Part 1 chapter 5 Economy in Employment of Constant Capital

Part 1 chapter 5

Economy in Employment of Constant Capital
(This post is part of an ongoing project: a close reading of volume 3 of Kapital, one post per chapter. I hope that others who are tackling this book for the first time might find my summaries and thoughts useful. I also hope that others might leave their own thoughts, criticisms, help, etc. here so that this blog might become a good collective resource for those brave souls who take on Vol. 3.)

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There are no dizzying equations in this chapter. There are some important points that will be of use in our future investigation of the Falling Rate of Profit. The FRP argument will claim that profits fall because the total investment in constant capital rises relative to the variable capital in the aggregate in the long run. Once most of the world’s population has been incorporated into the workforce capitalists cannot increase surplus value by hiring more workers. That surplus must be reinvested in generating relative surplus value instead- that is, invested in machinery which raises the social productivity of labor. But this means a rising concentration of fixed capital and a relatively stable variable capital, which means a falling rate of profit. Of course rising productivity also means that constant capital is made more cheaply. Can this stem the FRP? Many critics of the FRP say so. Let’s see exactly Marx is trying to say about the effects of the social productivity of labor on constant capital costs and the profit rate.

Marx begins by explaining that a rise in absolute surplus value will always raise the rate or profit. Remember that a change in absolute surplus value means a rise or fall in the total amount of surplus value, not a change in the rate of surplus value. A capitalist increases absolute surplus value by lengthening the working day or hiring more workers. This increases both v and s in the same proportion. When more work is being done more raw materials must be used up so the cost of circulating constant capital goes up. But because much of the capital invested in production is fixed capital, things like buildings and machines that wear out over the course of several years, the cost of c does not rise as fast as v and s. Therefore a rise in absolute surplus value means a rise in profits. A prolongation of the working day increases profits, even if overtime pay is paid! In addition, the turnover time of the fixed capital decreases as it is used up faster, thus boosting profit rates (see previous chapter.) Of course if the capitalist is hiring more workers instead of lengthening the work day this may eventually call for the purchase of more fixed capital which could effect the profit rate more dramatically.

Things are otherwise with relative surplus value. Relative surplus value comes from either reducing wages or increasing the productivity of labor. If the productivity is what is raising the surplus value then this means increased expenditures on machinery and raw material, which means a rise in c. Thus an increase in the productivity of labor exerts pressures to both raise and lower the profit rate. Which direction the influence goes depends on the degree of relative surplus value and the expense of the additional constant capital. It is the contention of the falling rate of profit that in the long run capitalists are forced by competition to invest more in constant capital then is actually gained, in aggregate, from relative surplus value. The thing about relative surplus value is that it is relative. The total amount of value being created stays the same. Meanwhile, year by year the mass of surplus value looking to be reinvested grows. More and more is plowed into fixed capital meant to increase relative surplus value. But this growing imbalance between C and s means that profit rates fall over time. But that argument comes later.

The first and foremost way in which capitalists economize on the use of constant capital is through the centralization of production. When machinery is concentrated in one place, on one shop floor, rather than spread out in small machines over many small producers, there is a more efficient use of constant capital. Such concentration of capital also increase the social cooperation of labor. Marx argues early on in Kapital Vol. 1 that cooperation between laborers increases the productivity of labor. By concentrating production in one place, sharing the same large machinery among a mass of workers, the cooperative powers of labor are harnessed and multiplied.

Marx is always making the point that what appears to be the production of value from machinery is actually the production of value by social labor. This is true to his method which asks how social production is coordinated via the exchange of material commodities- commodities that become bearers of value. Machines are commodities that bear value, they pass this value onto the product and they increase the social productivity of labor which increases relative surplus value. In the example here, when concentrated in one place they increase the social cooperation of labor which increases productivity and thus relative surplus value. But they don’t create value. This concentration of production takes the form of large investments in fixed capital: factories with huge machines, transport systems, etc. But this is also a radical economizing on constant capital compared to earlier periods of capitalism where production was dispersed between many independent, smaller factories, or even sub-contractors working from their houses.

