Tuesday 11 August 2015

Capital III, Chapter 12 - Part 6

All of this is seen on the surface as a consequence of competition, of demand and supply, altering market prices.

“What competition does not show, however, is the determination of value, which dominates the movement of production; and the values that lie beneath the prices of production and that determine them in the last instance.” (p 208) 

Instead, what appears on the surface, as a result of competition, is the reverse of the underlying value relations. The average profit appears to have no relation to the organic composition of the capital, and therefore, no relation to the surplus value produced by the labour-power employed. Changes in wages, which cause a change in the price of production, seem to flatly contradict the determination of the value of commodities, as a rise in wages leads to some prices – the average – remaining unchanged, whilst the value of those commodities which employ more labour rise, and those that employ less labour actually fall! And, whilst all of the fluctuations in the market price, due to temporary shifts in supply and demand, average out over a period, this average market price is not equal to the market value of the commodity, but to a price of production, which diverges from it considerably.

Its not surprising then that it is this superficial appearance of things that imposes itself on the human actors in this play, and in particular upon the capitalists, who thereby see their profits arising from their own particular skills etc., but also upon the bourgeois economists whose role is to describe these relations rather than to delve beneath them.

But, because of the various frictions set out earlier, and because of the peculiarities of each sphere of production, it becomes clear over a period, when prices and profits are relatively stable, and no huge movements from one sphere to another occurs, that any differences in profit rates are a result of these differences. For example, as described earlier, capitals with long turnover periods produce a lower rate of profit than capitals of the same size and composition with a shorter turnover period. As a consequence, capitals in this sphere must charge higher prices in order to compensate, and raise the rate of profit.

Similarly, some capitals are employed in higher risk spheres. Timber producers may see their capital go up in flames, shipping companies may see their capital sunk by storms etc. This means again that a higher price must be charged than for commodities produced by capitals of an equal size and composition employed in safer ventures. As capital develops, and insurance can be taken out against such risks, the higher cost of insurance then forms part of the cost-price of these commodities, which is passed on into the price of production.

But, all of these individual factors then become transformed in the mind of the capitalist and their apologists as grounds for compensating. In other words, for the capitalist obtaining a profit. So, capital has grounds for taking a profit where it risks being wiped out; it has grounds for profit where the risk is from being advanced for long periods, and so on. The basis of profit no longer appears to result from the exploitation of labour, but arises simply on the basis that capital is entitled to compensation for being employed.

“The capitalist simply forgets — or rather fails to see, because competition does not point it out to him — that all these grounds for compensation mutually advanced by capitalists in calculating the prices of commodities of different lines of production merely come down to the fact that they all have an equal claim, pro rata to the magnitude of their respective capitals, to the common loot, the total surplus-value. It rather seems to them that since the profit pocketed by them differs from the surplus-value they appropriated, these grounds for compensation do not level out their participation in the total surplus-value, but create the profit itself, which seems to be derived from the additions made on one or another ground to the cost-price of their commodities.” (p 210)


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