The Recovery Process: Corrective Mechanisims

G. The Recovery Process: Corrective Mechanisims

That “business livens up again” is taken for granted (MECW 32: 127). The corrective mechanisms assuring recovery turn partly on the low market prices relative to costs

26 See also: “Credit, which does not concern us further here, is the means whereby accumulated capital is not just used in that sphere in which it is created, but wherever it has the best chance of

being turned to good account. Every capitalist will however prefer to invest his accumulation as far as possible in his own trade. If he invests it in another, then he becomes a moneyed capitalist and instead of profit he draws only interest – unless he goes in for speculative transactions” (MECW 32: 114). 27 See also the reminder that “the examination of money – both in so far as it represents a form altogether different from the natural form of commodities, and also in its form as means of payment – has shown that it contained the possibility of crises . . . ” (MECW 32: 124).

1861–1863 II: Sectoral Analysis, Accumulation, and Stability characterizing crisis – or more accurately depression – reflected in a depreciation of

capital values: “ . . . the destruction of capital through crises means the depreciation of values which prevents them from later renewing their reproduction process as capital on the same scale. This is the ruinous effect of the fall in the prices of commodities. It does not cause the destruction of any use values. What one loses, the other gains. Values used as capital are prevented from acting again as capital in the hands of the same person. The old capitalists go bankrupt.” But the buyer of these commodities who has acquired them at “half their cost price, can go ahead very well once business livens up again, and may even have made a profit.

A large part of the nominal capital of the society, i.e., of the exchange value of the existing capital, is once for all destroyed, although this very destruction, since it does not affect the use value, may very much expedite the new reproduction.” The phenomenon is illustrated by transfers from the “industrial” to the “more enterprising” “monied” interest:

This is also the period during which monied interest enriches itself at the cost of industrial interest. As regards the fall in the purely nominal capital, state bonds, shares, etc. – in so far as it does not lead to the bankruptcy of the state or of the share company, or to the complete stoppage of reproduction through undermining the credit of the industrial capitalist who hold such securities – it amounts only to the transfer of wealth from one hand to another and will, on the whole, act favourably upon reproduction, since the parvenus into whose hands these stocks or shares fall cheaply, are mostly more enterprising than their former owners (127–8).

We shall return to the “more enterprising” monied interest in Chapter 14. Marx’s elaboration of “competition of capitals” (above, Chapter 10, p. 307.) is relevant to this issue. Here Marx envisages “the gradual compression of prices below their value” albeit above capitalists’ outlays (here called “costs”) with the differential (profit) continually reduced: “competition could force down the rate of profit everywhere, not only in one branch, but in many, indeed in all branches of production, through a gradual compression of prices below their value” (MECW

33: 91). But the fall in the rate of profit would be only temporary since each industrial capitalist would also obtain his inputs cheaper “as a result both of the devaluation of the total capital advanced and of the diminution in the production costs of labour capacity, hence the rise of surplus value relatively to variable capital” (92). Account must also be taken of the fixed-income recipients and “moneyed class”: “But society includes classes with fixed incomes, the moneyed class, etc., creditors and so on, hence there are fixed deductions from surplus value or profit which do not fall with the reduction in the rate of profit or the fall of the prices of commodities beneath their value.” And with the constant nominal income the moneyed classes “would be able to buy more. . . . [They] would in fact pocket the considerable part of the surplus value lost by industrial capital itself.” Marx, referring to Blake 1823, adds that “something of the kind took place in England between 1815 and 1830.” And in this empirical context the recovery process is ascribed largely to increased

H. On the “Overproduction” Literature 349 expenditures by the fixed-income and moneyed classes: “. . . a [depressed] state of

affairs could only be temporary, since it would call forth bankruptcies among the industrialists (as among the English farmers between 1815 and 1830) and hold up the accumulation of capital. A reaction would necessarily occur. Therefore, although competition may reduce the rate of profit not only in a particular branch of industry, as long as it is higher than the average rate, but also, as Adam Smith says, in all branches, the latter effect can only be temporary.” This latter observation is of the highest importance in defining the scope of Marx’s observations of the “overproduction” problem (above, Section E).

Should increased expenditures on the part of the fixed income and moneyed classes be devoted to consumption, “the price of the commodity would again move closer to its value, hence the rate of profit would again rise.” But matters are more complex if it is “loaned out again as capital,” for there would then be “a yet further increase in competition, hence the rate of profit, which had already fallen a long way, would sink still further owing to a further reduction of the prices of the commodities beneath their values, thereby bringing about a crisis, an explosion and a reaction. . . . ” Even so, “the new placements of funds, whether as interest or as rent, would be made at a lower rate, in line with the fall in prices” stimulating the return on industrial capital.

We return to the real dimension, or the “destruction of capital through crisis” in the sense of excess capacity and unemployment: “Machinery which is not used is not capital. Labour which is not exploited is equivalent to lost production. Raw material which lies unused is no capital. Buildings (also newly built machinery) which are either unused or remain unfinished, commodities which rot in warehouses – all this is destruction of capital” (MECW 32: 127). Unfortunately, Marx does not clarify whether the destruction of “real” capital also plays a corrective role – as it certainly does with J. S. Mill (Hollander 1985: 463–4).