“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...
...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)
These are the conditions that existed in the 1860's, 1920's, and 1970's. Unable to physically increase the size of the labouring population, sufficiently, and unable to intensify the exploitation of labour, as the shortage of labour causes wages to rise relative to profits, capital is forced to, instead, create a relative surplus population, by engaging in a technological revolution, whereby, machines replace labour in production. As Marx put it, in Value, Price and Profit,
“Take, for example, the rise in England of agricultural wages from 1849 to 1859. 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.”
The other consequence of this technological revolution is that, not only is the relative supply of labour increased, reducing the upward pressure on nominal, real and relative wages, but the value of wage goods, themselves, are reduced, as with the value of all other commodities, as social productivity rises. The value of labour-power falls, meaning that a smaller proportion of the working-day consists of necessary labour, and a greater proportion of surplus labour. Relative wages fall, and the rate of surplus value rises.
However, as Marx describes, workers still resist cuts in nominal wages, even if this goes along with a rise in real wages. The answer to that, for capital, is to be able to increase both nominal and real wages, whilst reducing relative wages. In Marx's response to Weston, he says, that farmers could not simply raise prices to cover the rise in agricultural wages. That is true, in terms of real prices, but, as Marx describes in A Contribution To The Critique of Political Economy, and elsewhere, they can raise nominal prices, provided that the currency/standard of prices is devalued. Unless, the underlying economic realities are addressed, this devaluation of the currency/standard of prices, does not change anything other than superficial labels, and so only defers that manifestation. As he put it, in The Poverty of Philosophy,
“By changing the name we do not change the thing. The quantity of corn, whether supplied or demanded, will be neither decreased nor increased by this mere change of name. Thus, the relation between supply and demand being just the same in spite of this change of name, the price of corn will undergo no real change. When we speak of the supply and demand of things, we do not speak of the supply and demand of the name of things...
Let the sovereign decree that one mark shall in future be two marks, commerce will keep on saying that these two marks are worth no more than one mark was formerly.” (p 80-81)
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