Friday, 18 September 2015

Capital III, Chapter 15 - Part 9

Provided these things – the means of production and means of consumption – are maintained in the appropriate proportions, society's output, and its capacity to produce a social surplus is maximised, and this social surplus can then be used to increase its means of production and consumption further. As demonstrated in Chapters 13 and 14, this process, which tends to lower the rate of profit (profit margin), at the same time, must increase the mass of profit and capital. The fact that this process tends to lower the rate of profit, of itself gives no grounds for the creation of crises. This is particularly the case where, as set out in Chapter 14, the excess surplus value and released capital, resulting from this process, is invested in the “new lines” of production, where the organic composition of capital is low, and the rate of profit very high. Here it soaks up the relative over-population and thereby creates demand for the output of the older lines of production.

Looked at purely on the basis of an exchange of the different components of the total social capital, there is no reason why a crisis should erupt, provided those necessary conditions are met. But, this act of producing surplus value, as part of the production process, is not the end of the story. Capitalists are not interested in some theoretical quantity of produced surplus value. They are only interested in hard cash, in the realisation of profits, and that requires that what has been produced is sold, and sold at prices that do realise that profit. This process, of realising profits, as the money-form of the produced surplus value, does not at all flow naturally from the production process. Quite the contrary. The laws which determine demand are based not on value but on use value, in other words, on the subjective preferences of consumers, and it is demand which determines whether what has been produced can be sold, and at what market price. As Marx puts it, in Theories of Surplus Value III,

“The value supplied (but not yet realised) and the quantity of iron which is realised, do not correspond to each other. No grounds exist therefore for assuming that the possibility of selling a commodity at its value corresponds in any way to the quantity of the commodity I bring to market. For the buyer, my commodity exists, above all, as use-value. He buys it as such. But what he needs is a definite quantity of iron. His need for iron is just as little determined by the quantity produced by me as the value of my iron is commensurate with this quantity.

It is true that the man who buys has in his possession merely the converted form of a commodity—money—i.e., the commodity in the form of exchange-value, and he can act as a buyer only because he or others have earlier acted as sellers of commodities which now exist in the form of money. This, however, is no reason why he should reconvert his money into my commodity or why his need for my commodity should be determined by the quantity of it that I have produced. Insofar as he wants to buy my commodity, he may want either a smaller quantity than I supply, or the entire quantity, but below its value. His demand does not have to correspond to my supply any more than the quantity I supply and the value at which I supply it are identical.”


In other words, the potential for crisis now becomes a reality, because market prices differ from market values. Prices can fall below costs of production, so capital cannot be reproduced. That then creates the potential for a crisis of the second form, as Marx describes it in Theories of Surplus Value II, i.e. a payments crisis, where productive-capital bought on credit cannot be reproduced, and the capitalist cannot repay the credit, which then impacts their creditors, causing a chain reaction of failed payments.

So, this is not a crisis arising from any tendency of the rate of profit to fall. Production has occurred, labour has been exploited, surplus value has been produced, with a rate of profit which may be high or low. The problem is not the production of surplus value, but its realisation.

“Now comes the second act of the process. The entire mass of commodities, i.e. , the total product, including the portion which replaces the constant and variable capital, and that representing surplus-value, must be sold. If this is not done, or done only in part, or only at prices below the prices of production, the labourer has been indeed exploited, but his exploitation is not realised as such for the capitalist, and this can be bound up with a total or partial failure to realise the surplus-value pressed out of him, indeed even with the partial or total loss of the capital. The conditions of direct exploitation, and those of realising it, are not identical. They diverge not only in place and time, but also logically.” (p 244)

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