Thursday, 29 August 2019

Theories of Surplus Value, Part III, Chapter 22 - Part 10

Marx quotes Ramsay's statements 

““… that demand must depend” (directly, immediately) “upon the amount of the latter species of capital alone” (op. cit., p. 87). (This is tautology on Ramsay’s part, since he equates circulating capital with capital laid out in wages.) “At every change of this kind, the fixed capital of the country is increased at the expense of the circulating” (loc. cit., p. 89). “… the demand for labour will generally increase as capital augments, still it by no means follows that it will do so in the same proportion” (loc. cit., p. 88). “It is not, until, in the progress of industry, favoured by the new inventions, circulating capital shall have become increased beyond what it formerly was,”” (p 335) 

And, Marx notes the same fallacy in Ramsay's argument, here, as seen previously, that a rise in the production of necessaries is automatically a rise in those necessaries intended for consumption by workers. As seen in previous chapters, that increased output of necessaries can go as increased unproductive consumption by capitalists and rentiers, including to provide for the consumption by retainers, domestic servants, mistresses, etc., employed by them. Alternatively, such necessaries can be exported, in exchange for imported luxury goods, or capital goods. 

Marx continues Ramsay's quote, and then also sets out the same argument I have elaborated elsewhere, in relation to the effect of the introduction of machines, which raise the rate of surplus value, raise the mass of produced surplus value, reduce the value of constant capital and variable capital, and, thereby, facilitate greater capital accumulation, including the employment of additional labour. 

““that a greater demand for labour will spring up. Demand will then rise, but not in proportion to the accumulation of the general capital. In countries where industry has much advanced, fixed capital comes gradually to bear a greater and greater proportion to circulating. Every augmentation, therefore, in the national stock destined for reproduction, comes, in the progress of society, to have a less and less influence upon the condition of the labourer” (loc. cit., pp. 90-91). “Every addition to fixed capital, is made […] at the expense of the circulating”, i.e., at the expense of the demand for labour (loc. cit., p. 91).” (p 336) 

In other words, the demand for labour will fall relatively, i.e. it will rise in absolute terms, but by a proportionally smaller amount than the rise in the quantity of materials processed. This rise in the proportion of materials processed, relative to labour, is the direct effect of the rise in productivity. Ramsay notes that this is a consequence of waves of new technology arising that act to displace labour, by raising productivity. So, as a new wave of such technology is introduced, labour is displaced, unemployment rises, wages fall. But, these evils are temporary, because, by raising the rate of surplus value, and cheapening the elements of capital, accumulation is once more spurred on; employment rises, wages rise, until capital is again led to introduce yet another wave of technology that again displaces labour, and the cycle repeats itself. 

As Marx puts it, 

“The capitalists who use the new machinery obtain extraordinary profits; consequently their capacity to save and to increase their capital grows. A portion of this is also used as circulating capital. Secondly, the price of the manufactured commodities falls in proportion to the diminished cost of production; thus the consumers save, and this facilitates the accumulation of capital, a portion of which may find its way to the manufacturing industry in question. Thirdly: the fall in the price of these products increases the demand for them.” (p 336) 

In other words, the phases of the long wave cycle. In the crisis phase, extensive accumulation causes labour supplies to be stretched, absolute and relative surplus value cannot be increased, as the social working-day is fully extended, and the demand for labour causes wages to rise, causing a profits squeeze. A crisis of overproduction of capital, i.e. capital cannot self-expand, due to this profits squeeze, arises. The overproduction means that small changes in conditions of supply results in tight profit margins turning into losses, and thereby a sudden fall in the rate of profit. Businesses, hold off additional investment, they begin to resist pay claims, causing strikes and so on to be far more protracted and bitter (as for example, with the 1984-5 Miners Strike). Firms, where they do invest, do so via intensive accumulation, introducing new technologies that are labour-saving. As with the introduction of new technologies in the print industry, in the early 1980's. A given amount of growth can now be achieved with relatively less labour, throwing workers on to the back foot, as their position in production is weakened. 

In the next phase of the cycle, the stagnation phase, this intensive accumulation becomes dominant. Old technologies are replaced with newer, technologies. One new machine or technology replaces several older machines or technologies. That means that whilst the stock of fixed capital grows, it grows much more slowly than the growth in output. Moreover, the new technologies bring about a moral depreciation of the existing fixed capital stock, both because the new machines make the older machines redundant, and because the rise in productivity the new technology brings about also reduces, hugely, the value  of all types of machine and technology.

Along with it goes the introduction of new materials, more efficient ways of using existing materials, and a significant reduction in the value of materials as a result. The most obvious example of this, in the stagnation phase that ran from 1987-1999, is the massive replacement of old technologies, based around transistors, and printed circuit boards, by the microchip technologies. It saw huge mainframe computers, taking up whole rooms, replaced by personal computers, and then hand-held devices with the same, or even greater, processing power and functionality.

The very fact that the same amount of output can be generated with a smaller quantity of fixed capital, and often even a smaller quantity of circulating constant capital, as well as with less labour, is why growth in this stagnation phase is lower than the long-term average. Yet, the growth in the quantity of output, i.e. of use values, can rise far more than the rise in the value of this output, during this period, precisely because of the rise in productivity. The fall in both the relative (if not absolute) mass of fixed capital employed, the huge moral depreciation of the existing fixed capital stock, and fall in value of all fixed capital due to higher productivity, the reduction in the unit value of elements of the circulating capital, and the rise in the rate of surplus value, as the value of labour-power is reduced, and wages that had risen previously, are now reduced, as the effect of the creation of a relative surplus population, causes a sharp rise in the rate of profit. The increase in the rate of turnover of capital, also causes the annual rate of profit, and thereby the average annual rate of profit to rise sharply. 

In the next phase, the Spring or Prosperity phase, the intensive accumulation of the previous phase starts to give way to a more extensive accumulation. What were the new technologies now become the standard technologies. As growth accelerates, more of these technologies are simply rolled out, and alongside them more workers are employed. This was seen in the period between 1999-2008. Finally, in the Summer or Boom Phase, this process of growth, fuelled by high levels of profits, and increasing masses of labour being employed, starts to cause the wage share to begin to rise again. Rising wage share as increasing masses of labour are employed, and wages themselves start to rise, creates a surge in demand for wage goods that firms seek to satisfy via additional investment, additional employment of labour. Eventually, this brings everything full circle, so that full employment, rising wages, and so on, begins to squeeze profits, and a new crisis phase begins. 

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