Tuesday, 28 July 2015

Capital III, Chapter 10 - Part 21

At a level of abstraction, Marx is correct, when he says that capital is indifferent about what use values it produces, just as the labour it employs, increasingly reduced to homogeneous, unskilled labour, is indifferent to which industry it is employed in.

“Second, one sphere of production is, in fact, just as good or just as bad as another. Every one of them yields the same profit, and every one of them would be useless if the commodities it produced did not satisfy some social need.” (p 195)

But, only at a level of abstraction. If it were the case that each sphere yielded the same rate of profit, there would be no movement of capital between them. At another level, depending upon the stage of capitalism considered, there are other frictions, which restrict the movement both of capital and labour. Wedgwood was a potter. He wasn't going to establish his business making furniture. When capitalists essentially lose this social function, and become providers of money-capital, they can invest this capital wherever it produces the best return, but the way they do this is then not by purchasing productive-capital, which becomes the function of the professional managers, but through purchasing shares. The means by which an average return on this money-capital is then obtained is not immediately via the movement of productive-capital, from one sphere to another, but is via the movement of share prices towards an average price/earnings ratio modified by various risk and other factors. Moreover, the return on this money-capital, is not profit, but interest, in the form of dividends, which Marx later demonstrates is determined by wholly different laws to those which determine the rate of profit.

The productive-capital, itself accumulated in ever larger units, for that very reason becomes increasingly immobile in the short term. A large car plant, in which hundreds of millions of pounds has been invested, cannot simply be turned over to washing machine production, if the rate of profit on the latter becomes higher.

Similarly, although capitalism tends towards the creation of a large homogeneous workforce, it simultaneously becomes more technological and requires the creation of large numbers of technicians, engineers, scientists etc. all of whom are increasingly specialised. It requires large numbers of administrators, who are equally specialised as accountants, lawyers etc. This is why capital is led to establish large welfare states to mass produce the educated labour it requires.

But, the point here is to remain at that level of abstraction, in order to explain the general tendency towards an average rate of profit, as a result of competition and the movement of market prices.

“Now, if the commodities are sold at their values, then, as we have shown, very different rates of profit arise in the various spheres of production, depending on the different organic composition of the masses of capital invested in them. But capital withdraws from a sphere with a low rate of profit and invades others, which yield a higher profit. Through this incessant outflow and influx, or, briefly, through its distribution among the various spheres, which depends on how the rate of profit falls here and rises there, it creates such a ratio of supply to demand that the average profit in the various spheres of production becomes the same, and values are, therefore, converted into prices of production. Capital succeeds in this equalisation, to a greater or lesser degree, depending on the extent of capitalist development in the given nation; i.e., on the extent the conditions in the country in question are adapted for the capitalist mode of production. With the progress of capitalist production, it also develops its own conditions and subordinates to its specific character and its immanent laws all the social prerequisites on which the production process is based.” (p 195-6)

Recognising the role of the frictions referred to above, Marx writes,

“The incessant equilibration of constant divergences is accomplished so much more quickly, 1) the more mobile the capital, i.e., the more easily it can be shifted from one sphere and from one place to another; 2) the more quickly labour-power can be transferred from one sphere to another and from one production locality to another.” (p 196)

In order to achieve this requires complete freedom of trade and removal of all monopolies other than those that arise due to capitalist concentration and centralisation. It requires the development of the credit system so that all of the scattered sums of money-capital can be concentrated and allocated to those spheres where the rate of profit is highest. It requires that all production is capitalist production, sweeping away the last vestiges of previous modes of production.

In fact, none of these conditions are ever fully met. The capitalist state itself establishes various monopolies such as the Welfare State; numerous restrictions even within the nation state, let alone between states, prevents complete freedom of trade.

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