## Sunday, 13 November 2016

### Capital III, Chapter 50 - Part 6

There is a difference then in the effect of a rise in the value of variable capital on the output value, to a rise in the value of the constant capital. A rise in the latter causes the value of the output to rise.

c 4000 + v 1000 + s 1000 = 6000, whereas

c 5000 + v 1000 + s 1000 = 7000, but

c 4000 + v 1200 + s 800 = 6000.

“Hence, if the advanced capital, set in motion by the same quantity of labour, increases or decreases, then the value of the product rises or falls, other circumstances remaining the same, if the increase or decrease in advanced capital is due to a change in the magnitude of the value of the constant portion of capital. On the other hand, the value of the product remains unchanged if the increase or decrease in advanced capital is caused by a change in the magnitude of the value of the variable portion of capital, assuming the labour productivity remains the same. In the case of the constant capital, the increase or decrease in its value is not compensated for by any opposite movement. But in the case of the variable capital, assuming the labour productivity remains the same, an increase or decrease in its value is compensated for by the opposite movement on the part of the surplus-value, so that the value of the variable capital plus the surplus-value, i.e., the value newly added by labour to the means of production and newly incorporated in the product, remains the same.” (p 857)

In short, if the variable capital rises without any change in productivity – which could arise because of a shortage of labour, or because capital requires workers who are better educated etc. - the price of the commodities is unaffected, but a greater proportion of the output goes to reproducing this variable capital.

If productivity rises, a smaller proportion of the working day is required to reproduce the variable capital, but if the working day remains the same, the same quantity of new value is created, as before. A greater portion of this new value now is left over as surplus product.

However, this rise in productivity does cause the value of the output to fall. It falls, not because of any change in v, but because the rise in productivity causes the value of the constant capital to fall. The rise in productivity will also cause the individual commodity values to fall, because the total output value will now be represented by an increased mass of products. Whether the value of the total output rises or not, in absolute terms, will depend upon whether this rise in productivity leads to the increase in the total mass of products growing faster than the fall in the individual value of commodities.

“On the other hand, assuming the constant capital in the above illustration to remain = 400c, if the change from 100v + 150s to 150v + 100s, i.e., the increase in variable capital, should be due to a decrease in the productiveness of labour, not in this particular branch of industry, say, cotton spinning, but perhaps in agriculture which provides the labourer’s foodstuffs, i.e., due to a rise in the price of these foodstuffs, then the value of the product would remain unchanged. The value of 650 would still be represented by the same quantity of cotton yarn.” (p 857)

So, for example, the sharp drop in the price of oil, in 2014/15, cut workers' cost of living, by reducing the cost for them to drive their cars and heat their homes, and thereby reduced the value of variable capital. But, this did not affect the productivity of labour in producing potatoes. In a day, agricultural workers would produce the same amount of new value, in growing potatoes. But, a smaller proportion of this new value was then required to reproduce their labour-power, leaving a greater proportion as surplus value.

“It follows, furthermore, from the above: If the decrease in the expenditure of constant capital is due to economies, etc., in lines of production whose products enter into the labourer’s consumption, then this, just like the direct increase in the productivity of the employed labour itself, may lead to a decrease in wages due to a cheapening of the means of subsistence of the labourer, and may lead, therefore, to an increase in the surplus-value; so that the rate of profit in this case would grow for two reasons, namely, on the one hand, because the value of the constant capital decreases, and on the other hand, because the surplus-value increases.” (p 857-8)

In other words, the fall in the price of oil also reduces transport costs, so that the price of commodities bought by workers falls, the price of plastics made from oil falls, which reduces the prices of packaging, and of some commodities consumed by workers falls. But, various pesticides used by farmers are derived from petrochemicals, and farm vehicles use oil, so this fall in the price of oil also reduced the value of constant capital employed by the farmer, as well as reducing the value of the variable capital.

The fall in the value of the variable capital, for the reasons described, increases the mass of surplus value (which raises the rate of surplus value and rate of profit), but also, by reducing the value of constant capital, raises the rate of profit, irrespective of the rise in the mass of surplus value. It can be seen how the fall in the oil price could have a significant effect because:
• It directly reduces the value of labour power, which causes the mass of surplus value to rise. It causes the rate of surplus value, s', s/v, to rise, and causes the rate of profit, p', s/c + v, to rise because s rises and v falls.
• It reduces the value of constant capital and so causes the value of many commodities to fall, which in turn indirectly reduces the value of labour-power, by reducing the prices of all these other wage goods, consumed by workers. It thereby increases the mass of surplus value further, and raises the rate of surplus value and profit for the reasons set out above.
• It reduces the value of constant capital and thereby raises the rate of profit, because s/ c+ v thereby rises.
“In our consideration of the transformation of surplus-value into profit, we assumed that wages do not fall, but remain constant, because there we had to investigate the fluctuations in the rate of profit, independent of the changes in the rate of surplus-value. Moreover, the laws developed there are general ones, and also apply to investments of capital whose products do not enter into the labourer’s consumption, whereby changes in the value of the product, therefore, are without influence upon the wages.” (p 858)