The Tie-Up and Release of Capital - Summary

The Tie-Up and Release of Capital

Summary

• The accumulation of capital involves the conversion of revenue into capital. In other words, a part of society's fund of commodities/money/labour-time, available for consumption, is instead used to accumulate additional productive capacity. A Tie-Up of Capital occurs where a fall in social productivity means that the current labour-time/value of those commodities that comprise constant and/or  variable-capital rises, so that a portion of revenue is then required, not to accumulate additional capital, but simply to ensure the reproduction of the existing capital.
• A Release of Capital occurs in the opposite conditions where a rise in social productivity causes the value of constant and/or  variable-capital to fall. Then a portion of current labour-time that previously would have been required to reproduce the consumed constant and/or variable-capital is released, and becomes available as additional revenue.
• Where the value of constant capital falls, and a release of capital arises, this release of capital creates the illusion of an increased mass of profit. No such actual increase in profit has occurred, because there is no change in the rate of surplus value, or the mass of labour employed, and so no change in the amount of surplus value produced. The illusion of additional profit arises, simply because a part of social production that was previously required to reproduce capital is now available as revenue. The opposite applies in relation to a tie-up of capital.
• For those in possession of constant capital, the release of capital as a result of a rise in social productivity, and a fall in its value represents a capital loss. For example, the owner of a machine whose value is morally depreciated, suffers a capital loss, equal to the amount of depreciation. But, for every other capitalist who owns money-capital, and seeks to buy such a machine, they obtain a capital gain on their money-capital, because that money-capital is worth more relative to the machine. That applies to the owner of the machine themselves, whose money-profits now also have appreciated relative to the value of any of these machines they seek to buy, either to replace those they have that have worn out, or else to add to their stock of machines. The opposite applies where capital is tied up due to a fall in social productivity, and a rise in the value of constant capital.
• Although a release of constant capital creates only the illusion of an increased mass of profit, it creates a real rise in the rate of profit. A change in the value of constant capital does not change the amount of surplus value produced, because that is a function of the rate of surplus value, and quantity of simultaneously employed labour. If the mass of surplus value then remains the same, but the value of constant capital falls, the rate of profit must rise. The rate of profit is s/(c + v). S and v have remained the same whilst c has fallen, so that (c + v) has fallen, meaning that s/(c + v) rises. The opposite is true where there is a tie-up of constant capital.
• Where capital is released (either constant or variable-capital) the released capital can be used for additional accumulation, in just the same way that any other increase in profit can be used for additional accumulation. Where the released capital is used for additional accumulation, so that more labour is employed, then, even assuming the rate of surplus value remains the same, this increase in the mass of simultaneously employed labour means that the mass of surplus value itself is increased. The opposite is true where there is a tie-up of capital, so that less capital and labour is employed, so that the mass of surplus value would then fall.
• A release of variable-capital arising from a rise in social productivity that reduces the value of wage goods, results in the same illusion of additional profit, but it also causes a rise in the rate of surplus value, and thereby in the mass of surplus value. This rise in the mass of surplus value, of itself, means that the rate of profit rises, i.e. even if (c + v) were constant, s/(c + v) rises due to the rise in s. However, here, not only does s rise, but v falls, so that (c + v) falls, meaning that the rate of profit rises for this additional reason. The opposite applies where there is a tie-up of variable-capital.
• A release of variable-capital can arise where wages themselves fall, which could be because they are pushed below the value of labour-power, or because they had previously been above the value of labour-power. The rate and mass of surplus value would again rise,  here, because a greater part of the day now constitutes surplus labour, and with the same mass of simultaneously employed labour, this means that the mass of surplus value rises. It again thereby means that the rate of profit rises, because of the increased mass of surplus value, and lower value of advanced capital.
• A release of variable-capital can arise where unit wage costs remain constant, but where less labour is simultaneously employed, because a rise in social productivity results in a rise in the technical composition of capital, i.e. less labour is required to process a given mass of material. The release of variable-capital creates the same illusion of additional profit. If the rate of surplus value remains constant, the reduced mass of simultaneously employed labour means that less surplus value is produced. But, c remains the same as before, and consequently the rate of profit falls. This is the basis of Marx's Law of The Tendency For The Rate of Profit To Fall.

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