Because the turnover period is now 2 weeks rather than 6 weeks the capital advanced previously in 6 weeks is now advanced in two weeks. The £5,000 of material previously processed in 6 weeks are now processed in 2 weeks, and so this £5,000 is advanced during this 2 week period. Three workers are now employed rather than 1, but the wages advanced are for 2 weeks, not for 6, so the amount advanced in wages remains the same. The surplus value produced in these 2 weeks is the same as was previously produced by 1 worker in 6 weeks. That is £400. But now the capital turns over 24 times rather than 8. the annual rate of profit is then:
£400 x 24 = £9,600 surplus value, advanced capital = Fixed capital £4500, Material £5,000, Wages £400 = £9900. So, 9600/9900 = 96.97%.
So, it can be seen how even in the most extreme conditions such as those chosen above, where the replacement machine costs 50% more than the ten machines it replaces, and where this causes a huge fall in the rate of profit, it establishes the basis for a release of capital which can be used for additional accumulation in machines, so that the working period is reduced, the rate of turnover of capital increased, and the annual rate of profit thereby also increased. The huge expansion of production that this would result in, would put even more pressure on the rate of profit. The consequence is clear from what was stated earlier. The profit margin would fall to a level, where the least efficient producers would be producing at a loss. They would go out of business, and this would be one means by which the capital employed in the industry would be reduced. It leads to a further huge concentration of capital into a smaller number of hands.
“All the circumstances which lead to the use of machinery cheapening the price of a commodity produced by it, come down in the last analysis to a reduction of the quantity of labour absorbed by a single piece of the commodity; and secondly, to a reduction in the wear-and-tear portion of the machinery, whose value goes into a single piece of the commodity. The less rapid the wear of machinery, the more the commodities over which it is distributed, and the more living labour it replaces before its term of reproduction arrives. In both cases the quantity and value of the fixed constant capital increase in relation to the variable.” (p 265)
As Marx set out in Capital I, the reason that the value of wear and tear of fixed capital falls, as a proportion of the value of each commodity unit, and, therefore, of the total laid-out capital, is not just that one new machine replaces several older machines, nor that its value falls as a result of rises in productivity, nor that its higher productivity means that its value is spread over far more commodity units. Besides all these things, it is also that technological improvements mean that the machines themselves are more durable and reliable. As he says here, a machine that has a longer lifespan, because its made of metal rather than wood, for example, will transfer its value over a longer period, and, therefore, less to any individual commodity unit. Moreover, as set out in Capital II, the maintenance costs of machines is included as part of the fixed capital cost. The more reliable the machine, the less that needs to be spent on it, for repairs, the less the overall fixed capital value advanced.
The importance of the rate of profit for the total social capital is the extent to which it enables capital accumulation, and thereby economic growth. However, as the example above demonstrates, it is really the annual rate of profit, not the rate of profit that is really decisive here.
On the one hand, a higher rate of profit means that the surplus forms a greater proportion available for expansion. But, as set out earlier, this is not the only consideration. Other factors include the rate of interest, rent, and taxes which are deductions from the industrial profit available for re-investment. There is also the question of how much the capitalist devotes to productive as opposed to unproductive consumption out of their profits.
“"All other things being equal, the power of a nation to save from its profits varies with the rate of profits: is great when they are high, less, when low; but as the rate of profits declines, all other things do not remain equal.... A low rate of profits is ordinarily accompanied by a rapid rate of accumulation, relatively to the numbers of the people, as in England ... a high rate of profit by a slower rate of accumulation, relatively to the numbers of the people. Examples: Poland, Russia, India, etc." (Richard Jones, An Introductory Lecture on Political Economy, London, 1833, p. 50 ff.)” (p 265-6)
Marx continues,
“Jones emphasises correctly that in spite of the falling rate of profit the inducements and faculties to accumulate are augmented; first, on account of the growing relative overpopulation; second, because the growing productivity of labour is accompanied by an increase in the mass of use-values represented by the same exchange-value, hence in the material elements of capital; third, because the branches of production become more varied; fourth, due to the development of the credit system, the stock companies, etc., and the resultant case of converting money into capital without becoming an industrial capitalist; fifth, because the wants and the greed for wealth increase; and, sixth, because the mass of investments in fixed capital grows, etc.” (p 266)
This says a lot in a relatively few words, and the implications are probably not widely recognised.
What does Marx mean when he says that the growing relative over-population provides an incentive to accumulation? He certainly doesn't mean that rising unemployment induces capital to provide work for the unemployed! Its necessary to remember what Marx means by this relative surplus population. It is, in fact, a corollary of the rising social productivity of labour, which leads to a falling rate of profit, but which also leads to a rising mass of profit, of the rate of turnover of capital, and to the release of advanced capital.
In other words, as with the example given above, even as the rate of profit falls, the rate of turnover rises, capital is released, which means that the additional capital can be accumulated, and the corresponding relative overpopulation set to work. As Marx describes in Chapter 14, particularly in times of rapid technological change, the areas in which this released capital is employed, and where the relative over population is absorbed, is in the “new lines” of production, where the organic composition of capital is low and where, consequently, a larger proportion of labour is absorbed.
That is also the point Marx is making here, when he talks about the branches of production becoming more varied. His second point re-emphasises that it is the physical amount of material to be processed which is decisive for how much labour-power is employed, given any set of technical conditions, not the value of those materials. As productivity reduces the value of materials, a greater quantity can be bought, to be processed, and so a greater quantity of labour-power is required to process it. The same is true of the value of machinery, and in a sense this is more significant, as the example above demonstrated.
If two machines can be employed for the previous cost of one, this halves the working period. In other words, the same amount of advanced circulating capital can mobilise twice the previous quantity of material and labour-power. As the price of fixed capital falls, this provides a strong incentive for accumulation.
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