In addition to this fall in the absolute value of the individual elements of fixed capital, however, there is also a fall in the relative value of fixed capital, which occurs whether or not there is a fall in its absolute value. In other words, the reason that capitalists introduce a new type of machine is that it is more productive than the previous machines. A machine with 500 spindles produces more yarn per hour than a machine with only 100 spindles. But the former does not contain five times as much material, and is not 5 times the value of the latter. Even if the former costs £1500, and the latter costs £1,000, the former is relatively cheaper. If the former produces 6000 units of output, with a value of £6,000, the machine represents 25% of this value, whereas if the latter produces 1200 units, with a value of £1200, the machine represents 83.3% of the value.
And, this is true for all fixed capital. The whole point of its introduction is to raise productivity, and the more productivity levels are raised, the smaller the proportion of the output value does the fixed capital represent. But, the corollary of this is that this same rise in productivity results in the quantity of material processed rising. As Marx states above, if the unit value of this raw material falls by the same proportion as the increase in the quantity of it processed, then its total value as a proportion of total output value also does not rise. But, Marx assumes that this does not happen, and sets out why.
“To this it is quite easy to answer that some kinds of raw materials, such as wool, silk, leather, are produced by animal organic processes, while cotton, linen, etc., are produced by vegetable organic processes and capitalist production has not yet succeeded, and never will succeed in mastering these processes in the same way as it has mastered purely mechanical or inorganic chemical processes. Raw materials such as skins, etc., and other animal products become dearer partly because the insipid law of rent increases the value of these products as civilisation advances. As far as coal and metal (wood) are concerned, they become much cheaper with the advance of production; this will however become more difficult as mines are exhausted, etc.”
(Theories of Surplus Value, Chapter 23)
Marx seems to have. Uncharacteristically. succumbed to a kind of Ricardian Malthusianism, here. Firstly, Marx himself had described the way in which animal husbandry had enabled sheep breeders to produce sheep that had a far greater quantity of wool. In addition, the development of sheep farming in Australia and New Zealand, meant that huge amounts of wool (as well as sheep meat) could be produced, cheaply. The same was true of leather, and beef, as vast areas of land in North and South America were turned over to cattle rearing. Massive revolutions in transport also meant that these materials could be shipped across the globe at a fraction of the previous cost and time. Factory farming of silk worms also led to a massive increase in output of silk, at much lower costs. The development of the cotton gin, meant that large increases in the quantity of cotton grown, picked and cleaned could take place, whereas previously some of it was left to rot in the fields. Whole new areas of the globe were given over to cotton production.
But, more significantly, Marx did not live to see the development of artificial fibres, produced on a vast industrial scale, and thereby obtaining all of the benefits of economies of scale, and falling marginal costs that he noted for all other industrial production. Acrylic replaced wool, Nylon replaced silk, Polyester replaced cotton, vinyl replaced leather and so on. Even where artificial fibres did not totally replace natural fibres, they enabled mixing of natural and synthetic fibres, thereby not only hugely reducing costs, but also obtaining the combined benefits of the two. In fact, the development of materials science has extended this to all areas. Plastics replaced natural materials in a whole range of functions, and more recently things like carbon fibre have replaced steel and other metals. Cheap glass fibre optic cable has replaced copper in telecommunications, and, as well as being much cheaper, is capable of carrying thousands of times the amount of information.
As far as wood and coal were concerned, these never did reach a stage where they became so scarce that their value did not continue to fall. As someone once said, the Stone Age did not come to an end because humans ran out of stones! Nor did we run out of timber or coal. Timber, once used as fuel, was replaced by the much more energy efficient coal, leaving wood to be used for the construction of ships, and buildings, and paper production. It was subsequently replaced in the production of ships, by iron and steel, in the construction of houses, by bricks and concrete, and in the production of paper by waste rags. Coal never ran out, and even Britain is estimated to have at least 300 years supply still in the ground. The development of mining technology, meant that ever larger, and deeper mines could be constructed that produced larger, and larger quantities of coal with less labour. Coal did not run out, but was instead replaced as fuel for steam engines by petrol and diesel, as the steam engine itself was replaced by the much more efficient internal combustion engine; it was replaced as fuel in industrial production by gas and electric, and in power generation by oil, gas, nuclear, and now solar, wind and other renewable sources; it was replaced as a means of heating by gas, electric, and oil; and in the production of gas itself, it was replaced by plentiful and cheap supplies of natural gas.
And, the same applies now to oil and gas. In the 1970's, Malthusians also told us that the fuel was about to run out, as they panicked in response to a temporary oil crisis. It wasn't, and, in fact, increasing supplies of oil and gas came forward, with the value of oil and gas also continuing to fall. In fact, the development of technology made it possible to extract oil and gas from deep sea wells, it enabled wells previously considered exhausted, on the basis of previous technology, to be brought back into production, so that proven reserves increased considerably, and, more recently, the development of fracking technology means that even more vast reserves of shale oil and gas have become available, with a consequent reduction in prices. And, again, in fact, long before oil would run out, cars and other vehicles will have switched to clean, efficient electric motors. As happened with wood (ignoring the recent fad of wood burning stoves), simply burning oil will be seen as wasteful, compared to its other uses in the production of petrochemicals, plastics and polymers, the importance of which will expand greatly as materials science develops, and as 3-D printing develops as a means of production of complex products.
So, not only does fixed capital fall in value, in both absolute and relative terms, but the rise in productivity it brings about, whilst it does result in the mass of raw material processed rising massively, also brings about a massive fall in the unit value of this raw material. As Marx himself says, the rise in the total value of this raw material, is never anywhere near the rise in the quantity of it processed, because of this fall in its unit value. For the reasons he sets out above, he did not believe that this fall in its unit value could be sufficient to prevent the rise in the total value of raw material, caused by the increase in the mass of it processed, but he did believe that it was sufficient to prevent it causing a fall in the rate of profit, when considered against all of the other countervailing factors to that law.
“The cheapening of raw materials, and of auxiliary materials; etc., checks but does not cancel the growth in the value of this part of capital. It checks it to the degree that it brings about a fall in profit.”
(Theories of Surplus Value, Chapter 23)
But, there is an even greater factor involved that Marx could never have taken into consideration given the time he was writing. At that time, the vast majority of the economy comprised the production of material commodities, with services comprising only a small element that was undertaken almost exclusively on the basis of an exchange against revenues rather than capital, i.e. unproductive private labour services. But, today, 80% of the economy is comprised of service industry production. By definition, this service industry is not involved in the processing of materials into material products. Consequently, output today can expand massively without any kind of equivalent increase in the mass, or value of raw materials processed. Consequently, the assumptions that lay behind the rising organic composition of capital, and thereby Marx's Law of the Tendency for the Rate of Profit to Fall no longer exist.
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