Increasing Rate of Surplus Value and Cheapening of Constant Capital

D. Increasing Rate of Surplus Value and Cheapening of Constant Capital

We shall presently draw upon the foregoing results in our exegetical analysis of Marx’s position. But before we can proceed to this task we must establish that Marx, who formulated his “tendency” with constant s/v, stood by the declining profit trend even in the event of rising s/v : “the rate of surplus value, at the same, or even a rising, degree of labour exploitation, is represented by a continually falling general rate of profit” (MECW 37: 211; emphasis added). Or again in a very useful summary of his position:

The law of the falling rate of profit, which expresses the same, or even a higher, rate of surplus value, states . . . that any quantity of the average social capital, say, a capital of 100, comprises an ever larger portion of means of labour, and an ever smaller portion of living labour. Therefore, since the aggregate mass of living labour added to the means of production decreases in relation to the value of these means of production, it follows that the unpaid labour and the portion of value in which it is expressed must decline as compared to the value of the advanced total capital. Or: An ever smaller aliquot part of invested total capital is converted into living labour, and this total capital, therefore, absorbs in proportion to its magnitude less and less surplus labour, although the unpaid part of the labour applied may at the same time grow in relation to the paid part (214; emphasis added). 11

Subsequently in this chapter on “The Law as Such,” Marx refers to an increase in the rate of exploitation “through a drop in the value of wages due to an increase in the productive power of labour” (as well as by lengthening or intensifying the working day) (218; cf., 224), without suggesting that such variation threatened the law. While he neglected to spell out the relevant constraints on surplus per man in the chapter now under discussion, he clearly stood by the profit-rate decline notwithstanding an increasing rate of exploitation, a fact much emphasized by Meek (1967: 131) following Rosdolsky (1980: 398–411). 12

This conclusion may be reinforced by reference to the profit-rate decline in the subsequent chapter on “counteracting tendencies.” Here, allusions to extensions of the workday and intensification of labor (MECW 37: 230–1) are followed by a most revealing observation regarding the reduced cost of producing wage-goods or increased “relative” surplus value:

Moreover, it has already been demonstrated – and this constitutes the real secret of the tendency of the rate of profit to fall – that the manipulations to produce relative surplus value amount, on the whole, to transforming as much as possible of a certain quantity of labour into surplus value, on the one hand, and employing as little labour as possible in proportion to the advanced capital, on the other, so that the same reasons which permit raising the intensity of exploitation rule out exploiting the same quantity

11 Similarly, in an international comparison Marx provides an example where the profit rate is lower in that country which has a higher c/v ratio despite a higher s/v (MECW 37: 213).

12 Rosdolsky (1980: 401) provides much textual evidence from the Economic Manuscripts 1861– 63.

D. Increasing Rate of Surplus Value and Cheapening of Constant Capital 119 of labour as before by the same capital. These are the counteracting tendencies, which,

while effecting a rise in the rate of surplus value, also tend to decrease the mass of surplus value, and hence the rate of profit produced by a certain capital (231; emphasis added).

Or again: the “same factors which raise the rate of relative surplus value, lower the mass of the employed labour power” (232). And yet more specifically: “The tendency of the rate of profit to fall is bound up with a tendency of the rate of surplus value to rise, hence with a tendency for the rate of labour exploitation to rise. . . . The rate of profit does not fall because labour becomes less productive, but because it becomes more productive. Both the rise in the rate of surplus value and the fall in the rate of profit are but specific forms through which growing productivity of labour is expressed under capitalism” (238).

The foregoing position is further reiterated at the outset of the third chapter of the trio dealing with the profit-rate decline – on “internal contradictions of the law”: “We have just seen that even a rising rate of surplus-value has a tendency to express itself in a falling rate of profit” (239). And subsequently in this same chapter the theme is again taken up in an elaboration of the development of the “social productive power of labour” (245). Rising productivity manifests itself both in rising s/v : “the reduction of the necessary labour time required for the reproduction of labour power,” and in rising c/v: “the decrease in the quantity of labour power (the number of labourers) generally employed to set in motion a given capital.” These “two movements not only go hand in hand, but mutually influence one another and are phenomena in which the same law expresses itself” (246).

Evidently the rising rate of exploitation alluded to here is not a “counteract- ing tendency” in the sense of a “disturbing cause” or change in ceteris paribus conditions, but a variation built into the process of rising K/L. Meek (1967: 136) defended Marx on these lines against the criticisms of Joan Robinson and others. But he does concede some validity to a further complaint that Marx treats reduc- tions in the value of constant capital – the “‘cheapening” of constant capital – as a counteracting cause incidental only to the law (see also Dickinson 1956–57: 123; Dobb 1959: 99–100). The fact is, however, that just as Marx allows in stating the law for rising s/v due to reductions in v, so he allows for “cheapening” of c, taking the position that despite such cheapening the value composition of capital can be expected to rise with increases in the technical composition, thus reducing employment per $100 of investment: “ . . . the same development which increases the mass of the constant capital in relation to the variable reduces the value of its elements as a result of the increased productivity of labour, and therefore prevents the value of constant capital, although it continuously increases, from increasing at the same rate as its material volume, i.e., the material volume of the means of production set in motion by the same amount of labour power. . . . [T]he same influences which tend to make the rate of profit fall, also moderate the effects of this tendency” (MECW 37: 234). Still, as we shall see in Section E, there is this

Economic Growth and the Falling Rate of Profit

important difference between the allowances in formulating the falling profit rate for rising s/v and for rising c/v – that the former has a sound rationale whereas the latter merely reflects a particular empirical estimate. It is also pertinent that Marx neglects the impact on c/v of rising productivity in the wage-goods sector (see below, p. 126).

Before proceeding, it should be noted that the impact of higher productivity in reducing capital-goods costs reflects continuous advance of science and technol- ogy, and extends beyond new additions to capital to the original stock upon its replacement:

The development of the productive power of labour reacts also on the original capital already engaged in the process of production. A part of the functioning constant capital consists of instruments of labour, such as machinery, &c., which are not consumed, and therefore not reproduced, or replaced by new ones of the same kind, until after long periods of time. But every year a part of these instruments of labour perishes or reaches the limit of its productive function. It reaches, therefore, in that year, the time for its periodical reproduction, for its replacement by new ones of the same kind. If the productiveness of labour has, during the using up of these instruments of labour, increased (and it develops continually with the uninterrupted advance of science and technology), more efficient and (considering their increased efficiency), cheaper machines, tools, apparatus, &c., replace the old. The old capital is reproduced in a more productive form, apart from the constant detail improvements in the instruments of labour already in use. The other part of the constant capital, raw material and auxiliary substances, is constantly reproduced in less than a year; those produced by agriculture, for the most part annually. Every introduction of improved methods, therefore, works almost simultaneously on the new capital and on that already in action (MECW 35: 600–1; emphasis added).

The emphasis on continuous scientific and technological progress – apart from ongoing minor improvements of a mechanical order – is striking. Such advance is in fact represented as “gratis” – gratis, that is, to the capitalist, since the impact of technological obsolescence is said to be passed on to labor under pressure of “competition”:

Like the increased exploitation of natural wealth by the mere increase in the tension of labour power, science and technology give capital a power of expansion independent of the given magnitude of the capital actually functioning. They react at the same time on that part of the original capital which has entered upon its stage of renewal. This, in passing into its new shape, incorporates gratis the social advance made while its old shape was being used up. Of course, this development of productive power is accompanied by a partial depreciation of functioning capital. So far as this depreciation makes itself acutely felt in competition, the burden falls on the labourer, in the increased exploitation of whom the capitalist looks for his indemnification (601).