Wednesday, 11 April 2018

Theories of Surplus Value, Part II, Chapter 15 - Part 14

[4. Confusion of Cost-Prices with Value in the Ricardian Theory of Profit] 

““Taxes on those commodities, which are generally denominated luxuries, fall on those only who make use of them… But taxes on necessaries do not affect the consumers of necessaries, in proportion to the quantity that may be consumed by them, but often in a much higher proportion.” “For example, a tax on corn…it alters the rate of profits of stock… Whatever raises the wages of labour, lowers the profits of stock; therefore every tax on any commodity consumed by the labourer, has a tendency to lower the rate of profits” (l.c. p. 231).” (p 384) 

Marx responds, 

“Taxes on consumers are at the same time taxes on producers, in so far as the object taxed enters not only into individual consumption but also into industrial consumption, or only into the latter. This does not, however, apply only to the necessaries consumed by workmen. It applies to all materials industrially consumed by the capitalist. Every tax of this kind reduces the rate of profit, because it raises the value of the constant capital in relation to the variable.” (p 385) 

So, for example, in Capital III, Chapter 6, Marx points out that flour was not only consumed by workers, but was also used extensively as size in textile production. The removal of the duty, by the repeal of the Corn Laws, thereby, not only reduced the price of food for workers, but also reduced the costs of constant capital, for textile producers. But, Marx seems to miss a point here, that is covered in Chapter 6, of Capital III. The fact, of the reduction in the price of food, with the removal of the corn duty, thereby also reduced the value of labour-power, and consequently wages. So, it is not only the value of the constant capital that is reduced by the removal of such a tax, and vice versa, but also the value of the variable-capital. The real consequence, for the rate of profit, that Marx should have been pointing to here, therefore, is not a change in the relation of the value of the constant capital to the variable-capital, i.e. the organic composition, but the rise in the total capital, relative to the surplus value, or the total new value produced. That can be seen from the following examples. Consider a baker who uses only flour and wage labour. Their capital comprises: 

c 1000 + v 1000 + s 1000 = 3000, s' = 100%, r' = 50% 

Now, suppose a tax on food increases the value of labour-power by 10%. In that case, v rises to 1100, but there is no change in the new value created by labour. It remains as 2000. But, because v has risen to 1100, s must fall to 900. 

The relation of c:v has fallen, and yet the lower organic composition of capital results not in a higher, but a lower rate of profit. It does so for two reasons. Firstly, suppose the amount of surplus value had remained 1000, the rate of profit would still have fallen, because the capital advanced has risen from 2000 to 2100. But, the rise in the value of the variable-capital, is a consequence of a rise in the value of labour-power, which caused the surplus value, thereby, to fall. So, the rate of profit falls also for the second reason that the mass of surplus value has also fallen, because of the tax on food. 

Now, suppose that the tax applies equally to constant capital, and the variable-capital, so that: 

c 1100 + v 1100 + s 900 = 3100, s' = 81.82%, r' = 40.91% 

In that case, the rate of profit not only falls, because the rise in the value of labour-power causes the mass of surplus value to fall, but also, because the total capital advanced rises, now, from 2000 to 2200. 

As Marx says, the rate of profit would fall even if there was no change in the variable capital, or the mass of surplus value, and even with the higher value of constant capital, being reproduced in the final output. So, 

c 1100 + v 1100 + s 1000 = 3100, s' = 100%, r' = 47.62% 

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