Monday, 2 October 2017

Theories of Surplus Value, Part II, Chapter 8 - Part 35

Every capitalist sees their capital in total as being the source of their profit, and not just the variable capital, that produces the surplus value. And, indeed, at the level of individual capitals that is true, as a result of the formation of a general rate of profit, and prices of production. A capital might theoretically employ no productive labour, and so produce no surplus value, and yet would still obtain the average rate of profit.

“This illusion confirms for the capitalist—to whom everything in competition appears in reverse—and not only for him, but for some of his most devoted pharisees and scribes, that capital is a source of income independent of labour, since in fact the profit on capital in each particular sphere of production is by no means solely determined by the quantity of unpaid labour which it itself “produces” and throws into the pot of aggregate profits, from which the individual capitalists draw their quota in proportion to their shares in the total capital.” (p 69)

It is that illusion that is the basis of Rodbertus' errors. In fact, as Marx points out, in some areas of agriculture, such as stock rearing, the variable capital is very small compared to the size of the constant capital, and so the rate of profit should be lower than the average.

Rodbertus is also wrong in his statement that,

““Rent, by its very nature, is always ground-rent” (p. 113).” (p 69)

As Marx says, all that can be said is that rent is always paid to the landlord. True ground rent, i.e. rent in economic terms, is surplus profit, profit above the average. But, landlords frequently obtain rent that is not ground-rent. They may obtain rent by depressing profit below the average, or by appropriating a part of the worker's wage.

“In practice this is proved as soon as competition restores the normal wage and the normal profit.” (p 69) 

This competition in all spheres occurs on the basis I set out previously. In those areas where the rate of profit is lower than the average, capital either leaves, or stops accumulating (falling in relative terms in either case), and moves towards those spheres where the rate of profit is higher. Supply falls in the former, pushing up average prices and profits, and rises in the latter, pushing down average prices and profits.

“Average prices, to which competition constantly tends to reduce the values of commodities, are thus achieved by constant additions to the value of the product of one sphere of production and deductions from the value of the product of another sphere—except in the case of II in the above table—in order to arrive at the general rate of profit.” (p 70)

If, however, for some reason, there is a sphere of production where the commodities continually sell at prices above the average price/price of production, this can only be because there is some restriction on capital freely flowing into this sphere so as to increase supply and reduce those prices and restore profits to the average level.

“What we are concerned with here and have to explain as a peculiar feature, as an exception, is not that the average price of commodities is reduced below their value—this [would be] a general phenomenon and a necessary prerequisite for equalisation—but why, in contrast to other commodities, certain commodities are sold at their value, above the average price.” (p 70) 

The average price/price of production is the cost price plus average profit. That is C (advanced capital) plus p/C (the average rate of profit) – (this only applies where the capital is turned over once during the year, so that the rate of profit equals the annual rate of profit).

If C + p/C, or k +p (cost of production plus average profit) is smaller than the exchange-value of the commodity (c + v + s), i.e. s is larger than p, then competition will force down the average price of the commodity, and a portion of its surplus value will then be appropriated in other spheres. For example, suppose this sphere produces yarn, if as a result, the price of yarn falls from £1.20 per kilo to £1.00 per kilo, weavers will buy yarn more cheaply, a portion of the surplus value produced by spinners will then be appropriated by weavers, but the output of weavers will also, thereby, tend to be cheaper, and so the cloth produced by the weavers will be sold to tailors more cheaply. The tailor will thereby also appropriate some of the surplus value produced by the spinner, and possibly some of that produced by the weaver, if the weaver produces a greater quantity of s than p.

The output of the tailor will then tend to be cheaper, and this will reduce the price of clothes, which reduces the value of labour-power. Consequently, every capital thereby obtains cheaper labour-power, increasing their surplus value, and so themselves appropriating some of the surplus value of the spinner and weaver. Had the spinner produced more p than s, i.e. had their organic composition been higher than the average, or their rate of turnover of capital lower than the average, the opposite movement to that described above would result.

But, in agriculture, the exchange-value of the output is higher than the price of production, and yet competition does not drive down the average price to bring about an average profit. The persistence of this surplus profit is the basis of the landlord's rent. But, the question is why does this surplus profit persist?

Back To Part 34

Forward To Part 36

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