Friday, 29 December 2017

Theories of Surplus Value, Part II, Chapter 11 - Part 6

Ricardo makes the same argument in relation to the mine or quarry.

““The compensation given for the mine or quarry, is paid for the value of the coal or stone which can be removed from them, and has no connection with the original and indestructible powers of the land” (l.c., pp. 54-55).” (p 249) 

It may have no connection to the original powers of the land, Marx says, but it clearly does have a connection to the “original” and “destructible” productions of the soil. Ricardo never talks about value as use value or utility, and so his use of the term “value” here is “just as ugly here as the phrase “repaid himself with a profit” was above.” (p 249) 

If he means by “value” here the value of the coal or minerals, in their natural state, before they are removed, when he talks about compensation, he negates his theory of value, because having not been produced by labour they could possess no value.

“Or does value mean here, as it must do, the possible use-value and hence also the prospective exchange-value of coal and stone? Then it means nothing but that their owner is paid rent for the permission to use the “original composition of the soil” for the production of coal and stones. And it is absolutely incomprehensible why this should not be called “rent”, in the same way as if the permission were given to use the “powers” of the land for the production of wheat. Or we end up again with the annulment of the whole theory of rent, as explained in connection with wood.” (p 249)

What is the actual situation? If we take the situation of the virgin forest, the labour employed is only that which removes it from its natural state, as with coal from a mine, or minerals from a quarry. That is different to a commercial forest, where labour and capital is employed to cultivate the forest, to plant replacement trees, etc., and where, therefore, labour has gone into the actual production of timber. In the case of a virgin forest, or coal or minerals, the labour does not produce the product but removes it from its natural state, processes it, and transports it. In such cases, the organic composition of capital is low. No raw material is used, and so, even as productivity rises – as a result of more and better fixed capital being employed – this does not have the effect of increasing the organic composition, as happens in manufacturing.

In manufacturing, more effective fixed capital causes productivity to rise, which causes the mass of raw material consumed to rise, and the value of circulating  constant capital to rise. The same process causes the value of the variable capital, and wear and tear of fixed capital to fall as a proportion of output value. But, where no raw material is used, this is not the case. This is also true in relation to the service industry that currently accounts for around 80% of value and  surplus value production. It is the main reason today why the  Law of the Tendency for the Rate of Profit to Fall, is now largely inoperable. As Marx points out, capital only introduces new fixed capital where it costs less than the value of the paid labour it replaces. Suppose a machine helps extract 100 tons of coal in a year. The machine has a life of ten years, and costs £1,000. It loses £100 per year in wear and tear to production, which is equal to £1 per ton. But, a new machine costing £2,000 may lose £200 p.a., and yet if it helps produce 250 tons p.a. that is only £0.80 per ton.

So, the increase in productivity causes no rise in constant circulating capital, and although this fixed capital increases absolutely, it declines relatively.

“If, therefore, the commodity is sold at its value here, then this value will be above its cost-price , i.e., the wear and tear of the instruments of labour, the wages , and the average profit . The excess can thus be paid as rent to the owner of forest, quarry or coal-mine.” (p 249-50) 

Marx asks why Ricardo used these clumsy formulations, the wrong use of value etc. and suggests the reason may emerge later. Ricardo wants to distinguish agricultural rent from these other forms of rent, and to create the basis for his theory of differential rent, by specifying the power of the soil to provide varying degrees of this “original power”.

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