Two examples illustrate these points. Suppose a capital employs ten workers who operate a machine with a value of £10,000. They work eight hours per day, and, at this pace, the machine loses 10% of its value in wear and tear to the produced commodity, so that is £1,000. However, the machine also loses £200 p.a. in depreciation. That is, irrespective of whether it is used or not, it loses this value, because of deterioration due to time. The most obvious manifestation of this is “moral depreciation”, where the value of the machine falls due to falls in its cost of production, or becoming outdated. In other words, simply as a result of the passage of time, productivity rises, so that the current replacement value of the machine falls, and new machines are introduced, making the current machine outdated.
The £1,000 of wear and tear is transferred to the value of its output, but the £200 of depreciation is not. It is a straightforward capital loss, just as if it had been damaged or stolen.
If the workers begin to work a shift system, with five on each shift, working eight hours, as before, the workers are now working more intensively, but no additional variable capital may be required to cover their wages. Similarly, the existing machine is being employed. In theory, it should now wear out in five years, rather than ten, and will transfer all of its value during this shorter period. In practice, this would not be the case.
However, even if it were, it would have reproduced its own value in five years rather than ten, so no additional capital is required for its replacement. But, in these five years the machine will only have lost £1,000 in depreciation, whereas previously it would have lost £2,000, over its lifetime. This represents a saving of £1,000 in depreciation costs, which is why capital always prefers to use fixed capital as intensively as possible.
Now, consider the situation whereby these workers and this machine process 10,000 kg of cotton in the year, into 10,000 kg of spun yarn. The cotton costs £5,000. But, now this 10,000 kg is spun in six months rather than a year. If the value of the yarn is say £14,000, this may comprise £5,000 of cotton, £1,000 wear and tear of machine, £4,000 wages and £4,000 profit.
This 10,000 kg is now sold after six months, and thereby reproduces this capital. As a result, no additional capital for the additional 10,000 kg. of cotton is required.