Prediction 4 – A Range of New Commodities and Services Flood Into The Market
The Innovation Cycle is driven by the condition of labour supply, which, in turn, determines the extent to which surplus value can be produced, and hence, determines whether capital is overproduced relative to that labour supply.
“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.”
(Capital III, Chapter 15)
As the productivity benefits of the last technological revolution decline, and capital accumulation takes on the form of extensive rather than intensive accumulation, so, increasingly, the size of the labouring population becomes the limiting factor on expanding the mass of surplus value. Neither the individual nor social working-day can be extended, so the potential to increase absolute surplus value disappears, and, in order to attract workers, in conditions where the demand for labour now starts to exceed supply, wages rise – nominal, real, and relative wages – causing a squeeze on profits. Ultimately, this results in a crisis of overproduction of capital, as any additional accumulation of capital, results in a further rise in wages, and decline in the mass of surplus value.
“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.”
(ibid)
The solution to this crisis of overproduction of capital, is to raise productivity, via a new technological revolution, which creates a new relative surplus population, and increases the rate of surplus value. Consequently, these new technologies are created for, and first applied in, production, as new instruments of labour, not as new consumer products. The internal combustion engine, electric motor and so on, were developed, initially, as means of raising productivity, not for the purpose of producing motor cars, or electrical products for personal consumption. But, the development of these base technologies, for that purpose, inevitably leads to them, subsequently, also, being used as the basis of new ranges of consumer goods and services too. If we take the internal combustion engine, developed to replace costly and limited steam engines, used to drive tractors, and trains, and also to replace the use of horses to pull road transport, its use in private motor cars was limited to a very small number of the ruling class, and only slowly extended to sections of the middle-class. In Britain, its only in the 1960's that car ownership starts to occur amongst the working-class.
Similarly, electric motors were introduced in factories to replace expensive and limited steam power used to drive large numbers of machines and equipment, just as electric lighting replaced gas lighting. But, it was not until after WWII, that there was a significant growth in the production of ranges of electrical consumer products, such as vacuum cleaners, washing machines, spin dryers, refrigerators and so on, as well as the introduction of new electrical goods, such as TV's. The technological revolution of the 1970's, which peaked in 1985, was again driven by the shortage of labour that created the crisis of overproduction of capital of the 1970's. The introduction of the microchip and so on, enabled the development of technology in printing, machine control (CAD-CAM), as well as in a whole range of administrative tasks, via the development of cheap computing power, as well as in communications systems.
Even in 1970, I was using a slide rule for calculations, at work, and the adding up of columns of figures was done using a mechanical adding machine. By 1972, basic electronic calculators were being used in offices, and by 1975, hand held versions were available for those that had need of them, though they remained expensive. In a matter of a few years, personal computers appeared in offices, and by 1985, they started to become cheap enough for small businesses to utilise them. The same microchip technology enabled the production of some of the first consumer electronic products based on them, such as video game consoles, such as the Atari, and also video tape players. It wasn't until the mid 1990's, that home personal computers started to take-off, largely also driven by the availability of the Internet, which, itself, did not expand rapidly until the end of the 90's.
In fact, therefore, given the power and flexibility of this technology, we are still, largely, in the phase of its development driven by its use to raise productivity. Even in terms of home PC's, and their evolution into mobile devices, such as smart phones etc., these are personal productivity tools, used as much for the benefit of raising the productivity of labour, and speeding up the rate of turnover of capital, as they are purely personal consumption goods. In previous years, I have set out the kinds of goods and services that these technologies are capable of providing, and there are no doubt many more that no one has envisaged, yet.
The fact that, during the last 30 years, and 20 years, in particular, realised profits were directed into financial and property speculation, rather than into real capital accumulation, in the development of consumer goods and services, means that this development has been prolonged compared to past long wave cycles. The majority of that development of new goods and services occurred in the 1990's, and early 2000's, with a lot of the subsequent development simply being the equivalent of the development of the motor car from the 1950's Ford Popular to the 1980's Ford Cortina. Just as the motor car has continued to develop from the 1980's Cortina, so too existing goods and services will continue to develop, but we have not yet seen the development of whole new ranges of goods and services.
Part of the reason for that is that, since 2010, governments have held back economic growth, and money has been diverted into financial speculation. Money revenues can be used for personal consumption, productive consumption, or savings. But, savings have increasingly taken this form of purchase of financial or property assets, whose prices were deliberately inflated, so as to produce capital gains. Similarly, a look at TV and online advertising shows that one of the industries that has grown is that of gambling. Consumers used revenues for that purpose rather than spending on new types of goods and services, whose prices tend to be high, and which produce high rates of profit for their producers. The owners of loanable money-capital, including firms in their control over realised money profits, had no great incentive, therefore, to invest large amounts of capital in the development of, and supply of, such new innovative goods and services, instead, preferring to, also, simply buy up existing financial and property assets, and obtain the same capital gains, as asset prices rose.
These new consumer products were relatively cheap, and made more accessible by the introduction of consumer credit. It took until the 1960's, and early 70's – 15 -25 years after the start of the new cycle – before it spread to the widespread consumption of the more expensive commodities such as the motor car. But, during all that time, capital continued to flow into the production of these new ranges of consumer goods and services, and, in doing so, as in previous cycles, thereby, created the conditions for the crisis of overproduction of capital. During all that time, in order to do so, realised profits were retained and invested, and companies issued shares so as to obtain additional funds for capital accumulation, in doing so, increasing the supply of these financial assets and depressing their price, causing yields and interest rates to rise.
On the basis of previous cycles, asset prices should have started to fall, in real terms, around 2015, and that should have facilitated a drive for capital to be invested in new high profit areas of production, which means in the development and production of these new ranges of goods and services. The crisis of 2008, was a marker on the road of that process, but it is precisely the measures taken by governments and central banks after 2008 that have prevented the normal functioning of the cycle, slowing down its mechanism, and so dragging it out. As I have set out in other posts, that hibernation of the cycle does not mean it no longer functions, and the events of the last two years following the end of lockdowns illustrate that point.
In Britain, the NHS is in a state of collapse, and social care along with it. The existing base technologies, developed during the 1970-85, Innovation Cycle, provide most of what is required to develop the new ranges of goods and services to deal with that. They have made possible the development of wearable devices, to monitor the condition of the human body, in the same way that engine management systems have long monitored and managed the mechanical and electrical systems of vehicles etc. The development of mobile technologies makes it possible to constantly monitor humans for signs of potential problems, and have that dealt with by healthcare systems, in the same way that home security systems pass information to home security providers.
These individually tailored health monitoring systems, will almost certainly be promoted by private capitals, as the NHS collapses, in Britain, but its likely that something similar will happen elsewhere, as the large, Fordist healthcare systems applicable for the needs of the 20th century, are no longer the most effective solution. In the same way, the microchip revolution that made possible the development of industrial robots in the 20th century, make possible the development of cheap domestic robots in the 21st century, to assist in social care provision. The development of AI, still at an early stage, will facilitate that, as AI will be the basis of the next Innovation Cycle, driven forward, after a new crisis of overproduction of capital arises in the 2030'/40's.
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