So, increases in the general price level cannot be explained by overall increases in costs of production separated from increases in liquidity and falls in the value of money tokens, because although costs of production, in some spheres, for some short periods of time, might rise, due to crop failures, natural disasters and so on, overall, social productivity rises, and overall costs of production/unit values fall.
Its undoubtedly true that, for example, in the 1970's, the actions of OPEC, caused oil prices to rise sharply, and because oil is used as auxiliary material/energy to fuel vehicles, as well as to produce petrochemicals for plastics, fertiliser and so on, this increased value passes through into a higher value of constant capital, in all other spheres. But, it is not a proportionate increase, because oil forms only a fraction of the constant capital consumed in those other spheres. If oil comprises 10% of the constant capital of firm A, and oil prices rise by 20%, that constitutes only a 2% increase in A's constant capital.
In Capital III, Marx describes the destabilising effects that such sharp rises in material/energy prices can have, because, although, in value terms, these higher prices of constant capital, are preserved and transferred into the prices of final output, in reality, because demand has to be considered, some times that is not possible, without causing demand itself to fall – demand destruction – which poses its own problems in so far as being able to continue production at optimum levels.
“This shows again how a rise in the price of raw material can curtail or arrest the entire process of reproduction if the price realised by the sale of the commodities should not suffice to replace all the elements of these commodities. Or, it may make it impossible to continue the process on the scale required by its technical basis, so that only a part of the machinery will remain in operation, or all the machinery will work for only a fraction of the usual time.”
(Capital III, Chapter 6)
So, for example, if the price of cotton doubles, as a result of, in Marx's example, the US Civil War, and the blockade of Southern ports, or today, the price of oil and gas rises, because of NATO imperialism's economic war against Russia, and attempts to prevent the sale of Russian oil and gas, and similarly of Russian, grain and other primary products, then, as elements of constant capital, this higher value should be simply passed into the value of the commodities in whose production it partakes. If we take cotton yarn, we might have:
c 100 kilos of cotton (£1,000) + v £500 + s £500 = £2,000 (100 kilos of yarn @ £20 per kilo.
If the price of cotton doubles:
c 100 kilos of cotton £2,000 + v £500 + s £500 = £3,000 (100 kilos of yarn @ £30 per kilo.
Note that, although cotton has doubled the price of yarn rises by only 50%, because cotton accounted for only 50% of the original value of yarn. However, yarn producers may see that, at £30 per kilo, the demand for yarn would fall precipitously. To stay in business, they may decide to absorb at least some of the higher cost of cotton out of their own profits. For example,
c 100 kilos of cotton £2,000 + v £500 + s £100 = £2,600 (100 kilos of yarn @ £26 per kilo.
The inevitable consequence is a squeeze on profits from these higher material costs, and some of the less profitable businesses would, also, thereby make losses, and some go out of business, reducing overall supply of yarn, allowing remaining yarn producers, to raise prices accordingly. Some of that is seen currently in recent profits reports by some retailers, and some intermediary producers. In the US, for example, the last Producer Prices Index showed input prices rising by 11%, which is higher than the latest CPI figure of 9.1%, indicating that some of those higher input costs have been absorbed by producers and retailers out of their profits.
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