If we consider production and accumulation then it is the case that accumulation can take place without any qualitative change in the investment – extensive accumulation. In other words, if we have a factory that employs 200 machines, 40 workers and processes 1,000 kilos of cotton, if it has a 10% rate of profit, all of which it accumulates, it would then have 22 machines, 44 workers, and process 1,100 kilos of cotton, and would, thereby still produce a 10% rate of profit. But, in fact, even if it continues to accumulate extensively, in this manner, not only will its productive power grow proportionally, but it will, at least at a certain point, grow more than proportionally. That is so, for example, because of the economies of scale. It will buy materials more cheaply, when it buys them in larger quantities; fixed costs for rent, heating and so on are spread over a larger volume of production; labour is used more cooperatively and effectively. In addition, just the increase in output, resulting from the use of additional machines, means the working period is reduced, so the capital is turned over more quickly, relatively less capital is advanced for a given quantity of output.
“Reproduction on an extended basis, accumulation, even if originally it appears only as a quantitative expansion of production—the use of more capital under the same conditions of production—at a certain point, therefore, always represents also a qualitative expansion in the form of greater productivity of the conditions under which reproduction is carried out. Consequently the volume of products increases not only in simple proportion to the growth of capital in expanded reproduction—accumulation.” (p 522)
If there is also a qualitative change in technology, for example, as referred to earlier, in relation to the introduction of spinning machines (intensive accumulation) this process is exacerbated. How might the introduction of the spinning machines lead to overproduction? Why doesn't demand for yarn rise, and similarly for cloth?
Suppose the production of yarn rises four fold, and the value of yarn falls 50%. Now, suppose that the value of cloth, per metre, consists of £1 yarn, £1 wages, £1 profit = £3 per metre. Now, it becomes £0.50 yarn, £1 wages, £1 profit = £2.50 per metre. Imagine that to take up the four fold increase in supply of yarn, four times as many hand loom weavers are employed. The supply of yarn is then taken up, but the supply of cloth now rises four-fold, whilst the value of cloth has only fallen by 16.66%. Its only if a revolution in weaving occurs, so that say in a metre of cloth only £0.50 is accounted for by wages, and £0.50 for profit, so the price per metre falls to £1.50, so that demand rises sufficiently so that all of the output can be absorbed. Then, less profit per metre is produced, but with four times as many metres being produced, the total mass of profit rises.
If we take this production of cloth, then, as seen earlier, the workers who produce it also, form a part of the demand for it. So long as they produce surplus value, they continue to be employed, and have wages to buy a part of their output. However, if we assume that there is an overproduction of this cloth, so that it lies unsold on the market, even if, in principle, the workers continue to produce surplus value, i.e. what they are paid as wages represents less labour-time than the labour-time they provide for the weaver, they will not be employed.
The weaver will not continue producing and paying out wages, when they still have unsold cloth sitting in the market. So, the weaver will begin laying off workers, or reducing their hours and wages. But, in reducing their wages, he thereby also reduces their ability to purchase and consume his cloth, so that the demand for cloth falls, meaning that even more of it is relatively overproduced. But, his workers do not only consume cloth. They consume food and other commodities, so that the demand for these commodities falls, creating a relative overproduction of those commodities. Moreover, the weaver buys yarn that is now relatively overproduced, and all of those producers of means of production thereby reduce their demand for inputs of wood, steel and so on, which thereby becomes relatively over produced. Furthermore, each of these producers lay off their own workers, who then cannot consume, so that all of the commodities they previously demanded become relatively overproduced and so on.
“They are now, all of a sudden, relatively over-produced, because the means with which to buy them and therefore the demand for them, have contracted. Even if there has been no over-production in these spheres, now they are over-producing.
If over-production has taken place not only in cotton, but also in linen, silk and woollen fabrics, then it can be understood how over-production in these few, but leading articles, calls forth a more or less general (relative) over-production on the whole market. On the one hand there is a superabundance of all the means of reproduction and a superabundance of all kinds of unsold commodities on the market. On the other hand bankrupt capitalists and destitute, starving workers.” (p 523)
The way in which such partial overproduction can become a relative general overproduction is quite clear. But, Marx says, this argument is also a double-edged sword. The overproduction of the producers of constant capital here is relative precisely because it only arises as a result of the overproduction of the weaver. If there was no oversupply of cloth on the market, so that the weaver continued to buy yarn and machinery at the previous level, these other producers could continue to go along producing happily with no problem. So, the issue here then still comes down to what causes cloth to be overproduced. It comes down to the basic fact that production expands faster than the market. And, this means that both partial overproduction and generalised overproduction can be explained on this basis. Production, as described earlier rises for two reasons. Firstly, it rises as a result of extensive accumulation. That is, for long periods, the general level of technology remains more or less constant, although continual small improvements arise, everywhere, and in some specific areas, more significant developments arise. But, even on the basis of this extensive accumulation, output tends to rise proportionately more than the capital advanced, because of economies of scale, the rise in the rate of turnover etc. But, secondly, at certain periods, large technological leaps are made so that output rises significantly, in relation to the capital advanced, i.e. periods of intensive accumulation.
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