Friday, 11 November 2016

Capital III, Chapter 50 - Part 4

The second reason such historic pricing would lead to a false conclusion is that given by Marx, in relation to calculating the value of commodities, or the total social commodity-capital, on the basis of a cost of production theory of value.

Suppose we take the example above, but now we assume that the value of the variable capital rises, i.e. because real wages rise, or as a result of a fall in productivity, the value of commodities comprising wage goods rises. This does not change the historic prices paid for those commodities, or the wages paid to workers to buy them. Nor, therefore, does it change the money value of the surplus value.

However, if wages, or the value of wage goods rises by 10%, this means that the value of labour-power rises to £2,200. But, this change in wages, or the value of labour-power, does not at all change the amount of new value created during the year.

If we assume that there is no change in the value of constant capital, that means that there is no change in the total value of output either. What does change is the way this value is allocated to ensure that total social labour-time is allocated to ensure that social reproduction can continue on at least the same basis.

The actual value relations in the economy, irrespective of what was previously paid, are as follows:-

c 5000 + v 2200 + s 1800 = 9000.

In other words, there is no change in the total social labour-time expended, or the value of the total output, but, in order to ensure that the constant capital and labour-power is physically reproduced, less social labour-time is actually available as surplus product, or to be utilised as surplus value.

Capitalists may have paid historic money prices of £5,000 for the commodities that comprise the constant and variable capital, and have paid money wages of £2,000, leaving them with £2,000 of money profits, but this is merely one of those illusions created by competition that Marx is describing. In reality, looked at from the perspective of how this total social production must now be allocated, so as to ensure 5000 units of constant capital and 2000 units of variable capital, wages must rise, a larger proportion of social labour-time, of this year's total social product/output value, must be allocated as variable capital, i.e. to reproducing wage goods, and an equivalent rise in money wages must go along with it, with a consequent reduction in the social labour-time, and proportion of total output available as surplus product and surplus value.  As Marx makes clear in contrast to Smith's cost of production theory, the value created by labour has nothing to do with the value of labour-power.

In other words, the historic prices here create an illusion. The £2,000 of money profits create the illusion that this profit can be spent on buying the same 2000 commodity units as previously, but this is clearly not possible, if social reproduction is to continue on the same scale. The illusion is created that the value of the output is 5000 c + 2200 v + 2000 s = 9200.  This also plays into those bourgeois notions, therefore, that rises in wages cause rises in prices - inflation.  An historic price model leads away from the Marxian Labour Theory of Value, and towards a Smithian cost of production theory of value.

Marx gives the following demonstration. He assumes a capital of 500, made up of 400 c + 100 v. It produces 150 s, giving a total output value of 650. He assumes that the price of production equals the exchange value.

Variable capital then comprises 20% of the advanced capital. The rate of profit is s/c+v = 30%, and is divided into 15% to rent, and 15% to profit. The newly added value is equal to 250, which is divided into 100 to reproduce labour-power, and 150 as revenue equal to the rent and profit. The worker produces 1.5 times as much surplus value, i.e. he works 1.5 times longer undertaking surplus labour, than he spends reproducing his own labour-power.

“If the working-day = 10 hours, then he worked 4 hours for himself and 6 hours for the capitalist. Therefore, the labour of the labourers paid with £100 is expressed in a money-value of £250. Apart from this value of £250, there is nothing to divide between labourer and capitalist, between capitalist and landlord. It is the total value newly added to the value of the means of production, i.e., 400. The specific commodity-value of 250 thus produced and determined by the quantity of labour materialised in it constitutes the limit, therefore, for the dividends which the labourer, capitalist and landlord will be able to draw from this value in the form of revenue — wages, profit and rent.” (p 854)

Marx then assumes an identical capital, but where the value of labour-power is equal to 6 hours rather than 4 hours. In other words, productivity has changed so that more labour-time is required to reproduce the labour-power. For social reproduction to continue on the same scale, the same physical quantity of constant capital must be set in motion, and has the same value of 400. With the same technical composition of capital, this 400 of constant capital requires the same quantity of labour-power, which now has a value of 150 rather than 100.

We then have c 400 + v 150.


“Since we have assumed that the variable capital of £150 sets the same quantity of labour in motion as did the variable capital of £100, the newly produced value would = 250, as before, and the value of the total product would be 650, also as before, but we would then have 400c + 150v + 100s;” (p 854)

Marx also assumes that this 100 s divides into different proportions of rent and profit than before, so that 45 goes to profit, and 55 to rent, whereas previously 75 went to both.

“The proportion in which the newly produced total value would be distributed as wages, profit and rent would now be very different; similarly, the magnitude of the advanced total capital would be different, although it only sets the same total quantity of labour in motion. Wages would amount to 27 3/11%, profit — 8 2/11%, and rent — 10% of the advanced capital; thus, the total surplus-value would be somewhat over 18%.” (p 854-5)

The worker would, in fact, have worked a larger proportion of the working day to reproduce their labour-power, leaving a smaller proportion of the working day available as surplus labour, and this remains the reality, whether this was reflected in the actual money wages (historic price of labour) or not. The reality is, on the basis that commodities exchange in proportion to their values, or price of production, i.e. no cheating, this has to be the case for the labour-power to be reproduced.

This reduced portion of total social output, available as surplus product, and surplus value is then also distributed differently to the landlord and capitalist.

“Finally, since the value of the constant capital would have remained the same and the value of the advanced variable capital would have risen, the reduced surplus-value would express itself in a still more reduced rate of gross profit, by which we mean in this case the ratio of the total surplus-value to the total advanced capital.” (p 855)

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