Monday, 6 July 2015

Capital III, Chapter 10 - Part 2

Going back to the total social capital, C + V + S, it is clear that, as with any other capital, it is reducible to the basis of valuelabour-time. C is equal to the total abstract labour-time required to produce the means of production advanced. V is equal to the labour-time required to produce the wage goods consumed by the workers (necessary labour), and S is the amount of surplus labour-time performed by the workers, which is embodied in the surplus product, remaining after the constant capital and variable capital has been physically replaced.

On that basis, S/V = s' for the economy, and S/C+V = r' for the economy. As with the organic composition, these rates, for the economy as a whole, thereby constitute the average for all of the individual capitals within it. And, precisely because it is an average there will be firms whose rate of profit falls below, and others whose rate of profit will be above it.

Those whose rate of profit is above the average will cancel out those whose rate of profit is below it. In those areas where the rate of profit is highest, there will be a tendency for there to be an influx of capital. Supply increases, which causes market prices to fall, which thereby reduces profits, and this continues until the rate of profit equals the average, which means, at this point, k + kp' equals the price of production.

By contrast, where the rate of profit is low, capital migrates. Supply falls, and so prices and profits rise. This is the answer to the question that Marx raises, and which the other economists failed to answer.

“The really difficult question is this: how is this equalization of profits into a general rate of profit brought about, since it is obviously a result rather than a point of departure?” (p 174)

In order to elaborate this process, Marx proceeds on the same basis he has done throughout Capital, by providing both an historical and logical explication. He begins, therefore, by examining the position, not under capitalism, but under a system of petty commodity production and exchange, where the means of production are owned by the producers themselves.

Under such conditions, commodities exchange according to their exchange-values not their price of production.

“According to the foregoing, very different rates of profit would then reign in the various spheres of production. It is prima facie two entirely different matters whether commodities are sold at their values (i.e., exchanged in proportion to the value contained in them at prices corresponding to their value), or whether they are sold at such prices that their sale yields equal profits for equal masses of the capital advanced for their respective production.” (p 175) 

A basic assumption here is that a single rate of surplus-value exists. The term is used loosely here because, in reality, a producer owning their own means of production, in these conditions produces a surplus product rather than surplus value. That is, the value of the commodity they produce contains no unpaid labour-time. All of the labour-time that makes up the new value added, is labour-time, which they have themselves expended in its production.

The term here rather signifies that, of the total labour-time expended, by the producer, it too, like that of the wage worker, can be divided into necessary and surplus labour-time. The necessary labour-time is that required to produce enough of the particular commodity to be sold so as to be able to buy the necessities required for the subsistence of the producer and their family. Any labour-time expended above this is surplus labour-time and the value of the commodities produced during this time, therefore, surplus value.

It is valid to argue for the existence of a single rate of surplus value, therefore, Marx says because if producers found that the price they were being paid for their commodities did not cover their subsistence needs/value of their labour-power, and also provide them with this average surplus value, they would move to some other type of production. The same thing applies for wage workers not paid the equivalent of the value of their labour-power.

“In reality there exists only approximation; but, this approximation is the greater, the more developed the capitalist mode of production and the less it is adulterated and amalgamated with survivals of former economic conditions.” (p 175)

So long as commodities are exchanged as commodities by direct producers, therefore, rather than by capitalist producers, there is no problem with commodities exchanging at their values. Producer A produces commodity X, which requires £100 of means of production, and to which they add £100 of additional value by their labour. So, they will sell it for £200, and of this, £50 may be required to cover their subsistence, and £50 will be surplus value. The other £100 is required to buy replacement means of production.

If the commodity repeatedly sold for more than £200, other direct producers, seeing that more surplus value could be produced, in this sphere, would enter it, supply would increase, the price would fall, and so would the amount of surplus value. The opposite would apply if the price were consistently below £200.

For the direct producer, or petty commodity producer, it is only a matter of recovering the value of the commodity.

“The whole difficulty arises from the fact that commodities are not exchanged simply as commodities, but as products of capitals, which claim participation in the total amount of surplus-value, proportional to their magnitude, or equal if they are of equal magnitude. And this claim is to be satisfied by the total price for commodities produced by a given capital in a certain space of time. This total price is, however, only the sum of the prices of the individual commodities produced by this capital.” (p 175) 

In other words, the capitalist enters production from a completely different standpoint than the petty-commodity producer. The latter is only concerned to obtain the equivalent of the labour-time they have expended. The capitalist, however, is concerned to obtain the highest rate of profit they can on the capital they advance.

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