Implications of Differential Rates of Productivity Increase

F. Implications of Differential Rates of Productivity Increase

We note first a possibly relevant concession on Marx’s part regarding the scope of his “law.” In the course of his exposition Marx, as we know, insists that the rate of

14 Cf. Dickinson 1956–57: 128: “There is reason to believe that, as an empirical fact, the produc- tivity of labour does not increase so fast in the production of workers’ consumption goods as

in the production of capital goods and luxury goods. If this is so . . . [the rate of surplus value] increases more slowly than we have assumed, and the point of diminishing [rate if profit] is reached with a smaller K than we have assumed.” Also Meek 1967: 141–2: “The initial rise in the rate of profit will be higher and the point of downturn will be later . . . the greater is the rise in productivity in the wage-goods industries relatively to that in the capital-goods industries.” And Rosdolsky relates Marx’s position that a rise in the rate of surplus value will not suffice to prevent the profit rate from falling to the probability that productivity increase in agriculture will fall short of its overall increase (Rosdolsky 1980: 407–8).

Economic Growth and the Falling Rate of Profit

profit falls despite a rising s/v. But he also adds the proviso that uniform technical progress is the exception:

Outside of a few cases (for instance, if the productiveness of labour uniformly cheapens all elements of the constant, and the variable, capital), the rate of profit will fall, in spite of the higher rate of surplus value, (1) because even a larger unpaid portion of the smaller total amount of newly added labour is smaller than a smaller aliquot unpaid portion of the former larger amount, and (2) because the higher composition of capital is expressed in the individual commodity by the fact that the portion of its value in which newly added labour is represented decreases in relation to the portion of its value which represents raw and auxiliary material, and the wear and tear of fixed capital (MECW 37: 225; emphasis added).

Clause (1) relates to the limited impact of rising surplus per unit of labor; clause (2) alludes to the rise in value composition. And the case for falling R is here said not to apply where β K = β L ;β K β L is represented as a necessary condition for the argument.

What may Marx have intended by thus restricting the scope of his “law” of falling R? After all, a uniform rate of value decrease, i.e., constant P K /P L , does assure a rise in value composition – in this case in organic composition–equal to α . (It is true though that L n and R will not necessarily fall.) In the event β K >β L , then P K /P L tends downwards checking the value composition and acting against a decline in L 100 and R – a “counteracting force.” The case for a falling L n and R is thus strengthened by assuming relatively rapid progress in wage-goods production, or β L >β K , and thus rising P K /P L . It cannot be ruled out that Marx intended by his restriction to limit his falling R to such cases. It is still possible on this view to incorporate the “cheapening of the elements of constant capital” as a counteracting force to the decline in R; for the profit-rate decline would be yet sharper should the capital-goods sector be unaffected by new technology. Whether or not this was Marx’s intention, the notion that the value composition rises despite the impact of new technology upon the price of “constant capital” can be more easily justified if we assume a relatively greater impact upon the price of wage-goods.

But this is inconclusive. We must look more closely at Marx’s empirical evaluation of the relative impact of new technology. There is much written in the Economic Manuscripts 1861–63 regarding the issue, in particular the passages which suggest a faster rate of agricultural than industrial improvement under advanced capitalism

(MECW 31: 341, cited Chapter 14, p. 420). 15 On this view there had occurred, or was actually underway, a transition between the relative growth rates of productivity favoring agriculture. However, as Perelman (1985) has pointed out, elsewhere in the same work a certain pessimism intrudes regarding prospects for agriculture

15 Cf. letter to Engels, 2 August 1862: “a prerequisite for industry is the older science of mechanics, while the prerequisites for agriculture are the completely new sciences of chemistry, geology

and physiology” (MECW 41: 397). On chemical applications and geological knowledge in Marx’s writings during the 1860s and 1870s, see references in Rubel 1963: 1567.

F. Implications of Differential Rates of Productivity Increase 125 under capitalist organization, with special reference to soil exhaustion (MECW 32:

433–4, cited Chapter 10, pp. 308–9). Whether there occurred a “sudden change” in viewpoint, as Perelman proposes (1985: 470), is open to question. Marx may well have distinguished between shorter-run and longer-run prospects. This seems to be the case in Capital. Here agriculture is represented as subject to a peculiar degree to labor-displacing technology – so much so that while aggregate industrial employment expands over time, agricultural employment declines: “As soon as capitalist production takes possession of agriculture, and in proportion to the extent to which it does so, the demand for an agricultural labouring population falls absolutely, while the accumulation of the capital employed in agriculture advances, without this repulsion being, as in non-agricultural industries, compensated by a greater attraction” (MECW 35: 636; 37: 631). At the same time, Marx warned of dangerous prospects ahead:

... all progress in capitalist agriculture is a progress in the art, not only of robbing the labourer, but of robbing the soil; all progress in increasing the fertility of the soil for a

given time, is a progress towards ruining the lasting sources of that fertility. The more a country starts its development on the foundation of modern industry, like the United States, for example, the more rapid is this process of destruction. Capitalist production, therefore, develops technology and the combining together of various processes into

a social whole, only by sapping the original sources of all wealth – the soil and the labourer (507–8).

