Materials, the Luxury-Goods Sector, and the General Profit Rate
H. Materials, the Luxury-Goods Sector, and the General Profit Rate
Marx, we have shown, adhered to the Ricardian inverse profit-wage relation. But
he did so “all else remaining the same” (above p. 38). Included in the ceteris paribus pound are the prices of raw materials, for should they rise or fall the general profit rate will be affected: “Since the rate of profit is s C , or s c +v , it is evident that everything causing a variation in the magnitude of c, and thereby of C, must also bring about a variation in the rate of profit, even if s and v, and their mutual relation, remain unaltered. Now, raw materials are one of the principal components
41 of constant capital. Even in industries which consume no actual raw materials,
H. Materials, the Luxury-Goods Sector, and the General Profit Rate
these enter the picture as auxiliary materials or components of machinery, etc., and their price fluctuations thus pro tanto influence the rate of profit” (MECW 37: 108). Accordingly, foreign trade can affect the general profit rate, independently of any change in the wage rate, by affecting “the prices of raw or auxiliary materials consumed in industry and agriculture,” a relationship misunderstood by Torrens and neglected by Ricardo: “It is due to an as yet imperfect understanding of the nature of the rate of profit and of its specific difference from the rate of surplus value that, on the one hand, economists (like Torrens) wrongly explain the marked influence of the prices of raw material on the rate of profit, which they note through practical experience, and that, on the other, economists like Ricardo, who cling to general principles, do not recognise the influence of, say, world trade on the rate of profit.” The valid charge that Ricardo confused s/v and s/(c + v) is first stated in the Grundrisse (see Chapter 8, p. 252), and then in the Economic Manuscripts (see Chapter 10, p. 311).
There is a related matter, also conspicuous in the Economic Manuscripts (see Chapter
10, p. 312). The set of industries in Marx’s V-scheme does not distinguish between wage goods and luxuries, suggesting that aggregate profits and the average profit rate are calculated by reference to all industries in the system; by implication, any disturbance affecting profits in the luxury sector will influence the general return. This is strongly insisted upon:
But in general, it should be noted . . . that if variations take place, either due to savings in constant capital, or due to fluctuations in the price of raw materials, they always affect the rate of profit, even if they leave the wage, hence the rate[s ′ ] and amount of
surplus value, untouched. They change the magnitude of C in s ′v C , and thus the value of the whole fraction. It is therefore immaterial . . . in which sphere of production these variations occur; whether or not the production branches affected by them produce necessities for labourers, or constant capital for the production of such necessities. The deductions made here are equally valid for variations occurring in the production of luxury articles, and by luxury articles we here mean all production that does not serve the reproduction of labour power (MECW 37: 107).
Marx’s case against Ricardo thus turns on his non-discrimination between indus- tries in laying out the initial value scheme; to avoid his conclusion he would have had to set out the scheme to exclude luxuries. For those interpretations of the Transformation according to which the profit-rate depends solely on the rate of
exploitation (s/v) and the organic composition (c/v) of “basic” goods, 25 Marx fell into serious error.
25 See Howard and King on the demonstration by Bortkiewitz to this effect (1985: 143, 149). See also Medio 1972: 330–1, 340–1 cited above, p. 11; Steedman 1982: 125–6.
42 Value and Distribution
Parts
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» The Transformation of Values into Prices: Formal Analysis
» The Transformation and the Allocation Mechanism
» Competition Constrained: Land Scarcity and Firm Size
» On “Market Value” and Competition
» The Inverse Wage-Profit Relation and Profit-Rate Equalization
» Materials, the Luxury-Goods Sector, and the General Profit Rate
» The Rate of Surplus Value as Endogenous Variable
» More on Final Demand and Distribution
» Concluding Comment: The Baumol-Samuelson Exchange
» Setting the Stage: Stationary Reproduction as Circular-Flow Process
» Determinants of the Rate of Accumulation
» The “Simple Reproduction” Scheme
» The “Extended Reproduction” Scheme
» ARRANGEMENT CHANGED FOR PURPOSES OF ACCUMULATION:
» The Subsistence Wage and the Value of Labor Power
» The Falling Wage Trend and Population Growth
» The Industrial Reserve Army and Cyclical
» Inter-Sectoral Labor Movements
» Concluding Remarks: Objections to Malthus
» The Conditions for a Falling Rate of Profit
» Increasing Rate of Surplus Value and Cheapening of Constant Capital
» The Limited Impact of a Rising Rate of Surplus Value
» Implications of Differential Rates of Productivity Increase
» Technical Progress and the Falling Profit Rate: An Overview
» Concluding Comments: On the Significance of the Falling Profit Rate
» Trend and Cycle: Causal Mechanisms
» The Raw Material Constraint and Upper Turning Point
» The Labor Constraint and Upper Turning Point
» Inter- and Intra-Departmental Imbalance
» Wage-Rate and Profit-Rate Trends
» The Private-Property System: Ricardo as bˆete noire
» On Aggregate Demand and “Overproduction”
» In Partial Defense of Proudhon
» Objections to Friedrich List
» Allocation, Cost Price, and the Labor Theory
» On “Labor Power” and the Source of Surplus Value
» The Inverse Wage-Profit Relation
» More on the Real-Wage Trend: Increasing Organic Composition,
» Profit-Rate Determination: “Competition of Capitals”
» Labor and Free Trade: On Marx’s Ricardian bonˆa fides
» Surplus Value and the Transition to Growth
» Elements of a Growth Model: Productivity Increase, Population
» A Marxian “Reply” to B¨ohm-Bawerk
» Surplus Value: Matters of Timing and Indebtedness
» On Ricardo and Surplus Value: An Excursus
» Capital Turnover: A Circular-Flow Process
» Obstacles to Value Realization
» On the Law of Markets and Overproduction Literature
» On Working-Class Consumption
» Profit-Rate Equalization and the Transformation
» The Transformation Aborted: Absolute Rent and the Priority
» The Falling Rate of Profit and Its Significance
» Materials, the Luxury Sector, and the General Profit Rate
» Commercial Capital and the Surplus-Value Doctrine
» Conditions for “Continuous” Accumulation
» Aggregate Demand Constraints
» Sources of Cyclical Instability
» The Recovery Process: Corrective Mechanisims
» On the “Overproduction” Literature
» The “Wages Fund” Doctrine Rejected: Synchronized
» Labor Demand and Technical Change
» Labor Supply: Population Growth and the “Reserve Army”
» The Mechanics of Population Growth and the Falling Wage Trend
» The Economic Role of Inequality
» The Allocative Role of the Free Market vs. Central Control
» Preliminaries: Industrial Organization
» The Supervisory and Allocative Functions
» Science and the Sources of New Technology
» On “Profit of Enterprise” in Capital 3
» On Joint-Stock Organization and Limited Liability
» Marx’s “Revisionism”: The 1860s and 1870s
» Marx and the Classical Canon: The Theory of Value
» Marx and the Classical Canon: The Trend Path of the Factor Returns
» Epilogue: On Engels and the “Closure” of Marx’s System
» Objections to Smithian National-Income Accounting
» On Differential Rent 1851–53
» Contemporary Commentary on Limited Liability
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