that small minority of the population for whom this is not the case. There are maybe 10-15% of the population for whom even the basic necessities are only just achievable. They stand in the same relation to the rest of the population as the pauper's described by Marx in his time. In terms of economic analysis, however, we should, like Marx, base ourselves on the situation of the majority not this minority, just as we would not base our analysis of general economic conditions on the extravagant behaviour of that tiny minority of the super rich.

It is, in fact, the increasing predominance of these kinds of high value products in the economy, and relatively increasing numbers of people involved in producing them, whilst the value of absolute necessities become almost de minimus, that in many ways, makes study of them more interesting. It is perhaps the material condition that finds its reflection in celebrity culture, and the growing mentality that the best means of obtaining an income is not through labour, but by appearing on TV, becoming a pop star, sport star etc.

“In a general analysis of this kind it is usually always assumed that the actual conditions correspond to their conception, or, what is the same, that actual conditions are represented only to the extent that they are typical of their own general case.” (p 143)

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