Monday 30 October 2017

Theories of Surplus Value, Part II, Chapter 8 - Part 63

It is only because production takes place on a large and increasing scale that the organic composition of capital can itself rise. Again, referring back to an earlier point, it was for this reason that, under capitalist production, industry could become more productive – in the second sense – than agriculture. It is only large scale production that makes it possible to introduce machinery, and increased masses of fixed capital.

“Incidentally, it is clearly only possible to have a ratio of 1 :1/6, for example, in the cotton industry, if a constant capital (this depends on the machines etc.) amounting to say £ 10,000 has been laid out, hence wages amounting to 2,000, making a total capital of 12,000. If only 6,000 were laid out, of which wages would be 1,000, then the machinery would be less productive etc. At 100 it could not be done at all.” (p 111)

But, on the other hand, as production expands, and productivity rises, the value of the machines and other fixed capital falls, and the productivity of this fixed capital itself thereby rises. One machine now does the work that two machines previously did, and so on.

“... more raw material and the same amount of labour require less machinery etc.” (p 111) 

“Then the ratio of variable to constant capital grows again, but only because the absolute [amount of] capital has grown. This is a check against the fall in the rate of profit.” (p 111)

Moreover, Marx describes the increasing amounts of laid out capital, i.e. the increasing scale of production required here to justify this increased mass of fixed capital, which brings about the rise in productivity, in the second sense, i.e. an increase in the quantity of use values produced, whilst resulting in a reduction in the amount of surplus value produced, relative to the laid out capital, i.e. a fall in the rate of profit, or profit margin.

But, the same process also means that the rate of turnover of capital rises, because it shortens the production period and circulation time. So, although the surplus value may fall relative to the laid out capital, it inevitably rises against the advanced capital, so that the annual rate of profit, and so annual average rate of profit rises.

“On the one hand, with the advance of industry, machinery becomes more effective and cheaper; hence, if only the same quantity of machinery were employed as in the past, this part of constant capital in agriculture would diminish; but the quantity of machinery grows faster than the reduction in its price, since this element is as yet little developed in agriculture.” (p 112) 

By contrast, where raw material cost increases, as a proportion of the value of industrial commodities, as productivity rises, and the proportion of labour costs fall, in agriculture, the fall in raw material prices, arising from rising productivity means that they increase as a proportion of cost to a much smaller degree.

“... raw material does not increase as a component part of the process of creating value to the same degree as it increases as a component part of the labour-process.” (p 112)

On this basis, it can be seen why landlords feared improvements in productivity that reduced agricultural prices, and so potentially rents. The same applied to the extension of land under cultivation. The same thing can be seen today in the concern of landowners to limit the amount of land available as building land, which thereby keeps land prices and property prices high.

But, Petty and D'Avenant showed that the rate of rent might decrease even as the amount of rent or rental rose. The reason is that a much greater outlay of capital is involved in bringing about the increase in supply. So, for example, a lot of capital may be employed to drain land as happened in Holland. As a consequence of this additional land being brought into cultivation, the total amount of rent collected may rise, but, as a proportion of the capital advanced that rent represents a smaller amount.

“It is also evident here, that the Englishman always regards the level of rent as rent related to capital and never to the total land in the kingdom (or to the acre in general, like Herr Rodbertus.” (p 113)

Back To Part 62

Forward To Chapter 9

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