But, even as each capital does this, and the amount of surplus value in each commodity unit shrinks, so still the mass of surplus value rises alongside the mass of units produced. The fall in the value of each unit is reflected in its price of production, which in turn increases the potential for demand for these commodities to rise. But, the more the supply and demand for these commodities rises, the more it reaches the limits of the market, because consumers will not simply keep expanding their consumption of any commodity, just because its price is lower. As Marx puts it,
"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.”
(TOSV 3 Chapter 20, p 119)
In other words, demand is determined not by value but by use value, and the greater the quantity of any particular use value that is dumped on the market, the more the demand for that use value will be satisfied, so that demand can only be increased further by reducing the price by ever larger amounts, until a point is reached whereby this market price is below the cost of production.
“The first (conditions of production) are only limited by the productive power of society, the latter by the proportional relation of the various branches of production and the consumer power of society. But this last-named is not determined either by the absolute productive power, or by the absolute consumer power, but by the consumer power based on antagonistic conditions of distribution, which reduce the consumption of the bulk of society to a minimum varying within more or less narrow limits. It is furthermore restricted by the tendency to accumulate, the drive to expand capital and produce surplus-value on an extended scale. This is law for capitalist production, imposed by incessant revolutions in the methods of production themselves, by the depreciation of existing capital always bound up with them, by the general competitive struggle and the need to improve production and expand its scale merely as a means of self-preservation and under penalty of ruin.” (p 244-5)
In other words, as seen in the quote from TOSV3 earlier, if capital increases produced surplus value, by cutting wages, it thereby reduces potential consumer demand from workers, thereby undermining the potential for realising those profits. The capitalists cannot make up that deficiency by spending more themselves, because, as was seen earlier, as Marx says, the purpose of capitalist production and the generation of surplus value, is not so that capitalists can consume more, but to expand capital. But, if they expand capital more, especially if they relatively reduce their own consumption to increase accumulation, this only results in the production of even more use values, thereby compounding the problem of realising the produced surplus value embodied within them.
This is the same problem as described earlier, of too much of the available labour-time being allocated to the production of means of production, and not enough to means of consumption. But, no individual capital would remedy this by voluntarily increasing the wages of its workers above the market price of labour-power, because that would be to voluntarily reduce its own profits. And, if such a measure were to be imposed by the state, across the economy, this would be to try resolve the problem of an inability to realise profits by reducing produced surplus value, and, therefore, profits!
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