Each capital seeks competitive advantage, by raising productivity, via additional division of labour, and use of technology. But, as each one does so, the initial advantage is lost, because the market value of their commodities falls. The amount of profit/profit margin on each unit of output falls, meaning that, although their total mass of profit rises, that is dependent on them selling all of their output. Output grows faster than the market, and so large profits can quickly turn into large losses, if, in order to sell all the output, prices are reduced to below the cost of production.
Ultimately, that can only be resolved by the creation of new markets, be it new markets for these commodities or the development of new industries/commodities, into which the excess capital can be accumulated, thereby creating a new market for those commodities.
“If now we picture to ourselves this feverish simultaneous agitation on the whole world market, it will be comprehensible how the growth, accumulation, and concentration of capital results in an uninterrupted division of labour, and in the application of new and the perfecting of old machinery, precipitately and on an ever more gigantic scale.” (p 41)
But, it can also be seen how this also creates the cycle for wages – nominal wages, real wages and relative wages. Starting with the period of crisis (e.g. 1910's, 1970's), it is an indication of an overproduction of capital, relative to the supply of labour/social working-day. As Marx describes, in Capital III, Chapter 15, and Theories of Surplus Value, Chapter 21, the extensive accumulation of capital uses up available labour. The individual working-day cannot be extended further, and so absolute surplus value cannot be increased. The working population, also does not, now grow fast enough to enable the social-working-day to expand.
In Theories of Surplus Value, Chapter 21, dealing with Hodgskin, Marx notes,
“If the population grows at the same rate as capital, then there is no reason whatsoever why I should not be able to extract from 8x workers with £800 the [same rate of] surplus labour that I can extract from x workers with £100. Eight times 100 C makes no greater demand on 8 times x workers than 100 C on x workers. Thus “Hodgskin’s” argument becomes groundless. (In reality, things turn out differently. Even if the population grows at the same rate as capital, capitalist development nevertheless results in one part of the population being made redundant, because constant capital develops at the expense of variable capital.)”
(Theories of Surplus Value, p 306)
But, Marx notes that the labour supply does not rise in proportion to this extensive accumulation of capital.
“We have seen that over 20 years, capital increased sevenfold, whereas, even according to the “most extreme” assumption of Malthus, the population can only double itself every twenty-five years. But let us assume that it doubles itself in twenty years, and therefore the working population as well. Taking one year with another, the interest would have to be 30 per cent—three times greater than it is. If one assumes, however, that the rate of exploitation remained unchanged, in 20 years the doubled population would only be able to produce twice as much labour as it did previously (and [the new generation] would be unfit for work during a considerable part of these 20 years, scarcely during half this period would it be able to work, in spite of the employment of children); it would therefore produce only twice as much surplus labour, but not three times as much.”
(Theories of Surplus Value, p 299)
Any, further accumulation of capital fails to increase absolute surplus value, as this additional capital does not act as capital – self-expanding value. It could only do so if relative surplus value increased, requiring a rise in productivity, to reduce necessary labour-time. However, at this point of the cycle that is not possible, precisely because of this relative shortage of labour. It leads to rising wages, and demands for a shorter working-day, and so on, so that, in fact, necessary labour rises, and surplus labour falls. Relative surplus value falls, and, as workers demand shorter hours, longer holidays, enhanced overtime payments, and so on, absolute surplus value also falls. Rising nominal wages feed into demand for wage goods.
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