I The nature of the problem to be solved
To maintain our grip on what Marx is doing in this chapter, we need to recall the conundrum he has just posed.
We have shown […] that in different branches of industry unequal profit rates prevail, corresponding to the different organic composition of capitals, and, within the indicated limits, corresponding also to their different turnover times; so that at a given rate of surplus-value it is only for capitals of the same organic composition – assuming equal turnover times – that the law holds good, as a general tendency, that profits stand in direct proportion to the amount of capital, and that capitals of equal size yield equal profits in the same period of time. […]. There is no doubt, however, that in actual fact, ignoring inessential, accidental circumstances that cancel each other out, no such variation in the average rate of profit exists between different branches of industry, and it could not exist without abolishing the entire system of capitalist production. The theory of value thus appears incompatible with the actual movement, incompatible with the actual phenomena of production, and it might seem that we must abandon all hope of understanding these phenomena.
In other words, ignoring for the moment differences in turnover time, of the conditions (1) that labour is the source of all new value, (2) that a general rate of profit applies between sectors of production, (3) that a general rate of surplus-value operates between sectors, and (4) that the organic composition of capital varies between sectors, on the face of it only three can coexist at the same time. Yet conditions (2), (3) and (4) are observable facts; and condition (1) is the basis of our entire theory. The existence of a general rate of profit contradicts the determination of value by labour-time: the coexistence of these two factors needs to be explained, as Marx elsewhere puts it, by means of a set of ‘intermediary stages’.
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Hi Ed, great blog. I have a question-
I know there is no Transformation Problem in the usual sense. but there is still a difficulty in understanding how the turnover of fixed capital is going to be accounted for (accounted as accountancy). Fixed capital turns over much slower than either circulating or variable capital and Marx is consistently clear that the value of this part of the means of production is passed on to the output in successive production periods as a percentage of its cost relative to its lifetime as a use value consumed productively.
This is not however the whole story even at this level of abstraction, though I may be arriving at ‘completely incorrect conclusions’, because in Department 1 the drive for surplus profits will keep forcing down the prices of the means of production and thus their Socially necessary abstract labour time. This will mean that as these drop I will no longer be able to add the full cost of my own outlay as a percentage because that value is no longer what it was. Its the equivalent of a golden spindle. I will be selling below the value of my own product while my recently opened competitors will be able to realise an excess until I catch up and re-organise the value composition of my own productive capital. So value is transferred to my competitors with a lower C(f).
I seem to have answered my own question. Do you agree that this is how we interpret the text and doesn’t this contradict the TSSI historic cost argument.
Cheers for the time and care you’ve spent on this, it has been very useful at our reading group, and to me personally
Scott
Hi Scott: thanks for your kind comments.
I broadly agree with your answer to your own question. I also think that Marx is *explicit* in chapter nine that the what is passed on to the value of the commodity through the productive consumption of constant capital is what the capitalist actually laid out on it, independently of either how much socially-necessary labour had actually been expended on its production or how much it would cost to replace it either at the moment of production or at the moment of the sale of the commodity which bears this value. In that sense it is the ‘historic’ (rather than any other) cost that is passed on (and I am broadly sympathetic to the TSSI position, although I wouldn’t claim to speak on its behalf). But what I think happens is that as labour productivity rises and hence the value (in terms of socially necessary labour) of as yet not used up fixed capital falls the capitalist is forced through competition to sell *below value*, and hence fails to realise an average rate of profit.
Thanks for the quick response- a follow up
So we could say that the capitalists ‘target cost’-the price “in her head, so to speak” is going to be too high and corrected by the new situation she finds herself in and this would suggest that these deviations from values in the previous production period are themselves part of how the prices and profits equalise in any given period and will tend to equalise down. A mitigating factor will also be that my own replacement costs for machinery is lower than it was historically and if I act quickly, and have a sufficient supply of money capital then the above situation will correct itself without my going under. Either way in the sector as a whole the tendency is for C(f) to drop over time relative to each unit of production and pricing and profit to follow that previous development.
I am very grateful to the TSSI, as it does return us to the logic of the argument as presented- but though the historic cost argument is intuitively satisfying I think we have to accept that moral depreciation does play a role in the setting of prices and profits. But I don’t really see the need to choose between current cost and historic cost, as my competitors with the lower value competition are obviously going to try initially to sell at the same price as my own outmoded production process does in order to realise a super profit. They will only bring their own prices down to their values as competition forces them to and then only as far as they have to as their own competitors will act towards them in exactly the way they did towards me, they will delay this as long as possible. In this sense there is gradient between historic and current cost that depends on the rate of change of the socially necessary labour time in department 1. The gradient being a spatial distribution of capitals of different ages -Time as Space. We could all meet up and agree that the rate of change of c(f) is destabilising our sector and plan accordingly how this effect can be mitigated- plotting historic cost/current cost gradients over time and agreeing a
profit strategy that takes this into account and projects into the future. The marketing of new machinery to as wide a market as possible would serve the same function as we will all be aware of a possible saving in prices of production and act pre-emptively even if this means writing off unrealised value in our current means of production.Value is value,whether paid or unpaid, says Marx. But value has always to be created-afresh whether paid or unpaid and labour-savings now are going to over-ride past(dead) labour.
