## Sunday, 8 April 2018

### Theories of Surplus Value, Part II, Chapter 15 - Part 11

The starting assumption was that labour created £60 of new value, divided £40 wages, £20 surplus value, so a rate of surplus value of 50%. If wages rose to £60, with no change in the amount of labour employed, therefore, all of the surplus value is wiped out; wages rise to equal the new value created. But, on this basis any rise in wages reduces the mass of surplus value accordingly. If wages rise to £50, surplus value falls to £10.

“Under all circumstances, therefore, the surplus-value and the rate of profit would fall to the same degree. For we are measuring the unchanged total capital here.” (p 382)

What Marx means here is that he is assuming the total capital of £100 remains constant, so a rise of £10 in wages to £50, is matched by a fall of £10 in constant capital, from £60 to £50, so total capital remains £100.

“While the magnitude of the capital (the total capital) remains the same the rate of profit must always rise and fall, not with the rate of surplus-value but with the absolute amount of surplus-value.” (p 382)

But, Marx says, the value of the materials that comprise the constant capital, could fall more than that. Wages may rise in spinning, because of a rise in the value of labour-power, or because of a shortage of labour-power. If productivity in spinning remains constant, the same quantity of labour spins the same quantity of flax, but the price of flax may fall, either because of a fall in its value, or because of an excess supply. Marx, therefore, sets out his tables on this basis, with the value of c falling by different amounts.

“... if, in the above example, the flax fell so low that the amount which the same number of workers were spinning could be bought for £40, then we would have the following:

 Constant capital £'s Variable capital £'s Surplus-value £'s Value of the product £'s Capital advanced £'s Rate of Profit % 40 50 10 100 90 11.11
The rate of profit would have fallen below 20 per cent. But supposing:
 Constant capital £'s Variable capital £'s Surplus-value £'s Value of the product £'s Capital advanced £'s Rate of Profit % 30 50 10 90 80 12.50
Supposing:
 Constant capital £'s Variable capital £'s Surplus-value £'s Value of the product £'s Capital advanced £'s Rate of Profit % 20 50 10 80 70 14.29

According to the assumption, the fall in the value of the constant capital never completely counterbalances the rise in the value of the variable capital. On the assumption made, it can never entirely cancel it out, since for the rate of profit to be 20, [£]10 would have to be a fifth of the total capital advanced. But in the case in which the variable capital amounts to [£]50, this would only be possible when the constant capital is nil.” (p 382-3)

Marx, therefore, amends his assumption of a rise in v to £50, and instead assumes it rises only to £45, leaving £15 as surplus value.

 Constant capital £'s Variable capital £'s Surplus-value £'s Value of the product £'s Capital advanced £'s Rate of Profit % 30 45 15 90 75 20

 Constant capital £'s Variable capital £'s Surplus-value £'s Value of the product £'s Capital advanced £'s Rate of Profit % 20 45 15 80 65 23.08

“Even with the fall in the surplus-value, therefore, the rate of profit could rise in this case, because of the proportionately greater fall in the value of the constant capital.” (p 383)

This undermines Ricardo's theory of the falling rate of profit, based on a progressive squeeze on surplus value. Marx's theory of the tendency for the rate of profit to fall is rather based on rising productivity, which leads to a rising rate and mass of surplus value. The rate of profit in Marx's theory, falls because the mass of material processed rises at a faster rate than the fall in the value of the material, so that c rises relative to v, as a result of that rise in productivity. However, as I've written elsewhere, there is no reason that the mass of material processed must rise by more than the fall in its value. Taking the last table, for example, if productivity in spinning doubled, so that twice as much flax is spun, but the unit value of flax fell by 75%, we would have,

c 15 + v 45 + s 15 = 75, k = 60, r' = 25%.

J.Lowrie said...

Boffy, A big debate between David Harvey and Michael Roberts on the latter's blog. I did miss your comments. J.Lowrie

Boffy said...

J,

I had a very brief scan of Bob's blog post, but it would take me too long to read his full piece in detail, let alone Harvey's responses. I find Bob's blog a bit of a bearpit, because of the trolls and their sock puppets, which gets in the way of rational debate. I am also very busy at the moment finishing off Theories of Surplus Value for publication, as well as planning a 5 volume work on Imperialism, a series on Lenin against Economic Romanticism, a book on Co-operation, as well as spending the time studying Africa I started several years ago, but which has been on a slow burner. I also have another novel to write, some completed novels and short stories to revamp for publication, as well as domestic issues to deal with.

So, you can see that responding to other people's blogs, which are often already dealt with in stuff I've already written, is not a top priority.

Boffy said...

J,

But, just for you, I have put a short one-off comment on Bob's blog today.

Boffy said...

J,

For some reason, despite having no links included in it, I notice it is "awaiting moderation".

Boffy said...

J,

Here is the content of my comment. You may want to take it up. The only additional point I would make, which partially supports Harvey's case is that Marx also takes into consideration questions of demand and supply in determining market value, because it affects what actually constitutes socially necessary labour. Also, Marx takes into consideration complex labour, which in support of Harvey's argument is only determinable post facto, in the market. However, as Marx's example in relation to Robinson Crusoe sets out, taking the total labour of society this distinction is dissolved, into one general labour. Distinctions between complex and simple labour then only have relevance for the values of different classes of commodity.

