Tuesday, 4 April 2017

Theories of Surplus Value, Part I, Chapter 4 - Part 29

Suppose, the coal producer produces 30,000 tons of coal, and of this 10,000 tons must be used to reproduce the constant capital – either by the coal itself being used as constant capital, or else being exchanged for constant capital in other forms. Although the value of each ton of coal will comprise one third constant capital, and two-thirds newly added labour, it will be as though in the 20,000 tons of coal that actually go into circulation, and are exchanged as revenue, they include no constant capital, but only the value of the newly added labour.

This, in fact, is the position presented by the national income accounts of countries, as they value output. Although these accounts appear to include the value of circulating constant capital, because they include the value of intermediate goods in final output, they only actually include the value added at each stage of production, which is thereby resolvable into factor incomes. On this basis, the value of national output is equated with the value of national income and national expenditure, whereas in reality, national income and expenditure is equal to just v + s, whereas the value of national output is c + v + s.

“... for the value of the pre-existing labour contained in the 20,000 hundredweight; for the 20,000 represent only two-thirds of the value of the total product in which the newly-added labour is realised.” (p 191)

Although the buyer pays the full value of each ton of coal they buy, in other words, including the constant capital, and the newly added labour, only 20,000 of the 30,000 tons are actually bought, the other 10,000 tons never entering circulation, but being directly exchanged with capital.

“Just as little does he pay for the farmer’s seed in paying for the wheat which he eats. The producers have mutually replaced this part for each other; therefore they do not need to have it replaced a second time.” (p 192)

What is produced in the year would not have been produced without their labour, but not everything produced in the year is the product of their labour in that year. Not only the fixed capital stock is the product of previous year's, but the circulating constant capital, consumed this year in the production of constant capital, is also the product of previous years. Equally, this portion must again be reproduced, on a like for like basis, out of this year's production, in order that reproduction can take place on the same scale.

Marx then sets out why, on this basis, the value of the capital must be determined by its current reproduction cost, and not the historic prices paid for it.

“Let production in iron, timber, machinery and so on, in a word, in the elements of production of which the one-third of the product is composed, become more costly. Let the productivity of mining labour remain the same. The 30,000 hundredweight are produced with the same quantity of iron, timber, coal, machinery and labour as before. But since iron, timber and machinery have got dearer, cost more labour-time than before, more coal than before must be given for them.” (p 192)

Marx assumes that the productivity of mining labour remains the same, and adds £20,000 of new value, with 30,000 tons produced as before. But, productivity in the production of iron, timber etc. has fallen, by 60%, so that constant capital that was bought for £10,000 now has a value of £16,000.

The total value of the product is then now £36,000, despite the fact that £10,000 was paid for constant capital, and £20,000 added by labour, because the current reproduction cost of the constant capital is £16,000, and this must be recovered in the value of the coal, in order for reproduction to continue on the same scale.

“Previously, 1/3 or 3/9 of the total product was equal to constant capital, 2/3 equal to labour added. Now the proportion of the constant capital to the value of the total product is as 16,000 : 36,000 = 16/36 = 4/9. It amounts therefore to one-ninth [of the value of the total product] more than before.” (p 193) 

Each ton of coal will have risen in value by 20%. That is not because of a change in the productivity in mining labour, but because of a change in the productivity of the mining labour plus the labour involved in the production of other forms of constant capital. The £20,000 of new value would be represented by a smaller quantity of output.

The total output remains 30,000 tons, with a value now of £36,000, or £1.20 per ton. But, the cost of constant capital is now £16,000, and this represents 13,333 tons, rather than the 10,000 tons previously. In that case, only 16,666 tons are available to be exchanged as revenue, but these now have a value of £20,000, equal to the new value added by labour. So, although the £20,000 of coal thrown into circulation is only equal to this new value created by labour, and contains no value of constant capital, the price of the commodities represented by it, is as affected by the rise in the value of the constant capital, as is the component which only reproduces the constant capital.

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