On the basis of his analysis, focused on the individual worker, and individual working-day, Hodgskin concludes that, as capital accumulates, on a compound basis, it becomes impossible for this individual worker to produce enough surplus value to maintain the rate of profit.
If we take a 12 hour day, and a 100% rate of surplus value, so that £25 constitutes wages, and £25 profit, if £100 of capital is employed, that is a 25% rate of profit. If, as a result of the reinvestment of profit, the capital rises to £400, in order to produce the same 25% rate of profit, £100 of surplus value must be produced by the worker. If the worker produced £25 of surplus value in 6 hours, to produce £100 would require 24 hours, which is clearly impossible. Firstly, they could not work for 24 hours every day, and even if they could they would still need to work for an additional 6 hours to produce the value required to reproduce their wages.
Its on this basis that Hodgskin concludes that, although the exploitation of the workers is led to be increased, so as to produce this additional profit, the fact that the workers' labour-power needs to be reproduced leads to capital and labour being forced to come to terms, and the capitalists have to accept the inevitability of a fall in the rate of profit.
Marx then examines this more closely. He takes Hodgskin's use of the term interest, on the basis set out earlier, i.e. as synonymous with profit. But, using actual interest as an analogy, Marx notes,
“If one narrows the problem, that is, considers solely interest-bearing capital, then compound interest would swallow up profit and more than profit; and the fact that the producer (capitalist or not) has to pay the lender compound interest means that sooner or later, in addition to profit he has to pay him part of his capital as well.” (p 305-6)
Again, this has parallels with the points I have made about the situation today, whereby ever larger proportions of surplus value have had to go to fund interest and rent payments, even to prevent a much larger fall in yields, due to the astronomical, speculative inflation of asset prices.
Put in terms of the actual accumulation of capital, and the impossibility of the worker producing enough surplus value to prevent the rate of profit falling, then, Marx notes the point I made earlier. In other words, if £1,000 employs 1 worker, who produces £100 of profit, it is the same if £10,000 employs 10 workers who produce £1,000 of profit. In both cases, the rate of profit is 10%.
“Thus it should be noted first of all that Hodgskin’s view only has meaning if it is assumed that capital grows more rapidly than population, that is, than the working population.” (p 306)
In one case, if capital accumulates faster than labour supply, wages would rise and profits would be squeezed. That implies no changes in technology, and consequently in the technical, and, thereby, organic composition of capital. It is typical of a period of extensive accumulation. In the other case, technological change means that labour is replaced by machines. Instead of a labour shortage, causing wages to rise, and profits to be squeezed, a relative surplus population is created, so wages fall, the rate of surplus value rises. But, capital accumulates faster than the employed labour, here, because the employed labour is now more productive. It processes more material for each unit of labour, so the technical composition of capital rises. Even if this rise in productivity causes the unit value of material to fall, the mass of processed material increases by a larger proportion, so that c:v rises. Moreover, the rise in productivity reduces the value of labour-power, and the relative surplus population causes wages to fall, so v falls (per unit). In absolute terms, more workers are employed (facilitated by the lower value of labour-power), but relative to the total capital, and output, less labour is employed. The lower value of labour-power, and lower wages, mean that s rises, relative to v, so more surplus value, in total, is produced, but less, relative to the total capital, so the rate of profit falls.
“If the population grows at the same rate as capital, then there is no reason whatsoever why I should not be able to extract from 8x workers with £800 the [same rate of] surplus labour that I can extract from x workers with £100. Eight times 100 C makes no greater demand on 8 times x workers than 100 C on x workers. Thus “Hodgskin’s” argument becomes groundless. (In reality, things turn out differently. Even if the population grows at the same rate as capital, capitalist development nevertheless results in one part of the population being made redundant, because constant capital develops at the expense of variable capital.)” (p 306)
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