Profit, Rent, Interest and Asset Prices - Part 5 of 19

The mass and rate of profit, Marx has shown, are now objectively determinable. However, in the real world, a multiplicity of other factors intervene to prevent this appearing in a pure form. That is true of all objective laws. The rate at which an object falls to Earth can be objectively determined by the laws of physics, for example. In theory, as Galileo argued, it does not matter whether this object is a piece of lead or a feather; they should both fall to the ground at a rate of 32 feet per second per second, the rate of acceleration caused by gravity. In practice, of course they do not. Both fall to Earth through the atmosphere, and both thereby experience varying amounts of resistance from it. An object falling to Earth does not just respond to the law of gravity, but also to other laws, which determine its terminal velocity.

In the same way, even though the value of a commodity, or under capitalism, its price of production, can be objectively determined, its actual market price will only accidentally coincide with these objectively determined values. In the real world, a host of other factors will cause demand to be higher than supply, or lower than supply, so that the market price, at any one time, will be higher or lower than this objectively determined value, or price of production. Similarly, where the supply of labour-power rises relative to the demand, workers may not just face lower wages, as a result of this condition, but the working-day may rise beyond the normal working day, as capital feels enabled to use up this excess supply without threatening its own longer-term interests. As Marx puts it,

“We can only say that, the limits of the working day being given, the maximum of profit corresponds to the physical minimum of wages; and that wages being given, the maximum of profit corresponds to such a prolongation of the working day as is compatible with the physical forces of the labourer. The maximum of profit is therefore limited by the physical minimum of wages and the physical maximum of the working day. It is evident that between the two limits of the maximum rate of profit an immense scale of variations is possible. The fixation of its actual degree is only settled by the continuous struggle between capital and labour, the capitalist constantly tending to reduce wages to their physical minimum, and to extend the working day to its physical maximum, while the working man constantly presses in the opposite direction.”

(Value, Price and Profit) 

In other words, just as gravity exerts a force pulling objects to Earth, so the resistance to those objects provided by air, or water acts to push them in the opposite direction. But, these contending forces are not arbitrary. Neither are those that limit the extent to which capital can extend or intensify the working-day, or to which workers can push in the opposite direction; nor are the forces arbitrary which determine the extent to which capital can reduce wages, or to which workers can increase them. The notion that such consequences can result solely from industrial struggle is the basis of reformism and syndicalism. It implies that capital imposes such conditions upon workers arbitrarily, reducing the motivations of capital down to being a question of morals, and the greed of the capitalist, whilst similarly implying that workers' condition, within capitalism, can be extended almost without limit, solely on the basis of more militant industrial struggle, or political reforms that bring about a redistribution of income. 

That is a moralistic, Sismondist view, and not the scientific view of Marx. As Marx puts it,

“As to the limits of the value of labour, its actual settlement always depends upon supply and demand, I mean the demand for labour on the part of capital, and the supply of labour by the working men.”

(ibid) 

But, those factors which, on the one hand, increase the demand for labour-power, i.e. the accumulation of capital, can simultaneously act to increase its supply. For example, as capital accumulates, the population will also grow. Moreover, this accumulation of capital, Marx has demonstrated also goes along with a change in the composition of capital, because as technology improves, new machines are introduced, and these machines raise the productivity of labour, so that less labour is required to produce a given amount of output. Consequently, even as the accumulation of capital may outstrip the growth of population, so a relative excess population is created. As wages rise, putting pressure on profits, capital will have an increased incentive to utilise science and technology to develop new labour-saving technologies that relatively reduce its demand for labour-power. It is the interplay of these contending forces that play out, over periods of many years, that create the objective laws that determine the long wave.

“Take, for example, the rise in England of agricultural wages from 1849 to 1859. What was its consequence? The farmers could not, as our friend Weston would have advised them, raise the value of wheat, nor even its market prices. They had, on the contrary, to submit to their fall. But during these eleven years they introduced machinery of all sorts, adopted more scientific methods, converted part of arable land into pasture, increased the size of farms, and with this the scale of production, and by these and other processes diminishing the demand for labour by increasing its productive power, made the agricultural population again relatively redundant. This is the general method in which a reaction, quicker or slower, of capital against a rise of wages takes place in old, settled countries. Ricardo has justly remarked that machinery is in constant competition with labour, and can often be only introduced when the price of labour has reached a certain height, but the appliance of machinery is but one of the many methods for increasing the productive powers of labour. The very same development which makes common labour relatively redundant simplifies, on the other hand, skilled labour, and thus depreciates it.”

(ibid)

And, as Marx puts it elsewhere.

“Now it so happens that in spite of the constant daily revolutions in the mode of production, now this and now that larger or smaller portion of the total capital continues to accumulate for certain periods on the basis of a given average proportion of those constituents, so that there is no organic change with its growth, and consequently no cause for a fall in the rate of profit. This constant expansion of capital, hence also an expansion of production, on the basis of the old method of production which goes quietly on while new methods are already being introduced at its side, is another reason, why the rate of profit does not decline as much as the total capital of society grows.”

(Capital III, Chapter 15)

So long as capitalism exists, these objective laws will continue to apply and thereby determine the distribution of revenue. As Marx puts it in the Critique of the Gotha Programme.

“Any distribution whatever of the means of consumption is only a consequence of the distribution of the conditions of production themselves. The latter distribution, however, is a feature of the mode of production itself. The capitalist mode of production, for example, rests on the fact that the material conditions of production are in the hands of non-workers in the form of property in capital and land, while the masses are only owners of the personal condition of production, of labour power. If the elements of production are so distributed, then the present-day distribution of the means of consumption results automatically. If the material conditions of production are the co-operative property of the workers themselves, then there likewise results a distribution of the means of consumption different from the present one. Vulgar socialism (and from it in turn a section of the democrats) has taken over from the bourgeois economists the consideration and treatment of distribution as independent of the mode of production and hence the presentation of socialism as turning principally on distribution. After the real relation has long been made clear, why retrogress again?”

Back To Part 4

Forward To Part 6