The Limited Impact of a Rising Rate of Surplus Value

E. The Limited Impact of a Rising Rate of Surplus Value

We shall return to the value composition of capital and its trend after looking more

E. The Limited Impact of a Rising Rate of Surplus Value 121 of rising s/v or (for this amounts to precisely the same thing) the limits to surplus

per unit of labor (say, per day). In the Grundrisse, Marx states very clearly the limits to the rise in s as v per day falls, and one element of his rationale for a falling profit rate is explained far more satisfactorily than do the formulations given in Capital itself (see MECW 28: 265–6, cited Chapter 8, p. 253). The point made is that each given successive cost reduction of, say, β percent has a declining absolute impact on surplus per day; so that once the value of the wage basket has fallen to very low levels in consequence of the cumulative effect of the annual cost reductions, a further cost reduction of β percent will have a negligible absolute impact on the surplus. (This reflects the simple fact that value per day is a constant and divided between surplus and necessary labor; though s/v rises to infinity as v → 0, absolute s has an upper limit.) Consequently, as P L falls by β per cent annually, we have surplus per day, (1– P L ), rising at an ever decreasing rate.

The passage from the Grundrisse says nothing explicitly about the force of the (declining) rate of increase in surplus per man relative to the fall in employment per $100, upon which depends surplus per $100. This issue is broached in the Economic Manuscripts 1861–63 (MECW 32: 433 as we shall see below Chapter 10, p. 308); and in Capital 1:

... the compensation of a decrease in the number of labourers employed, or of the amount of variable capital advanced, by a rise in the rate of surplus value, or by the lengthening of the working day, has impassable limits. Whatever the value of labour power may be, whether the working time necessary for the maintenance of the labourer is 2 or 10 hours, the total value that a labourer can produce, day in, day out, is always less than the value in which 24 hours of labour are embodied. . . . The absolute limit of the average working day – this being by nature always less than 24 hours – sets an absolute limit to the compensation of a reduction of variable capital by a higher rate of surplus value, or of the decrease of the number of labourers exploited by a higher degree of exploitation of labour power. This palpable law is of importance for the clearing up of many phenomena, arising from a tendency (to be worked out later on) of capital to reduce as much as possible the number of labourers employed by it, or its variable constituent transformed into labour power, in contradiction to its other tendency to

produce the greatest possible mass of surplus value (MECW 35: 309–10). There are, in brief, “impassable limits” to the compensation for falling net value per

$100 – i.e., falling employment per $100 – that can be generated by rising surplus per workday, not only limits imposed on lengthening the working day – absolute surplus value – but those imposed on relative surplus value achieved by reducing the costs of wage goods (in line with the Grundrisse).

A famous passage from Capital 3, in the chapter on internal contradictions of the law, also touches on the issue of the relative strengths of the labor-reducing (and thus value-reducing) and surplus-increasing forces – on the one hand, L per $100 and, on the other, surplus per hour and thus surplus per $100:

Inasmuch as the development of the productive power reduces the paid portion of

Economic Growth and the Falling Rate of Profit

but inasmuch as it reduces the total mass of labour employed by a given capital [$100], it reduces the factor of the number by which the rate of surplus value is multiplied to obtain its mass. Two labourers, each working 12 hours daily, cannot produce the same mass of surplus value as 24 who work only 2 hours, even if they could live on air and hence did not have to work for themselves at all. In this respect, then, the compensation of the reduced number of labourers by intensifying the degree of exploitation has certain insurmountable limits. It may, for this reason, well check the fall in the rate of profit, but cannot prevent it altogether (MECW 37: 246). 13

The opening reference to reductions in the “paid portion of employed labour” due to “the development of the productive power” might, in itself, be read as an illusion to the fall in v due to technical progress – reductions in the cost of producing wage- goods. Unfortunately, Marx proceeds to illustrate his contention that the profit rate decline is only checked and not prevented, by reference to the limited effects of extensions in the length of the working day. Now of course such extensions are constrained by the “insurmountable limits” of nature (or by legislation). Marx seems to forget the impact of efficiency increase with which the passage apparently commences. This, however, is precisely the key issue; extensions of the working day or of the intensity of labor are merely sideshows because of their quantitative limits. But we need not stress this weakness, since Marx has said enough to make it clear that his proposition is intended to hold good generally – i.e., even if we assume working days of given length and intensity – once allowance is made for the impact upon v of new technology.

As we know, declining R requires that L 100 fall over time (above, p. 115); for (1 – P L ) is rising and a rising L 100 would confirm an upward trend in R. Marx proceeded by taking for granted that L 100 does indeed decline. On this assumption he is correct that R will fall (at least ultimately); because of the limits to compensation deriving from rising surplus per unit of labor, the relative impact of declining L per $100 is constantly growing. R may yet rise at initial stages of the trend path notwithstanding falling L per $100, should this decline be outweighed by the rising trend in surplus per man. But this Marx seems to have appreciated; at least he sometimes states that the law applies “in the long run”: “The rate of profit could even rise if a rise in the rate of surplus value were accompanied by a substantial reduction in the value of the elements of constant, and particularly of fixed, capital. But in reality, as we have seen, the rate of profit will fall in the long run” (228). Similarly, the “long-period” property of the law emerges in the chapter on counteracting tendencies: “ . . . the same influences which produce a tendency in the general rate of profit to fall, also call forth countereffects, which hamper, retard, and partly paralyse this fall. The latter do not do away with the law, but impair its effect. Otherwise, it would not

be the fall of the general rate of profit, but rather its relative slowness, that would

be incomprehensible. Thus, the law acts only as a tendency. And it is only under 13 See also Economic Manuscripts 1861–63, MECW 33: 108–11, cited Chapter 10, p. 308.

F. Implications of Differential Rates of Productivity Increase 123 certain circumstances and only after long periods that its effects become strikingly

pronounced” (233; emphasis added).

Of course, even assuming that our parameters β K ,β L , and α are such as to assure a fall in L(n) (and thus in R) there is no guarantee that the decline will set in within a period of much interest to anyone: the “long-run” may be very long indeed (cf. Dickinson 1956–7: 129; Meek 1967: 135). And the decline may be almost imperceptible – except to a computer calculating to several decimal places. This too seems to be implied in the foregoing passage.

The major problem, however, is that L per $100 need not necessarily fall; Marx and his defenders, who insist on the ultimate necessity of a declining R, have put excessive weight on the limit to surplus per hour – itself a valid notion within the “value” framework. For, as we have seen, even a rising value composition – the condition is that

1−β K (1 + α) > 1 1−β L

– does not guarantee falling L n . But secondly, the value composition of capital may not rise despite an increase in the physical capital-labor ratio. (For example with β K = .091, β L = .0455 and α = .1 the value composition rises; but with α at .05 the same β values yield a decline.)

It has, on the other hand, emerged from our analysis that the case for falling R is enhanced by assuming β L >β K . Now a lag in the impact of new technology on wage-goods, so it may be supposed at first sight, will put downward pressure on

the profit rate, since the rise in s/v is muted. 14 But in fact the opposite is true –

a relatively unprogressive wage-goods sector implies a lower value composition than in the reverse case, for P K /P L is lower, and to that extent stimulates L per $100 and R. In the next section we shall consider Marx’s position regarding the relative progressiveness of the two sectors.