Sunday, 22 April 2018

Theories of Surplus Value, Part II, Chapter 15 - Part 25

Suppose, as a result of improvements, Marx says, the composition rises from 60:40 to 66.6:33.3. In other words, more machinery is introduced to replace labour. This might be induced by a rise in agricultural wages due to “emigration, war, discovery of new markets, prosperity in the non-agricultural industry”, which Marx also cites in “Value, Price and Profit”, between 1849-59. Or, it could be, he says, that competition from imported grain forces domestic producers to seek to raise productivity. However, these are different circumstances that Marx does not distinguish. So, he says, 

“... the same circumstances could continue to operate after the introduction of the improvement and wages therefore might not fall despite the improvement).” (p 393) 

If its import competition that provokes the introduction of machines, wages would not have risen to begin with. On the other hand, if agricultural wages rise, for the reasons described, then it would be expected that industrial wages would also have risen, so the rate of surplus value, and rate of profit would have fallen. 

Marx assumes that the value of the agricultural product falls, as a result of the reduction in the variable capital, and no change in the rate of surplus value. In other words, c rises by 6.66, whilst v falls by 6.66, and s falls by 3.33, so that the total value falls by 3.33. At the same time, he assumes that the general annual rate of profit remains 10%, so that, on £100 of capital, the price of production remains £110. On £100 of capital, the value of output is now £116.66, so that the rent falls from £10 to £6.66. However, if wages in general rise, that would have meant that the general annual rate of profit would fall, with a consequent effect on the price of production of agricultural output. But, also, as Marx and Engels describe, in Capital III, capitalists only introduce machinery where its value is less than the value of the paid labour it replaces, so as to increase profits. That is one of the inducements, not only to develop machines that are ever more efficient, but also to produce those machines themselves more efficiently, and thereby reduce their value. 

“The absolute rent may rise because the general rate of profit falls, owing to new advances in industry. The rate of profit may fall due to a rise in rent, because of an increase in the value of agricultural produce which is accompanied by an increase in the difference between its value and its cost-price. (At the same time, the rate of profit falls because wages rise.)” (p 393) 

So, advances in industry may raise social productivity so that a given mass of labour processes a larger mass of material, which causes the organic composition of capital to rise, and the rate of profit to fall. But, this assumes that this does not reduce the value of constant capital – both of the processed material, and a moral depreciation of the fixed capital stock – or raise the rate of surplus value, thereby causing the general rate of profit to rise. And, it assumes that the rise in productivity does not raise the rate of turnover of capital, and thereby the general annual rate of profit. 

A rise in the value of agricultural products may raise the value of labour-power, because of higher food prices, which thereby reduces the rate of surplus value, and rate of profit. An increased value of agricultural output, at the same time as a lower rate of profit, and so lower prices of production, increases the difference between the price of production and value of agricultural output, and so causes rent to rise. 

“The absolute rent can fall, because the value of agricultural produce falls and the general rate of profit rises. It can fall, because the value of the agricultural produce falls as a result of a fundamental change in the organic composition of capital, without the rate of profit rising. It can disappear completely, as soon as the value of the agricultural produce becomes equal to the cost-price, in other words when the agricultural capital has the same composition as the non-agricultural, average capital.” (p 393) 

But, as I've discussed elsewhere, there is no reason why landowners would lease their land for free, and nor would all of them wish to farm or mine it themselves. Land would, therefore, tend to be simply withheld. Prices of agricultural and mineral products would then rise as a consequence of inadequate supply, so that prices rose above exchange-values, and prices of production, to a level where rents acceptable to landlords could be paid. What would constitute “acceptable” would depend on what yields could be obtained on alternative revenue producing assets, such as bonds or shares. 

Landowners may sell land where higher yields are available elsewhere, so reducing land prices, until available rents provided equivalent yields. However, as seen recently, landowners, as well as owners of financial assets may hold on to them, even at zero or even negative yields, if they believe that potential gains from rises in the price of those assets, underpinned by central banks, and state activity, more than offset the lack of revenue. 

The absolute rent, in this case, arises because landed property is able to prevent capital being employed. The surplus profit arises not because the value of output exceeds its price of production, but because the output is sold at a monopoly price above the value. This represents a draining of surplus value from industry, as a consequence of these monopoly prices. It is then not technically rent, but a portion of profit, in the economic sense. 

“Ricardo’s proposition would only be correct if expressed like this : When the value of agricultural produce equals its cost-price, then there is no absolute rent. But he is wrong because he says: There is no absolute rent because value and cost-price are altogether identical, both in industry and in agriculture. On the contrary, agriculture would belong to an exceptional class of industry, if its value and cost-price were identical.” (p 393) 

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