I also wonder and am going to have to think about the other possible effects of various turnovers on the schema in this and chapter 10.It seems obvious that a higher turnover of variable capital in one sector will tend to acceleration of ‘absolute moral depreciation'(obsolescence) as we all attempt to speed up our turnover we will all have to direct more and more capital to new labour saving devices and this will drive profit down globally. I suspect that this tendency to replace machinery(invest) before it can pass on its full value will over ride the counter tendency to cheapening means of production(relative moral depreciation). And (pushing it now) that in this sense it IS historic cost that lurks behind the tendency. The mortality rate of start-ups would suggest that this is so.
This will hopefully safeguard me from a monstering by Andrew Kliman for simultaneity (ha). Does it seem like a sound argument to you. I’m on my own on this one and any input is greatly appreciated.
Scott.
Oops, typo ; ‘Lower value composition’ Line 5 paragraph 2.
s
I think this all sounds perfectly reasonable. The argument about replacement cost and historic cost seems to me to boil down to this. If, through moral depreciation, because of rising labour productivity, the capitalist is forced to sell at a price in which the fixed capital component of a commodity is determined by the replacement cost, then, if you argue that the price of production of the commodity includes a fixed capital component determined by what was actually laid out on it then the capitalist sells below value. If c[c] is circulating constant capital, c[f-h] is what the capitalist actually laid out on fixed capital, c[f-c] the current replacement cost of the fixed capital, v wages and π profit, then if the capitalist is forced to sell at c[c] + c[f-c] + v + π rather than c[c] + c[f-h] + v + π , and c[f-c] is less than c[c-h], then there’s a shortfall which has to come out of profit. Essentially, the capitalist has laid out x on fixed capital and got less than x back. There’s a shortfall. And as you say, if the moral depreciation is severe enough, the capitalist may actually have to scrap the fixed capital before it is even completely used up. It seems to me that the argument about historic versus current replacement costs is not about whether the capitalist has to sell at replacement cost or no but that when she inevitably does she fails to realise average profit.
Still thinking this through, mind, but that’s how it seems to me.
Let me know what you come up with. I think its important to try and return Marx as Marx to the fray and a collective effort at elucidation seems like the best way to combat the academicising tendencies that are ever present.
Will do. And I fully agree.
Ed
I don’t see the need for The iteration in Kliman’s model, because I don’t see the ‘inconsistency’ that bourgeois marxists find in this chapter. Surely it only boils down to the fact that In the previous production period (that is relative to my own capital; the production of the raw materials and replacements for fixed capital assets used up) the prices of production have already been set by the same mechanisms as in this. There is no additions of profit from one to the next period, (no r+r) because the previous period has already subsumed the profit into their own price of production which has been realised by my purchase. Whether they have sold at their value or not is immaterial to me and to society as a whole as the whole sector is continually adjusting their prices through the equalisation of the rate of profit. It obscures the value production, but it does not change it because at the level of the total social capital invested in that sector the sum of values equals the sum of prices. They are the same thing from different points of view, value is the proletarian product and price the capitalists means of realising the normal return on his investment
Why do we need to determine the values produced in each individual capital, when Marx specifies all the way through volume 1 that the appearance of value is exchange value (and by this I have understood that he means that it manifests itself in the social world as exchange-value and not that it only looks-like exchange-value.The essence of essence is to appear)
This is what I understood to be the logical movement from essence to appearance. Value can only appear as exchange value because it only realises itself in exchange- the confrontation with other commodities produced privately under different conditions. As the appearance of social labour it does not reveal itself in private production, but in the fetishised form of exchange value in the specifically capitalist form of the social which is the market.
Isn’t all the sturm und drang over this really just a hangover from the sweezy- steedman days when price and value were not understood to be forms of the same thing. Value is the created essence and price is the appearance it takes in a class-society that appropriates it through accumulation and its conversion into property. In the final analysis all value is appropriated surplus value and only exists because of and through the class-system.
Am I missing something.
regards
Scott
Oh and do you know what the stakes were in the barney over Heinrich between Kliman/Freeman and Roberts/Carchedi on Roberts blog?