Similarly, it emerges in Capital 3 that while capitalism promotes agricultural tech- nology it does so at the expense of (ultimate) exhaustion of the soil: “The moral of history, also to be deduced from other observations concerning agriculture, is that the capitalist system works against a rational agriculture, or that a rational agri- culture is incompatible with the capitalist system (although the latter promotes technical improvements in agriculture), and needs either the hand of the small farmer living by his own labour or the control of associated producers” (MECW

37: 123). 16 But even allowing for soil exhaustion (and assuming this implies a lag in agri- cultural productivity) it would still not be certain that wage-goods prices fall less rapidly than capital-goods prices. After all, raw materials constitute an important part of constant capital – indeed an increasingly important part (110); to that extent any constraint upon the impact of new technology in the extractive industries acts to maintain the value composition of capital by raising P K relative to P L with a negative effect on R.

16 On occasion, Marx seems actually to assume positive cost increases; thus “agriculture and the extractive industries” entail “a decrease in labour productivity and, therefore, an increase in the

number of employed labourers” (MECW 37: 60). See also the Economic Manuscripts MECW

33: 290–1. Burkett 1999 finds in our texts an important contribution to modern ecological issues.

Economic Growth and the Falling Rate of Profit

The question that remains is whether similar constraints keep up the value of variable capital – wage-goods. The argument in the Economic Manuscripts regard- ing the limits to increasing surplus value relative to falling employment (referred to above, p. 121) is followed immediately by the assertion that “the value of labour capacity does not fall in the same degree as the productive power of labour or of capital increases” (MECW 32: 433). This might mean no more than β L < α; but the assertion is justified in terms of the more rapid development of industry considering prospective land exhaustion (cited above, pp. 124–5) and this suggests

β L <β K . 17 The evidence, therefore, is mixed, but on balance it seems fair to con- clude that Marx viewed with some pessimism the relative prospects for agricultural

technology under capitalism in the very long term. But what to make of this weighting? One cannot escape the impression that Marx wished to avoid taking up the impact of wage-goods prices on R via the value composition of capital; it is the impact on R via the rate of surplus value – the limited impact – upon which he concentrates. Thus, in discussing the formation of a general rate of profit in Capital 3, he writes that “[t]he organic composition of capital depends at any given time on two circumstances: first, on the techni- cal relation of labour power employed to the mass of the means of production employed [our K/L]; secondly, on the price of these means of production [our P K ]” (MECW 37: 153) – entirely neglecting P L . The following chapter on coun- tervailing influences to the law of falling R does allude to reduced wage-goods prices but allows for an impact on R only by way of the rate of surplus value: “Since foreign trade partly cheapens the elements of constant capital, and partly the necessities of life for which the variable capital is converted, it tends to raise the rate of profit by increasing the rate of surplus-value and lowering the value of constant capital” (235). Marx seems to forget that v is the denominator not only of s/v but also of c/v ; lowering the value of “constant capital” says very little if the value of wage-goods is also falling. In the same chapter he refers to increasing relative surplus value (by way of reduction in wage-goods costs) as a force rais- ing or maintaining the profit rate in a case where technology is such as not to require a higher K/L ratio: “Everything that promotes the production of relative surplus value by mere improvement in methods, as in agriculture, without altering the magnitude of the invested capital, has the same effect [of raising the profit

17 This order of magnitude is further reinforced: “An additional factor is that, as a consequence of landownership, agricultural products are more expensive compared with other commodities,

because they are sold at their value and are not reduced to their cost price. They form, however, the principal constituent of the necessaries” (Economic Manuscripts 1861–63; MECW 32: 433). Marx is basing himself here on a presumption that the organic composition in agriculture is low – itself an index of relative technological backwardness – so that value exceeds cost price,

a differential which is not competed away by inflows of capital but is absorbed by “absolute” rent. (See Chapter 1, Section E for the discussion in Capital 3.) And there is also allusion to a sort of diminishing returns applied, however, in a context of falling costs: “Furthermore, if one-tenth of the land is dearer to exploit than the other nine-tenths, these latter are likewise hit ‘artificially’ by this relative infertility, as a result of the law of competition” (433–4).

G. Technical Progress and the Falling Profit Rate: An Overview 127 rate]” (231). Doubtless he intended to define instances where increasing K/L is

not involved in order to assure the force of rising s/v undiminished by rising c/v; but again he neglects the fact that, even with given K/L, c/v rises with falling v. As

a final example, consider the interesting complexity allowed by Marx, that a rise in productivity in the capital-goods sector can affect R by raising s/v as well as by lowering c/v :

If the decrease in the expenditure of constant capital is due to economies, etc., in lines of production whose products enter into the labourer’s consumption, then this, just like the direct increase in the productivity of the employed labour itself, may lead to

a decrease in wages due to a cheapening of the means of subsistence of the labourer, and may lead, therefore, to an increase in the surplus value; so that the rate of profit in this case would grow for two reasons, namely, on the one hand, because the value of constant capital decreases, and on the other hand, because the surplus value increases (844).

Again the fall in v is allowed to act on s/v but not on c/v. Marx’s rather cavalier approach towards the determinants of c/v cannot be justi- fied. If, as seems to be his position, the fall of materials’ prices is ultimately destined to lag behind those of capital goods proper because of the exhaustibility of natu- ral resources, then β K (which relates to capital-goods proper as well as materials) will exceed β L , so that P K /P L falls, with a positive effect on R, via the lower value composition of capital.