Machines and Productivity
The problem with Paul's earlier, confused description of The Labour Theory of Value, which failed to distinguish between labour and labour-power, is again illustrated in the example he gives, when he comes to examine productivity. He sets out an example of a factory producing 10,000 units of a commodity. It requires 10,000 hours of living labour, and 10,000 hours of congealed labour, or “finished labour” as he calls it. That is a total of 20,000 hours. Each unit is equal to 2 hours labour.
“On the market, it should exchange for the money equivalent of two hours labour-time.” (p 158)
But, previously, we saw that Paul defined this amount as the equivalent of an hour's wages (p 151). If we use the $0.28 figure, it would mean that it sold for $0.56. Out of that, $0.28 go as wages, whilst the other $0.28 must go to pay for the replacement of the consumed “finished labour”. But, that means that the firm could produce no profit. We will let that go.
Paul then says, assume a new process is introduced that doubles labour productivity in one firm. Now, each of its units contains 1 hour of finished labour and ½ hour of living labour. It can still sell its output at the market value of 2 hours per unit, making a surplus profit of ½ hour per unit. That gets other firms to introduce the new process so that the market value of the commodity falls from 2 hours to 1.5 hours, and the surplus profit disappears. But, then Paul makes a leap that does not follow from this argument. Remember, he only spoke about a new “process”. He then says,
“To increase productivity, we increase the proportion of 'machine value' to the living labour employed.”
But, that is not what this example shows. It talks only of a new process. The division of labour continually introduced new processes that raised labour productivity without increasing the machine value relative to labour. What does increase, in such conditions, is the raw material value relative to labour, because the rise in productivity by definition, means a given amount of labour processes more material. Marx and Engels describe a variety of new chemical and other processes, which increased productivity without any additional machinery, and sometimes without any additional cost.
But, even if we take Paul's argument here to mean that the new process involves the introduction of a new machine, his argument does not follow. Suppose there were 100 workers initially each using a machine. Now, a new machine is introduced that can do the work of 2 of the old machines. So, now, 50 machines are employed rather than 100 machines, and 50 workers are employed rather than 100 workers. So, in terms of machines to workers there is no change; it is 1:1, as before.
Marx himself describes this in Theories of Surplus Value, Chapter 23.
"Here it is not simply a question of the quantitative ratio but of the value ratio.
If one worker can spin as much cotton as 100 [workers spun previously], then the supply of raw material must be increased a hundredfold, and this is moreover brought about only by the spinning-machine which enables one worker to control 100 spindles. But if simultaneously, one worker produces as much cotton as 100 workers did previously and one worker produces a spinning-machine whereas previously he produced only a spindle, then the ratio of value remains the same, that is, the labour expended in the spinning, [in the production of] the cotton and the spinning-machine remains the same as that expended previously in spinning, the cotton and the spindle."
Indeed, as I've set out elsewhere, the technological advances that make this new machine possible mean that its value is also likely to be lower. Moreover, Marx sets out, in Capital, that any such new machine, introduced must cost less than the paid labour it replaces. Each new machine replaces a worker, and so must cost less than a worker's wages. So, in actual fact, we might expect the machine value to fall relative to the value of the living labour. What would increase, relative to labour is the value of the processed material, because now each worker and machine processes twice as much of it.
In the rest of his argument in Chapter 23, Marx assumes that the value of the machinery rises against labour, and falls on relatively as against the output value. That is what Marx sets out, in Capital III, Chapter 6, that the value of both fixed capital and of labour falls as a proportion of the value of output, whilst the value of raw material rises. If the 100 machines cost £100, the 50 that replace them can cost no more than £100, but they may cost less than £50. Say they cost £75, and wages fall from £100 to £50, then machine value will rise, relative to wages, but both machine value and wages will fall relative to output, but materials rise. In fact, there is no reason why the value of fixed capital, and of materials may not fall by a larger proportion, so that in value terms they fall relative to labour. That is certainly true, in economies based upon service production, where no processing of materials is essentially involved.
Paul believes that it is this process whereby more machines are introduced that replace labour which is continually proceeding to reduce the employed labour, and so production of surplus value that leads to the tendency for the rate of profit to fall, which then ultimately leads to crises. What stands in its way are the various countervailing forces to the fall in the rate of profit, described by Marx in Capital III, Chapter 14. But, this is all wrong. Firstly, Marx nowhere says that his law of falling profits leads to crises of overproduction. He says that this law, which only operates as a tendency, is only perceptible over long periods, and in Theories of Surplus Value, Chapter 23, he says that the fall attributable to it is much smaller than it is said to be, and that the countervailing tendencies are sufficient to reduce the value of materials sufficiently to offset it.
"The cheapening of raw materials, and of auxiliary materials; etc., checks but does not cancel the growth in the value of this part of capital. It checks it to the degree that it brings about a fall in profit."
But, also in Capital III, Chapter 15, he makes clear that for long periods, there are no technological leaps, and, instead, all that happens is that more of the existing machines are rolled out, employing more workers to operate them, and thereby resulting in more surplus value being produced, not less, and also no change in productivity, meaning no change in the organic composition of capital, or in the rate of profit. As he sets out in Theories of Surplus Value, Chapter 21, if £1,000 of capital employs 1 worker who produces £100 of surplus value, the rate of profit is 10%. But, it is still 10% if then £8,000 of capital employs 8 workers who produce £800 of surplus value.
What does lead to overproduction, in these cases, is where this increase in employment means that wages begin to rise, so that the rate of surplus value falls, and profits get squeezed. As I've set out previously, its in response to these conditions that capital is led to innovate, to introduce new labour-saving technologies, which are the response and solution to those crises, not the cause of them.
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