Wednesday, 4 July 2018

Theories of Surplus Value, Part II, Chapter 17 - Part 6

[2. Value of the Constant Capital and Value of the Product] 

“For the sake of simplicity, when we speak of the reproduction of constant capital we shall in the first place assume that the productivity of labour, and consequently the method of production, remain the same. At a given level of production, the constant capital which has to be replaced is a definite quantity in kind. If productivity remains the same, then the value of this quantity also remains constant. If there are changes in the productivity of labour which make it possible to reproduce the same quantity, at greater or less cost, with more or less labour, then similarly changes will occur in the value of the constant capital, which will affect the surplus-product after deduction of the constant capital.” (p 473-4) 

As stated previously, this is why the value of the consumed capital has to be determined by its current reproduction cost, not its historic cost

“For example, supposing 20 quarters [of wheat] at £3, totalling £60, were required for sowing. If a third less labour is used to reproduce a quarter it would now cost only £2. 20 quarters have to be deducted from the product, for the sowing, as before; but their share in the value of the whole product only amounts to £40. The replacement of the same constant capital thus requires a smaller portion of value, a smaller share in kind out of the total product, although, as previously, 20 quarters have to be returned to the land as seed.” (p 474) 

Marx returns to this point in Chapter 22, in dealing with the illusion of profit arising from the use of historic pricing rather than current reproduction costs, in his critique of Ramsey.

Whatever the historic cost of the seed consumed in production, its current reproduction cost is only £2, and it is this value, not the historic cost, which is reproduced in the value of output, just as it is this value that is taken from the output value, to replace, in kind, the consumed seed.   As Marx also sets out in Chapter 22, this illusion of profit also depends upon a concept of capital, in which its circuit is M - C ... P... C` - M`.  In other words, capitalist production ends with the realisation of capital values as money.  But, as Marx describes meticulously, in Capital II, that only applies in two  cases.  Firstly, it applies only to newly invested money-capital, for example, where a new firm is established, or else where capital accumulation is occurring with the use of realised profits or borrowed capital, and only then in relation to the accumulated capital, i.e. m - c, not to M-C.  Secondly, it applies to where a firm is closing down, so that not only its commodity-capital, but also all of its productive-capital is sold and converted thereby into money.  Even in this case, it is usually the case that whilst this is the circuit for the capital of the individual capitalist, it is not true for the circuit of the capital itself, as it is often bought by some other capitalist, and its circuit continues as before.

It would require a view of capital in which production stops at the end of each circuit, that all capital is converted into money, rather than continually being reproduced and metamorphosed simultaneously into its succeeding forms.  As Marx sets out in Capital II, and returns to this point in TOSV Chapter 21, that is not a description of industrial capitalism, whereby the vast majority of capital is existing capital that is continually being reproduced.  For this existing industrial capital, as Marx describes at length, in Capital II, the circuit is rather.

Ramsey's error, which led him to believe that money profits or losses also arose from changes in prices of the constant capital, was based, as Marx outlines in Chapter 22, precisely on his use of historic prices, and the failure to recognise that the use values that comprise the constant capital, must be physically reproduced "on a like for like basis", including all of those items of constant capital that are reproduced "in kind", out of current production, and that this reproduction of those use values, occurs at their current reproduction cost, not on the basis of their historic prices!

Returning to the point made by Ricardo, in the previous section, about the value of output of a million men in a year, Marx says, if, in both nations, the million men created £100 of new value, but, in one nation, they employed £10 million of constant capital, whereas, in the other, they employed only £1 million of constant capital, then the value of output of the first would be £110 million, and of the other only £101 million. Moreover, the nation that employed the £10 million of constant capital would, undoubtedly, produce a much greater volume of output than the other nation, because some of the constant capital would be in the form of machines that increase the productivity of the labour. Although the value of the output of I is £110 million, and that of II only £101 million, therefore, when this much greater volume of output is taken into consideration, the prices of the individual commodities, produced by I will undoubtedly be lower than those of II

“It is true that a greater portion of the value of the product goes to the replacement of capital in nation I as compared with nation II, and therefore also a greater portion of the total product. But the total product is also much greater.” (p 474) 

That is quite apparent with manufactured commodities, Marx says, where Britain produced both a much greater volume and greater value of output than in other countries, but whose prices, for those commodities, were lower. However, it is not necessarily the same in agriculture, and the reason is the differences in the natural fertility of the soil. Marx compares Britain with Russia. At the time, there were around a third of the population employed in agriculture, in Britain, as opposed to 80% in Russia. The figures are not entirely accurate, he says, because, in Britain, there were a lot of people employed in industries related to agriculture. For example, Britain had large-scale food processing industries, whereas in Russia the processing and packaging of food was done on the farm itself. Setting that aside, and any variations resulting from Russian peasant producers selling their output below its value, however, the reason that Russian agricultural products sold at lower money prices, despite appearing to require more labour is apparent. The British agricultural producer uses more constant capital, and this raises the productivity of the labour. That is why proportionally less of the British population was employed in agriculture. So, for any given amount of agricultural output, less British labour is used than Russian labour. But, the living labour is not the only cost of production, it also includes all of the previous labour embodied in the constant capital used by the British workers. However, if the Russian soil is more fertile than the British soil, the productivity of the Russian worker becomes greater than that of the British worker, so that the value of each unit of output is less. This is also the point Marx made earlier in his analysis of long wave agricultural prices, and the time required for the investment of fixed capital to become embedded within the natural fertility of the land. 

“This would also explain the higher money price of the labourer’s wage.” (p 476) 

The worker, during the year, undertakes labour and thereby produces new value, which is embodied alongside the constant capital in a new product. The worker who produces means of subsistence consumes a portion of this new product. The capitalist who has been consuming the surplus product created in the last year, now, at the end of this year, has this surplus product replaced for them by the new value created by the worker. Finally, the workers producing means of production create a new value by their labour, and obtain means of subsistence equal to the value of their labour-power, in exchange for constant capital, whilst the capitalist producing means of production obtains means of consumption equal to the value of the surplus value produced by their workers, again in exchange for constant capital. 

“Finally, the constant capital which is consumed in the production of constant capital, in the production of machinery, raw materials and auxiliary materials, is replaced in kind or through the exchange of capital, out of the total product of the various spheres of production which produce constant capital.” (p 476) 

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