So, even if the value of labour-power rises, because the value of wage goods rises, and so relative surplus value falls, the capitalist must still reproduce the consumed labour-power, on the same scale. It is the use-value of labour-power that must be reproduced, and not its previous value/historic price, and, consequently, if wages rise, the capitalist must, now, use a portion of their profit to reproduce that labour-power, leading to a tie-up of variable-capital, as well as a fall in the rate of surplus value, and rate of profit.
If the value of wage goods falls, it is still the physical use-value of labour-power, i.e. 10 workers, working 10 hours each that must be reproduced, so that to pay those wages, for the coming period, represents a smaller proportion of the new value created by that labour, and appropriated by capital, in the current period. It brings a release of variable-capital that appears, superficially, as an increase in the mass of profit, but also brings a real rise in the rate of surplus value and rate of profit.
“... if the same labour produced twice as many clothes as before, their relative value would fall by half; but, nevertheless, this double quantity of clothing would not thereby be reduced to disposing over only half the quantity of labour, nor could the same labour command the double quantity of clothing; for half the clothes would still go on rendering the worker the same service as before.” (p 53)
Indeed, as absolute surplus value production is limited by the size of the social working-day, capital comes to increasingly rely on relative surplus value, and so has an incentive to continually raise productivity, so as to reduce the value of wage goods, and so the size of the necessary working day, increasing the amount of surplus labour, and so surplus value/profit.
But, as Marx sets out, in Capital III, Chapter 6, and in Theories of Surplus Value, Chapter 22, a similar condition applies to constant capital. As he sets out in the quote above from Capital III, Chapter 49, for social reproduction to continue, it is necessary to replace all of the physical use-values “on a like for like basis”. There is no point continuing to employ 10 workers for 10 hours, if 2 machines are mothballed, and only 80% of the raw material previously processed is advanced to production.
On the contrary, it is the physical size of the constant capital – number of machines, quantity of material – that determines how much labour is employed, given any technical composition of capital. The physical mass of fixed capital – buildings, machines – that the capital can advance depends on how much money-capital the given capital can mobilise from its resources and borrowing, as against the unit value of that fixed capital, the amount of materials advanced depends on that, as well as the extent of commercial credit, i.e. how much suppliers of materials will supply without requiring payment until later.
However, wages, as with commercial credit, are paid in arrears. Consequently, the individual capital can employ any required amount of labour – provided its available – without, necessarily, having the corresponding money-capital to hire it. If, having allocated all of their available money-capital to the purchase of fixed capital and materials, in the appropriate proportions, they need to employ 10 workers to process it, they do not, necessarily, need money to cover these wages, in advance. Having employed the 10 workers for a week, these workers produce commodities with a value added of 500 hours (5 x 10 x 10), and, once sold, the capitalist appropriates the whole of this value, say £500, but, now, out of this £500, they pay the workers wages in arrears, amounting to £400 (8 x 10 x 5 days).
But, again, as Marx describes, it is the physical use-values of this constant capital that must be reproduced, therefore. Unlike variable-capital, the value of constant capital is preserved, and transferred to the value of the final product. So, if a kilo of cotton has a value of 10 hours labour, this value is transferred into the value of a kilo of yarn. Having sold the yarn, the capitalist recovers this 10 hours of value, but, if the value of cotton has risen since then, to 12 hours, the capitalist must buy it at this new higher price, so that a portion of the profit made in the sale of the yarn must now go to the physical replacement of the cotton. In other words, they have made 6 hours of surplus value, say £6, but, now, £2 of it is tied up as capital to physically reproduce the cotton “on a like for like basis”. It appears, as Marx sets out, that the actual amount of profit has fallen, as well as the rate of profit. The rate of profit does fall, but contrary to what Ramsay believed, as described in Theories of Surplus Value, Chapter 22, the amount of profit does not, it is an illusion resulting from this tie-up of capital. The same is true in reverse, when the value of constant capital falls, creating a release of capital.
As I have set out in other posts, commenting on current growth rates, based on GDP, because GDP is only a measure of revenues (v + s), i.e. new value created, and not of output (c + v + s), this is why periods of rapid inflation, such as seen in the latter part of 2021, through 2022 and 2023, result in this kind of tie-up of capital that, then, appears as a reduction in profit, and consequently, of total revenues/GDP, even though, in reality, no such reduction occurred. This explains why GDP was seen to be stagnant, or even falling, despite the fact that new value creation (v + s) was rising, as witnessed by the continued sizeable increases in employment. Capital does not employ additional labour to produce the same, or less, new value!
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