Friday, 12 January 2018

Theories of Surplus Value, Part II, Chapter 12 - Part 14

A change in the organic composition, therefore, requires a change in social productivity, which brings about this change in the technical composition. Assuming no change in the technical composition of capital, and so no change in its organic composition, a change in the value composition could occur in a number of ways. As Marx set out in Capital III, a change in the price of the commodities that comprise the constant capital, and variable capital may be the result of a change in the value/price of production of those commodities, or else may be the consequence of merely short-term, movements of market prices. Either way, the immediate effect is the same.

If the price of means of production rises, this will cause the value composition to rise. For any quantity of capital, less means of production can be bought. Suppose there is £100 of capital, and currently 50 units of constant capital and 50 units of variable capital are employed. Each unit has a value of £1. However, if the value of means of production rises to £1.50, fewer units can be bought, or if the same quantity is bought, less capital is available to buy labour-power. Assuming no change in the technical composition, the same number of units of constant and variable capital must be employed. In that case, assuming no change in the value of means of consumption, 40 units of each would be employed, with the value of c rising to £60, and v falling to £40, so that c:v rises from 1:1 to 1.5:1.

If the price of means of consumption rises, so that the value of labour-power rises, the opposite occur. So, £100 of capital would buy 40 units of each, but now the value of c would be £40, with the value of v rising to £60, so that c:v falls to 1:1.5. If the price of means of production and means of consumption both rise by the same amount, fewer units of both are employed, but with no change in the relation of c:v. For, example, if the price of both rises to £1.25, again 40 units of each are employed, and this amounts to £50 c + £50 v, whilst c:v remains 1:1.

As Marx points out, such a situation would be unusual.

“This may never occur in practice. A rise in the price of certain agricultural products such as wheat etc., raises the (necessary) wage and the raw material (for instance seeds). A rise in coal prices raises the necessary wage and the auxiliary material of most industries. While in the first case the rise in wages occurs in all branches of industry, that in raw materials occurs only in some. With coal, the proportion in which it enters into wages is lower than that in which it enters into production. As regards total capital, the change in the value of coal and wheat is thus hardly likely to affect both elements of capital equally.” (p 276-7)

The consequences of these changes will, however, be different. In the first case, where the price of materials rises, this causes less of both c and v to be employed. Marx assumes no change in the working-day, so the rate of surplus value remains the same. So, if we assume a 100% rate of surplus value, the initial position would be

c 50 + v 50 + s 50 = 150, r' = 50%

We would now have, where the price of c rises,

c 60 + v 40 + s 40 = 140, r' = 40%,

whereas,, if the price of v rises,

c 40 + v 60 + s 20 = 120, r' = 20%.

The reason for the difference is that where the price of c rises, this causes the mass of variable-capital to fall, and with a constant rate of surplus value, the mass of surplus value also falls, so the rate of profit falls. However, where the price of v rises, this has two consequences. Firstly, both less constant and variable capital are employed. The smaller mass of v produces a smaller mass of surplus value. But, in addition to this, the rate of surplus value itself falls as a result of the rise in wages. Forty units of labour is employed, and with no change in social productivity, produces the same £80 of new value. But, now £60 of this new value goes to reproduce v, leaving only £20 as s.

Where the price of both c and v rise in the same proportion, we would have.

C 50 + v 50 + s 30 = 130, r' 30%.

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