Michael Roberts Fundamental Errors, VI – Inflation and Roberts' Confusion of Money With Money Tokens, and New Value With Total Value - Part 5 of 7

Roberts says,

“new value growth (which we measure in hours of labour worked by the whole labour force in an economy) tends to slow relative to increased output of commodities. So prices per unit of output should tend to fall, as less labour time is involved in the production of output.”

In other words, he, correctly, assumes productivity growth each year. In that case, the new value component of the value of commodities, and of total output, would, indeed, fall proportionately, but the proportion of congealed value, the value of materials and wear and tear of fixed capital would rise. In other words, if productivity rises by 10%, so that we still have the same 1200 hours of new value produced, this 1200 hours of labour, would not, now, process just 20% more materials etc., but 30%, more.

These materials and fixed capital, were produced in previous years, both the C, and the c (i.e. the replacement of consumed material, and the accumulation of additional materials), illustrated in Marx's formula of the circuit of industrial capital. Consequently, the total value of output would rise to 2600 c + 600 v + 600 s = 3800. Previously, congealed value (constant capital) represented 66.6% of total output value, and as a result of the rise in productivity, and consequent change in the technical composition of capital, it now represents 68.4%.

However, as Marx sets out, in Capital III, Chapter 49, this constant capital consumed in production, must, again, be physically reproduced, on a “like for like” basis, out of current production. That current production has benefited from the 10% rise in social productivity. So, when the 3800 of total output value resolves into its component parts, as reproduction takes place for the following year, the 2600 of value of constant capital preserved in the value of current output, has a value only of 2340, i.e. less social labour-time is required for its production, or put another way, it represents a smaller proportion of total output value, and produces a release of capital.

As Marx puts it,

“In so far as reproduction obtains on the same scale, every consumed element of constant capital must be replaced in kind by a new specimen of the same kind, if not in quantity and form, then at least in effectiveness. If the productiveness of labour remains the same, then this replacement in kind implies replacing the same value which the constant capital had in its old form. But should the productiveness of labour increase, so that the same material elements may be reproduced with less labour, then a smaller portion of the value of the product can completely replace the constant part in kind. The excess may then be employed to form new additional capital or a larger portion of the product may be given the form of articles of consumption, or the surplus-labour may be reduced. On the other hand, should the productiveness of labour decrease, then a larger portion of the product must be used for the replacement of the former capital, and the surplus-product decreases.”

(Capital III, Chapter 49)

The 3800 of total output value resolves into 2340 c + 600 v + 860 (600 s + 260 “profit”). Here, as Marx describes, above, in Chapter 49, the 260 of “profit”, in addition to the produced surplus value, is really an illusion, arising from the release of capital, caused by the rise in productivity.

Suppose no change in the following year, however. The total value of output in that year would, then, be 3540, comprised of 2340 c + 600 v + 600 s. Originally, the rate of profit was 600/(2600 + 600) = 18.75%. Now, however, it is 600/(600 + 2340) = 20.41%. This shows the error of the claims about the law of the tendency for the rate of profit to fall, because as Marx sets out, in Theories of Surplus Value, Chapter 23, it would only arise if the rise in the technical composition of capital, resulting from a rise in productivity, was greater than the fall in the value composition of capital resulting from the same cause. Moreover, we have only taken into consideration, here, the effects of that change in productivity on the value of the constant capital.

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