## Thursday, 18 June 2015

### Capital III, Chapter 8 - Part 3

As stated earlier, on the basis of the constraints imposed, then with a constant rate of surplus value, the variable capital not only acts as an index of the amount of labour-power employed, but also of the surplus-value produced. If there is a 100% rate of surplus value, and the variable capital is £1,000 then surplus value will also be £1,000. If the variable capital represents 100 workers, working a 10 hour day, that is 1,000 hours worked. The value of the labour-power is then £1 per hour. But, the value created by this labour is equal to £2 per hour. The total new value is then 1,000 hours x £2 = £2,000.

If the variable capital doubles to £2,000 this means the labour-power employed rises to 2000 hours. But, this 2000 hours of labour now creates 2000 x £2 = £4,000 of new value. As the variable capital has doubled, so the amount of new value doubles, and with it the surplus value also doubles. But, with capitals of equal magnitude, this means that the rate of profit must vary in inverse proportion to the organic composition of capital.

c 100 + v 50 + s 50; C = 150, s' = 100%, p' = 33.3%

c 50 + v 100 + s 100; C = 150, s' = 100%, p' = 66.7%

The total capital advanced, C, is 150 in both cases. The rate of surplus value, s', is the same in both cases. But, the rate of profit, p', is double in the second case. The reason is that it is only the variable capital that produces surplus value, and the second sector employs twice the proportion of variable capital – 100:50, as opposed to 50:50 – employed in sector 1. Here, the actual amount of surplus value is double in sector 2, but it would be no different if sector 1 produced the same amount of surplus value, provided the organic composition remained the same, so:-

c 200 + v 100 + s 100; C = 300, s' = 100%, p' = 33.3%

Here, the amount of surplus value is the same as for sector 2, £100. The rate of surplus value remains 100%, but the rate of profit is still half that of sector 2. In order to produce the same amount of surplus value, double the variable capital has been employed, but that requires also double the constant capital.

The difference here between sector 1 and 2 could, as stated earlier, be due to either a different technical composition of capital, or to a different value composition. Sector 1, for example, could be a jewellery business that has to advance large amounts of money to buy relatively small amounts of gold, silver, diamonds etc. that are processed by a small number of workers, whereas sector 2 might be a pottery manufacturer that buys large amounts of clay that is processed by a large number of workers. Here the technical composition may be the same, it is only the value of the materials that differ.

On the other hand, sector 1 might be a car manufacturer that employs industrial robots that process large amounts of relatively cheap materials, supervised by a small number of workers, whereas sector 2 is a specialist buggy whip maker that uses relatively few materials, but employs a relatively large amount of highly skilled complex labour, to produce hand crafted products.

The difference between these two situations is that in one the rates of profit can be equalised by reducing the value of the constant capital, i.e. obtaining cheaper materials, but the other can only be equalised by bringing about a transformation of the technical composition, and, therefore, of its technological basis.