The opposite is the case where a good harvest results in the supply of cotton exceeding the demand, so that market prices fall below the exchange-value/price of production. The same thing applies, as I have set out elsewhere, in relation to the long wave cycle. At the start of periods of strong global increases in output, where new technological developments also result in rapid increases in demand for inputs, the process that Marx describes, above, whereby primary producers gear their output to expected increases in demand, fail to keep pace. During all of the stagnation/Winter phase of the long wave cycle (i.e. about 12-15 years), the growth in this demand is sluggish. Primary producers are reluctant to invest in new facilities, and seek to simply exploit existing mines, quarries, oil and gas fields more exhaustively. Only when they are convinced that demand is increasing sustainably do they start to engage in exploration and the development of new facilities. But, these, in turn, take around 12 years to reach optimum production, and in the meantime primary product prices continue to rise. That is what was seen between 1999-2014. When all the new production does hit the market, it represents an oversupply, which results in sharp falls in market prices of those primary products, as seen in 2014.
“The rate of profit—and possibly, as we saw above, the total amount of profit—increases, consequently, not only in the proportion in which it would have increased had the cotton which has become cheaper been sold at its value; but it increases because the finished article has not become cheaper in the total proportion in which the cotton-grower sold his raw cotton below its value, that is, because the manufacturer has pocketed part of the surplus-value due to the cotton-grower. This does not diminish the demand for his product, since its price falls in any case due to the decrease in the value of cotton. However, its price does not fall as much as the price of raw cotton falls below its own value.” (p 223)
Marx notes,
“In cases in which the price of the raw material declines, not as a result of a permanent or continuous fall in its average production costs but because of either an especially good or an especially bad year (weather conditions), the workers’ wages do not fall, the demand for labour, however, grows. The effect produced by this demand is not merely proportionate to its growth. On the contrary, when the product suddenly becomes dearer, on the one hand many workers are dismissed, and on the other hand the manufacturer seeks to recoup his loss by reducing wages below their normal level. Thus the normal demand on the part of the workers declines, intensifying the now general decline in demand, and worsening the effect this has on the market price of the product.” (p 223)
Marx then quotes passages from Mill, which demonstrate the fallacy of his argument. But, Marx’s argument against them also contradicts the position he has just outlined, in relation to short-term changes in the price of wage goods. Mill says,
““If the cost of production of wages had remained the same as before, profits could not have risen. Each labourer received one quarter of corn; but one quarter of corn at that time was the result of the same cost of production as 1 1/5 quarter now. In order, therefore, that each labourer should receive the same cost of production, each must […] receive one quarter of corn, plus one-fifth” ([John Stuart Mill, Essays on some unsettled Questions of Political Economy, London, 1844,] p. 103).
“Assuming, therefore, that the labourer is paid in the very article he produces, it is evident that, when any saving of expense takes place in the production of that article, if the labourer still receives the same cost of production as before, he must receive an increased quantity, in the very same ratio in which the productive power of capital has been increased. But, if so, the outlay of the capitalist will bear exactly the same proportion to the return as it did before; and profits will not rise.” (This is wrong.) “The variations, therefore, in the rate of profits, and those in the cost of production of wages, go hand in hand, and are inseparable. Mr. Ricardo’s principle […] is strictly true, if by low wages be meant not merely wages which are the produce of a smaller quantity of labour, but wages which are produced at less cost, reckoning labour and previous profits together” (loc. cit., p.104).” (p 225)
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