Capital Vol. III Part III
The Law of the Tendency of the Rate of Profit to Fall
Chapter 15. Exposition of the Internal Contradictions of the Law
After two chapters of pretty straightforward exposition of the falling rate of profit this chapter struck me as shockingly ambiguous at times. It contains several passages that seem blatantly underconsumptionist. I can also see where confusion comes from between terms like overaccumulation and overproduction. As with much of this book my suspicion is that the most constructive approach is to always try to settle dispute over the micro-details of textual interpretation through recourse to the general methodological structure of the argument.
The central problem is that of the rising social productivity of labor. Under other circumstance this productivity could be a good thing but within the context of capitalist social relations it is self-contradicting. (And it is this way with everything in capitalism- the use-value contradicts the exchange-value.) The mass of surplus value rises at the same time that the rate of profit falls. Capital fulfills its purpose in self-expanding yet at the same time it negates itself by diminishing the very component that breathes life into it, human labor. Yet this contradiction is only true to the extent that rising productivity results in a rising organic composition of capital.
Thus Marx’s explanation of the falling rate of profit exposes the historical limit to capitalism. Prior theories of capitalist crisis rested on the idea that crisis was a result of some eternal trauma or limit to the natural equilibrium of the system. For Marx such external interferences are secondary to the antagonism that exists at the heart of the system. Yet, what does Marx mean when he says that the FRP exposes the historical limit to capital? There has been debate as to whether Marx saw crisis as a terminal stage of capitalism- that capitalism will reach a crisis which it cannot overcome. But this is not a currently accepted view of crisis amongst any of the contemporary crisis thinkers I have followed. Crisis is a central part of the accumulation cycle. It devalues capital, destroys some of the accumulated surplus, clearing the way for accumulation to begin anew. While many capitalists may not survive crisis, capitalism seems to always emerge renewed and stronger. I don’t think we should read Marx’s comment about the historical nature of capital as expressing some faith in a terminal crisis. I think it is more useful to say that there are limits to how far the social productivity of labor can be developed without contradicting the private ownership of means of production- that capitalism limits the historical development of the human species.
After a brief criticism of Ricardo Marx turns to a discussion of the limits to the creation and realization of surplus value. The argument he makes is pretty straightforward. What isn’t so clear is how this relates to the rest of his argument about the falling rate of profit. I’ve seen parts of these two paragraphs quoted by underconsumptionists , yet the surrounding paragraphs seem to bear no relation at all to the problem of realization that they talk about.
Marx begins by saying there are two limits to the production of surplus value. These are the size of the population and the rate of exploitation. Assuming a given rate of surplus value, capital can only appropriate as much surplus value as there are workers to be exploited. Given a fixed working population capitalists are only limited by the degree of relative surplus value they can extract from workers. All this sounds good and familiar. This is the basic distinction between absolute and relative surplus value. But what about the falling rate of profit? Is this a limit to surplus value production? Later in section III of this chapter (p.251 Moscow Edition) Marx will say that the falling rate of profit forms a limit to accumulation at that point in which the growing mass of surplus value isn’t great enough to compensate for the falling rate of profit. Yet here he says that “the creation of surplus value has no other limits than those mentioned above”. This is because the TRFP is not a limit on surplus value production but on the cost of surplus value production. In other words, the TRFP says that producing SV gets more and more expensive, but not that it can’t be produced.
What are the limits to the realization of surplus value? This limit is the “antagonistic conditions of distribution, which reduce the consumption of the bulk of society to a minimum varying within more or less narrow limits.” This looks like the basic underconsumptionist argument. Later, on page 257, he will even dismiss the classic response to this underconsumptionist argument, that capitalists can make up their own demand for surplus products.
Here there is much interpretive room for debate as to how to make sense of these statements and how they relate to the overall structure of the argument. What is the status of the realization problem to crisis theory? What is the relation of realization to the TRFP?
I’ve seen these passages quoted so many times, and with such different takes. Though I tend to agree with his work on crisis theory I couldn’t help but laugh at Guillelmo Carchedi’s interpretation where has to insert copious bracketed qualifications:
It is this contradictory outcome, an increasing output of use values incorporating a decreasing quantity of (surplus) value, that is the ultimate cause of crises: “periodical crises … arise from the circumstance that now this and now that portion of the labouring population becomes redundant under its old mode of employment” (op. cit, p.264). In other words, ultimately crises are the consequence of labour reducing but productivity increasing technological innovations. Therefore, “the ultimate reason for all real crises [as opposed to financial and speculative crises, G.C.] always remains the poverty and restricted consumption of the masses [due to the expulsion of labour as a consequence of labour decreasing and productivity increasing technologies, G.C.] as opposed to the drive of capitalist production to develop the productive forces [the productivity of labour through those technologies, G.C.] as though the absolute consuming power of society [rather than the poverty and restricted consumption of the masses, G.C.] constituted their limit” (op. cit. p.484). As argued above, this quotation should not be interpreted in an underconsumptionist light, as if it were impossible to realize all the (surplus) value produced. This would then be the ultimate cause of crises. But for Marx there is no such theoretical impossibility.”
