Friday, 19 June 2015

Capital III, Chapter 8 - Part 4

So, it is only where the organic composition of capital is the same that there could be an equal rate of profit. On the basis of the assumptions adopted, that means within the same industry. In reality, firms in the same industry would not have the same rate of profit because some will be more efficient than others, some will have the latest machines, better locations and so on.

However, as seen in Volume I, the consequence of this is that the weaker firms will be swallowed up by the stronger. All firms in the industry will tend to the same methods etc., so that they will all tend towards the average. The development of an average rate of profit in each industry, as a result of competition, is a necessary stage in the development of an average rate of profit for capital as a whole.

However, on the basis of the analysis so far, it is clear that in so far as different industries have different organic compositions of capital, if commodities exchange at their values, there must be widely different rates of profit between them. This is important if we are examining the rate of profit between different countries. For example, suppose in Britain a cotton spinner faces a 100% rate of surplus value, so that they work half the day for themselves and the other half for capital. In India, however, the cotton spinner faces a 25% rate of surplus value, working 75% of the day for themselves. Such a situation is realistic because the lower level of productivity in India means it takes longer to reproduce the means of subsistence required by the worker.

Putting the position of the two workers in percentage terms we might then have for the British spinner,

c 84 + v 16 + s 16; C = 100, s' = 100%, p' = 16%

and for the Indian spinner,

c 16 + v 84 + s 21; C = 100, s' = 25%, p' = 21%.

So, even with a much lower rate of surplus value the Indian capital makes a higher rate of profit. The problem with this example, of course, is that the volume of yarn represented by C in both cases will be vastly different. The amount of yarn produced by the British spinner will be many times that of the Indian spinner, so the value of each unit of output will be much lower in the case of the former. It is this price, which will determine the price of yarn on the world market, so the actual value of the Indian output will be only a fraction of the British output. Once the value of the Indian output is suitably adjusted, then on the above figures it may be that the production is undertaken at a loss. At the very least, the amount of surplus value produced will be much smaller, and so will be the actual rate of profit. That is why Indian spinners, even at very low wages, could not compete with British textile factories, and why, as Marx set out in Volume I, European textile producers could not compete with Britain, even though European wages were half those in Britain.

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