The technical composition of capital refers to the physical relationship between the quantity of constant capital, and the quantity of labour required to process it. Constant capital is comprised of fixed capital, and circulating constant capital. Fixed capital is things like buildings, machines and tools. They are things that are not used up completely during the production period, and so do not have to be physically replaced at the end of the production period. A portion of their value remains fixed in them, and only their wear and tear is transferred to the value of the output. Circulating constant capital refers to raw material, and auxiliary material.
Raw material refers to anything that is used in the production process that has itself been produced by labour. Coal still in the ground is not raw material for the coal producer, it is raw material produced by the coal producer. Coal dug from the ground by labour is raw material when used in the production of coke and gas, and other chemicals. It is not raw material when it is used to produce electricity in a power station, because its physical properties, its use value, is not transferred to the end product. It is, in this case, an auxiliary material. That is, its function is to produce heat, which boils water that drives generators, which produces electricity. It contributes to the production process, but does not form a material component of the end product. The same applies with oil, which is a raw material in the production of petrochemicals and plastics, but is only an auxiliary material when it is used as a source of energy, or as a lubricant of machinery. Steel is a raw material, when it is used in the production of cars and so on. This distinction applies to all intermediate production. Constant capital is measured in appropriate physical units, e.g. a factory, a machine, a kg of cotton, a metre of linen, a barrel of oil.
Labour refers to the living labour used in the production process. The quantity of labour is measured in labour hours. In other words, it is meaningless to say that the technical relationship between 1 kg of cotton, as raw material, and labour, is 1kg to one worker, because its necessary to know whether this one worker processes the cotton into yarn, in one hour, two hours, or ten hours. Its only possible to measure this technical relationship as being a given quantity of material to a given quantity of labour-time. From this perspective, it does not matter whether 1 kg of cotton is processed by 1 worker in 10 hours, or by 10 workers each working 1 hour sequentially. The importance of that can be seen in considering shift working.
In Capital I, Marx says that the technical composition is the basis of the organic composition of capital.
“... I call the value composition of capital, in so far as it is determined by its technical composition and mirrors the changes of the latter, the organic composition of capital. Wherever I refer to the composition of capital, without further qualification, its organic composition is always understood.”
In terms of this organic composition, however, Marx has a different definition, which is the relationship of the value of constant capital to the value of variable-capital. This definition is not the same as the relationship between the value of the constant capital, and the new value created by labour, in the production process, which is the actual relation that flows, logically, from the technical composition. The variable-capital does not equal the total labour-time applied to process the material, but only the labour-time required to reproduce the labour-power. Suppose the new value created by 1 hour of labour is equal to £1. The rate of surplus value is 100%, so that wages are equal to £0.50 per hour. If the technical composition of capital is 10 kg of cotton to 10 hours of labour, and, if the value of 1 kg of cotton is £1, then, if the worker works for 10 hours, the relationship is £10 of constant capital to £10 of new value created by labour. The value of constant capital equals 50% of the value of output with labour comprising the other half. However, the variable-capital equals only £5, so that the organic composition here is not 1:1, as with the technical composition, but 2:1. The organic composition, here, is not just a function of the technical composition, but also of the rate of surplus value.
If the rate of surplus value rises, so that wages fall to £2.50, then the organic composition rises from 2:1 to 4:1, and yet there has been no change in the technical composition, nor in the value of output, which remains £20. The consequence of this is significant in understanding the difference between Marx's Law of the Tendency for the Rate of Profit to Fall, which is based on the technical composition, and that of his predecessors, which is based on the value composition of capital. Initially, the rate of profit is 33.3%. According to Marx's Law of the Tendency for the Rate of Profit to Fall, the rate of profit falls, as the organic composition of capital rises. But, here, the organic composition has doubled from 2:1 to 4:1, and yet the rate of profit rises from 33.3% to 60%. The reason is that the change in the organic composition here, is not a result of a change in the technical composition, but in the value composition of capital.
The same would be true if, on the other hand, the price of cotton rose to, say, £20. Now, if wages remained £5, the organic composition would rise to 4:1, because of the increased price of cotton. In both cases, this is due to what Marx calls a rise in the value composition of capital. It occurs for reasons outside the immediate production process. In other words, it is reasons outside the production process of spinning yarn, which cause the price of cotton to rise, and it is reasons outside the process of spinning yarn that cause the value of labour-power to fall. But, also in these two cases, the result is different.
In the first case, the fall in the value of labour-power results in a rise in the rate of profit, because there is a rise in the rate of surplus value, creating more surplus value, but, in the second, it is simply that the value/price of constant capital rises, and that results in a fall in the rate of profit. There would also be further and differing effects on the mass of surplus value in both cases, as a result of the release or tie up of capital that results from the change in values/prices. Its for that reason that Marx distinguishes between these changes in the value composition of capital, and the changes in the technical composition of capital, and their separate and differing effects on the organic composition. It is the technical composition that is significant, for Marx, because it is that which signifies technological changes, and changes in productivity, which lie behind his Law of the Tendency for the Rate of Profit to Fall, as opposed to the laws of falling profits of his predecessors, such as Smith and Ricardo, which are based on changes in the value composition of capital, which result in a squeeze on profits due to rising wages and rents.
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