Relative surplus value always goes along with absolute surplus value. When capital introduced machines to raise productivity, and extract relative surplus value, the capitalists needed to ensure that the machines were fully utilised, and so that led them to introduce an egregious extension of the length of the individual working-day. In addition, once machines are introduced, the capitalist seeks to continually have those machines run faster (speed-up), so that the intensity of the working-day is increased, thereby extracting additional absolute surplus value. Machines are introduced because wages have risen, and wages rise because labour has become relatively scarce, i.e. overproduction of capital. Alongside this rise in wages, workers take the opportunity to reduce the length of the working-day, to obtain additional holidays, shortening of the working week, earlier retirement, and so on. When machines are introduced to replace labour, a relative surplus population is created, this increases competition between workers so that not only are wages cut, but capital can again begin to increase the length of the individual working-day, to increase overtime working, introduce new shift patterns, increase weekend working, reduce holidays, and extend the retirement age. All this means that workers in employment work longer, and suffer over-employment, whilst alongside them grows a pool of unemployed and under-employed workers.
Its only when all of these new machines introduced to replace labour (intensive accumulation) become the norm, and are rolled out more extensively, alongside a growing mass of labour (extensive accumulation) that the gains in productivity begin to slow down, and the relative surplus population once more begins to be used up. This cyclical process is part of the long wave cycle. Eventually, as the labour reserves are used up, and the social working-day cannot be expanded further, capital is faced again with an overproduction of capital. It cannot produce any more absolute surplus value because the social working-day cannot be expanded. But, this very condition, in which labour again starts to become scarce, means that it also cannot reduce wages. Rather competition between capitals, in the context of a booming economy driven on by full employment and high wages, driving rapidly increasing demand for consumer goods, including, now, even some previously luxury goods, means that it has to pay higher wages to obtain the labour supplies it requires.
Not only do workers first obtain payment for overtime, and then premium rates for overtime, but they also obtain higher hourly rates of pay, and they begin again to secure shorter hours, more holidays, earlier retirement and so on. This means that absolute surplus value now even begins to decline, as capital accumulates, and capital is forced to accumulate as a result of the force of competition in a booming economy. Eventually, this overproduction of capital breaks into a crisis of overproduction. As Marx describes it,
“As soon as capital would, therefore, have grown in such a ratio to the labouring population that neither the absolute working-time supplied by this population, nor the relative surplus working-time, could be expanded any further (this last would not be feasible at any rate in the case when the demand for labour were so strong that there were a tendency for wages to rise); at a point, therefore, when the increased capital produced just as much, or even less, surplus-value than it did before its increase, there would be absolute over-production of capital; i.e., the increased capital C + ΔC would produce no more, or even less, profit than capital C before its expansion by ΔC. In both cases there would be a steep and sudden fall in the general rate of profit, but this time due to a change in the composition of capital not caused by the development of the productive forces, but rather by a rise in the money-value of the variable capital (because of increased wages) and the corresponding reduction in the proportion of surplus-labour to necessary labour.”
(Capital III, Chapter 15)
The overproduction of capital results in a change in its value composition, as wages rise, and surplus value falls, i.e. a fall in the rate of surplus value, as a result of this fall in absolute surplus value. There is only one solution, in such a condition.
“Given the necessary means of production, i.e., a sufficient accumulation of capital, the creation of surplus-value is only limited by the labouring population if the rate of surplus-value, i.e., the intensity of exploitation, is given; and no other limit but the intensity of exploitation if the labouring population is given.”
(ibid)
Capital must increase the rate of exploitation, but cannot do so by expanding absolute surplus value, it can only do so by increasing relative surplus value. Marx explained this in relation to an actual situation, where between 1849-59, a shortage of agricultural labour led to rising agricultural wages.
“What was its consequence? The farmers could not, as our friend Weston would have advised them, raise the value of wheat, nor even its market prices. They had, on the contrary, to submit to their fall. But during these eleven years they introduced machinery of all sorts, adopted more scientific methods, converted part of arable land into pasture, increased the size of farms, and with this the scale of production, and by these and other processes diminishing the demand for labour by increasing its productive power, made the agricultural population again relatively redundant. This is the general method in which a reaction, quicker or slower, of capital against a rise of wages takes place in old, settled countries. Ricardo has justly remarked that machinery is in constant competition with labour, and can often be only introduced when the price of labour has reached a certain height, but the appliance of machinery is but one of the many methods for increasing the productive powers of labour. The very same development which makes common labour relatively redundant simplifies, on the other hand, skilled labour, and thus depreciates it.”
(Value, Price and Profit, Chapter 14)
Thus capital engages in a new Innovation Cycle, developing new base technologies that enable labour to be replaced. It creates a relative surplus population pushing wages down, and increasing relative surplus value, it reduces the value of wage goods, thereby reducing the value of labour-power, causing wages to fall, and increasing relative surplus value. It ends the crisis of overproduction of capital, by thus ending the shortage of labour relative to capital, and it increases the rate of surplus value, and the mass and rate of profit, by increasing the mass of surplus value, and also by reducing the value of constant capital. It increases the value composition of capital by reducing wages, it reduces the value composition by reducing the value of fixed capital and circulating constant capital. It increases the technical composition of capital, by increasing labour productivity so that a given mass of labour processes a larger mass of raw material, and in this way brings about a rise in the organic composition of capital.
It is this, which brings about a fall in the long-term average rate of profit, as the share of labour in total value declines. In this way, far from The Law of the Tendency for the Rate of Profit to Fall being the cause of crises of overproduction, it is the means by which those crises are resolved. Crises of overproduction arise from changes in the value composition of capital, primarily a rise in wages, as absolute surplus value cannot be expanded, whilst crises of overproduction are resolved by a rise in the technical and thereby organic composition of capital, as productivity is increased, and relative surplus value is increased as a consequence of it.
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