Wednesday, 21 November 2018

Theories of Surplus Value, Part III, Chapter 19 - Part 17

6. Malthus’s Use of the Ricardian Theses of the Modification of the Law of Value in His Struggle Against the Labour Theory of Value 

Malthus bases his polemic against Ricardo’s definition of value entirely on the principles advanced by Ricardo himself, to the effect that variations in the exchangeable values of commodities, independent of the labour worked up in them, are produced by the different composition of capital as resulting from the process of circulation—different proportions of circulating and fixed capital, different degrees of durability in the fixed capitals employed, different returns of circulating capitals. In short, on Ricardo’s confusing cost-price with value and regarding the equalisation of cost-prices, which are independent of the mass of labour employed in the particular spheres of production, as modifications of value itself, thereby throwing the whole principle overboard.” (p 29) 

Remember that where Marx refers to “cost price” here, he means “Price of Production” as defined in Capital III. As was seen in earlier chapters, Ricardo confuses value with price of production. He also regularly conflates value with exchange-value, which we will see, later, also causes him, and particularly his followers, a problem in trying to measure it. He correctly sees market prices as fluctuating around a central point, as a result of variations in supply and demand. However, he fails to recognise that, whilst under simple commodity production and exchange, this central point is the exchange value of the commodity, under capitalism, this cannot be the case. 

Under capitalism, because each capital seeks to obtain the highest annual rate of profit, more capital accumulates in those spheres where the annual rate of profit is highest, and less where it is lowest. Consequently, the supply of commodities in the former rises, relative to demand, causing market prices and profits to fall, whilst, in the latter, the supply of commodities declines, relative to demand, causing market prices and profits to rise. By these means, an average rate of profit is established, and it is this which then becomes the determinant of the central point around which market prices fluctuate. 

The price of production is the cost of production (c + v) plus the average amount of profit. It is the price of production which now becomes the central point, because if prices rise above it, whilst (c + v) remains constant, the profit will rise, and this will bring about increased supply, and vice versa. 

Ricardo insisted on believing that it was the exchange-value that continued to be the central point around which the market price rotated. He, therefore, sought means of determining this exchange value, via modifications resulting from different proportions and durability of fixed capital. He was, thereby, moving in the right direction, of understanding the role played by the organic composition of capital, and the rate of turnover of capital, in the formation of the average annual rate of profit, and prices of production, but his failure to distinguish constant capital from variable capital, as opposed to fixed capital from circulating capital, prevented him from making the necessary intermediate steps. Ricardo clearly saw the growth and accumulation of capital, and saw within that the growth of the means of production relative to labour, but, because his categories are fixed capital and circulating capital, he views this accumulation, and rise in the organic composition purely through this lens, i.e. the growth of fixed capital relative to circulating capital. This is also a factor preventing him from understanding the actual basis of the law of the tendency for the rate of profit to fall

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