Saturday, 22 February 2020

The Technical Composition of Capital - Summary

  • The technical composition of capital refers to the physical relation between the quantity of constant capital ([fixed capital] buildings, machines, tools, [circulating constant capital] raw materials and auxiliary materials) and the quantity of labour required to process it.
  • In practice, the technical composition is a relation between the quantity of circulating constant capital, and the quantity of labour that processes it. If a machine with 50 spindles replaces a machine with 10 spindles, the relation is still 1 machine to 1 worker, but, in the former case, the relation is 5 times as much material processed by 1 worker, i.e. a rise in the technical composition.
  • In fact, the technical relation between fixed capital and labour tends to decline. A handicraft workshop employs 10 workers, a manufactory employs 100 workers with hand tools, a large-scale industrial factory, based on machine production, employs 1,000 or more workers, for example. In each case, its one building to varying numbers of workers, and as capital accumulates and production expands, the number of workers per building rises, meaning a lower technical composition in relation to fixed capital.
  • Similarly, a handicraft worker uses many different tools as fixed capital, and all these tools are replaced by one machine. A carpenter, for example, uses hammers, mallets, chisels, saws, screwdrivers, planes. A woodworker in a machine factory uses just one machine, as part of the division of labour. Either the machine performs the functions of several tools, or several different machines are employed, each with their own worker.
  • What increases is not the quantity of fixed capital per worker, but the size and complexity of each unit of that fixed capital, i.e. a factory that holds 1,000 workers, and all of the machinery, as against the handicraft workshop, which only houses 10 workers, who continue to produce in the old way, using hand tools. Similarly, it is not that more machines per worker are employed, but that the machine with 50 spindles is bigger, and more complex than the machine with only 10 spindles.
  • The Technical Composition of Capital is the basis of the Organic Composition of Capital. In other words, the machine with 50 spindles enables the worker to process five times as much cotton as the machine with 10 spindles. So, the mass of cotton processed per worker rises by five times, and if the unit value of cotton (price per kg.) remains the same, the organic composition of the capital would rise accordingly. But, even if the unit value of cotton falls, as a result of a similar rise in productivity, the total value of cotton processed will be greater, due to its greater mass, unless its unit value falls by an even greater proportion. This is the basis of Marx's Law of the Tendency for the Rate of Profit to Fall.
  • The absolute quantity of fixed capital employed also rises. A factory that employs 1,000 workers replaces 10 manufactories employing 100 workers each, or 100 handicraft workshops employing 10 workers each. However, the transition from handicraft workshop to manufactory, to industrial factory is itself a reflection of the expansion of production and accumulation of capital. As capital accumulates, and output expands, capital becomes more and more concentrated and centralised. In reality, as capital accumulates, the total number of factories increases, and the total quantity of machines employed increases. The total number of workers employed also increases, but by a smaller proportion than the quantity of raw material processed, which is a consequence of the rising technical composition.
  • Although the mass of fixed capital increases in absolute terms (more factories, more machines), it falls relative to the mass of output. The industrial factory that employs 1,000 workers, even if there were no change in productivity, represents a lower technical relation to its output than does the handicraft workshop employing 10 workers. If the latter produces 10 units of output, and the former 1,000 units of output, the relation is one building to 1,000 units, as compared to one building to 10 units. But, in fact, the industrial factory, as a result of higher productivity, would produce far more than 1,000 units.
  • Its not the number of factories or machines to workers that rises, but the size and complexity of the factory and machine. However, an industrial factory that employs 1,000 workers is not 100 times bigger than the handicraft workshop and, does not cost 100 times what a handicraft workshop does. A machine with 50 spindles is not five times bigger, and does not cost five times as much as a machine with only 10 spindles.  A diesel engine tractor is, in fact, smaller than a steam driven tractor.  The ratio of the value of fixed capital to labour rises, but by a smaller proportion than the rise in the mass of output per worker. So, the value of fixed capital as a proportion of total output value also falls, alongside the proportion of new value created by labour.
  • In fact, as Marx sets out, the unit value of fixed capital may fall relative to labour due to technological revolutions, and rises in productivity, even if the mass of fixed capital employed rises significantly. A 1970's mainframe computer costing, say, £2 million, employed, say, four operators, four programmers, and 2 data entry clerks – 10 workers in total. A modern PC has an equal amount of processing power, but costs only, say, £500 per machine. That means that 4,000 machines can be bought for the price of a 1970's mainframe, and these PC's now employ 4000 workers, compared to the 10 employed by the mainframe.
  • Similarly, the technical composition, in relation to the circulating constant capital, depends upon the economy being one based on manufacture, and the processing of materials. It is the increased mass of processed materials that is the basis of the rising technical composition, and, thereby, organic composition of capital, and consequently Marx's Law of the Tendency for the Rate of Profit to Fall. If, the economy is a service based economy that no longer applies, and, moreover, the part of the economy in which materials processing occurs, may also see technology reduce the mass and unit value of the materials, by more efficient use, replacement by other materials, the creation of new types of commodities that use less materials, and a general fall in the value of materials due to rising social productivity.
  • A sharply rising technical composition is a function of, and determinant of the long wave cycle, as it reflects a period of intensive, rather than extensive accumulation. The intensive accumulation arises as a response to crises of overproduction, caused by the mass of capital rising faster than the labour supply (social working-day), which limits the production of absolute surplus value, and causes relative surplus value to fall, as wages rise due to a relative shortage of labour. That leads to capital engaging in technological innovation to replace labour.

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