Michael Roberts Gets Overexcited By The Rate of Profit - Part 7 of 10

Marx sets out this process again in Capital III, Chapter 6, explaining that the proportion of value accounted for by fixed capital continually falls.

“Further, the quantity and value of the employed machinery grows with the development of labour productivity but not in the same proportion as this productivity, i. e., not in the proportion in which this machinery increases its output. In those branches of industry, therefore, which do consume raw materials, i. e., in which the subject of labour is itself a product of previous labour, the growing productivity of labour is expressed precisely in the proportion in which a larger quantity of raw material absorbs a definite quantity of labour, hence in the increasing amount of raw material converted in, say, one hour into products, or processed into commodities. The value of raw material, therefore, forms an ever-growing component of the value of the commodity-product in proportion to the development of the productivity of labour, not only because it passes wholly into this latter value, but also because in every aliquot part of the aggregate product the portion representing depreciation of machinery and the portion formed by the newly added labour — both continually decrease. Owing to this falling tendency, the other portion of the value representing raw material increases proportionally, unless this increase is counterbalanced by a proportionate decrease in the value of the raw material arising from the growing productivity of the labour employed in its own production.”

And, its this that is the basis of Marx's Law of the Tendency for the Rate of Profit to Fall, i.e. the increase in the proportion of raw material in the total value of output, whilst the proportion accounted for by fixed capital and labour (variable-capital + surplus value) falls. In Theories of Surplus Value, Chapter 23, Marx then looks at what actually causes the technical/organic composition of capital to rise, which is this increased mass of raw material processed, as a result of rising productivity induced by the new technology, now embedded in the fixed capital.

The unit value of the raw material also falls, as a result of the rise in social productivity, but Marx believes, because it is largely the product of agriculture and natural processes, rather than manufacture, that it does not fall in the same proportion as the value of manufactured products, and does not fall proportionate to the rise in the quantity of it consumed. So, cotton might fall from £1 per kilo to £0.80 per kilo, but if the quantity of cotton processed rises from 1,000 kilos to 1500 kilos, the value will rise from £1,000 to £1200. As a result the technical/organic composition of capital would rise, and this would cause a fall in the rate of profit. The question is by what amount, and would this be enough to offset the rise in the rate of profit resulting from the fall in the value of fixed capital, and rise in the rate of surplus value.

Marx concludes that the net result is that the rise in the technical/organic composition, caused by the rise in the proportion of raw material costs is not enough to cause any significant fall in the rate of profit overall.

“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.”

(ibid)

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