6. Stirling [Vulgarised Explanation of Profit by the Interrelation of Supply and Demand]
Marx quotes Stirling.
“... the quantity of every commodity […] must be so regulated that the supply of each commodity shall bear a less proportion to the demand for it than the supply of labour bears to the demand for labour. The difference between the price or value of the commodity, and the price or value of the labour worked up in it […] constitutes the […]profits” (op. cit., pp. 72-73).” (p 188),
and,
“When the values of commodities are exchanged with one another according to their production costs, “the value of these commodities may be said to be at par” (p. 18).” (p 189)
This has elements of Smith's cost of production theory of value, but its underlying explanation of profit is the pre-Smithian, Mercantilist concept of profit on alienation. Smith recognised that surplus value is created in production. He recognised that the value created during a working-day is greater than the value required to reproduce the labour-power of the worker itself. But, because he fails to make this vital step of recognising the difference between labour-power and labour, he ends up in a series of contradictions and dead-ends. Having identified the source of surplus value, all Smith needed to do, to explain profit, was to demonstrate that what the wage worker sells is not labour, but labour-power, and is paid the value of that commodity by the capitalist. The capitalist, thereby, appropriates the surplus value as profit.
Instead, Smith gets caught up in trying to explain how it is that the capitalist can appropriate this surplus value, and can only do so by arguing that, because labour is plentiful and capital scarce, the price of labour is paid below its value, and the price of capital above its value. But, the fact is that even if this relation did not exist, the division of the working-day into necessary labour and surplus labour would still exist. A labourer who owned their means of production would still only have to work for part of the day to reproduce their labour-power, leaving them free to work the rest of the day engaged in surplus labour.
The value of their labour-power would still be less than the value of the product of their labour. The relative abundance of labour, and relative scarcity of capital does not explain the existence of surplus value, it simply explains why the capitalist, rather than the worker, is able to appropriate that surplus value, as profit. It is not that the worker receives a price for labour below its value, but that what the worker sells to the capitalist is not labour, but their labour-power. They are paid the value of that labour-power.
Following on from Smith, therefore, Stirling's argument is that, if the demand and supply for labour was equal, labour would be sold at its value. But, if that were the case, so that the worker was paid not for their labour-power, but for all of the labour they provide, there could be no profit – there would still be surplus value, but it would now end up in the pocket of the worker, not the capitalist. But, then, there would be no reason for the capitalist to employ the worker. Hence, Stirling's argument that the supply of labour must exceed the demand for it.
But, what then determines the demand for the labour; it is the demand for the product of that labour. So, Stirling ends up with a Mercantilist theory of profit on alienation. The profit arises because the demand for the commodity is greater than the supply, so that its price is higher than its value. The profit might then arise because either a) the demand and supply for the commodity is in balance, so that it sells at its value, but at this level of production, the demand for labour is less than its supply, so that the labour is sold below its value; or b) the demand and supply of labour is in balance, so that labour is sold at its value, but at this level of output, demand for the commodity is greater than supply, so that it sells at a price above its value; or c) a combination of both, so that at this level of output the demand for the commodity exceeds the supply, so that it sells above its value, but, at those levels of output the supply of labour exceeds the demand for it, so that its price is below its value; or conceivably, even if the demand for labour exceeds the supply, so that its price is above its value, the demand for the commodity exceeds its supply by a larger amount, so that the price rises above its value, by an amount that covers not just the higher price of labour, but produces a profit over and above it.
“Or the demand for labour is greater than the supply and the price [of labour] is higher than its value. In these circumstances, the capitalist has paid the worker more than the value of the commodity, and the buyer must then pay the capitalist a twofold surplus—first to replace the amount he [the capitalist] has already paid to the worker and then his profit.” (p 189)
Stirling frames this in terms of the capitalist so arranging things that the supply is lower than the demand, but this then leads to the point made previously, in relation to Walras. If such profit exists, then why would other capitals not engage in production to obtain it? That would increase the supply, lowering the profit, and would simultaneously raise the demand for labour, increasing its price. Competition would then eradicate the profit.
Stirling's argument implies that capitalist production is somehow planned at a social level, so that production matches consumption requirements, whilst providing for the profit. But, that is totally at odds with the true nature of capitalist production, based upon competition, even when we get to the stage of monopolistic competition between huge socialised capitals. These oligopolies do plan their production for long periods ahead, and do not plough ahead with additional investment, to increase output, when their market research tells them that the market will not support such an increase in output. As Andrew Kliman says,
“Companies' decisions about how much output to produce are based on projections of demand for the output. Since technical progress does not affect demand – buyers care about the characteristics of products, not the processes used to produce them – it will not cause companies to increase their levels of output, all else being equal.”
(The Failure of Capitalist Production, Note 4, p 16)
However, that does not mean that these capitals stop competing against each other. Rather than additional investment to increase output, they look to more technological solutions of intensive accumulation, so as to produce their existing level of output at lower cost. As each does so, whilst the quantity of supply may not rise, the market value/price of production of this output falls, bringing about lower market prices, and, where supply, or the rate of turnover does rise, lower profit margins. Or, they may compete in other ways, where such intensive accumulation is not possible, for example, by improving quality, increasing the range, or even just via advertising and marketing.
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