Friday, 13 July 2018

Theories of Surplus Value, Part II, Chapter 17 - Part 15

As the means of transport and communication are improved and speeded up, the more stocks can be reduced. This was seen in Capital II. If transport between the location of suppliers and producers are prone to being severed, producers will want to hold larger stocks, in case their supplies do not get through, in time, which would disrupt their production. They may go for less frequent, but larger deliveries. If the speed of communication is slow, that is likely also to be the case, whereas with fast, secure communication it means that orders can be sent out closer to when supplies are required, smaller, more frequent batches may be used, as with Just In Time production and stock control systems. 

Engels, in Capital III, described the way the speeding up of sea transport, as a result of steamships, and the building of the Suez Canal, had slashed circulation times for capital, which had a corresponding effect on raising the rate of turnover, and consequently, the annual rate of profit. But, also, because it reduced the need to hold such large stocks, it also removed one of the main causes of crises, because production did not continue to run ahead of the market so easily. 

“The chief means of reducing the time of circulation is improved communications. The last fifty years have brought about a revolution in this field, comparable only with the industrial revolution of the latter half of the 18th century. On land the macadamised road has been displaced by the railway, on sea the slow and irregular sailing vessel has been pushed into the background by the rapid and dependable steamboat line, and the entire globe is being girdled by telegraph wires. The Suez Canal has fully opened East Asia and Australia to steamer traffic. The time of circulation of a shipment of commodities to East Asia, at least twelve months in 1847 (cf. Buch II, S. 235 [English edition: Karl Marx, Capital, Vol. II, pp. 251-52. — Ed.]), has now been reduced to almost as many weeks. The two large centres of the crises of 1825-57, America and India, have been brought from 70 to 90 per cent nearer to the European industrial countries by this revolution in transport, and have thereby lost a good deal of their explosive nature. The period of turnover of the total world commerce has been reduced to the same extent, and the efficacy of the capital involved in it has been more than doubled or trebled. It goes without saying that this has not been without effect on the rate of profit.” 

(Engels, Capital III, Chapter 4) 

In my book “Marx and Engels' Theories of Crisis”, I have pointed to a similar situation as a result of the introduction of containerisation, and a similar feature has been created by the Internet, both in terms of the circulation time for the delivery of services and digital goods (software, music video, games etc.), and in terms of the speeding up of payments via electronic payments systems. 

In the last few decades, there has been continual changes in both areas, as well as revolutionary changes in both. Take for example, in the transport of commodities. A major shift was the introduction of containerisation. Like many such innovations, containerisation was not new. It goes back, at least, to late 18th century coal mines in Britain. But, like the take up of any such innovation, it really only takes off when other economic factors come together to make it a suitable solution to resolve the existing problems. Containerisation slashed the cost of transport, and at the same time massively increased the speed of shipments. 

According to this World Bank Report, using data from the McKinsey Report, the productivity in 1965 of dock labour (prior to containerisation) was 1.7 tons per hour. Post containerisation, in 1970, that had risen to 30 tons per hour. The average ship size went from 8.4 GRT to 19.4 GRT, insurance costs fell from £0.24 to £0.04, and capital tied up in transit halved from £2 per ton to £1 per ton. Today, 90% of goods are transported by container, in an integrated road, rail and sea system. As the report suggests, the reduction in cost, and increase in speed, has also had a significant effect in stimulating the circulation of commodity-capital in the process. 

This is perhaps one of the most notable increases in transport productivity, but it should not be missed that alongside it many more such improvements continually occur, for example, in increasing the size of carriers, improvements in speeds of carriers, development of additional road and other transport networks and so on. Moreover, alongside these physical improvements in transport speed, through technological development come others. For example, the development of common markets, like the EU, across the globe, has speeded up the movement of goods and services by the removal of various legal barriers - an advantage which Britain will lose as a result of Brexit. The introduction of the Schengen Agreement in Europe, means that time spent at border crossings has been slashed. Even, things such as the introduction of satellite navigation systems, has acted to speed up deliveries. 

But, changes in production have also acted to speed up circulation. The introduction of flexible specialisation systems, alongside the introduction of Just In Time, means that the suppliers of the large companies operating such systems, have themselves to introduce similar systems, in order to be able to provide the guarantees to customers that they will be able to provide the inputs of the right type, quality, and in the necessary quantity, at short notice, to be delivered precisely when required. This means that the quantity of commodity-capital at any one time lying fallow is reduced. 

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