Wednesday, 29 July 2015

Marx and Machines - Part 3 of 7

As Marx sets out in Theories of Surplus Value, there are essentially four potential causes of crises arising from commodity production and exchange. The first is that there is a contradiction at the heart of the commodity itself. It is that the commodity is simultaneously a use value and exchange value, and these two aspects are antagonistic one to the other.

In order to increase social wealth, more use values must be produced and to do this with a limited amount of social labour requires an increase in social productivity. But, this rise in productivity, which raises social wealth by producing more use values, simultaneously reduces the value of each commodity unit. The problem here is one recognised by orthodox economic theory. As the mass of use values produced increases, so the demand for those use values is increasingly satisfied. The more the demand is satisfied the less consumers will demand of any commodity at any given price. In other words, there is diminishing marginal utility.

Marx describes this diminishing marginal utility like this.

“The same value can be embodied in very different quantities [of commodities]. But the use-value—consumption—depends not on value, but on the quantity. It is quite unintelligible why I should buy six knives because I can get them for the same price that I previously paid for one."

He gives another example of this in relation to two producers whose productivity changes at different rates.

“It is quite incomprehensible, therefore, why industry A, because the value of its output has increased by 1 per cent while the mass of its products has grown by 20 per cent, must find a market in B where the value has likewise increased by 1 per cent, but the quantity of its output only by 5 per cent. Here, the author has failed to take into consideration the difference between use-value and exchange-value.”

(Theories of Surplus Value 3)

In other words, although the value of output of both industries remains exactly the same, as it was originally, when they fully exchanged their product one with the other, this relative variation in productivity destroys that possibility, precisely because demand is a function of use value not value.

The second potential cause of crises arising from commodity production is the separation of production and consumption. A direct producer will only expend their labour-time on producing those products they require for consumption. If they spend additional time to this, it will only be to obtain those few items they cannot produce themselves. But, not only will this production be limited, it will itself be geared to what the producer knows they can exchange. Indeed, much of it will be to meet already determined needs.

Capitalist production begins in the 15th century, but, even in respect of this production, it advances relatively slowly. For a long time, it is really just a continuation of handicraft production, but under one roof, and with the individual producer turned into a wage labourer.

It is only in 1825 that the first crisis of overproduction erupts, and it is quite clearly linked to the fact that capitalist production is transformed into machine production, and the steam engine provides the basis to bring into operation many more machines than could previously be set in motion by human, animal or water power. It means that, in addition to more machines, more powerful machines are set in motion. In Britain, Marx cites the average number of spindles per factory rising to 12,500 by the mid 1800's. Each machine still required only one minder, so that the quantity of material processed by each machine and each worker explodes, and it is this which results in the kind of disproportion and overproduction that Marx describes in the earlier examples.

It is then that the separation of production and consumption leads to crises because the quantity of use values thrown on to the market rises to such an extent that there is insufficient demand for them even at their now much lower market value. In order to raise demand to clear the market of the supply, the market price must fall much lower, and at this price, the value of the capital used in its production cannot be reproduced.

The capital must then contract, workers are thrown out of their jobs, and this in turn means that there is a reduced demand in the economy, which means that other commodities cannot be sold, and so on.

It appears then that it is the machines that have caused this crisis by replacing labour. But, as Marx describes in his criticism of the Luddites, this is not the case. The crisis here was not caused by machines massively expanding production. What kind of crisis is it that manifests in an abundance of wealth? It is not machines that turn such a fortuitous circumstance into a crisis, but a social system whose only concern is the production of profit. But, even within the realm of capitalism here, it is not the fact that machines enabled a vast increase in the level of output, which created the crisis, but the fact that the owners of these machines, in search of ever more profits, insisted that these machines churn out this vastly increased quantity without any regard for whether the market could absorb the level of supply.

As I set out in my first book, there is no reason that this should lead to a crisis, if the increased productive potential is used instead to produce a range of commodities in the correct proportions. To take Marx's earlier example, in respect of knives, I may have satisfied my demand for them, and have no demand for more, but, if the cutlery producer uses their increased capacity to produce cheaper, forks, spoons and other utensils, I may now be encouraged to buy these items.

The real problem here arises where the level of productivity for all existing production has risen to where this begins to be a problem, but where there is an insufficient range of new types of production into which the released productive capacity can be channelled, so as to develop new markets. This is a problem related to the long wave cycle, as I have set out elsewhere.

Part 4 will appear on Friday

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