-Carchedi’s “Return from the Grave” recent crisis essay.
It seems like Volume 2 left us with the conclusion that there was no realization problem- that given the correct investment strategies capitalism could go on accumulating forever. The premise that Marx’s reproduction shema was based on was the premise that technological changes were held constant. This immediately leads to Volume 3 which is about the destabilizing effects of technological change on profit rates. On the other hand we could view the Volume 2 argument as establishing the analytical possibility for balanced accumulation, which is different than saying that realization problems can’t happen. In fact if we remember way back to the beginning of volume 1 we’ll remember that it is the separation of purchase and sale which makes crisis a possibility. A crisis is, by definition, a phenomenon which we will witness in the realm of the market, in the inability to sell things and purchase things. But the fact that it appears in the market does not mean that its source is in the market.
I guess we could also argue that the reproduction schema of Volume 2 also rest on the assumption that there is some way of actually knowing what investment strategies will allow for reproduction. It could be argued that without some sort of planning we end up with realization problems. I feel like such arguments are constantly being alluded to by David Harvey in his Limits to Capital where after explaining the complexity of turnover times or fixed capital investments he asks how capital could maintain balanced growth given the lack of coordination. But isn’t the profit rate a means of coordination? Or, at least, isn’t it supposed to be? If the profit rate is stable capital should be able to flow from sectors of overproduction into profitable areas with market demand (like the demand for capital goods). The profit rate is the coordinating force that should take care of realization problems. That doesn’t mean that all SV is always realized. The process of investment, mistakes, failures, readjustments of investment will involve some SV not being realized, some devaluation, etc. But this is not the same as a crisis. Or, to put it another way, this happens on a different level of abstraction than the forces of crisis. This is why realization questions always resolve to a discussion of the profit rate and whether or not it can do its job.
For many, the attempt to establish a singular theory of crisis is pointless…. There are multiple places where capital can break down. This is the gist of the plural in Harvey’s “LimitS to Capital”. On the other hand, even Harvey, wants to give these Limits a unifying theme, the overaccumulation of capital (or in his current pedagogy “3% compound rate of growth). Harvey’s desire to treat all the different “limits” to capitalist accumulation as just a list of factors, all on the same level of abstraction reminds me of Sweezy’s statement that instead of talking about a tendency of the rate of profit to fall we should talk about the overall change in the rate of profit as influenced by a variety of factors, none of which have some sort of primacy. This emphasis on multi-causal theories of crisis are often accompanied by admonitions to avoid “dogmatism” and “orthodoxy”.
I find these comments about dogmatism distasteful and problematic but I won’t get into that here. In terms of multi-causal theories I have this to say: the difficulty with Marx’s method, and with understanding capitalism, is that we are dealing with lots of different levels of abstraction and vantage points at the same time. Just thinking about all of the contradictions of a capitalist society, workers vs. capitalists, use-value vs exchange-value, the contradiction in the money form, workers vs machines, etc, one might be tempted to see these as a series of intertwined but separate contradictions. I don’t think this is the case. I think that they are all the same contradiction which takes many different forms. The most fundamental of these is the contradiction between ourselves and our alienated product. This takes the form of a commodity with a use-value and an exchange-value. This exchange value takes the form of capital and capital takes the form of capitalists, etc.
In terms of crisis theory, these contradictions all come to the fore in a crisis. Their inner antagonisms are laid bare (more of less). The contradiction in the money form becomes speculation and debt, the contradiction between production and exchange becomes a realization problem, the contradiction between classes becomes austerity and political struggle, and the contradiction between ourselves and our alienated product is expressed in the tendency of the rate of profit to fall. The Marxist project is more than just identifying these contradictions. It seeks to systematize their inner relations to get at their most fundamental nature. This is why I think it is important to theorize crisis as a structure of inter-related categories rather than a list of limits.
On with the chapter….
The rest of part one of this chapter is more straightforward.
The accumulation of capital is not just dependent on the mass of profit but also on the prices of the means of production and labor power that the capitalist purchases in the market. A larger capital with a low rate of profit creates more surplus value than a small capital with a high rate of profit. This is an often repeated theme. Marx suggests that a some stages in history capital may be content with a relatively high rate of profit and relatively low productivity of labor because wages are low. Later it will be forced to raise the social productivity in order to increase relative surplus value. This historical treatment of different accumulation strategies is crucial the “regulation school” of thought that we associate with Michel Aglietta.
