Tuesday, 11 February 2020

Theories of Surplus Value, Part III, Addenda - Part 63

In the same way that landed property is subordinated to industrial capital, because it can only appropriate, as rent, surplus profits, so too commercial and interest-bearing capital is subordinated to productive-capital, because it only provides space for them so long as they facilitate a greater mass of realised profits and higher rate of profit

“The equalisation of values to cost-prices occurs only because the individual capital functions as a commensurate part of the total capital of the whole class and, on the other hand, because the total capital of the class is distributed amongst the various individual spheres according to the needs of production. This is brought about by means of credit.” (p 519) 

Commercial credit, via Bills of Exchange, plays a crucial role in speeding up and facilitating the circulation of commodities. But, precisely because the process of reproduction does not take place on the same uniform basis, bank credit plays a crucial role in the reallocation of capital. Businesses use lines of credit to finance working-capital. If the rate of profit, in industry A, is falling, and, in B, is rising, then firms in A increase their working-capital at a slower pace, or even reduce it, as they slow down their employment of additional workers, and materials or even lay off workers and cut back production. But, now, this unused bank credit is available to B, whose firms need additional working-capital to expand their production to respond to the higher rate of profit in that industry. 

“Credit not only makes this equalisation possible and facilitates it, but one part of capital—in the form of moneyed capital—appears in fact to be the material common to the whole class and employed by it.” (p 519) 

Capital accumulation can be viewed from two standpoints. On the one hand, there is the accumulation of the real capital, i.e. of the physical commodities that comprise the elements of capital. Each firm, as it produces profit can utilise it to accumulate additional physical capital. But, alongside this accumulation of physical capital is the accumulation of money-capital, and the two are not synonymous, nor coterminous. Firms accumulate money profits, as well as reserves for wear and tear etc.; capitalists themselves obtain revenues as profits and interest, not all of which they use for consumption immediately; landlords do not immediately spend all of their rents; even workers accumulate small temporary savings, the smallness of which is counterbalanced by the very large number of workers. All of these various reserves of money become pooled in a relatively small number of locations in the banking and shadow banking system, as well as in the Stock Exchange. 

It “becomes, in part, the responsibility of a special class, in part everything accumulated by society in this sense becomes accumulation of capital and is placed at the disposal of the industrial capitalists. Operations of this kind take place at a very large number of isolated points in society, [their results] are concentrated and collected in certain reservoirs. Money which lies idle due to freezing of the commodities in the metamorphosis, is thus converted into capital.” (p 519) 

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