The implications of these different conditions in relation to variations in the value of c, and its relation to v, and consequently for the rate of profit, have been set out previously. It is quite clearly different if the rate of profit falls, because a reduction in social productivity causes the value of constant capital to rise – a rise in the value composition – as against where a rise in productivity enables a rise in the technical composition, so that the value of c only rises, because more material is processed. In so far as the former may also result in less labour and material being employed, it will result in less surplus value being produced, as well as the rate of profit falling, even though the rate of surplus value remains constant.
For example, if only £2,400 of capital is available, and a rise in the price of yarn means that the capital is divided 2:1, the number of workers may fall from 1000 to 800. If the rate of surplus value remains 20%, the surplus value falls from 200 to £160. The rate of profit falls from 10% to 1/3 of 20% = 6.66%.
And, as Marx describes, in Capital III, Chapter 6, where capital must operate on a minimum scale, to be efficient, it may need to employ the same amounts of materials and labour. Under those conditions, the 100 workers continue to produce £200 of surplus value, but the output cannot be sold at the new higher price. In that case, in order to sell the output, firms have to absorb the higher material price out of their profits, so that, although produced surplus value is unchanged, realised profits are squeezed.
This is clearly different to where productivity rises, and more material is processed. Here, 100 workers may now process 1200 kilos of yarn, so that surplus value is still £200, but now £2200 of capital is advanced so that the rate of profit falls from 10% to 9.09%. But, the value of linen now falls from say £2 per metre to £1.80 per metre. At this lower price, demand for linen rises, and more capital is employed in linen production. Now, if the capital employed rises, more material and labour is employed proportionally.
If 1800 kilos of yarn are now processed by 150 workers, c = £1800 and v £1500, so C is £3300. With 50% more workers employed, and the rate of surplus value constant, so s rises from £200 to £300. But, although the mass of profit rises here, the rate of profit still falls to 9.09%, because v/(c+v) has not changed. In fact, as Marx sets out several times, in Capital III, this basis for the tendency for the rate of profit to fall, as opposed to the conditions which result in a profits squeeze, is not only compatible with a rise in the mass of profit, but, in fact, necessitates it. It does so for this reason that it implies an expansion of production, and of capital, including an expansion of the variable-capital, and consequently of the mass of surplus value.
But, as Marx also sets out, a rise in social productivity also implies a reduction in the value of labour-power, so that the rate of surplus value also rises. Consequently, whilst v/(c+v) may fall, because c + v itself increases absolutely, v itself rises absolutely. So, even as s/C falls, s rises absolutely. But, also, because these conditions of rising productivity cause s/v to rise, s rises absolutely for this second reason. So, as Marx sets out, the very condition that underlies the tendency for the rate of profit to fall – rising social productivity – simultaneously causes the mass of capital employed to rise, causes the mass of labour employed to rise, and causes the rate of surplus value to rise, which causes the mass of profit to rise.
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