Marx defines the organic composition as follows:-
“Different ratios in which it is necessary to expend constant capital in the different spheres of production in order to absorb the same amount of labour. The combination of the same amount of labour with the object of labour requires either that both more raw material and more machinery are used in one case than in the other, or that more of only one of these is used.” (p 387-8)
Marx then examines the situation where the ratios of fixed to circulating capital vary. Some industries, such as mineral extraction, use a lot of fixed capital, but little or no raw material. By contrast, other industries use relatively little fixed capital, but process a lot of raw material. But, the ratio of constant to variable-capital may be the same in both. Marx gives the example of coal mining and tailoring. He excludes auxiliary materials in both cases.
On that basis, a coal mining capital may comprise half as fixed capital, and the other half as variable-capital. The tailoring capital may comprise half raw material, and half variable-capital. So, the organic composition will be the same in both, if we assume that the same rate of surplus value applies in both spheres. But, the value of output will differ as a result of the variation in fixed and circulating constant capital.
Marx assumes the advanced capital in both cases is £100. He assumes the fixed capital, in the coal industry, turns over every ten years, whilst the circulating capital in the tailoring industry turns over once a year, as does the variable-capital in the coal industry. Marx assumes a 100% rate of surplus value. So, at the end of the year, the tailor's capital of £100 will have produced an output of £50 material plus, £100 of new value (divided into £50 to reproduce the variable-capital and £50 surplus value) = £150. The coal mining capital will have produced a value of £105 - £5 wear and tear of fixed capital + £100 of new value (divided into £50 to reproduce the variable-capital and £50 surplus value). The annual rate of profit is the same in both cases, because the same £100 of capital has been advanced – although the amount of capital laid out differs (£55 in coal mining, £100 in tailoring) – and the same £50 of surplus value is produced, therefore, the annual rate of profit is 50/100 = 50%. But the rate of profit in mining is s/(c + v), i.e. surplus value as a proportion of the laid-out capital = 50/55 = 90.91%. It retains £45 of value in its fixed capital. In tailoring, where all of the capital is laid out and consumed it is 50/100 = 50%. Marx notes that for the coal miner,
“As in the case of the tailor, the total value of his product plus the fixed capital will amount to 150, that is, the product, 105, plus 45 for the remaining fixed capital. The production of different magnitudes of value therefore does not preclude the production of the same amount of surplus-value.” (p 388)
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