Labour, Labour-Power and Surplus Value
Surplus value is only produced by labour. Either surplus value rises because more labour is undertaken (absolute surplus value) or because less necessary labour is required (relative surplus value). A cheapening of constant capital results indirectly in a rise in surplus value. A cheapening of constant capital releases capital as revenue, and this released capital can then be accumulated so that both more constant capital, and more labour is employed. The increased mass of labour employed results in more surplus value being produced. But, a cheapening of constant capital can result indirectly in a rise in the rate, and so mass of surplus value. To the extent that a fall in the value of constant capital reduces the value of commodities consumed by workers, it reduces the value of labour-power. By reducing the necessary labour-time, it increases the surplus labour-time.
What becomes a bigger problem for machines that last forever is that whilst they transfer near zero amounts of value, as wear and tear, they suddenly, and periodically lose all their value, as a result of moral depreciation. That is precisely the problem with intellectual labour, in so far as it acts like fixed capital. Yesterday's wonder drug may be today's Thalidomide, or simply surpassed by today's wonder treatment that makes it look like the equivalent of leeches. Today's superstar is tomorrow's sex pest; today's must-see movie, tomorrow's object of derision.
The real problem for the producer of computer aided production software, such as in a pressing shop, discussed by Paul (p 168-9), is not the pirating of the software – why would companies you sold it to for their production machines lose the competitive advantage they paid to obtain – but that tomorrow some other programmer comes up with a better programme, some other engineer comes up with a better dye pressing process, so that yours becomes worthless.
Paul says,
“We've seen what happens if you inject zero marginal cost products into the price model: it breaks down.” (p 169)
But, we haven't seen that. The concept of zero marginal costs, of public goods, is not new, and orthodox economics developed models more than 50 years ago to deal with it. Moreover, all Paul has shown is that these tendencies lead to zero marginal costs for fixed capital, in so far as more of its content is information based. The fall in the value of raw material is due to rising productivity, of which information technology is an important part, but the main reason that that raw material is less important is because more economic activity is about service industry than manufacturing industry. In terms of manufacturing, there certainly is no reduction to zero marginal costs, as increased output involves increased consumption of raw and auxiliary materials, and still more labour-power.
In service industry, as output expands, often made possible by information technology, it certainly involves more labour, and so no zero marginal cost. The smartphone and apps, along with GPS made Uber possible, which has meant more labour employed as Uber drivers. The Internet, faster computing etc. made possible a massive expansion of financial services, with a huge growth of labour employed in that sphere. The interesting question arises when Paul's argument is extended further, and we ask what happens when the Uber car, like the trains, lorries etc. can drive themselves, and when the AI systems in investment banks only requires humans to wave fans over them to keep them cool?
Paul's failure to properly grasp the Labour Theory of Value, and the difference between labour and labour-power again jumps up to bite him, in his next example. He sets out the following scenario.
Capital 200
Energy 200
Material 200
Labour 200
He notes he has not included profit, but if he had, he might possibly have seen his obvious error. The 200 capital, he says, represents 200 hours of wear and tear of a machine. If the machine lasts forever, he says, the value would then become zero. He then says,
“Now we run the spreadsheet over time: in Period #2, the zero-effect in the capital line spills over and reduces the number of labour hours transferred to the final product – because the hours needed to reproduce labour are reduced.” (p 170)
But, this is totally wrong! If 200 hours represents the actual quantity of labour-time required for production this is in no way changed as a result of a change in wages/value of labour-power. Paul has fallen into this error as a result of using Adam Smith's cost of production theory of value, based on the value of labour-power, rather than Ricardo's or Marx's Labour Theory of Value, based upon the quantity of labour.
If the value of the commodity in Period #1 is as set out above, so that there is no profit/surplus value, because all the new value created by labour is used to pay wages, then if, in Period #2, wages fall because the free machine reduces the value of wage goods, the result is only to reduce the value of wages, and thereby create a surplus value! Say the free machine causes wages to fall to 150 hours, we would then have:
Capital 0
Energy 200
Materials 200
Labour 200 – divided 150 wages, 50 Profit.
Where no profit existed, now 50 hours of surplus value would exist, equal to a rate of surplus value of 33.3%, and the rate of profit would rise from 0 to 50/550 = 1/11 = 9.09%.
If, as Paul suggests, we reduce the value of energy and raw materials, in the same way, we would get:
Capital 0
Energy 150
Materials 150
Labour 200 (divided 150 wages, 50 profit)
The rate of surplus value remains 33.3%, but now the rate of profit rises to 50/450 = 1/9 = 11.11%. Paul's example does not show what he wants it to show, because he has confused labour with labour-power, the value created by labour with the value of labour-power. Labour-power does not transfer its value to production, as constant capital does, or as Adam Smith presents it in his cost of production theory of value, adopted by Paul. Only the new value created by labour is embodied in the value of the output, irrespective of the value of the labour-power involved in that process. The consequence of a fall in the value of labour-power, as presented in Paul's example, only changes the allocation of that new value between what reproduces that labour-power, and what forms surplus value.
If Paul had wanted to show a declining labour share in the value of output, what he needed to show was not a progressive fall in the value of labour-power, but a progressive decline in the quantity of immediate labour required for this production, as a result of year after year rises in productivity, due to new technological inventions. His example does not do that.
In actual fact, far from the scenario that Paul depicts representing a situation that industrial capital would fear, it is one it would highly desire. In fact, that is exactly what Marx said in the quote he cited from the Grundrisse,
“If capital could obtain the instrument of production at no cost, for 0, what would be the consequence? The same as if the cost of circulation = 0. That is, the labour necessary for the maintenance of labour capacity would be diminished, and thus surplus labour, i.e. surplus value, [increased], without the slightest cost to capital.”
To be able to reduce the amount of social labour-time required for the reproduction of the physical inputs it requires, be it machines or material releases capital, which can then be accumulated. That is the advantage of viewing the process of social reproduction on Marx's method of using current reproduction costs, rather than the historic cost basis used by proponents of the Temporal Single System Interpretation. If it reduced wage costs, whilst also thereby releasing immediate labour, which could be employed alongside the released/accumulated constant capital, that would bring about a massive expansion of capital, of the mass of surplus value, and rise in the rate of profit.
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