In practice, the technical composition is this relation between the quantity of raw material and 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, if the normal working day is 10 hours, it is still 1 machine to 10 labour-hours, 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. What changes, here, is not the number of machines per worker, or per labour hour, but the size and complexity of the machine. If we take buildings, then, in fact, the technical composition falls, because one large factory building will employ more workers than a smaller factory building or workshop.
When capital began to formally subordinate labour, it brought handicraft workers together in workshops. The handicraft workers continued to use their own tools, being supplied with materials by the master, who took the finished product to sell. The price paid for the product to the labourer was essentially just a wage, the difference between this wage and the new value created by the worker constituting the surplus value/profit appropriated by the capitalist. Such a workshop might employ, say, 10 workers. As capital accumulated, and capitalists increased the division of labour, they brought larger numbers of workers together in a manufactory. The workers continued to work with the same hand tools, but, now, each worker became a detail worker concentrating on a different aspect of the production process. Such a manufactory might employ 100 workers. Finally, when machine production begins, the hand tools are replaced by machines, with each worker now minding a machine that performs various functions. Such a factory might employ 1,000 workers.
In each case, here, the technical composition is 1 building, but to 10, 100 and 1,000 workers respectively. Again, its not the number of buildings to workers that is determinant, here, but the size and complexity of the building. However, a manufactory employing 100 is not ten times bigger, and does not cost ten times as much to build, as a workshop employing 10 workers. Similarly, a factory employing 1,000 is not ten times bigger, and does not cost ten times as much to build, as a manufactory employing 100. In other words, measured in terms of the size and value of the buildings, although it rises in absolute terms, it falls relative to the number of workers employed, and relative to the new value created by those workers. If a workshop costs £100, and its 10 workers create £100,000 of new value in its lifetime, the workshop represents 0.1% of that new value, or 1:1000. A manufactory costs, say, £500, but its 100 workers produce £1 million of new value, so that the ratio is 1:2000. Finally, a large factory that costs £1,000, but whose 1,000 workers create £10 million of new value produces a ratio of 1:10,000.
This is all the more significant when looking at the ratio of the value of this fixed capital to the total output value. Suppose that the workshop produces 100,000 kilos of yarn, using 100,000 kilos of cotton, and the value of cotton is £1 per kilo. In that case, the total value of output is £100 workshop, £100,000 cotton, £100,000 new value created by labour = £200,100. The ratio of fixed capital to total output value is 1:2,001. The manufactory, represents a higher stage of production, due to a more developed division of labour, and higher productivity. It produces, 2 million kilos of yarn, using 2 million kilos of cotton. Its total output value is 3,000,500. The ratio of fixed capital here is 5:30005, or 1:6,001. Finally, the machine factory produces 50 million kilos of yarn. The total value of its output is 60,001,000. The ratio is 1:60,001.
This demonstrates Marx's point in Capital III, Chapter 6 that, as production expands, and productivity rises, although the absolute mass of fixed capital increases, its value, as a proportion of total output value, falls. Moreover, as Marx describes, in relation to this fixed capital, its actual value also falls rapidly, as more of it is produced. A large part of the value of a new type of factory, for example, is the labour of the architects and designers. But, this cost is a fixed cost. Once it has been expended to design the factory, and or the machines to go in it, it does not need to be expended again. The next identical factory or machine, simply uses the blueprints from the first. Moreover, having dealt with any snags in the first construction, the actual construction costs of further factories and machines fall, as greater expertise in construction is achieved.
Marx notes,
“The astonishing expedition with which a great cotton factory, comprehending spinning and weaving, can be erected in Lancashire, arises from the vast collection of patterns of every variety from those of gigantic steam engines, water wheels, iron girders and joists, down to the smallest member of a throstle or loom in possession of the engineers, mill-wrights, and machine makers. In the course of last year Mr. Fairbairn equipped water wheels equivalent to 700 horses power and steam engines to 400 horses power from his engineer factory alone, independent of his mill-wright and steam-boiler establishment. Hence, whenever capital comes forward to take advantage of improved demand for goods, the means of fructifying it are provided with such rapidity, that it may realise its own amount in profit, ere an analagous factory could be set a-going in France, Belgium or Germany” (Andrew Ure, [Philosophy of Manufactures, London, 1835, p. 39,] Philosophie des Manufactures etc., tome I, Paris, 1836, pp. 61-62).”
(Theories of Surplus Value, Chapter 23)
The new value created by labour, here, also falls as a proportion of total output value. In the workshop it is 100,000:200,100, or 1000:2001, or more or less 50%. In the manufactory it is 1,000,000:3,000,500, or approximately 33%. Finally, in the large industrial factory it is 10,000,000:60,001,000 or approximately 16%. By contrast, the proportion of raw material value to total output value rises from 50% to 67%, to 84%. This is the basis of Marx's Law of the Tendency for the Rate of Profit to Fall, because what this shows is that, even if the rate of surplus value rises, so that the mass of surplus value rises, it tends not to rise fast enough to compensate for the declining share of new value in total output value.
We assumed a rate of surplus value of 100%, so that wages were £0.50 per hour. That means that, in the workshop, of the total new value created of £100,000, £50,000 is paid as wages. That means that surplus value is also £50,000. The rate of profit is then 50,000/(100 + 100,000 +50,000) = 33.3%. In the manufactory it is 500,000/(500 + 2,000,000 + 500,000) = 20%. And, finally, 5,000,000/(1,000 + 50,000,000 + 5,000,000) = 9.1%. Now, even if we assume that the rising social productivity, reflected in these figures, causes the value of labour-power to fall, and rate of surplus value to rise, we still get a falling rate of profit. So, if the rate of surplus value, in the manufactory, rises to 150%, so that surplus value amounts to 600,000, and wages fall to 400,000, we get a rate of profit of 25%. If we assume that, in the large-scale factory, the rate of surplus value rises to 300%, so that we have surplus value of £7.5 million and wages fall to £2.5 million, we have a rate of profit of 15%. Even if the rate of surplus value rose to 500%, reflecting the same rise in productivity as in yarn production, so that surplus value rises to £8.3 million, and wages fall to £1.7, the rate of profit still falls to 16%.
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