Theories of Surplus Value, Part II, Chapter 10 - Part 28

What competition affects, Marx says, is two migrations of capital. In the first migration, capital moves to those spheres where the rate of profit is highest. That is those spheres where the organic composition of capital is low, and where the rate of turnover of capital is high. As capital migrates to these areas, supply increases and market prices fall towards the price of production. This process tends towards the creation of a general annual rate of profit, but is continuous, because values and prices of production are continually changing. But, within each sphere, a second migration is also taking place, because, at any one time, actual market prices are fluctuating around the price of production.

“It is this latter, more superficial movement which Ricardo examines and at times unconsciously confuses with the other.” (p 209)

What drives both migrations is the desire for the owners of capital to employ it so as to bring the highest return.

“This tendency has the effect of distributing the total mass of social labour-time among the various spheres of production according to the social need. In this way, the values in the different spheres of production are transformed into cost-prices, and on the other hand, the variations of the actual prices in particular spheres from the cost-prices are levelled out.” (p 209-10) 

Marx then comes to the point referred to earlier, where he reflects on the achievement of Ricardo in describing the means of the reallocation of capital via credit.

“He was, however, only able to do this because the credit system was more highly developed in his time than in the time of Adam Smith”. (p 210)

Marx gives a long quote from Ricardo where this is described. Essentially, Ricardo explains that, in the modern world, firms utilise credit extensively. They use commercial credit between each other, and they utilise bank credit for short term loans, and cash-flow.

“When the demand for silks increases, and that for cloth diminishes, the clothier does not remove with his capital to the silk trade, but he dismisses some of his workmen, he discontinues his demand for the loan from bankers and monied men; while the case of the silk manufacturer is the reverse: […] he borrows more, and thus capital is transferred from one employment to another, without the necessity of a manufacturer discontinuing his usual occupation. When we look to the markets of a large town, and observe how regularly they are supplied both with home and foreign commodities, in the quantity in which they are required, under all the circumstances of varying demand, arising from the caprice of taste, or a change in the amount of population, without often producing either the effects of a glut from a too abundant supply, or an enormously high price from the supply being unequal to the demand, we must confess that the principle which apportions capital to each trade in the precise amount that it is required, is more active than is generally supposed” (l.c., pp. 81-82).” (p 210-11) 

By means of credit, therefore, the whole social capital can be reallocated to where the highest returns are achieved, and social needs met.

“Credit therefore is the means by which the capital of the whole capitalist class is placed at the disposal of each sphere of production, not in proportion to the capital belonging to the capitalists in a given sphere but in proportion to their production requirements—whereas in competition the individual capitals appear to be independent of each other. Credit is both the result and the condition of capitalist production and this provides us with a convenient transition from the competition between capitals to capital as credit.” (p 211)

Back To Part 27

Forward To Part 29