[Perhaps reviewing some points about relative surplus value here would be useful. Relative surplus value means, among other things, that more value is not necessarily being produced, just more value relative to other costs or to other capitalists. If the productivity of labor increases in the food industry this means that the cost of subsistence of the working class goes down which causes wages to shrink which raises surplus value. In this example we see how the productivity of labor is truly a social phenomena, with one capitalist’s innovations aiding the entire class. But why would a capitalist engage in such an indirect means of increasing surplus value? There is another type of relative surplus value that motivates the capitalist directly. When a capitalist lowers their production cost per commodity below the socially necessary labor time for that commodity they reap relative surplus value. The actual value produced by that capitalist is lower than the socially necessary labor time (SNLT), yet the rest of the industry still prices their commodities at the SNLT. Profit is realized. Of course this encourages competition, imitation of this more efficient production method by competitors and eventually the SNLT lowers itself down to this new level. This type of relative surplus value is fleeting and pulls the capitalist class into a never-ending competition to increase productivity through technological innovation. Relative surplus value that comes from technological innovation makes it appear that machines themselves are creating value. But actually the opposite is happening. Machines are causing less value to go into each product. Meanwhile the cost of the new machinery may cause cost-price to rise.This will all be useful to us in discussing the falling rate of profit.]

Another way of economizing on constant capital is to recycle waste from production. This waste is also a result of the social productivity of labor. Marx doesn’t expand on this point much but we can see that today there are whole industries devoted to recycling productive and consumer waste in an attempt to decrease constant capital costs.

If for any reason surplus value becomes fixed then capitalists much seek to raise profits by decreasing constant capital costs. I can’t think of any real-life examples where surplus value is fixed so I assume that this is more of a theoretical abstraction in order to look at the way savings in constant capital increase the profit rate.

The amount of constant capital used in production is not a function of its exchange value, but of its use-value. To set a given number of workers in motion a certain amount of machines and raw materials are necessary. This number is given by the material-technical aspects of production and is not effected by the price of raw materials and machines. Surely, a capitalist must take their prices into account when deciding how much to invest, but it is the material use-value which determines the proportion of raw materials, machines and people needed in production. If these material-technical proportions change this is a a result of the changing productivity of social labor. The prices of raw materials and machines also may change. These changes are the result of changes in the productivity of labor elsewhere in the economy. If the price of flax falls its because flax production has become more efficient. If the price of office computers fall its because computer production has become more efficient.

Reductions in the wear of machinery decrease constant capital costs. If we factor in regular repair costs to our constant capital calculations then reductions in the wear of machinery mean less repair costs.

The increased productivity of labor in one industry, and subsequent falling of commodity prices, causes a saving in constant capital for other industries that rely on that commodity for production. If the cost of coal goes down, factories that rely on coal experience a fall in constant capital costs. This is a great example of how social production really is in a capitalist society. Changes in productivity in one sphere have rippling effects everywhere. Marx makes a brief aside here to say that changes in productivity come not just from the laborers directly engaged in production but also from the division of labor and from intellectual labor (scientific progress.) The capitalist takes advantage of this entire ensemble of social productivity, not just the productivity of his own workers. His comments about intellectual labor in Vol. 1 are useful on this point. Once an intellectual idea becomes widespread it offers up its value like a force of nature (like a windmill uses the power of wind). It becomes a free social good. I think these points are quite important in our current economic climate where the value of many industries rely so heavily on intellectual property and the legal copyrights that protect them.

On page 82 Marx returns again to point out that efficiency in the use of means of production by concentrating them in one place make possible the large scale use cooperation of labor and thus saves on constant capital. I’m not sure why he repeats the point again here.

If there were no constant capital costs then the rate of surplus value would equal the rate or profit. Adding constant capital costs into the equation only lowers the rate of profit. But we know that the material-technical process of production requires various proportions of constant capital. Therefore the capitalist seeks to get the best machines and raw materials for her money and to use these as efficiently as possible. No waste! Of course there is also the practice of cheating in exchange- of selling adulterated or cheapened products, but this issue involves the process of exchange and so we leave it alone here.

The paragraph on page 84 is doubly important. It begins by reminding us that just because increased productivity may cause the price of constant capital to fall this doesn’t meant that the total, aggregate price of constant capital falls. The interaction effects of this rising productivity are complex but we do know that the total mass of constant capital tends to rise relative to workers. One of the big debates among proponents and opponents of the falling rate of profit thesis is whether or not the cost of aggregate constant capital rises or falls over time. It’s clear that the mass does, but does the value of this mass rise as well or is it offset by the falling cost of constant capital? Marx says “A relative cheapening of the means of production does not, of course, exclude the possible increase of their absolute aggregate value, for the absolute volume in which they are employed grows tremendously with the development of the productive power of labour and the attendant growth of the level of production.” I read this as saying that it is possible for the value of aggregate constant capital to rise even though the per unit values of constant capital may be falling. But in this paragraph Marx does not seem to go further than to say that it is a possibility.