***
“As DH puts it: “if there is no market, there is no value”. ”

That’s the same mistake that Ricardo made in confusing value with exchange-value, which opened the door to subjectivists such as Samuel Bailey. Harvey should read Marx’s own rejection of the notion he is putting forward, which is contained in TOSV 3, in his response to Ricardo’s confusion, and the advantage taken of it by Bailey, and the other anti-Ricardians.

In short, as Marx makes clear in that refutation, you cannot have exchange-value, the basis of the market, unless you first have values, because exchange-value is only the objective relation of one amount of value, contained in one use value, as against another. As Marx puts it, value is a measurement of immediate intrinsic value. It is absolute in the sense that it represents a definite determinable mass of labour-time, and is not dependent upon any outside relationship. It is only variable to the extent that changes in productivity change the absolute mass of that labour-time.

Exchange value, which is what Ricardo always discusses and confuses with value, which is why Malthus and Bailey criticise him for also talking about it in value terms, as an absolute amount of labour-time, is not an immediate intrinsic measurement of value, but is contingent upon external relations, i.e. relations with other values, with which it is brought into relation and comparison. The process by which the product is gradually transformed into the commodity, by external trade between nomadic peoples, is also the process by which the individual value intrinsic to a product is formed into a social value (average socially necessary labour), and this social value then expressed in relation to other products, as an exchange value. Engels describes it, for example, in his Supplement to Capital III.

By this process, as Marx also sets out in the Contribution, and in Chapter 3 of Capital I, the value form analysis shows how a universal equivalent form of value is derived, as a money commodity, which then becomes as Marx puts it in his refutation of Bailey in TOSV 3, exchange value incarnate, the external measure of value. But, it is impossible to get to exchange value, or a universal equivalent form of value, a money commodity, or money, without their first being individual value embodied in individual products, equal to the labour-time required for their individual production, which becomes transformed into social/market value as part of a process of social production, as an aggregate of those individuals, a social average amount of necessary labour time currently required for the production of any class of product, which can then be placed into a relation with other products, as a basis for comparison, which is a fundamental requirement for trade, and for a market to develop in the first place.

Boffy said...

J,

I note that two of my comments have now appeared following moderation on MR's blog, but a third seems to have disappeared. So, here is what it said. Perhaps you could take up the points, as I now have to get on with other stuff.

****

I had intended not to comment further, but saw this bit, which is so egregiously wrong, I could not let it pass.

“The difference is that Ricardo had a theory of (use-) value based on ‘concrete labour’ (physical amounts of labour) measured in labour time.”

Ricardo most certainly did not have a theory of “use value”, which is what Marx attributes to the Physiocrats, and which Adam Smith slips into on occasion, where he slips from a labour theory of value to a cost of production theory of value. Marx notes that Ricardo’s advance over Smith and the Physiocrats is precisely that he does not fall into that trap, he consistently applies labour-time as the measure of value, but it is in doing so, whilst failing to make the distinction, like Smith, between labour and labour-power, that he then lands in a terrible mess.

Like Smith, you are right that Ricardo has an “embodied labour” theory of value. That is he determines the value of commodities by the labour actually used in their production. Marx criticises this concept of embodied labour or embodied value, which leads to the conclusions that value is somehow intrinsic to the commodity, which is the foundation of commodity fetishism. Marx makes clear not only that value is determined by socially necessary abstract labour but that each commodity is thereby only a representative of this social value, as a proportion of social labour-time, which is continually changing, and so far from any concept of being embodied within the commodity, as a result of some past act of labour undertaken in relation to it. Indeed, this is Marx’s critique of the concept of historic prices, because for Marx value is always the value determined by the current reproduction cost of commodities, including those commodities that physically comprise the productive-capital, and on which is calculated the rate of profit.

But, according to Marx as set out in TOSV II and III, in the Chapters and sections critiquing Ricardo’s theory of value, and the attacks on it by Malthus, Bailey and others, the real problem is that Ricardo, having stuck consistently to a labour theory of value based on the quantity of labour-time (unlike Smith, who lapses into a cost of production theory in which at points he confuses this quantity of labour with the value of labour, i.e. wages) Ricardo then attempts to find an absolute measure of this quantity of labour, in some other commodity.

As Marx sets out ibn TOSV III, this was a fool’s errand, because there never could be such an absolute external measure of labour-time (which is why those today who try to find such an external measure of value in gold, for example, are also engaged in such a fool’s errand) because any such external measure, be it labour-power, corn (as Smith used as a proxy), or gold, must itself be a commodity, whose value fluctuates along with changes in social productivity.

In TOSV III, in setting this out, Marx says that the one good thing that came out of Bailey’s critique of Ricardo was to illustrate the pointlessness of this search. All that Ricardo needed to have done was to have recognised the difference between value as determined by labour-time, and thereby absolute, and independent, as against exchange-value as being contingent, and external. But, then he would have to have also addressed the distinction between labour as the essence and measure of value, and labour-power, as a use value, which as wage labour becomes a commodity sold by the wage worker, which thereby provides the basis for the creation of surplus value in production, which Adam Smith had discovered, but likewise was unable to recognise because he similarly failed to distinguish between labour-power as a commodity, and labour the value creating activity.