Monday, 16 November 2015

Capital III, Chapter 17 - Part 10

The capital so advanced affects the rate of profit. The more advanced, the lower the rate of profit, and vice versa. To the extent that merchant capital, by fulfilling this role, reduces the capital advanced for this purpose, it raises the rate of profit. In fact, merchant capital never really advances this capital. The physical capital itself is the product of industrial capital. The value he obtains in the sale of commodities, with which he reproduces this constant capital, is also not value produced by him, but only by other industrial capitals.

“First, therefore, the merchant has this constant capital recovered for him and, secondly, receives his profit on it. Through both of these, therefore, the industrial capitalist's profit is reduced. But owing to economising and concentration which are bound up with division of labour, it shrinks less than it would if he himself had to advance this capital. The reduction in the rate of profit is less, because the capital thus advanced is less.” (p 297)

The selling price of commodities (we should remember that this is for total social production, or for the average commodity) is then, so far, made up of B, the price paid by the merchant, plus k, the constant capital, required for commercial operations, plus b, the amount laid out for wages, plus the average profit on B + k + b.

Suppose that merchant capital has the following costs. Fixed capital – made up of buildings and equipment – with a value of £100 billion, with an average life of 10 years, therefore, £10 billion per year; other constant capital of £10 billion; and variable capital of £1 billion. In addition, it lays out £100 billion for the purchase of the commodities it sells. The average rate of profit is 10%. Its total costs are then 10 + 10 + 1 + 100 = £121 billion. In order to make the average profit, it must sell all of the commodities for 121 + 12.1 = £133.1 billion in total.

The average profit appears to fall compared with the surplus value measured against just the industrial capital required for its production, or even compared with the industrial capital plus the merchant's capital needed to buy it. The addition of these extra elements of cost, for constant and variable capital, reduce the average rate of profit, and, therefore, the price of production for industrial capital. The difference covers the additional price charged by the commercial capital to cover these costs.

But, these additional costs are less than had the industrial capital had to bear them, because of the economies of scale enjoyed by the commercial capital. If we examine just B and k, the profit of the merchant can be seen as being a function of the fact that they can perform these functions more effectively than could industrial capital, i.e. the profit arises as a function of the cost-saving. But, that is not the same for the variable capital. Here, as demonstrated earlier, the profit of the merchant capitalist does not arise because the cost to them of employing this wage labour is less than it would be if industrial capital were to do so (though this may also be the case), but because, as stated earlier, this wage labour realises more surplus value than it is paid for the value of its labour-power. This is true whether this wage labour is employed to carry out this function by industrial capital, or merchant capital.

In order to elaborate, Marx takes the situation of such labour employed by the industrial capitalist rather than the merchant. Every industrial capitalist must employ such commercial workers in offices attached to the production process, even if physically separated. Even where inputs are bought from and outputs sold to merchants, the industrial capitalist must employ workers to deal with these sales and purchase operations.

“The office is from the outset always infinitesimally small compared to the industrial workshop. As for the rest, it is clear that as the scale of production is extended, commercial operations required constantly for the circulation of industrial capital, in order to sell the product existing as commodity-capital, to reconvert the money so received into means of production, and to keep account of the whole process, multiply accordingly. Calculation of prices, book-keeping, managing funds, correspondence — all belong under this head. The more developed the scale of production, the greater, even if not proportionately greater, the commercial operations of the industrial capital, and consequently the labour and other costs of circulation involved in realising value and surplus-value.” (p 299)

This indeed is one reason that the industrial capitalist seeks to reduce all of these overhead expenses to a minimum by transferring these functions to specialised capitals. In the 1980's, large capitals applied this principle to all non-core functions, as they decentralised their operations.

“Hence, industrial capital does not maintain the same attitude to its commercial wage-labourers as it does to its productive wage-labourers. The more productive wage-labourers it employs under otherwise equal circumstances, the greater the output, and the greater the surplus-value, or profit. Conversely, however, the larger the scale of production, the greater the quantity of value and surplus-value to be realised, the greater the produced commodity-capital, the greater are the absolute, if not relative, office costs, giving rise to a kind of division of labour.” (p 299)

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