Sunday 25 August 2019

Theories of Surplus Value, Part III, Chapter 22 - Part 6

As seen earlier, Ricardo had raised the issue of spheres employing much fixed capital as providing an exception to the determination of prices by labour-time. In attempting to reconcile the contradictions in the Ricardian system, his followers, like J.S. Mill and McCulloch, had turned this exception into a rule, and the contortions this led to resulted in the dissolution of the Ricardian School. 

Ramsay also refers to Ricardo's exceptions. For the reasons already discussed, those exceptions are a diversion. Marx briefly shows why, by summarising his analysis in relation to the formation of prices of production, and the effect of a general rise in wages. The points can be summarised as follows:- 
  1. Assuming the working day and rate of surplus value in each sphere is the same, the rate of surplus value can only change if wages rise or fall.
  2. Spheres where the organic composition of capital is higher than the average, or where the rate of turnover is lower than the average will have higher prices of production than exchange values, because to obtain the average annual rate of profit, they have to appropriate more surplus value than they produce, and vice versa.
  3. A general rise in wages causes the rate of surplus value and the average annual rate of profit to fall.
  4. Those capitals that have a higher price of production than exchange value then see their price of production fall, because the fall in the average profit is greater than the rise in their wage cost; those capitals that have a lower price of production than exchange value see their price of production rise, because the fall in the average profit is less than the rise in their wage cost; those capitals whose price of production is equal to their exchange value see no change in their price of production. 
To effect these changes, capital must leave the spheres where price of production rises, and enter those spheres where price of production falls. On this basis an average annual rate of profit is restored. It also means that it brings about a further concentration and centralisation of capital, because the spheres into which capital flows are those more capital intensive areas of production. 

But, as Marx points out, this has nothing to do, directly, with the division of capital between fixed and circulating capital as defined by Ricardo. 

“Bankers and merchants employ almost exclusively circulating capital and hardly any variable capital; that is, they lay out relatively small amounts of capital on living labour. Contrariwise, a mine-owner employs incomparably more fixed capital than a capitalist engaged in tailoring. But it is very questionable whether he employs relatively as much living labour. It is merely because Ricardo advanced this special, relatively insignificant case as the only instance of a divergence between production price and value (or, as he incorrectly put it, [as] an exception to the determination of value by labour-time) and presented it in the form of a difference between fixed and circulating capital, that this blunder—and in an incorrect form at that—has survived as an important dogma in all subsequent political economy. (The mine-owner should be counterposed not to the tailor but to the banker and the merchant.)” (p 333-4)

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