The situation described at the end of Part 35, is also analysed by Marx in Theories of Surplus Value. It is also a point Marx discusses in Capital about the way varying levels of productivity in different spheres, necessarily results, in a market economy, in violent disproportions, which prevent exchange taking place on the basis of values.
In Capital, Marx sets out that any economy, not just a capitalist economy, must produce in accordance with certain proportions. Its a point made in relation to Robinson Crusoe, who must first ensure he produces enough food to be able to live, before he thinks about allocating labour-time to any other pursuit. But, the same would be true if Crusoe and Friday were independent producers of commodities, which they sold to each other.
If Crusoe produces nets, and Friday produces fish, it may take Crusoe a day to produce a net, and Friday a day to produce twenty fish, so that they exchange these commodities on this basis. But, if the net lasts for a week, there is no point, Crusoe trying to sell another to Friday on the following day, because although the value of a net and of twenty fish will not have changed, so that on this basis they could exchange, the fact is that Friday has no need of an additional net. As Marx points out, it is the use value of the net, which Friday demands, not its value, and it currently offers him no use value.
Similarly, if Crusoe's productivity rises, so that he can now produce two nets in a day, instead of one, the value of a net halves. Now, in value terms two nets exchange for twenty fish. But, this does not change Friday's demand for nets. He still only needs one, which last him for a week. He will now be happy to exchange ten fish for a net, as this represents an exchange of equal amounts of labour-time, but will see no reason to exchange his remaining ten fish for the other net, of which he has no need. The amount of value produced in the society remains the same at two days, but the change in productivity in net making has resulted in a crisis of overproduction for Robinson. He could only exchange his net, if there were some additional producer of fish, with whom he could exchange his overproduced net. Alternatively, he must use his surplus labour-time, to produce something other than nets, to exchange with Friday.
Marx describes this situation as follows.
“When spinning-machines were invented, there was over-production of yarn in relation to weaving. This disproportion disappeared when mechanical looms were introduced into weaving.”
In Capital, Marx sets out that any economy, not just a capitalist economy, must produce in accordance with certain proportions. Its a point made in relation to Robinson Crusoe, who must first ensure he produces enough food to be able to live, before he thinks about allocating labour-time to any other pursuit. But, the same would be true if Crusoe and Friday were independent producers of commodities, which they sold to each other.
If Crusoe produces nets, and Friday produces fish, it may take Crusoe a day to produce a net, and Friday a day to produce twenty fish, so that they exchange these commodities on this basis. But, if the net lasts for a week, there is no point, Crusoe trying to sell another to Friday on the following day, because although the value of a net and of twenty fish will not have changed, so that on this basis they could exchange, the fact is that Friday has no need of an additional net. As Marx points out, it is the use value of the net, which Friday demands, not its value, and it currently offers him no use value.
Similarly, if Crusoe's productivity rises, so that he can now produce two nets in a day, instead of one, the value of a net halves. Now, in value terms two nets exchange for twenty fish. But, this does not change Friday's demand for nets. He still only needs one, which last him for a week. He will now be happy to exchange ten fish for a net, as this represents an exchange of equal amounts of labour-time, but will see no reason to exchange his remaining ten fish for the other net, of which he has no need. The amount of value produced in the society remains the same at two days, but the change in productivity in net making has resulted in a crisis of overproduction for Robinson. He could only exchange his net, if there were some additional producer of fish, with whom he could exchange his overproduced net. Alternatively, he must use his surplus labour-time, to produce something other than nets, to exchange with Friday.
Marx describes this situation as follows.
“When spinning-machines were invented, there was over-production of yarn in relation to weaving. This disproportion disappeared when mechanical looms were introduced into weaving.”
(TOSV2 Note p 521)
“Moreover, all equalisations are accidental and although the proportion of capital employed in individual spheres is equalised by a continuous process, the continuity of this process itself equally presupposes the constant disproportion which it has continuously, often violently, to even out.”
“Moreover, all equalisations are accidental and although the proportion of capital employed in individual spheres is equalised by a continuous process, the continuity of this process itself equally presupposes the constant disproportion which it has continuously, often violently, to even out.”
(TOSV2 p 492)
“Just as it is a condition for the sale of commodities at their value, that they contain only the socially necessary labour-time, so it is for an entire sphere of production of capital, that only the necessary part of the total labour-time of society is used in the particular sphere, only the labour-time which is required for the satisfaction of social need (demand). If more is used, then, even if each individual commodity only contains the necessary labour-time, the total contains more than the socially necessary labour-time; in the same way, although the individual commodity has use-value, the total sum of commodities loses some of its use-value under the conditions assumed.”
“Just as it is a condition for the sale of commodities at their value, that they contain only the socially necessary labour-time, so it is for an entire sphere of production of capital, that only the necessary part of the total labour-time of society is used in the particular sphere, only the labour-time which is required for the satisfaction of social need (demand). If more is used, then, even if each individual commodity only contains the necessary labour-time, the total contains more than the socially necessary labour-time; in the same way, although the individual commodity has use-value, the total sum of commodities loses some of its use-value under the conditions assumed.”
