Tuesday, 12 September 2017

Theories of Surplus Value, Part II, Chapter 8 - Part 15

If the land produces average profit, and yet is very unproductive, this is an indication that the total social capital is itself very unproductive. It means that a large part of the working-day is taken up in necessary labour, whether on the land to produce the food and raw materials required, or in manufacture, to produce the manufactured goods required, simply for the reproduction of the means of production and labour-power.

So, the absence of rent, in these three cases, can be summarised as follows. In the first, it arises from the existence of available land, and absence of monopoly. It goes along with a rise in the rate of profit, compared to other countries where these conditions are absent, and so where rent has developed.

In the second case, the absence of rent does not affect the rate of profit, because its absence is due to the absence of surplus profits.

In the third case, the absence of rent is due to generally low levels of profits, arising from generally low levels of productivity.

“It follows from this that the development of a particular rent in itself has nothing to do with the productivity of agricultural labour, since the absence or lack of rent can be associated with a rising, falling or constant rate of profit.” (p 39) 

Surplus value is unpaid labour, just as value is labour. The average profit is then the average amount of unpaid labour a given amount of advanced capital is supposed to command, irrespective of how much surplus value that particular capital produces. If the average rate of profit is 10%, then an advanced capital of of £1,000 should command a profit of £100, equal to that amount of unpaid labour.

“Thus excess of surplus-value over average profit implies that a commodity ( its price or that part of its price which consists of surplus-value) contains a quantity of unpaid labour [which is] greater than the quantity of unpaid labour that forms average profit, which therefore in the average price of the commodities forms the excess of their price over the costs of their production. In each individual commodity the costs of production represent the capital advanced, and the excess over these production costs represents the unpaid labour which the advanced capital commands; hence the relationship of this excess in price over the costs of production shows the rate at which a given capital—employed in the production process of commodities—commands unpaid labour, irrespective of whether the unpaid labour contained in the commodity of the particular sphere of production is equal to this rate or not.” (p 40) 

Marx makes a slip here on several counts. Firstly, the cost of production (wear and tear {d}, materials, wages) are only equal to the value of advanced capital if the capital turns over once during the year. Suppose a capital is comprised of £10,000 of fixed capital, which suffers £1,000 of wear and tear, £5,000 of materials, and £4,000 variable capital. It produces £4,000 of surplus value.

If the average rate of profit is 10%, this is the amount of profit that the total advanced capital is entitled to obtain. The total capital advanced includes the whole of the fixed capital, which must have been advanced for production to occur. So the total capital, C, here is £19,000. With a 10% rate of profit, that is £1,900 of profit. It is that amount that the capital is entitled to obtain, above its cost of production. But, the cost of production is not £19,000, it is £1,000 (wear and tear), £5,000 (materials), plus £4,000 (wages), which equals £10,000. The profit of £1,900 is then equal to a rate of profit, or profit margin of 19%.

In each commodity, the costs of production do not represent the advanced capital, as Marx misstates here. They represent only the laid out circulating capital, which is continually being reproduced in each turnover of that capital, along with the profit. Although all of the value of fixed capital is advanced, in each turnover, only the wear and tear represents a cost of production, and is thereby reproduced in the value of the commodity. If the whole of the fixed capital represented a cost of production, then the cost of production here would be £19,000, which it clearly is not. This is complicated in Theories of Surplus Value, because throughout, Marx when he talks about “cost of production” means “price of production” as he defined it in Capital III, as being the cost of production plus the average profit.

Similarly, the circulating capital might turn over five times during the year. In that case, £1,000 of materials, and £800 of wages are actually the capital advanced, alongside the £10,000 of fixed capital. So, the total capital advanced is equal to £10,000 + £1,000 + £800 = £11,800, which gives an average profit of £1,180. Adding this £1,180 to the actual cost of production, the total laid out capital of £10,000 gives a total price of production for this output of £11,180, and a rate of profit/profit margin of 11.8%.

Marx sets out these relations in Capital III, Chapter 12, and so his statement here is obviously just a slip, whereby, as he did earlier in Capital, he assumes a single turnover of the advanced capital, without making clear that assumption.

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