Sunday, 27 November 2016

Capital III, Chapter 50 - Part 20

In examining the conditions under which competition occurs, wages, interest, rent and profits are taken as constants, and this adds to the illusion. For example, if in country A wages are high, but the price of land is low, capital will tend to use the land extensively, but seek to minimise the use of labour, which may only be possible if capital is also used extensively.

In country B, wages may be low and the price of land also low, whilst a lack of capital will cause interest rates to be high. In each case, because of competition between A and B, it will appear that the value of the commodity is a function of the value of the land, labour and capital employed in each case, and that the quantity of each employed was a function of its individual price.

This indeed is the basis of the determination of value by marginal productivity theory, whereby land, labour and capital are treated as homogeneous independent variables, each contributing a marginal product and consequently a marginal revenue product, and with each of these factors being employed up to the point where the additional value contributed is equal to the price of that factor.

“Here, then, experience shows theoretically, and the self-interested calculation of the capitalist shows practically, that the prices of commodities are determined by wages, interest and rent, by the price of labour, capital and land, and that these elements of price are indeed the regulating constituent factors of price. 

Of course, there always remains an element here which is not assumed, but which results from the market-price of commodities, namely, the excess above the cost-price formed by the addition of the aforementioned elements: wages, interest and rent. This fourth element seems to be determined by competition in each individual case, and in the average case by the average profit, which in its turn is regulated by this same competition, only over longer periods.” (p 875) 

In fact, when the neo-classical economists are forced to take their theory to its logical conclusion, they are forced to conclude, like Walras, that profit cannot exist, because if labour is employed up to the point where it creates no additional value above what is paid in wages; if land is employed up to the point where it creates no additional value above what is paid in rent; and if capital is employed up to the point where no additional value is created above what is paid in interest, the whole value of the commodity is accounted for, and distributed as revenue, leaving nothing left over for profit, any such profit would be competed away.

Even where production takes place on a non-capitalist basis, and where these divisions do not exist, the value of the commodity is still divided up in this way. A self-employed worker is thereby considered to pay themselves wages, as a cost of their production; if they own their own land or property, as the basis of their production, they are considered to be their own landlord, paying an imputed rent to themselves, which forms an additional cost of production; the remainder of the value of their production is then considered profit, which they pay to themselves, as their own capitalist.

“Assuming the capitalist mode of production and the relations corresponding to it to be the general basis of society, this subsumption is correct, in so far as it is not thanks to his labour, but to his ownership of means of production — which have assumed here the general form of capital — that he is in a position to appropriate his own surplus-labour. And furthermore, to the extent that he produces his product as commodities, and thus depends upon its price (and even if not, this price is calculable), the quantity of surplus-labour which he can realise depends not on its own magnitude, but on the general rate of profit; and likewise any eventual excess above the amount of surplus-value determined by the general rate of profit is, in turn, not determined by the quantity of labour performed by him, but can be appropriated by him only because he is owner of the land. Since such a form of production not corresponding to the capitalist mode of production may thus be subsumed under its forms of revenue — and to a certain extent not incorrectly — the illusion is all the more strengthened that capitalist relations are the natural relations of every mode of production.” (p 875-6)

But, if capitalism is not assumed then this division becomes rather meaningless. A division is indeed required, because every mode of production, out of its total output, must divide it into a portion required to physically reproduce the consumed means of production, and the consumed means of consumption, and it must set aside another portion as an insurance fund to replace those means of production destroyed by accidents, as well as a social insurance fund to cover the consumption of those who cannot work. It will need to set aside a portion of total output to cover the consumption needs of those whose labour is needed by society, but which does not create additional value. Finally, it will need to set aside a portion of total output to be used to increase the means of production, so as to satisfy its future needs.

“... if we strip both wages and surplus-value, both necessary and surplus labour, of their specifically capitalist character, then certainly there remain not these forms, but merely their rudiments, which are common to all social modes of production.” (p 876)

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