Instead of pursuing the point further Marx moves onto a discussion of the difference between the actual cause of the fall in constant capital cost (the productivity of labor) and the way this productivity appears to the capitalist and worker. When a capitalist buys cheaper constant capital this is a result of an increase in productivity somewhere else in the economy. This is one of the things that links the productivity of all labor together. But to the individual capitalist this decreased cost of raw materials, or more efficient machinery appears as the product of capital itself. Capital appears to create profit all by itself without the worker. But for Marx capital is a self-expanding circuit between money and commodities- a circuit whose powers of self-expansion come from the fact that the body of the worker is incorporated into the circuit.

The worker doesn’t care what the price of the means of production are. The worker only encounters the means of production as use-values. This interconnection of the social productivity of all labors which we observe in the changing value of constant capital- this harnessing of the collective productivity of the working class- appears as an alien force to the worker, a force that dominates him/her in production. But if workers owned the factories themselves, Marx cites the cooperatives of Rochdale as an example, this would not be their experience. (If anyone can cite other mentions of Rochdale in Marx’s writing I would appreciate that.)

While the capitalist is interested in getting the best quality of constant capital per dollar this concern for quality does not always extend to the sphere of safety and health standards. Dangerous machinery, overcrowding of workers in production… etc.- This continual problem of unsafe working conditions is a result of the desire to reduce constant capital costs without any regard for the living part of capital that spend its life working with these means of production.

It is often argued, against the theory of the falling rate of profit, that capitalists have an equal tendency to reduce both variable and constant capital costs and that therefore the organic composition of capital does not necessarily rise. Towards of the end of this section Marx seems to be saying something similar to this: “Just as capital has the tendency to reduce the direct employment of living labour to no more than the necessary labour, and always to cut down the labour required to produce a commodity by exploiting the social productiveness of labour and thus to save a maximum of directly applied living labour, so it has also the tendency to employ this labour, reduced to a minimum, under the most economical conditions, i.e., to reduce to its minimum the value of the employed constant capital.” But this tendency to seek reduced costs in both variable and constant capital doesn’t mean that there is no absolute objective tendency in the composition of capital. A decrease in per unit constant capital cost can only be the result of increased social productivity which necessarily means less and less labor is incorporated into each product. Meanwhile the mass of surplus value is growing, albeit at a decreasing rate, and it has no choice but to invest in more constant capital, thus raising the organic composition.

He then makes the following statement:

“We must make a distinction in economy as regards use of constant capital. If the quantity, and consequently the sum of the value of employed capital, increases, this is primarily only a concentration of more capital in a single hand. Yet it is precisely this greater quantity applied by a single source — attended, as a rule, by an absolutely greater but relatively smaller amount of employed labour — which permits economy of constant capital. To take an individual capitalist, the volume of the necessary investment of capital, especially of its fixed portion, increases. But its value decreases relative to the mass of worked-up materials and exploited labour.”

I believe Marx is saying that even though constant capital costs may rise in a firm this increased concentration of fixed capital can be seen as increased efficiency in the use of means of production. By concentrating capital in one place it permits more efficient use of these means of production even though it costs more to bring all of these means of production into one place.

The rest of the chapter is devoted to examples of these forces. Perhaps these will shed some light.

II. SAVINGS IN LABOUR CONDITIONS AT THE EXPENSE OF THE LABOURERS

Beginning with some dark reports of deadly labor conditions in the coal mines Marx points out that the attempt to save on constant capital outlays can mean a cruel squandering of human life. But instead of just referring to these savings as “savings in constant capital” he says, “Capitalist production… is very economical with the materialised labour incorporated in commodities.” Either way- variable or constant capital- what is being economized on is human labor. (But whether this is direct human labor or embodied human labor is essential for understanding profit rates.) Marx points out the absurdity that this reckless disregard for human life is what forms the basis of the way our social relations are reproduced.

And then, so briefly you might miss it, he slips in a rather romantic description of capitalism as “the epoch of history immediately preceding the conscious reorganisation of society.” It is rare that we hear Marx speak of communism. We should savor every bit we get, no matter how vague. If anything can sum up the radical potential in the idea of communism it is this phrase “conscious reorganization of society.” Not a society indirectly organized through competing self-interest but a consciously reorganized society of direct social relations.

