Sunday, 28 May 2017

Theories of Surplus Value, Part I, Chapter 4, - Part 82

As Marx demonstrates in Capital II, the capital used in spinning must be smaller than that used in weaving, because the output of the spinner forms part of the constant capital of the weaver, and the weaver adds additional capital in the form of variable capital in order to produce their output.

In considering that part of A's constant capital that must be reproduced by new labour, i.e. that which exchanges with the revenue of B, it is only that part which comprises the circulating capital, or the wear and tear of fixed capital that must be reproduced. In other words, to keep production on the same scale, the raw and auxiliary materials currently used up must be continually replaced, in kind, whilst the wear and tear of equipment must be reproduced, either in the shape of repairs, or else in the shape of an amortisation fund.

“A large part of the existing constant capital—large as regards the relation of the fixed capital to the total capital—does not therefore require to be replaced annually by new labour. For that reason the (absolute) amount [of the capital to be annually replaced] may be considerable, but nevertheless it is not large in relation to the total (annual) product. This entire part of the constant capital, in A and B, which enters into the determination of the rate of profit (with a given surplus-value), does not enter as a determining element into the current reproduction of the fixed capital. The larger this part in relation to the total capital—the greater the scale on which present, already existing, fixed capital is employed in production—the greater the current volume of reproduction will be that is used for the replacement of the worn-out fixed capital, but the smaller relatively will be the proportional amount, in relation to the total capital.” (p 242)

It is not this fixed capital, however, that is the explanation for that element of the value of total current production that forms no part of revenue. For one thing it is only the value of the wear and tear of fixed capital that enters into the value of current output. It is that part of the circulating capital plus the wear and tear of fixed capital, of the producers of means of production, which constitutes this element.

The reason that the estimates of the rate of profit, used by many economists today, are wrong is not because, in some cases, they do not take into consideration the fixed capital, but rather because the value of constant capital they use is only that for intermediate production, i.e. that which is equal to the revenues of Department I. In short, they really exclude constant capital from the calculation, because the value of constant capital represented by intermediate production is only equal to the new value produced by labour in the current year I (v + s). What is represented as a rate of profit, for the economy, is, in reality, only the rate of surplus value.

If we take the fixed capital in an economy, different parts of it will wear out faster than others, but it can be aggregated together to give an average period of duration, during which it is turned over. Say this average duration is 10 years, then if the total fixed capital constitutes 10% of the total capital, then this would mean that 1% of the total capital would be turned over annually, in the form of fixed capital. But, if the fixed capital comprised 30% of the total capital then 3% of the total capital would be turned over annually in the form of fixed capital. 

Similarly, where fixed capital comprises the same proportion of total capital, the effects will vary if the rate of turnover of this fixed capital varies. If fixed capital comprises 50% of the total capital but it only turns over every 20 years, 5% p.a., then only 2.5% of the total capital turns over in a year, as fixed capital. Even if the fixed capital represented 80% of the total capital, only 4% of the total capital turns over during the year as fixed capital.

By contrast, if the fixed capital turns over three times a year, then even if it constitutes only 10% of the total capital, then 30% of the total capital is turned over each year as fixed capital.

“On the average, the larger the fixed capital in proportion to the total capital, the longer is its relative (not absolute) period of reproduction; and the smaller it is, the shorter its relative period of reproduction. Implements form a much smaller part of handicraft capital than machinery does of machine-production capital. But handicraft implements wear out much more quickly than machinery.” (p 243)

Its important to note here that it is not the total capital turning over that is being specified here, but only that part which relates to fixed capital. Marx does not actually make this clear in his comments. For example, suppose a capital comprises £100 fixed capital and £100 circulating capital, with the latter turning over once in a year, and the former turning over every two years, i.e. £50 per year. Then £50 of fixed capital turns over each year, and this comprises a quarter of the total capital. But, all the circulating capital turns over, so the total capital turned over is £150, or 75% of the total capital.

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