Before setting out Engels' response to that, I want to focus on the preceding statement about “all must be sought in each and each in all”. I want to examine Marx's analysis of value and price, and supply and demand, of value and use-value, in this context. Marx shows that value, and, consequently, prices cannot be explained by supply and demand. Rather, supply is a function of value, and demand a function of use-value. This is set out, in detail, in Theories of Surplus Value, Chapter 20. Producers will only continue to produce commodities if the price they obtain for them provides the average annual rate of profit on the capital advanced. What determines that is the value of the commodity, i.e. its social cost of production, as against the demand for it at that price.
If the demand for the commodity, at that price, is enough to ensure that all of the supply is taken up, then, in aggregate, the producers of this commodity will make the average annual profit. As Marx says, this level of demand fluctuates, in the short-term, sometimes being above or below the level of supply, causing the market price to rise above, or fall below, this equilibrium or natural price, but, thereby, averaging out to it. Producers have to learn, by experience, just how long a period is involved, for their particular commodity, in this averaging, as against what represents a structural shift, such that, at the equilibrium price, demand will continue to be either above or below the supply.
The supply is made up of the supply from a range of producers, each of which operate at different levels of efficiency – individual values. The social cost of production/individual value of Producer 1 is different to that of Producers 2, 3, 4, …,n, and it is the aggregate of these different individual values that is the basis of the market value of the given commodity, and which is the basis of its natural or equilibrium price. Consequently, if Producer 1 is the most efficient, and Producer n the least efficient, and so on, because they all sell at this average market value, Producer 1 will make more than the average annual rate of profit, and Producer n will make less than the average annual rate of profit. It is only by taking the industry as a whole, the aggregate of these different profits that it makes the the average, annual rate of profit.
Of course, as Marx and Engels set out, in Capital III, and Theories of Surplus Value, this annual rate of profit is itself vastly different to the rate of profit/profit margin, because of the role of the rate of turnover of the capital. The higher the rate of turnover, the greater the difference. For example, if the annual rate of profit is 30%, and the advanced capital turns over once, the rate of profit/profit margin is also 30%, but if it turns over ten times, during the year, it is only 3%. The significance of this is fairly obvious that any market fluctuation that causes prices to fall will have a much less damaging effect on commodities where the profit margin is 30% than in those where its 3%. In the latter case, it is the difference in selling at a profit or a loss, and so, for the least efficient firms, already selling with a profit margin below 3%, the difference between survival and failure.
Indeed, as large-scale industrial capital raised productivity massively, and, with it, raised the rate of turnover of capital, it, necessarily, reduced the rate of profit/profit margin, on this huge volume of output, even as it maintained or raised the annual rate of profit. That occurred, as Marx sets out in Capital III, not as bourgeois economists and capitalists claim, because firms voluntarily reduce their margins in order to sell more, but, because, as the annual rate of profit rises, as productivity increases – both reducing the value of constant and variable capital, and because a given amount of advanced capital now produces more surplus value/profit during the year, as a result of it turning over more times – that rise in turnover, likewise means that any given annual rate of profit, represents a lower rate of profit/margin. That is most notable in relation to commercial capital, as set out in Capital III, Chapter 18.
It was also this which meant that this large-scale industrial capital needed to avoid strikes, so as to keep production continuous, and needed the state to plan and regulate the economy, so as to avoid such fluctuations in demand and prices. It needed the ever-expanding single-market/state that is the basis of imperialism.
So, it is value that determines supply. As Marx sets out in Capital III, and in Theories of Surplus Value, Chapter 20, and in The Grundrisse, however, it is use-value that determines demand. If I don't like commodity A, I will not demand it, no matter how cheap it is. Similarly, if I am a steel producer, and require a certain quantity of iron ore to produce steel, I do not require more iron ore than that. It has no use-value for me over and above the quantity I need for production.
“No grounds exist therefore for assuming that the possibility of selling a commodity at its value corresponds in any way to the quantity of the commodity I bring to market. For the buyer, my commodity exists, above all, as use-value. He buys it as such. But what he needs is a definite quantity of iron. His need for iron is just as little determined by the quantity produced by me as the value of my iron is commensurate with this quantity.”
No comments:
Post a Comment