Monday, 21 December 2015

Capital III, Chapter 21 - Part 1

Interest-Bearing Capital

The analysis, so far, has taken us from the development of an average rate of profit, based on the advanced productive-capital to a definition of average profit that includes the advanced merchant and commercial capital. That is the capital advanced to undertake the circulation of commodities, and the money-dealing capital, which effects the necessary movement of money required as payments. The definition of general or average profit was made more precise by referring to it as the general annual rate of profit, which makes clear that it is calculated on the basis of the sum of the industrial and merchant capital, advanced for one turnover period, and not the capital laid out for the entire year. It is this definition, now set out, Marx says, which should be understood by the term general or average rate of profit, from this point on.

Under this latest definition, of the general annual rate of profit, it makes no difference whether we are discussing an industrial capital or a merchant capital. Either type of capital receives the same rate of profit, which is pro rata to the capital it advances for one turnover period. With capitalist production, any owner of capital can bring about the self-expansion of that capital, i.e. make profits. That indeed is what makes it capital; it is value that is self-expanding. And, the fact that it is self-expanding value, means that the form of this value is not relevant.

Value in any form may be capital or may simply be a commodity. What makes this particular value capital is the purpose to which it is put, and the social context within which that purpose is carried out. If I own a house, that house may simply be a use value, or a commodity I may have bought, and may sell. But, as simply a commodity, the value of this house has no potential to self-expand. If I sell it at its value, I will only get back the value I expended on its purchase, or that was expended on its production. However, if I use the house as an instrument of production, as part of a capitalist venture, then, like every other capitalist, I will expect to obtain the average profit on the capital I advance – here represented by the value of the house.

The house here represents constant capital. But, similarly, if I possess variable capital, in the shape of means of subsistence, which can be used as means of payment for workers, I could set these workers to work, in the expectation that the new value these workers create, by the exercise of their labour, will be greater than the value of these means of subsistence, I pay them as wages. However, if I simply consume the food, clothing, and shelter, which comprise these means of subsistence, there is no chance of their value expanding. And, as with the house, if I simply sell these commodities, at their value, I will only obtain for them the same value I expended for their purchase. Similarly, if the means of subsistence I own, and pay as wages to workers, only results in those workers producing a use value I consume myself, for example, where I employ domestic servants such as a cook, then again no surplus value is produced, and that value did not act as capital.

In both cases, the capital is a sum of value, and this value is expressed in money terms, even though, in neither case, was this value in the form of money. Capital is expressed as an amount of money only because money is the universal equivalent form of value. All value, in whatever form can be reduced to and represented by it. Therefore, value, and so also capital-value, can then be compared.

In this sense, all value, in whatever form, is money, but money also, in this sense, as value that has the potential to expand, i.e. capital, thereby assumes an additional use value. In just the same way that labour has the use value not only to produce some specific product, but also to create value, and so surplus value, so capital has the use value of being able to self-expand.

“Money — here taken as the independent expression of a certain amount of value existing either actually as money or as commodities — may be converted into capital on the basis of capitalist production, and may thereby be transformed from a given value to a self-expanding, or increasing, value. It produces profit, i.e., it enables the capitalist to extract a certain quantity of unpaid labour, surplus-product and surplus-value from the labourers, and to appropriate it. In this way, aside from its use-value as money, it acquires an additional use-value, namely that of serving as capital. Its use-value then consists precisely in the profit it produces when converted into capital. In this capacity of potential capital, as a means of producing profit, it becomes a commodity, but a commodity sui generis. Or, what amounts to the same, capital as capital becomes a commodity.” (p 338-9)

Again, this is like the situation with labour-power. Labour-power – the power to perform labour and thereby create value – becomes a commodity, because this capacity, for capital, constitutes a use value. It does become a use value, because, having been separated from their means of production, the workers must sell their labour-power, in order to live.

But, under capitalist production, as a result of the development of prices of production, determined by the general rate of profit, it is no longer, for any individual capital, the employment of this labour-power which is the source of profit, but only the ownership of capital. A very large capital may employ little labour-power, and yet will obtain a large amount of profit compared to a small capital that employs a lot of labour-power.

At the level of capital in general, profit remains a function of the exploitation of labour, and production of surplus value, but, at the level of the individual capital, this is no longer true. The appropriation of profit is now only a function of the ownership of capital. A merchant capital produces no surplus value, but obtains its proportionate share of profit; at the extreme, an industry that was fully automated, and employed no workers, would produce no surplus value at all, but would claim its share of profit pro rata to the size of its capital.

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