Krasin failed to understand the meaning of this law that lies behind Marx's Law of The Tendency for the Rate of Profit to Fall, and so concludes that the increased production of means of production for the production of means of production appears absurd. But, what this law amounts to is the replacement of hand labour by machine labour, and there is nothing at all absurd in that, Lenin says.
“That is precisely what the Narodniks try their utmost to prove—the absurdity of Russian capitalism, which, they aver, is ruining the people, but is not providing a higher organisation of production. Of course, that is a fairy-tale.” (p 105)
As hand labour is replaced by machine labour, productivity rises so that a given mass of labour processes more material. More capital and labour must be employed, both producing machines and producing material, relative to that producing the commodities that comprise the final output of commodities for consumption. In other words, Department I must accumulate faster than Department II. But, within Department I itself, the same dynamics apply. Department I does not just provide machines and materials for Department II, i.e. intermediate goods. It must also reproduce its own machines and materials consumed in the production of means of production sold to Department II.
Because the firms in Department I sell means of production to other firms in Department I, this too has the superficial appearance of being intermediate production. For example, a coal producer who sells coal to a steel producer appears to produce, in the coal, the constant capital of the steel producer as intermediate production. Likewise, the steel producer sells rails and pit props to the coal producer, which again has the appearance of being intermediate production, as much as the sale of coal and steel to Department II producers. However, this is an illusion, as Marx sets out in Capital II, III, and in Theories of Surplus Value, Part I.
In fact, as Marx sets out, none of this production is intermediate production, but is simply a mutual reproduction of Department I (c) by the firms in Department I, on a like for like basis, out of their current production. If Department I were considered as one huge conglomerate producing coal, steel etc., all of this production would appear as simply reproducing Department I (c), with only that part of Department I production equal to Department I (v + s) = Department II (c) actually constituting intermediate production.
Within Department I, its own process of capital accumulation involves the same replacement of hand labour with machine labour. In primary production, this may not involve the production of additional raw materials, because, unlike manufacturing, primary production does not process raw materials. A coal mine, for example, that introduces a machine will produce more coal, but the coal is not a raw material for the coal mine. Rather the mine is the producer of this raw material, which is used by others. The mine may use more material, as it expands, but only as auxiliary material, not raw material. For example, more production will involve using more pit props, and rails, deeper mining will require more steam engines, and coal to fuel them, and so on, but these are auxiliary materials not raw materials.
In agriculture, if production rises, because machines replace labour, more fertiliser is required, which requires fertiliser producers to produce more. But, agriculture is a good example of the process being discussed. A machine replaces labour, and more land can then be cultivated, but this additional cultivation requires additional seed to be sown. Consequently, the amount of new value produced by labour may decline, if the machine actually displaces existing labour, or remain the same if existing labour simply produces more output. But, now, because more seed has to be sown, the proportion of the final output consisting of the seed (which represents c) rises. In addition, c rises, because, as well as the additional seed, additional constant capital has been advanced for the machine, so that its wear and tear also now forms part of the value of the output. Within Department I, therefore, this same process, whereby c rises relative to v + s, also occurs.
“Naturally, therefore, it is wrong to divide the development of capitalism into development in breadth and in depth; the entire development proceeds on account of division of labour; there is no “essential” difference between the two features. Actually, however, the difference between them boils down to different stages of technical progress. In the lower stages of the development of capitalist technique—simple co-operation and manufacture—the production of means of production as means of production does not yet exist: it emerges and attains enormous development only at the higher stage—large-scale machine industry.” (Note, p 105)
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