Technology, Productivity and Profit
Monopolies will undoubtedly attempt to protect super-profits, and rents, arising from monopoly pricing, and various frictions, as they attempt to obtain as much profit before their particular commodity becomes outdated and worthless, due to moral depreciation. Like landlords, in the past, extracting rent, they will try to do that be restricting access where possible.
The move away from actually buying software, games, films etc., to be downloaded, which means they can then be copied, to instead renting access to all those things, actually sitting on the owners servers, in the cloud, is an obvious means by which to achieve that end. These commodities are not free, as Paul presumes, but the unit value, when considered over huge volumes of output, is certainly much reduced. If we take English Premier League football, the value produced in an hour is phenomenal, yet, taken in terms of what each viewer, across the globe, pays, via a few pence to cover their satellite subscription, etc. is negligible, compared to the £50 or so, to buy a ticket to sit in the ground. The recent Amazon bid for the rights indicates the amount of value produced. But, it also shows that monopolistic competition will also push prices down, along with unit values. The fact that Amazon, Netflix etc. have massively brought down the cost of live streaming films etc. into your home, has in no way prevented those firms from drawing huge revenues from doing so, and growing the companies in the process.
Paul says, returning to his 4 line model.
“But, suppose you did add profit and growth? Once the zero marginal cost effect kicks in, there would have to be tremendous profits and growth to offset the eventual impact on labour costs.” (p 172)
However, as I've shown, where Marx's Labour Theory of Value is properly applied, rather than Adam Smith's cost of production theory, which is what Paul actually uses, a massive rise in the annual rate of profit is exactly what you get! And Paul's conclusion,
“In other words, there would have to be new industrial revolutions every fifteen years, very rapid nominal growth and ever bigger monopoly firms.
But that can't happen.” (p 172),
no longer applies.
The erroneous view of the Labour Theory of Value, and indeed of Marx's analysis of the average rate of profit, and prices of production, comes out again in Paul's comment,
“Capitalism worked as long as capital could move, when technological innovation brought lower costs in one sector, to sectors with higher wages, higher profits and higher-cost inputs.” (p 172)
This is utterly confused. If technological innovation in some sphere reduces its costs, why does Paul think that capital would rush away from it? Firstly, for some firm, in that sphere, that reduces the individual value of its output, as a result of introducing a new machine, and it will obtain surplus profits. Certainly, as other firms in this sphere catch up with it, those surplus profits disappear, and the market value falls. But, as the market value falls, demand for those commodities will rise. The price of production of these commodities will rise relative to their exchange-value, because this sphere will produce relatively less surplus value, whilst still demanding the same rate of profit, i.e. the average annual rate of profit. But, in conditions of rising demand, that can be achieved without any capital actually leaving the sector, it only requires that capital accumulates more slowly than elsewhere, so that the rise in supply lags the rise in demand.
To the extent that any such technological improvements reduced other input costs, it would result in the rate of profit rising, and so an influx of capital, as Marx describes in Theories of Surplus Value, Chapter 15 et al. In other words, suppose a petrochemical plant employs 100 workers, who produce £1,000 per day of new value by their labour. They process 10,000 tons of oil into product. The oil costs £10,000, wages are £500. The organic composition of capital is 10,000:500 = 20:1. The rate of profit is 4.76%.
Now assume a technological improvement means the oil is used more effectively by those 100 workers, so only 5,000 tons are required. The organic composition falls to 10:1, and the rate of profit rises to 9.09%. The £5,000 of money-capital, previously required to buy oil, is released, and could now be used to expand the capital, buying an additional 4,000 tons, and employing 80 more workers, in which case, the mass of profit would also rise. The same would apply if some technological change caused the price of oil to be halved.
And, Paul only thinks that high wages produce high values of output because he uses Smith's cost of production theory of value, rather than Marx's Labour Theory of Value. It's not high wages that are the basis of a low organic composition of capital, and higher than average rate of profit, but a low technical composition of capital, i.e. a high quantity of labour required to process a low quantity of material. In fact, in Capital III, where Marx explains that, he says that one advantage of those new areas is not just that they have a high labour content, but that the labour employed, in these sectors is also often the lower paid, so capital benefits both from low c:v, but also from a higher s:v. There is absolutely no reason why capital would want to move to some new sphere where other input costs, i.e. raw and auxiliary materials were high, because that reduces the rate of profit, just as described above, reducing those input costs raises the rate of profit!
One other relevant point here also is that nowadays, these new, labour-intensive, low organic composition areas may not employ large amounts of concrete labour, What counts is the amount of abstract labour employed, and consequently the surplus value produced by it. A potbank may employ 100 workers working a 40 hour week = 4,000 hours, whereas a football club employs 11 players working only 2 hours per week = 22 hours. But, if the latter represents 100,000 hours of abstract labour, the organic composition will be much lower than for the potbank, and the amount of surplus value, and rate of profit much higher.
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