There is a long passage relating the history of legal efforts to improve safety standards in factories. Nothing of terribly important theoretical important here but I do like the phrase, “killing was no murder when it occurred for the sake of profit.” As the increased social productivity through centralization of production brings workers together in large workplaces the nearness of large groups of humans to each other creates health problems in itself. Poor ventilation creates a huge increase in “consumption and pulmonary disease”. Marx takes pages listing the deaths in the English agricultural districts in 1860 and 1861. As with Vol. 1, my eyes tend to glaze over when Marx veers from theory into these long historical documentations of working conditions, diseases and deaths. But then I have to remind myself that we would know very little of the horror and destruction that capital wrought upon humanity in Marx’s time if it were not for his detailed lists, reports and descriptions. These are people who would have been forgotten by history- empty husks of bodies used up, discarded and forgotten by capital. Marx is taking time out of a very dense and theoretical book to record their stories because they are important. What contemporary Marxist economists devote so much time and writing to descriptions of the atrocities of the modern labor process? The amount of time Marx took to read and copy by hand factory-inspector reports and government hearings is amazing.

III. ECONOMY IN THE GENERATION AND TRANSMISSION OF POWER, AND IN BUILDINGS

The entirety of this section quotes a letter from “the famous engineer James Nasmyth of Patricroft, the inventor of the steam-hammer,” that Marx must have copied into a notebook with the intention of using for this section. It appears to just be an illustration of previously made points about economy of constant capital through more efficient power.

IV. UTILISATION OF THE EXCRETIONS OF PRODUCTION

Excretions come from both production and consumption. Capital tends to waste a lot of this, filling up landfills and polluting the planet. But sometimes the price of raw materials causes capital to seek to reuse these excretions in production. Advances in science allow us to find new ways of using these waste products. Of course in Marx’s time we didn’t have radioactive waste, carbon pollution, or styro-foam. There seems to be a scientific limit to how much of this waste can be reused. Marx points to the irrational waste of human poop which pollutes the Thames river in London rather than being used to fertilize farm land. In a rationally planned society we could put all this waste to good use. But in a capitalist society we must wait for it to be profitable. Our current debate over carbon trading could easily fit into this chapter.

Some of this recycling results in the production of crap. Marx gives the example of “shoddy”- inferior wool garments made from discarded rags and scraps that wear out easily. The poor workers who bought this shoddy had continually buy more of it as it wore out so quickly. This, I believe, is the origin of the word “shoddy” as an adjective to describe inferior goods. It may also be one of the first examples of planned obsolescence.

Reduction of waste is another way of saving costs. Technology which makes more efficient use of raw materials is the means of this reduction.

V. ECONOMY THROUGH INVENTIONS

The important point here is between universal labor and cooperative labor. This is the only place where I can think of seeing “universal labor” used in this way. Often universal labor is used interchangeably with the concept of Abstract Labor but I don’t think this is the intention here. Here universal labor refers to scientific labor, the fruits of which are used over and over again by the whole planet for as long as we deem it appropriate. Today we might use the term “intellectual labor” or “information”. Cooperative labor is the labor directly engaged in production. Once performed it is done with, history.

The trailblazers in an industry invest a lot in this “universal labor”. Their competitors come along later and imitate these technological advances at less cost. Many new ideas, at first used exclusively by one capitalist, become the free property of all of humanity thus offering up their forces like a free force of nature. Secrecy, patent and copyright can preserve the right to exclusively use a new idea and charge monopoly prices. But eventually competition will break down this barrier, liberating this idea.

In today’s economy, where the automation of production has really made intellectual labor one of the last remaining sources of value, we see this dynamic at work with a vengeance. We live in a perpetual innovation, information age where millions are spent on the race to come up with the next big new idea. But as soon as these ideas pass into the public realm we need new ideas to replace them. For more on this check out the book “Cutting Edge” edited by Jim Davis.

next post: Chapter 6

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2 Responses to Part 1 chapter 5 Economy in Employment of Constant Capital

  1. Pingback: Das Kapital vol.3 part 1, chapter 4: The Effect of Turnover on the Rate of Profit « Kapitalism101

  2. Your aside on relative surplus value is so well put. Many confuse it with the mere intensification of surplus extraction, (and thus give undue credit to c as such—so typical of course of classical and neo classical political economy).And the result, as usual, is obfuscation of the real source of value.

    I detect a strong Mandel influence on your reading of Marx. And you cannot go wrong with Mandel (esp vol 1 of MET), methinks.

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