The amount of capital advanced is £1,000 in both cases discussed above, but the length of time for which it is advanced differs. For the capital which advances £500, as fixed capital, it must wait five years before all of this value is returned to it, but, for the capital which advances no fixed capital, all of its capital is returned to it in a quarter of a year. Returning to the point made previously, in relation to the coal producer, therefore, Marx notes,
“When one considers the total capital outlay, surplus-value and profit are the same—£100 in the first year on the £1,000 advanced. In the second year, it is rather the fixed capital that has a higher rate of profit, since the variable capital has remained the same, whereas the value of the fixed capital has declined. The capitalist only advances £400 fixed and £500 variable capital in the second year and receives a profit of £100 as he did before. But 100 on 900 amounts to 11 1/9 per cent, while the other capitalist, if he continues to reproduce his capital, advances £1,000 as he did previously and makes a profit of £100, that is, 10 per cent.” (p 394)
Of course, if the total amount of capital advanced increases, so that the proportion of constant capital to variable-capital changes, that is a different matter. Indeed, if the technical composition of capital remains the same, so that an increased mass of constant capital employs an increased mass of labour, then the value of surplus value will also consequently rise.
“However, if in the case cited above, the fixed capital were [not £500 but £1,000 and the circulating capital only £500 [as previously], then matters would be different. This, however, would not be due to the fact that it is fixed capital. For if the circulating part of the constant capital in the second case were to amount to £1,000 instead of £500 (because of the dearness of raw materials, for example), then the result would be the same.” (p 395)
If the average rate of profit is 10%, then if £1,000 of capital is advanced as fixed capital, and £500 as variable-capital, so that the total advanced capital is £1500, the profit would need to rise from £100 to £150, but, this is not the result of it being an increase in fixed capital. If fixed capital is zero, but circulating constant capital rises from £500 to £1,000, with £500 of variable-capital, then the profit must similarly rise to £150.
What would again differ would be the rate of profit/profit margin, because of the variation in the rate of turnover of the capital, which brings about a variation in the cost of production, and value of output. For example, if fixed capital rises to £1,000, so that, now, wear and tear is £200, we have £200 + (4 x £500) = £2,200. The 10% annual rate of profit gives average profit of £150, which gives an output price of production of £2,350. The rate of profit/profit margin is then 150/2200 = 6.82%.
By contrast, in the other example, circulating constant capital rises to £1,000 so that laid out capital is 4(£1,000 + £500) = £6,000. The average profit is £150, so that the rate of profit/profit margin is 150/6000 = 2.5%.
“Moreover, the whole business of the turnover was in fact originally derived from merchant capital, where it is determined by different laws. In the case of merchant capital, as I have demonstrated, the rate of profit is indeed determined by the average number of turnovers, regardless of the composition of this type of capital which, incidentally, consists mainly of circulating capital. For in the case of merchant capital, profit is determined by the general rate of profit.” (p 395)
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