Tuesday, 6 February 2018

The Bitcoin Canary in the Coal Mine - Part 3 of 5

The effect of the crisis, then, Marx says, is to lead both to capital being withdrawn, and for new capital introduced to be of this new type that displaces labour, and reduces the value of the commodities that comprise the constant capital

“... the fall in prices and the competitive struggle would have driven every capitalist to lower the individual value of his total product below its general value by means of new machines, new and improved working methods, new combinations, i.e., to increase the productivity of a given quantity of labour, to lower the proportion of variable to constant capital, and thereby to release some labourers; in short, to create an artificial over-population. Ultimately, the depreciation of the elements of constant capital would itself tend to raise the rate of profit. The mass of employed constant capital would have increased in relation to variable, but its value could have fallen. The ensuing stagnation of production would have prepared — within capitalistic limits — a subsequent expansion of production.” 

The other side of the development of the crisis is that, as capital expands, and employs increasing masses of labour, and wages rise, so the workers' living standard rises. The proportion of consumption in GDP rises, and capital is led, by competition between capitals, to increase the output of wage goods to meet the increased demand. The crisis is presaged not by under-consumption, as the Keynesians believe, but by, if anything, over consumption. But, as workers consume more of their basic needs, out of their rising incomes, so their marginal propensity to consume more of those basic commodities declines. That means that, in order to sell more of them, having produced them, firms have to reduce market prices by increasing amounts, squeezing already squeezed profit margins even further. 

Capital, in order to respond to the ensuing crisis, introduces new technologies and techniques that raise the level of productivity, increase the rate of surplus value, and mass of surplus value, but which by the same token, as a result of the increase in the technical composition of capital, and consequent rise in the organic composition of capital, causes the rate of profit to fall. This was the situation that existed, in the 1980's, as capital introduced whole swathes of new technologies in every industry that replaced labour, and drove up productivity. The base technology that made it possible was the introduction of the microchip. In the early, to mid 1980's, it resulted in serial deep recessions, as labour was displaced, and unemployment rocketed. Wages fell, and the rate of surplus value was driven up, thereby removing the conditions that had led to the squeeze on profits during the 1960's, and 1970's. 

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