Spring 1999
A
Paradox
We
know from last week, from Part 1 of Volume 3, that the rate of profit depends
primarily on the rate of s-v and the composition of capital. (It depends also on the turnover time if the
rate of profit is calculated not on the basis of each cycle but for example on
a yearly basis, but that is less important for this stage of the
argument.) Marx wants us to set aside
differences in the rate of s-v here and focus instead on different compositions
of different capitals. [Actually,
parenthetically, we should recognize his argument for why the rate of s-v tends
to be uniform in a given economic realm.
The uniform rate of s-v "assumes competition among the workers, and
an equalization that takes place by their constant migration between one sphere
of production and another" (275).
The workers being mobile or fluid, then, they would tend to flow from
the higher to the lower levels of exploitation and thereby create a tendency toward
equalization. That is why we can assume
a constant rate of s-v.]
·We know from
Volume 1 that in one sphere of production, textiles for example, there is a
tendency toward one common composition of capital. In other words, as new technologies and new divisions of labor
(say the power loom) are introduced that raise the productivity of the labor
process and thus raise the composition of capital, the value of the commodities
produced goes down and through competition all capitals in that sphere (here
textiles) are forced to adopt the new technologies and thereby conform to the
new (higher) composition of capital. [NB: a higher composition of capital
means a greater portion of constant capital with respect to variable
capital. In general, higher
productivity means a higher composition of capital because by definition the
labor-time for each commodity is reduced and also usually the value of the
constant capital required is raised.]
·While the
composition of capital tends to be common in each sphere of production,
however, Marx claims that in different spheres of production (textiles and
cotton growing, for example) there are very different compositions of
capital. Imagine that in textile
production which is conducted in a factory with relatively high technology the
composition of capital is 90c + 10 v, whereas in cotton growing which is very
labor intensive with low technology the composition of capital is 10c +
90v. Obviously, since labor is the
source of profit, the rates of profit in these two different cases could be
quite different (even if the rates of surplus value or exploitation were
different). See Marx's example between
European production (high tech) and Asian production (low tech) on pp.
249-50. [Clearly, the composition of
capital is not common not only among different sectors within one national or
regional economic sphere, but also varies geographically, from nation to nation
or region to region. This is something
very important that Marx deals with very little here.]
·This fact of
there being different compositions of capital in different sectors of
production and hence theoretically different rates of profit leads Marx to the
paradox that sets up all of Part 2.
Read p. 252 bottom. Several laws
of capitalist production are presupposed here:
a)
that commodities are sold at their value and that their value is determined by
the amount of labor-time that went into their production (the labor theory of
value from Volume 1);
b)
that "profits stand in direct proportion to the amount of capital, and
that capital of equal size yield equal profits in the same period of time"
in all sectors or spheres of capitalist production (that the profit on £100
invested in cotton growing should be the same as that on £100 invested in
textile production).
The
paradox is that when there are different compositions of capital, b contradicts
a; a says that the rates of profit must be different but b says they must be
the same.
Average
Profit and the Standpoint of the Totality
You
might ask at this point: who says that the rate of profit has to be constant in
different sectors of production, who says that £100 in cotton growing should
give just as much profit as £100 in textile manufacture? This seems to me a rather large and
important claim and I wish we had more argumentation for it, but what
explanation Marx does give depends on the mobility of capital and the
competition among capitals. "The
rates of profit prevailing in the different branches of production are
accordingly originally very different.
These different rates of profit are balanced out by competition to give
a general rate of profit which is the average of all these different
rates. The profit that falls to a
capital of given size according to this general rate of profit, whatever its
organic composition might be, we call the average profit" (257). [I wish we had some data to back this
up.] Here Marx is assuming that in
whatever economic realm or totality we are considering (the nation, for
example) that capital is perfectly mobile and fluid. Capital will thus flow naturally to wherever the profit rate is
highest. This unrestricted flow will
tend to raise the profit rates below the average and raise those above. Because of this equalization process too
much s-v will be paid in some sectors and too little in others, or rather,
which is to say the same thing, the price of some commodities will be above
their value and the price of other below.
Read p. 261 middle.
The
answer to the paradox, then, is that profit and value can only be understood
and reconciled from the point of view of the totality, the total social
capital. In what might be thought of as
a process of dialectical inversion, competition (the self-interest of each
individual capital) produces the standpoint of the totality (the total social
capital. The equalization of the rates
of profit due to the mobility and competition of capitals, or really the
creation of the general rate of profit, creates a situation in which the profit
of each capital does not depend directly on the surplus value generated in its
own production process, but rather is a portion of the total profit on the
total social capital. "What they
secure is only the surplus-value and hence profit that falls to the share of
each aliquot part of the total social capital, when evenly distributed, from
the total social surplus-value or profit produced in a given time by the social
capital in all spheres of production" (258). From the perspective of the totality, the value of the total
social product is equal to the price of the total social product. Value and price do not coincide, however,
from the particular standpoints of specific commodities or specific branches of
production.
