Thursday, 5 January 2017

Theories of Surplus Value Part I, Chapter 2 - Part 11

Turgot recognised.
“When a large part of the society had only their arms to maintain them, it was necessary that those who thus lived on wages should begin by having something in advance, either to procure the materials upon which to labour or to maintain them while waiting for the payment of their wages” (p 58)

And so constant capital – the means of production – and variable capital – means of consumption – must exist physically, either directly in the possession of the employing capitalist, or else in the possession of other capitalists, which can be bought with money wages, prior to the wage labourer being employed.

Its for this reason that this physical product, in the shape of constant capital and variable capital, consumed in current production, is the product of past production, but must be physically reproduced out of current production. Its on this basis that the value of the consumed capital must be determined on the basis of its current reproduction cost, and not its historic cost.

Again, this was most apparent in agriculture. The agricultural wage labourer could not eat the product of the grain they planted today, until it was harvested month's later. The grain they consumed today was paid to them as wages, by the farmer, out of the grain that was harvested last year. Even with things that were produced on a daily basis, such as milk, eggs, meat, it was only possible to consume these today, because in previous years, a sufficient stock of cattle, poultry and so on had been produced, so as to enable a portion of current output to physically reproduce this fixed capital, as well as to meet the needs of current consumption.

In other words, out of current production the products which comprise the circulating constant capital, and the variable capital must be replaced, and along with that must also be reproduced the actually worn out fixed capital, which as Marx described in Capital II, on average is equal to the value transferred to the produced commodities by wear and tear.  This mirrors the distinction made by Marx between the rate of profit, calculated as the surplus relative to the laid-out capital s/(d +c + v), which is also the same as the profit margin, and the annual rate of profit, calculated as the total surplus value for the year, relative to the advanced capital, i.e. the total fixed capital plus the circulating capital advanced for one turnover, which is the basis for the calculation of the average annual rate of profit.

As Marx set out in Capital III, in order for social reproduction to continue, simply on the same scale, these means of production and consumption must be physically reproduced out of current production.

“Originally the proprietor or cultivator pays wages directly each day and supplies the material, for example, to the spinner of flax. As industry develops, larger advances and continuity of the process of production are necessary. This is then undertaken by the possessor of capital.” (p 58)

The capitalist producer must then recover, in the price of the commodities they sell, not just the current value of the capital they have physically advanced, but also a profit on top of it. This profit, for Turgot, is equal to ““what his money would have been worth to him if he had employed it in the purchase of an estate”, besides his wages, “for doubtless, if the profit. were the same, he would have preferred to live without any exertion on the revenue of the land he could have acquired with the same capital””(p 59)

This again reflects the contradictory nature of the Physiocratic system, because here the average rate of profit is essentially equated with the rent obtainable on land, whereas, as Marx demonstrates in Capital III, under capitalism, the average rate of profit is actually determined outside agriculture, and rent then is determined by it on the basis of surplus profit over and above this average profit.

In fact, as Engels describes, in his Supplement to Volume III, the original basis of the average rate of profit, in industry, was the average rate of commercial profit, obtained by merchant capitals. In other words, where merchant capital begins to engage in production, for example, first through the “putting out system”, it proceeds on the basis of its cost of production plus a percentage mark up of profit, and this mark-up is initially based on the average rate of commercial profit. Its not surprising, therefore, that the Physiocrats, for whom rent is the only form of surplus value, see this return as the basis for the average rate of profit, a capital should expect to obtain from its employment.

“The “stipendiary industrial class” is itself subdivided “into capitalists, entrepreneurs and simple workers”, etc. (p. 39). Agricultural entrepreneurs are in the same position as these [industrial] entrepreneurs. They must similarly get all their advances replaced, along with the profit as shown above.” (p 59) 

Marx again quotes Turgot on this point. The rent represents the “net produce”. Everything else is merely a physical reproduction of what has been advanced, and cannot thereby be considered a “revenue”.

“... when one considers that, if the cultivator did not get them back, he would take care not to employ his resources and his toil in cultivating the field of another” (l.c., p. 40).” (p 59)

Turgot also understands this division between capital and revenue as components of the annual output, in a way that Adam Smith, and later economists did not. He understands that both the capital and revenue must be physically reproduced out of this production. The limitation of this understanding, in Turgot, stems from the belief that it is only rent which constitutes surplus value. On that basis, any accumulation by capitalists occurs because a portion of their wages (which for the Physiocrats includes profit) intended as revenue (consumption) is instead used for accumulation.

“As profit, like wages, is reckoned in with the costs of cultivation, and only the surplus forms the revenue of the proprietor, the latter — in spite of the honourable status given him — is in fact excluded from the costs of cultivation (and thereby from being an agent of production), just as with the Ricardians.” (p 59)

Another reason for the emergence of the Physiocrats, and an analysis of surplus value, emanating from production was,

“... the opposition to Colbertism and, in particular, with the hullabaloo over the John Law system.” (p 59)

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