Friday, 9 December 2016

Capital III, Chapter 51 - Part 12

“And now let us consider profit. This specific form of surplus-value is the precondition for the fact that the new creation of means of production takes place in the form of capitalist production; thus, a relation dominating reproduction, although it seems to the individual capitalist as if he could in reality consume his entire profit as revenue.” (p 882)

But, again, its clear that this is not true because of further objective laws. Firstly, the capitalist at an individual or social level, could not simply consume all of their surplus as revenue, because they must set aside certain funds for insurance. If a business suffers a fire, flood or other such accident, a portion of its fixed or circulating capital, may thereby be destroyed, and the firm cannot recover this value. It would then mean that it could not operate on the same level, which may mean it could not function at all.

The firm must then set aside a portion of its profit as an insurance fund to cover such eventualities. It doesn't matter whether this takes the form of a sum of money, kept in an account, by the firm to cover such eventualities, or whether the firm hands over a sum of money to an insurance company to cover such eventualities. Either way, a portion of the profit, even were there to be simple reproduction, could not be consumed.

But, competition also means that the individual capitalist cannot consume all of the profit, because unless a portion is given over to accumulation, the firm will become uncompetitive, lose market share and eventually be destroyed.

“The entire process of capitalist production is furthermore regulated by the prices of the products. But the regulating prices of production are themselves in turn regulated by the equalisation of the rate of profit and its corresponding distribution of capital among the various social spheres of production. Profit, then, appears here as the main factor, not of the distribution of products, but of their production itself, as a factor in the distribution of capitals and labour itself among the various spheres of production.” (p 882)

Not only is the amount of surplus value determined by these objective laws, operating in the realm of production, which flow from the requirement to physically reproduce the consumed means of production and consumption, but also the manifestation of this surplus value as profit is constrained by those same objective laws operating within the realm of production.

At an individual level, it may be the case that the capitalist decides to take a larger or smaller proportion of their profit as revenue, rather than accumulating it as capital, but firstly, even at an individual level, this can only occur within certain constraints, but secondly, at an aggregate level, competition ensures that a certain proportion must be accumulated, though this proportion will vary according to other objectively determined conditions, i.e. the ability to accumulate additional capital as capital.

That is in addition to the other objective laws previously established, which limit the proportion of surplus value that can be realised as profit, as opposed to that which must form interest and rent.

“The division of profit into profit of enterprise and interest appears as the distribution of the same revenue. But it arises, to begin with, from the development of capital as a self-expanding value, a creator of surplus-value, i.e., from this specific social form of the prevailing process of production. It evolves credit and credit institutions out of itself, and thereby the form of production. As interest, etc., the ostensible distribution forms enter into the price as determining production factors.” (p 882-3)

The same is true in relation to rent. Capitalist rent is not the same as rent under other modes of production. Capitalist rent itself derives from the objective laws immanent within capitalist production itself, in particular, the existence of surplus profits. Capitalist rent, therefore, is not the same as arbitrary revenue obtained by the landlord, which they can force out of tenants, as for example, feudal landlords could do. The landlord is constrained by the fact that capitalist rent is equal to the amount of surplus profit. The landlord under capitalism is also reduced to the role of merely a receiver of rents, rather than the manager and controller of production, as they were under previous modes of production, and this too is a direct consequence of capitalist production, and the social relations it creates.

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