Price
I
see three primary consequences of this notion of a general rate of profit that
is determined by the total surplus value on the total social capital: the first
and more practical is a theory of prices; the second, which is really correlate
to the first, is a theory of supply and demand; and the third and more
theoretical is a notion of class.
Marx
told us in Volume 1 that he was assuming that commodities were sold at their
value but that in fact price and value often diverge. Now he is explaining how and when they diverge. Value is determined by the total labor-time
that went into its production, or really by the sum of the constant cap.,
variable cap, and surplus-value that are contained in the product. Consider these examples:
cotton
10c + 90v + 30s = 130 (30%
rate of exploitation)
textile
90c + 10v + 10v = 110 (100%
rate of exploitation)
The
calculation of the price of a commodity, on the other hand, takes a completely
different route. Value = c+v+s, whereas
price = k+kp'. So with a general rate of profit (p')=20%
cotton
100k + 100x20% = 120
textile
100k + 100x20% = 120
In
one case the price is above the value and in the other below. The only perspective in which price = value
is that of the totality (or that of the average).
·Here we can
recognize more clearly than even we could last week that the individual
capitalist's standpoint that understands production in terms of profit and
price cannot see that the value of commodities is determined by the labor they
contain and that profit depends on the extraction of unpaid labor. "It appears to them, rather,
that the profit which they pocket is something different from the surplus-
value they extort; that the grounds for compensation do not simply equalize
their participation in the total surplus-value, but that they actually create
profit itself, since profit seems to derive simply from the addition to the
cost process made with one justification or another" (313). The real production of value cannot be seen
(or is not true) from the standpoint of individual capitals; only from the
perspective of the totality, that is total social capital, can one see that
value is determined by labor and that unpaid labor is the source of profit.
Supply
and Demand
The
relationship between supply and demand takes on the same form as the
relationship between value and price.
First of all, like value and price, supply and demand when considered
from a particular perspective do not necessarily coincide. "In actual fact, demand and supply
never coincide, or, if they do so, it is only by chance and not to be taken
into account for scientific purposes; it should be considered as not having
happened" (291). Now, whereas
value and price do coincide when we expand from the particular perspective to
the totality, supply and demand require a temporal expansion of perspective to be
seen as coincident. In other words,
although Marx has already said that "demand and supply never
coincide," he continues to say that "supply and demand always
coincide if a greater or lesser period of time is taken as a whole; but they
coincide only as the average of the movement that has taken place through the
constant movement of their contradiction" (291). Once again, the coincidence is recognized only in terms of the
average or from the standpoint of the totality or, what I take is a third
conception of the same process, as oscillations around a common center of
gravity.
Now
the oscillations of supply and demand do not only take the same form as the
oscillations of price and value, the two oscillations are related and even
co-determining. In other words, we can
first see, as the capitalist commonly sees, that the relationship between
supply and demand explains the divergences of market price from market
value. Marx continues, however, that
"if demand and supply determine the market price, then market price in
turn, and at a further remove market value, also determine demand and
supply" (292). For example, if
prices go up with respect to value, then demand will go down. Moreover, or more interesting, is the determination
of supply and demand by the process of the equalization of rates of profit
(which is really also indirectly the relationship between price and
value). "This constant migration
[of capitals], the distribution of capital between the different spheres
according to where the profit rate is rising and where it is falling, is what produces
a relationship between supply and demand such that the average profit is the
same in the various different spheres, and values are therefore transformed
into prices of production" (297).
So, I wouldn't say that the effects of supply and demand are illusionary
or false, but rather that they merely indicate a more fundamental movement,
which involves the variation between price and value in different sectors, a
variation that oscillates around a center of gravity that is the general rate
of profit.
Class
The
notion of totality that grounds Marx's proposition of a general rate of profit
is interesting because of how concrete that totality is. If the nation is taken as the total space,
then the totality of social capital appears on something like the national
balance sheet. The coherence of the
totality is created precisely by the competition and mobility among capitals
and among labor.
Now,
this totality is also given as the key here to the understanding of class
interest and even class consciousness.
In the first instance it might appear that capitalists compete with one
another for the greatest profit, but those are merely oscillations around a
common center of gravity. From the
perspective of the totality, or the general rate of profit, the capitalists
actually cooperate as a class.
"From what has been said so far, we can see that each individual
capitalist, just like the totality of all capitalists in each particular sphere
of production, participates in the exploitation of the entire working class by
capital as a whole, and in the level of this exploitation; not just in terms of
general class sympathy, but in a direct economic sense, since, taking all other
circumstances as given, including the value of the total constant capital
advanced, the average rate of profit depends on the level of exploitation of
labour as a whole by capital as a whole" (298-99).
"We
thus have a mathematically exact demonstration of why the capitalists, no
matter how little love is lost among them in their mutual competition, are
nevertheless united by a real freemasonry vis-à-vis the working class as a
whole" (300).
"This
is the form in which capital becomes conscious of itself as a social power,
in which every capitalist participates in proportion to his share in the total
social capital" (297).