The advantages accruing to large capitals lead to a growing concentration of capital in larger and larger firms. The petty bourgeois are appropriated by large capitalists until “The labour of a capitalist stands altogether in inverse proportion to the size of his capital, i.e. , to the degree in which he is a capitalist. It is this same severance of the conditions of production, on the one hand, from the producers, on the other, that forms the conception of capital.” I like this bit. It forms a handy retort for the idea that capitalists create value through their own work.
II. CONFLICT BETWEEN EXPANSION OF PRODUCTION AND PRODUCTION OF SURPLUS-VALUE
The reduction of the necessary labor time in order to increase surplus labor time and the reduction in the amount of labor power employed per unit of invested capital both come from the same law. They are the two sides of the same coin yet they have opposite effects on the rate of profit. The mass of profit is equal to the rate of surplus value multiplied by the amount of workers employed (s’v). The reduction in necessary labor time raises the rate of surplus value but decreases the variable capital by which this rate is multiplied. This means that there is a natural limit to the amount of workers that can be eliminated from production. This is different than just the falling rate of profit. It’s a limit to the mass of profit itself. “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. ” This forms another check on a falling rate of profit. Thus Marx’s theory of the falling rate of profit is not just about the absolute fall in the amount of workers employed because there is an internal limit to how many workers can be eliminated. It is also a theory of rising organic composition.
This next paragraph (p.248) must have been written while Marx was smoking crack. Let’s see if I can make any sense of it.
The development of the social productivity of labor usually depreciates the existing stock of capital. For example, the production of new, cheaper, more efficient steam drills depreciates existing stocks of steam drills. A rise in productivity can cheapen the means of subsistence or constant capital. As we have seen, these changes in productivity lead to a fall in the rate of profit while they at the same time can mediate that fall by raising the rate of SV or cheapening constant capital. Both decreasing the price of variable and constant capital lead to a depreciation of the existing capital. Yet Marx seems to be saying that they also may lead to an increase in the value of existing capital if they can somehow raise the profit rate, thus raising the value of the surplus that is reconverted into capital. This sounds like the idea of release and tie-up of capital discussed in Chapter 6. A fall in the price of constant or variable capital releases capital to be reinvested so that capital can expand. But it doesn’t make sense, to me, to say that this increases the value of the existing capital. It adds to the mass of the existing capital creating a bigger capital of bigger value. Perhaps Marx is missing this temporal distinction here.
Indirectly, increased productivity can increase the value of existing capital in the following way. To say a capital represents increased productivity means that its machines can absorb more labor and produce more use-values. A more productive assembly line can employ more workers and put out more products. Thus it allows for the creation of more surplus value. In this indirect way rising productivity raises the value of existing capital. This is an interesting take on the relation between exchange value and use-value. A more productive assembly line doesn’t necessarily embody greater exchange value than a less productive one. In this sense it has less value. But it allows for the future creation of more value. It’s use-value represents a greater potential value. But we shouldn’t make the mistake of thinking that Marx is saying that this use-value creates value in and of itself. That is the bourgeois definition of capital. For Marx capital is only valorized by human labor.
Capital seeks to absorb greater and greater quantities of human labor as accumulation sends capital across the globe, penetrating and creating new labor markets. At the same time the mass of surplus value embodied in capital grows and grows, always seeking more labor to valorize itself. These two processes do not just happily coexist. They contain a contradiction. Capital expands by decreasing the amount of labor employed in relation to the mass of capital. Thus we see on one side an increase of the working population and on the other an increase in relative over-population.
This, of course, is the way the rising mass of surplus value and falling rate of profit manifests itself in regards to population and employment. In the next few paragraphs Marx adds depreciation into the forms of appearance of these forces. Depreciation is a counteracting influence against a falling rate of profit. If the capital which the rising mass of surplus value is embodied is devalued then there is less surplus seeking valorization and capital can begin anew. A few paragraphs later though Marx remarks that this process of devaluation is not a simple and pretty one. When capital is devalued all sorts of things can happen depending on the size and nature of the devaluation. When AIG writes off losses lots of people lose jobs. When Detroit’s auto plants are devalued we call it a crisis in the auto industry. Marx isn’t specific about the difference between devaluation that temporarily stabilize profit rates and devaluation that results in major crisis. Yet, he does seem to be aware that there is some difference between the two.
