Sunday, 3 January 2016

Capital III, Chapter 21 - Part 14

The market price of capital as a commodity is determined, as with every commodity, by the interaction of demand and supply. But, as stated earlier, for all other commodities, the fluctuations of demand and supply only explain the movement of this market price, its deviation from the market value or price of production. But, capital as a commodity has no market value or price of production. For all other commodities, if demand and supply coincide, then they cease to explain anything, and the price of the commodity is explained by the immanent laws of capitalist production.

“The same applies to wages. If supply and demand coincide, they neutralise each other's effect, and wages equal the value of labour-power. But it is different with the interest on money-capital. Competition does not, in this case, determine the deviations from the rule. There is rather no law of division except that enforced by competition, because, as we shall later see, no such thing as a "natural" rate of interest exists. By the natural rate of interest people merely mean the rate fixed by free competition. There are no "natural" limits for the rate of interest. Whenever competition does not merely determine the deviations and fluctuations, whenever, therefore, the neutralisation of opposing forces puts a stop to any and all determination, the thing to be determined becomes something arbitrary and lawless.” (p 356)

As a result, everything appears superficial. Interest appears to be a function of time, whereas profits are not. But, Marx demonstrates this is not so. As seen in previous chapters, the rate of profit is also a function of the rate of turnover of the capital, whereas the rate of turnover of merchant capital also determines the profit margin per unit, and consequently unit prices.

“With his usual insight into the internal connection of things, the romantic Adam Müller says (Elemente der Staatskunst, Berlin, 1809, Dritter Theil, S. 138);

'In determining the prices of things, time is not considered; while in determining interest, time is the principal factor.'

He does not see how the time of production and the time of circulation enter into the determination of commodity-prices, and how this is just what determines the rate of profit for a given period of turnover of capital, whereas interest is determined by precisely this determination of profit for a given period. His sagacity here, as elsewhere, consists in observing the clouds of dust on the surface and presumptuously declaring this dust to be something mysterious and important.” (p 356-7)

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