Tuesday, 18 October 2016

Capital III, Chapter 49 - Part 1

Concerning the Analysis of the Process of Production

Marx begins by reasserting the point made earlier, in the chapter on the transformation of exchange values into prices of production, that, taken at the level of the total social production, the value of the national output is equal to the total price of production of the national output. In other words,
 C + V + S = K + P.

“For the purposes of the following analysis we may leave out of consideration the distinction between price of production and value, since this distinction disappears altogether when, as here, the value of the total annual product of labour is considered, i.e., the product of the total social capital.” (p 812)

This must be the case, because both represent the same thing merely expressed differently. The total national output is equal to the labour-time required for its reproduction, made up of the labour-time required for the reproduction of the constant capital, consumed in current production, plus the new value added by the expenditure of labour in the current year. This value is expressed as an exchange value by putting a money price on it. Nothing is changed, therefore, if this total quantity of labour-time (C + V + S) is similarly expressed, in money terms, as the sum total of all prices of production (K + p). That is because, C is the value (i.e. current reproduction cost) of the constant capital consumed in this year's production (materials, plus wear and tear of fixed capital) plus the new value created by labour in the current year, which divides into V and S. But, similarly, K is the cost price made up of C + V, and P is merely the sum total of surplus value produced.

What does potentially change, as Marx set out in Chapter 12 (p 206-7) is the quantity of surplus value produced under a regime of prices of production, as opposed to exchange values, and consequently, the rate of surplus value and rate of profit. That is because, if the prices of wage goods are higher when calculated on the basis of prices of production – because the organic composition of capital for these commodities is higher – then this will cause the value of labour-power itself to be higher. A greater portion of the day will be required for workers to reproduce it, and so the quantity of surplus value must fall.

“In the same way, 20v might diverge from its value if the consumption of the wage includes commodities whose price of production diverges from their value; in which case the labourer would work a longer, or shorter, time to buy them back (to replace them) and would thus perform more, or less, necessary labour than would be required if the price of production of such necessities of life coincided with their value.” (Chapter 12, p 207)

With this proviso, then, the laws previously outlined continue to apply. That is that this total of surplus value constitutes the limit for the total amount of profit, interest and rent, which are only components of this surplus value, and consequently, of the price of commodities.

The total amount of profit, rent and interest may be less than the total surplus value, but it can never, under the normal conditions assumed, be more. This normal condition assumes that wages are equal to the value of labour-power. Its possible that the profit obtained in some spheres is greater than the average profit, because of the existence of monopoly prices. This prevents capital entering this sphere, to increase supply and thereby reduce prices, and profit to the average. But, this simply means that the higher than average profits, in this sphere, are compensated by lower than average profits elsewhere, because relatively more capital continues to be employed in these spheres than had it been able to move freely, and so prices, and profits, in these spheres, are lower than they otherwise would have been.

In fact, Marx points out the total surplus labour is never fully realised, because its always the case that some commodities are sold at prices below their individual value, and price of production. That is because, for any commodity, it is produced under conditions above, at or below the average level of efficiency. Considered statically, those commodities produced under better than average conditions cancel out those produced under below average conditions. The former sell at prices above their individual price of production, and the latter below. But, capitalist production does not occur under static conditions. Productivity is more or less continually rising.

“The surplus-labour is not entirely realised if only for the reason that due to a continual change in the amount of labour socially necessary to produce a certain commodity, resulting from the constant change in the productiveness of labour, some commodities are always produced under abnormal conditions and must, therefore, be sold below their individual value.” (p 833)

The profit (interest plus profit of enterprise) plus the rent, is always equal to the realised surplus value, and it is always this realised surplus-value, as opposed to the produced surplus-value that is reflected in the price of the commodity.

In Chapter 6, for example, Marx describes the conditions whereby a sharp rise in the price of cotton could not be passed on in the price of textile products, because market conditions meant that the price elasticity of demand for those products would have caused a sharp contraction in demand, had their prices been raised in line with the rise in the price of cotton. To sustain demand at the minimum level required for efficient production, therefore, textile manufacturers absorbed some of the cotton price rise themselves, and thereby realised only a portion of the surplus value they had produced.

It is a similar point as that made by Marx in Chapter 15, where he makes clear that not all surplus value, produced by workers, can be realised, because the conditions for its production are not the same as the conditions for its realisation, and indeed may contradict each other. Low wages, for example, may facilitate the production of surplus value, but will simultaneously hinder its realisation by depressing demand.

“On the other hand, wages, which form the third specific form of revenue, are always equal to the variable component part of capital, i.e., the component part which is laid out in purchasing living labour-power, paying labourers rather than in means of labour.” (p 833)

Being extremely pedantic, this is not strictly true, for the same reason that Marx set out above, about capitalist production being characterised by continual changes in productivity. The payment of wages is equal to the variable capital, because the variable capital is itself equal to the value of those commodities required to reproduce labour-power. In fact, as Marx sets out elsewhere, nothing would be changed here if the variable capital took the form of actual commodities, rather than money, and if these commodities, wage goods, were then given to the workers by the capitalist rather than money wages.

But, if continual changes in productivity mean that the value of these wage goods fall, this may not be immediately reflected in money wages, i.e. wages will then buy more of these wage goods than strictly required just to reproduce the labour-power. On a pure value basis, wages would then be higher than the value of labour-power, which means that realised surplus value would be lower than produced surplus value.

If we take variable-capital as being that which Marx goes on to define as,

“... the materialisation of that portion of the total working-day of the labourer in which the value of variable capital and thus the price of labour is reproduced; that portion of commodity-value in which the labourer reproduces the value of his own labour-power, or the price of his labour.” (p 833),

then its clear that continual improvements in productivity reduce this portion of the working day, whilst money wages are not continually reduced accordingly, and so wages must continually diverge from the value of the variable capital as defined.

If, however, we take the analysis on a strict value basis, rather than considering the money prices paid, the point is tautologically true. If, for example, the variable-capital was comprised of actual commodities, wage goods, simply handed to workers, rather than money wages, this would automatically follow. Any rise in productivity would simply mean that these commodities, handed to the workers, in the same quantity, would have a lower value, they would have required less labour-time, a smaller proportion of the total social working day, to produce. The wages, therefore, would have automatically fallen in value, and so would the value of the variable capital, because both would have taken the form of the self same commodities.

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