Thursday, 2 July 2015

Capital III, Chapter 9 - Part 10

So far as the total social capital is concerned, the laws previously defined, reflect a material fact that whatever the organic composition of capital, the amount of profit appears to be generated by the total capital and not just the variable capital. Marx says,

“The individual capitalist (or all the capitalists in each individual sphere of production), whose outlook is limited, rightly believes that his profit is not derived solely from the labour employed by him, or in his line of production.” (p 170)

I'm not sure this is true in the sense Marx proposes. They clearly believe its due to their total capital not just to labour, but this is not what Marx means. He seems to want to make the point that each capitalist recognises they stand as a single class against labour. They do, but its not clear they believe that on the basis that each capital shares in the total amount of surplus value. In fact, as Marx says,

“To what extent this profit is due to the aggregate exploitation of labour on the part of the total social capital, i. e., by all his capitalist colleagues — this interrelation is a complete mystery to the individual capitalist; all the more so, since no bourgeois theorists, the political economists, have so far revealed it.” (p 170)

What does appear indisputable to each capital is that the more they are able to replace paid labour by machines, the more profit they seem to make. That is because, for any individual capital, the introduction of machines that replace paid labour, reduces the individual value of the commodities produced by that capital, below the exchange value. So, an additional profit attaches to these capitals for as long as this advantage exists. But, competition ensures that the same methods are applied across the industry, so the exchange value falls, and the additional profit disappears. The consequence is that the organic composition of capital has increased for the industry.

Depending upon the effects on the value of constant and variable capital, and on the rate of surplus value, the consequence must be that the rate of profit in this sphere falls, and that ultimately affects the general rate of profit. Consequently, each individual capital seeks to maximise its profits by replacing paid labour with machines, where the latter are cheaper, but this very process, as it spreads throughout the industry acts to reduce the rate of profit within it.

This is exacerbated by the fact that this same process may cause the rate of turnover of capital, and so the annual rate of profit to rise. Consequently, firms see their mass of profits rising, and the rate of this profit to their advanced capital rise (annual rate of profit), whilst their rate of profit (profit margin p/k) is squeezed by the same process.

In fact, this can be seen in the product life-cycle. New products require large amounts of high-value, skilled labour, for their development and production. Output is typically low, and high value. As the product becomes more mature the initial development costs are sunk, prices fall and it reaches a wider market. Increasingly, as output increases, machines are introduced to replace labour, skilled labour is replaced with unskilled labour, small batch production of high-value, high-profit commodities is replaced by mass production on the basis of small profit margins. Often this is accompanied by the shift of production from high-wage to low-wage economies.

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