Saturday, 7 April 2018

[3. The Value of Constant Capital Decreases While That of Variable Capital Increases and Vice Versa, and the Effect of These Changes on the Rate of Profit]

In regard to case C, [page], 640, it should also be noted:

It would be possible for the wages to rise but for constant capital to fall in terms of value, not in physical terms. If the rise and fall were proportional on both sides, the rate of profit could remain unchanged.” (p 382)

Marx sets out a situation where constant capital is £60, wages £40, and the rate of surplus value is 50%, producing £20 profit, so the output value is £120, and rate of profit is 20%. He then changes the amounts in line with the above hypothesis. So, constant capital is reduced by £20 from £60 to £40, and wages raised by £20 from £40 to £60. As wages rise, but the amount of new value produced remains constant, he reduces the rate of surplus value from 50% to 33.3%, so that surplus value remains at £20. The final figures give output value again at £120, and a rate of profit of 20%. But, having set this out, Marx rightly adds,

“This is wrong.” (p 382)

In fact, it can be seen, prima facie, a number of things that are wrong. Firstly, the fall in constant capital is not equal proportionally to the rise in the variable capital. The former falls by £20, which represents a fall of a third, whilst the latter rises by £20, which represents a half. Secondly, if the rise in wages represents simply that, with only the same number of workers employed, the new value created would remain the same, so that not only the rate, but also the mass of surplus value would fall. In order for the mass of surplus value to remain constant, more workers need to be employed, so that whilst the value of labour-power rises, causing the rate of surplus value to fall, the increased number of workers causes the mass of surplus value to rise, cancelling out the effect. That would require a fall in productivity, so that the same mass of materials requires more workers to process it. That contradicts the point made earlier by Marx that, in general, productivity in industry rises rather than falls.

Marx works through the case, presenting a number of scenarios, which he then summarises in a number of tables.