(TOSV2 p 521)
And finally,
“By the way, in the various branches of industry in which the same accumulation of capital takes place (and this too is an unfortunate assumption that capital is accumulated at an equal rate in different spheres), the amount of products corresponding to the increased capital employed may vary greatly, since the productive forces in the different industries or the total use-values produced in relation to the labour employed differ considerably. The same value is produced in both cases, but the quantity of commodities in which it is represented is very different. 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, firms A and B currently exchange all of their output with each other. Both expand by the same amount in value terms, say 1%, but because higher productivity in A might result in its physical output rising by 20%, from 1000 to 1200 units, whereas the physical output of B expands by only 5%, from 2000 to 2100, it will be almost impossible for A to sell all of its 1200 units to B at their value in exchange for the 2100 units of B's production, even though both have the same value. That is because, the demand for A and B's commodities is determined by their use-value not their value. The more the supply of A rises, the more its use value supplies B with all of their needs for it, so the less B will be prepared to pay for additional units of it, even though the value of A and B have both risen by the same amount.
If A wants to sell all of their 1200 units to B, they may have to accept only 2050 units of B's commodity (or money equivalent) in return for them. In other words, although the market value of A and B have both risen by 1%, the market price of A will fall relative to B. The limitation of the market for A effectively places a barrier to the expansion of its production. Only if the producer of A can find new markets for their commodity can they overcome that limitation.
And finally,
“By the way, in the various branches of industry in which the same accumulation of capital takes place (and this too is an unfortunate assumption that capital is accumulated at an equal rate in different spheres), the amount of products corresponding to the increased capital employed may vary greatly, since the productive forces in the different industries or the total use-values produced in relation to the labour employed differ considerably. The same value is produced in both cases, but the quantity of commodities in which it is represented is very different. 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, firms A and B currently exchange all of their output with each other. Both expand by the same amount in value terms, say 1%, but because higher productivity in A might result in its physical output rising by 20%, from 1000 to 1200 units, whereas the physical output of B expands by only 5%, from 2000 to 2100, it will be almost impossible for A to sell all of its 1200 units to B at their value in exchange for the 2100 units of B's production, even though both have the same value. That is because, the demand for A and B's commodities is determined by their use-value not their value. The more the supply of A rises, the more its use value supplies B with all of their needs for it, so the less B will be prepared to pay for additional units of it, even though the value of A and B have both risen by the same amount.
If A wants to sell all of their 1200 units to B, they may have to accept only 2050 units of B's commodity (or money equivalent) in return for them. In other words, although the market value of A and B have both risen by 1%, the market price of A will fall relative to B. The limitation of the market for A effectively places a barrier to the expansion of its production. Only if the producer of A can find new markets for their commodity can they overcome that limitation.
In order to overcome the problem of high wages, and low rates of surplus value, capital may seek cheaper labour overseas. British capital expanded into Europe and the US, in the 19th century, and in the 1980's and 90's, capital from developed economies relocated into specific parts of Asia and Latin America.
But, as was seen earlier, low wages are usually an indication of low levels of productivity. As Marx says, in Capital I, quoting Adam Smith, wherever wages are low the price of labour is high. In other words, although workers are paid low wages, the value they create is low, and the unit labour costs are high. Its only where existing high productivity, mass production methods can be transposed in to an economy with low wages, that it can be beneficial. But, even then, because of the socialised and co-operative nature of labour, even that is not enough on its own. Its necessary for all of the necessary infrastructure to also be in place around such industries before the necessary levels of productivity can be achieved to make it profitable.
However, when all this is in place, the relocation of capital to such economies, does represent excess capital for the workers in the economy from where it has moved. It is no longer capital, which provides employment for them, or contributes value into their economy, as was clear from the process of de-industrialisation that occurred in Britain, and the US, during the 1980's and 90's. That capital then produces commodities sent into the global market that competes with the capital from the home economy, seeking to push it out of those markets.
“If capital is sent abroad, this is not done because it absolutely could not be applied at home, but because it can be employed at a higher rate of profit in a foreign country. But such capital is absolute excess capital for the employed labouring population and for the home country in general. It exists as such alongside the relative over-population, and this is an illustration of how both of them exist side by side, and mutually influence one another.” (p 256)
The effects of these processes necessarily affect the big capitals differently to the smaller capitals. The process, which results in overproduction is the rise in social productivity. That same process results in a sharp rise in the mass of profit produced, even as the rate of profit falls. But, the effect of this is not felt evenly. As stated earlier, a big capital can accumulate more with a low rate of profit than a small capital with a high rate of profit. The big capitals can use this within the competitive struggle to squeeze the small capitals. The bigger capitals, for whom wages form a smaller proportion of their total costs can better compete for labour-power via higher wages.
“To be sure, the competitive struggle is accompanied by a temporary rise in wages and a resultant further temporary fall of the rate of profit.” (p 256)
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