Saturday, 21 November 2015

Capital III, Chapter 18 - Part 5

As Marx described in Chapter 15, and sets out again here, these kinds of crises of overproduction are typical of periods of exuberance when high rates and masses of profits cause over investment and over-trading. Moreover, the high levels of profit and investment lead to high levels of employment and wages, which act both to squeeze surplus value and to lead to higher elasticities of demand for wage goods.

“The manufacturer may actually sell to the exporter, and the exporter, in his turn, to his foreign customer; the importer may sell his raw materials to the manufacturer, and the latter may sell his products to the wholesale merchant, etc. But at some particular imperceptible point the goods lie unsold, or else, again, all producers and middlemen may gradually become overstocked. Consumption is then generally at its highest, either because one industrial capitalist sets a succession of others in motion; or because the labourers employed by them are fully employed and have more to spend than usual. The capitalists' expenditures increase together with their growing income.” (p 304)
Its not just amongst the merchants, however, that conditions of prosperity and high profits breed the conditions of crisis. Marx points out that, in Capital II, it had been shown how constant capital itself circulates within Department I, irrespective of Department II. That is because the existing constant capital in Department I, must continually be reproduced.

If the whole of the capital goods sector is thought of as say a coal mine, a portion of the mine's output must be continually consumed by the mine itself to keep its steam engines running, so that the mine can operate. The same is true of the producer goods sector itself, a portion of its output must continually go just to reproduce its own constant capital, and, therefore, never forms a part of society's revenue, never forms an income – wages, profit, interest or rent – for anyone, even though it is an integral and growing element of society's value of output.

That is why there is a growing disparity between society's value of gross national product, and the value of gross national income, contrary to Smith and Keynes' belief that these two amounts are identical, i.e. that the value of a commodity, and so of a country's total production, resolves solely into factor incomes. But, as Marx illustrates, those factor incomes amount to only (v + s), whereas the actual value of the commodity, and so also total national output, is equal to (c + v + s), and c is constantly growing relative to (v + s), as a consequence of accumulation, and a rising organic composition of capital, brought about by rising social productivity.

“It is at first independent of individual consumption because it never enters the latter. But this consumption definitely limits it nevertheless, since constant capital is never produced for its own sake but solely because more of it is needed in spheres of production whose products go into individual consumption. However, this may go on undisturbed for some time, stimulated by prospective demand, and in such branches, therefore, the business of merchants and industrialists goes briskly forth. The crisis occurs when the returns of merchants who sell in distant markets (or whose supplies have also accumulated on the home market) become so slow and meagre that the banks press for payment, or promissory notes for purchased commodities become due before the latter have been resold. Then forced sales take place, sales in order to meet payments. Then comes the crash, which brings the illusory prosperity to an abrupt end.” (p 305)

The effect of the merchant's capital is greater because it affects the turnover of several industrial capitals, as described previously , and because as well as facilitating the metamorphosis of the commodity-capital, of industrial capital, into money, it also facilitates the metamorphosis of money-capital into productive capital.

The merchant buys the commodities of a number of industrial capitals, either all in the same line of business, or in different types of businesses. They are selling the commodities of one whilst simultaneously buying the commodities of another. But, at the same time, they are supplying industrial capitals with the means of production they require.

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