Anti-Duhring, Part III – Socialism, I – Historical - Part 13

But, as Marx notes, as soon as credit arises, the currency circulation becomes almost infinitely flexible. Capitalists are no longer reliant upon the supply of money tokens from the state, because they are able to trade with each other via commercial credit transactions, the use of Bills of Exchange and so on. The consequence of this is that, irrespective of any change in the value of money, capital is able to cover the increased costs it faces, be it from rising wages or other costs, by raising prices, again, irrespective of any change in values. It simply increases the amount of credit in circulation, which is tantamount to an increase in the currency supply, reducing the value of each money token/the standard of prices – inflation.

So, as relative wages rise, and relative profits fall, that is reflected, not in a “recession”, driven by a falling rate of profit, but a proportional movement of capital into wage goods production. Capital mitigates this process, and tries to protect its relative profits, by inflating the currency supply/credit, and so causing a general rise in prices, but that cannot change the underlying material conditions, of the demand for labour expanding faster than its supply. As seen, clearly, in the 1960's/70's, as capital inflates the currency supply, to enable firms to raise prices, to protect profits, workers simply respond by demanding even higher nominal wages, so as to protect their real wages. It simply creates a price-wage spiral, and increasing instability.

As the rate of profit falls, and the supply of additional money-capital from realised profits falls, relatively, the rate of interest rises, causing asset prices to fall. All this was seen, for example, in the period between 1962-1974. What was also seen, and is discussed by Marx in Theories of Surplus Value, Chapter 21, is that, as this unfolds, workers, also, demand a shorter working-day, more holidays and so on. Consequently, not only does relative surplus value fall, but so does absolute surplus value. Eventually, this phase of boom tuns into a phase of crisis in which the squeeze on profits from rising relative wages, creates an overproduction of capital relative to labour. The least efficient capitals start to make losses, and this spreads across the economy.

“The rate of profit would not fall under the effect of competition due to over-production of capital. It would rather be the reverse; it would be the competitive struggle which would begin because the fallen rate of profit and over-production of capital originate from the same conditions. The part of ΔC in the hands of old functioning capitalists would be allowed to remain more or less idle to prevent a depreciation of their own original capital and not to narrow its place in the field of production. Or they would employ it, even at a momentary loss, to shift the need of keeping additional capital idle on newcomers and on their competitors in general.

That portion of ΔC which is in new hands would seek to assume a place for itself at the expense of the old capital, and would accomplish this in part by forcing a portion of the old capital to lie idle. It would compel the old capital to give up its old place and withdraw to join completely or partially unemployed additional capital.”

(Capital III, Chapter 15)

But, it is precisely this crisis of an overproduction of capital relative to labour that provokes capital to seek to resolve it via a technological revolution.

“...the fall in prices and the competitive struggle would have driven every capitalist to lower the individual value of his total product below its general value by means of new machines, new and improved working methods, new combinations, i.e., to increase the productivity of a given quantity of labour, to lower the proportion of variable to constant capital, and thereby to release some labourers; in short, to create an artificial over-population.”

(ibid)

Whether it is the introduction of steam engines to power machines, or electric motors, or internal combustion engines, assembly lines, electronic devices, or microchips, the driver of all these developments is to replace labour in the production process, and so overcome the relative shortage of labour/overproduction of capital.

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