Monday 14 November 2016

Capital III, Chapter 50 - Part 7

In order to understand Marx's analysis, and the reason that basing your analysis on historic prices misses the point, it is necessary to understand the foundations of Marx's analysis of social reproduction, as grounded in the analysis of the Physiocrats, and the Tableau Economique, which begins with the previous year's harvest. It is this previous year's harvest which, in fact, produces the products which constitute the constant and variable capital. But, it is this year's production, which creates the new value. Moreover, it is this year's production which must physically reproduce the constant and variable capital used in this year's production.

The historic price – the amount of labour-time actually required last year, to produce the commodities that comprise the constant and variable capital consumed, in this year's production, is, therefore, irrelevant. The physical quantities of products required to reproduce the constant and variable capital are fixed. 

“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.” (Chapter 49, p 849)

Consequently, what is significant is not what proportion of total output and available social labour-time was used in the past to produce those commodities, but what proportion of current total output, and available social labour-time is now required for their reproduction and replacement! In other words, not their historic cost, but their current reproduction cost.

That includes any variation in that cost arising not just from changes in production, but also from technological changes, i.e. that two machines may be replaced by one that has the “effectiveness” of two. In other words, that accounts for “moral depreciation”.

“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.” (ibid)

In either case, what is relevant is not the historic cost, but the current reproduction cost, because it is the latter, not the former, which determines how much social labour-time, what proportion of the total gross output, must be devoted to the reproduction of the constant capital, what to the variable capital, and consequently, what is left over as surplus product and surplus value, and also thereby, what proportion this surplus product and surplus value represents relative to that portion of the social product that must be set aside for the means of production and means of consumption, in short what is the potential for accumulation and growth, what is the rate of profit.

“Thus, the separation and resolution of new value annually added by new labour to the means of production, or to the constant part of capital, into the various forms of revenue, viz., wages, profit and rent, do not at all alter the limits of the value itself, the total value to be distributed among these various categories; any more than a change in the mutual relations of these individual parts can change their total, this given magnitude of value.” (p 858)

Suppose last year, 1000 hours of social labour was used to produce the constant capital, used in this year's production. This 1,000 hours represents the historic cost. But, this is irrelevant if social reproduction is to continue on the same scale, if a change in social productivity changes this time. 

In an agricultural economy, for example, suppose a further 1000 hours was required to produce the commodities that constituted the variable capital. There was a total of 3000 hours of social labour-time available for the creation of new value, which means 2,000 constituted surplus value, and was constituted as a surplus product consumed by capitalists and landlords.

If there is a crop failure, so that this 3000 hours of available social labour-time is represented by a smaller mass of products, then its clear, as Marx stated earlier, this change in productivity does not just change the proportion of the day required to reproduce the labour-power, and therefore, the mass and rate of surplus value. It also affects the proportion of the available social labour-time, the proportion of the gross output that must be set aside to reproduce the constant capital. 

If the last year's harvest comprised 4000 commodity units ( 1000 c + 1000 v + 2000 s), in order to ensure reproduction on the same scale, then out of this year's production, 1000 units must again be devoted to replacing the consumed constant capital, and a further 1000 units to replacing the variable capital. Unless this is done, the same acreage of land cannot be planted, and the same amount of labour-power cannot be employed. In other words, social reproduction does not occur.

However, suppose that a crop failure causes this year's output to fall to 3000 units. In that case, the 1000 units required to reproduce the 1000 units of constant capital consumed, now comprises a third of the society's total output, whereas previously it constituted only a quarter. The same is true in relation to the variable capital. By contrast, the surplus product has fallen in half, and it comprises now only 1000 units. Previously, it made up half of the total social output, and now comprises only a third. The rate of surplus value was equal to 200%, and rate of profit to 50%. Now the rate of surplus value is equal to 100%, and the rate of profit is 33.3%.

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