Friday, 6 December 2019

Theories of Surplus Value, Part III, Chapter 24 - Part 46

[c) Jones on Accumulation and Rate of Profit. On the Source of Surplus-value] 

Marx notes that Jones' “original contribution so far has been that it is by no means necessary for accumulation to arise from profit; and secondly, that the accumulation of auxiliary capital depends upon the advance of knowledge. He limits the latter to the discovery of new mechanical appliances, motive forces, etc. But it is true in general. For example, if corn is used as raw material in the preparation of spirits, then a new source of accumulation is opened up, because the surplus product may be converted into new forms, satisfy new wants and enter as a productive element into a new sphere of production.” (p 445) 

As stated earlier, when this leads to new types of production, this opens up a sphere into which released capital and labour can be employed, and this, then, provides a means by which the surplus value in the old industries can be realised, via exchange of its output with the output of these new industries. 

“The sphere of exchange of these particular commodities and of all commodities is thereby expanded. The same takes place when coal is used for lighting, etc.” (p 445) 

In the same way, foreign trade can also facilitate the process of accumulation, because it means that surplus production of one range of use values produced by country A, can be exchanged for the surplus production of a different range of use values from country B, so that the surplus value embodied in both sets can be realised and accumulated. 

Marx notes that Jones correctly identifies that accumulation is not a function of the rate of profit. Marx makes the same comment in Capital III. Jones, however, is not clear about the objective basis of the rate of profit. Jones writes, 

““The power of a nation to accumulate capital from profits does not vary with the rate of profit… on the contrary, the power to accumulate capital from profits, ordinarily varies inversely as the rate of profit, that is, it is great where the rate of profit is low, and small where the rate of profit is high” ([Jones, Text-book of Lectures,] p. 21).” (p 446) 

This relates back to Marx’s Law of The Tendency For The Rate of Profit To Fall. As Marx points out, the mass of profit rises, as the rate of profit falls, simply because a greater mass of capital itself is employed. In other words, 10% profit on £10 million is £1 million, but 5% profit on £100 million is £5 million. This greater mass of profit, thereby, enables a greater mass of capital to be accumulated. But, in Capital III, Marx also makes the point that the mass of capital always increases by more than the fall in the rate of profit. We saw earlier, in Chapter 23, that Marx says that this fall in the rate of profit is much smaller than it was said to be, by previous economists. 

As Marx sets out in Capital III, Chapter 14, there are all the countervailing forces. But, in addition to that, in terms of accumulation, the relevant metric is the annual rate of profit, which is the basis for the general annual rate of profit. As productivity rises, due to increased capital accumulation, this causes the rate of turnover to rise, which causes the annual rate of profit to rise, at the same time as it causes the rate of profit/profit margin to fall. 

But, in addition, the factors Marx discussed earlier, also come into play. The larger the installed capital base, the easier it is to simply copy and replicate existing patterns and designs and plans for buildings, assembly lines and so on. A series of such economies of scale arise in respect of large scale fixed capital, not to mention large infrastructure projects for roads, railways, airports, ports and telecommunications and so on. But, also, the point mentioned above by Marx is important. Even with lavish unproductive consumption, by the wealthiest capitalists, the proportion of their profits, devoted to consumption falls dramatically, leaving much larger masses of profit available for accumulation. 

Paul Baran made a similar point in respect of less developed economies. They often have large surplus products that could be utilised for accumulation, but, often, the surplus product is consumed unproductively by the country's rulers, especially where they are some kind of military junta or Bonapartist bureaucratic regime. 

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