Sunday, 25 March 2018

Theories of Surplus Value, Part II, Chapter 14 - Part 21

Smith also discusses here the effect of demand and supply on these prices. Demand generally rises as a consequence of rising wealth, as social productivity rises, and due to rising population. The effect on price then also depends on how the rising productivity also affects supply. In terms of raw products, this depends on the extent to which the supply can be increased by the application of capital and labour. Smith describes three types of raw products. In the first category, he includes, 

“Fishes, rare birds, different sorts of game, almost all wild-fowl, in particular the birds of passage, etc. The demand for these increases greatly with wealth and luxury.” (p 367) 

These products' supply is almost entirely independent of human industry, and so, as demand for them rises, supply does not rise to meet it, and prices rise. 

The second category includes those products whose supply can be increased, in line with demand, by an application of capital and labour. 

““It consists in those useful plants and animals, which, in uncultivated countries, nature produces with such profuse abundance, that they are of little or no value, and which, as cultivation advances, are therefore forced to give place to some more profitable produce. During a long period in the progress of improvement, the quantity of these is continually diminishing, while, at the same time, the demand for them is continually increasing. Their real value, therefore, the real quantity of labour which they will purchase or command, gradually rises, till at last it gets so high as to render them as profitable a produce as any thing else which human industry can raise upon the most fertile and best cultivated land. When it has got so high, it cannot well go higher. If it did, more land and more industry would soon be employed to increase their quantity” ([O.U.P., Vol. I, pp. 250-51; Garnier,] Vol. II, pp. 94-95).” So, for instance, with cattle.” (p 367-8) 

Smith here though also recognises that it is not merely the price that is significant, but the profit. So, for example, he refers to venison. However high the price of venison, he says, “is not near sufficient to compensate the expense of a deer park, as is well known to all those who have had any experience in the feeding of deer” ([O.U.P., Vol. I, p. 256; Garnier,] Vol. II, p. 104).” (p 368) 

By contrast, he notes that poultry can be fed from what would otherwise be waste products, and so the cost of producing it is thereby negligible. 

“so he can afford to sell them for very little.” While this supply is sufficient, poultry [is] as cheap as butcher’s meat. With the growth of wealth, the demand grows, and consequently the price of poultry [rises] above that of butcher’s meat, until “it becomes profitable to cultivate land for the sake of feeding them” ([O.U.P., Vol. I, p. 257; Garnier,] Vol. II, pp. 105-06).” (p 368) 

In a less developed state of society, where population is small, a large part of demand for these products is met purely by nature, which increases their supply by natural means. Because they require little labour for their production, their value is low. Only as society develops, population and demand rises, is additional labour and capital required to increase supply. 

“According to Adam Smith, the gradual rise in the price of these raw products only proves that, little by little, they are becoming products of human industry, while previously, they were practically only products of nature. Their transformation from products of nature into products of industry is itself the result of the advance of cultivation, which is increasingly limiting the scope of the spontaneous productions of nature. On the other hand, under less developed conditions of production, a large part of these products was sold below its value. The commodities are sold at their value (hence the rise in prices), as soon as they cease to be a by-product and become an independent product of some branch of agriculture.” (p 368) 

Its only when the prices of all these different natural products rise to a sufficient level that all the land in a country can be cultivated, Smith says. This sufficient price, he argues, must not only cover the cost of production and profit of a farmer producing corn, but also the rent of the land in corn production, ““as it is that which regulates the rent of the greater part of other cultivated land””. (p 368) 

Marx notes, 

“Here it is once more evident, how Smith is only able to use value as determined by the quantity of labour it [value] can buy, in so far as he confuses it with value as determined by the quantity of labour required for the production of the commodities.” (p 369) 

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