Wednesday, 15 February 2017

Theories of Surplus Value, Part I, Chapter 3 - Part 35

Ramsey is right to lay great stress on this effect on the rate of profit, Marx says. Ricardo is correct that a fall in the value of the commodities which comprise the constant capital always depreciates the value of those commodities already in the hands of individual capitalists. A machine that I bought yesterday, which cost £1,000, and comprised 1,000 hours of labour, may only have a value of £500 today, if a revolution in productivity means it can be produced in 500 hours, or if a revolution in technology means that a new machine is twice as productive.

From an individualist point of view, the fact that this halving of the value of the machine results in a doubling of the rate of profit offers me no advantage, because I paid £1,000 not £500 for it. But, from the perspective of capital, rather than of this individual capitalist, it makes a considerable difference, because now only half the amount of social production, half the amount of social labour-time, needs to be set aside for the replacement in kind of this machine as did previously. Not only does this mean that a portion of the social product and social labour-time is freed for other purposes (release of capital), but that every portion of surplus value is now able to accumulate twice as many of those machines as it did previously, and thereby to increase output by a greater amount.

That can be seen if the personal fortunes of the individual capitalists are set to one side, and the situation considered of what happens if the capitalist sells the business. In that case, the capital loss of the existing owner of the firm, resulting from the reduced value of the machine, is the capital gain of the buyer of the firm, whose money-capital now buys more. On the basis of this lower capital value of the firm, the new owner will see that they obtain a higher rate of profit, and this profit buys twice as many machines as was previously the case. 

But, Marx also points out that this fall in the value of the fixed capital reflects only a minor part of the fall in the value of constant capital resulting from a rise in productivity. Even the circulating constant capital held by individual capitalists, as stock, work in progress, etc. constitutes only a minor part of their total outlays on material. Whatever they may suffer as capital loss, resulting from the fall in value of that stock, is then more than compensated by the release of capital, and rise in their rate of profit, consequent upon the fall in the value of the capital they must advance.

“It is of no advantage to the individual capitalist that the surplus-value rises in relation to the total capital, if the rise in this rate has been due to a fall in the total value of his constant capital (which he already had before the depreciation). But this is true only to a very small extent for that part of the capital which consists of raw materials or completed commodities (which do not form part of the fixed capital). The existing amount of these that can be depreciated in this way is always only an insignificant magnitude compared with the total production. It holds good for each capitalist only to a slight extent for that part of his capital expended as circulating capital. On the other hand—since the profit is equal to the proportion of the surplus-value to the total advanced capital, and since the quantity of labour that can be absorbed depends not on the value but on the quantity of raw materials and on the efficiency of the means of production—not on their exchange-value but on their use-value—it is clear that the greater the productivity of industry in the branches whose product enters into the formation of constant capital, the smaller the outlay of constant capital required to produce a given quantity of surplus-value; consequently the greater the proportion of this surplus-value to the whole advanced capital, and therefore the higher the rate of profit for a given amount of surplus-value.” (p 105-6)

That is why the sharp fall in the price of oil that began in the latter part of 2014, represented a significant release of capital, and important element in raising the general rate of profit.

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