Despite what seem to me like some unclear and unworked out arguments at times this section of chapter 15 ends with some good stuff. We are reminded that all of these different factors can occur at once or at different points in time. The specific way they manifest themselves are a result of historical contingency. There is nothing deterministic about this. The general contradiction is that between the forces and relations of production, though Marx doesn’t come right out and make this point specifically. Instead he says that capital must develop the productive forces to their maximum “regardless of the value and surplus-value it contains, and regardless of the social conditions under which capitalist production takes place”. At the same time capital must preserve the value of the existing capital and expand that value. The development of the productivity of labor negates its ability to do this. In Harvey’s attempted synthesis in Limits to Capital he de-emphasizes the falling rate of profit and emphasizes this idea of a conflict between the forces and relations of production as the real central point around which crisis theory develops. (Again, I’ll save a more detailed discussion of Harvey’s synthesis for later.)
The strategies which capital takes in order to save itself from crisis only postpone the crisis in time and space making that crisis even larger and more severe when it inevitably breaks out. Such an argument shows how thoroughly dialectical Marx’s entire exposition of capital is. From the very beginning of Volume One we see the contradiction between use-value and exchange value transferred to higher levels of contradiction. An ever-expanding argument unfolds in which contradictions are displaced to higher and higher levels, creating larger and more confusing structures, all attempting to resolve the fundamental contradiction(s) at the heart of the system. David Harvey’s real addition to this body of theory is his analysis of the way these contradictions are displaced in space and time, his creation of a field of Marxist geography. Whether of not we agree with all of Harvey’s synthesis of Marx’s crisis theory it is clear that this important dimension of capitalist history is not fully elaborated in Marx. Yet such an understanding of capitalism is essential for any serious analysis of capitalism today.
This 2nd section ends with some rather famous concluding remarks from Marx:
“The real barrier of capitalist production is capital itself. It is that capital and its self-expansion appear as the starting and the closing point, the motive and the purpose of production; that production is only production for capital and not vice versa, the means of production are not mere means for a constant expansion of the living process of the society of producers. The limits within which the preservation and self-expansion of the value of capital resting on the expropriation and pauperisation of the great mass of producers can alone move — these limits come continually into conflict with the methods of production employed by capital for its purposes, which drive towards unlimited extension of production, towards production as an end in itself, towards unconditional development of the social productivity of labour. The means — unconditional development of the productive forces of society — comes continually into conflict with the limited purpose, the self-expansion of the existing capital. The capitalist mode of production is, for this reason, a historical means of developing the material forces of production and creating an appropriate world-market and is, at the same time, a continual conflict between this its historical task and its own corresponding relations of social production.”
III. EXCESS CAPITAL AND EXCESS POPULATION
As the social productivity of capital grows the minimum amount of capital required for a producer to actually produce at the socially necessary labor time grows. Smaller capitals are crowded out of the market or confined to marginal sectors of production. Even though these larger capitals have a lower real rate of profit they amass a larger amount of surplus value. We’ve heard this all before, but Marx takes the argument in a new direction. This accumulation eventually leads to overproduction of capital. This overproduction doesn’t just mean over-production of commodities (although capital does take the form of commodities and so this can manifest itself as overproduction of commodities) but of capital in general. It is an overaccumulation of capital. Harvey uses this term “overaccumulation” to characterize capitalist crisis. (I have reasons to question Harvey’s preference for “overaccumulation” , but again I’ll save this for later.) What does overaccumulation mean? It means the same thing Marx has been saying all along: a rising mass of surplus value with a shrinking pool of profitable alternatives to employ this capital. At some point this mass of capital grows to such a size relative to the rate of profit that the amount of surplus value produced is the same or less then that mass of capital. This is when a crisis breaks out. This is not a crisis of a particular industry, not a business cycle, but an all-out crisis of the system.
But how does it break out? What form does it take? Marx says the first sign is actually rising wages in response to the growing demand for variable capital to valorize the overaccumulated mass of surplus value. Marx doesn’t expand upon this point here, which is a shame. A cursory look at the current crisis and many of the theories of this crisis reveals 30 years of stagnant wages. (At least, this is the most commonly accepted view of the trend in wages. See Andrew Kliman’s newest work which challenges some of this.) Theories of underconsumption argue that it is falling wages that create a crisis of realization. It seems, at first, as if empirical observations of the last 30 years are on the side of the underconsumptionists and not Marx’s falling rate of profit and rising wages. Yet Falling Rate of Profit theorists have a much longer view of this crisis. They argue that the current crisis is the continuation of the crisis of the 1970’s which was never allowed to come to completion (sufficient amounts of capital were not destroyed) due to interventionist policies of states and alliances of the capitalist class. The 1970’s much more closely resemble the descriptions of crisis made by the FRP, even this bit about rising wages. From 1967-1973 annual wages grew at 2.5% per year. After ’73 they grew by less and less until 1995-2000 when they rose by 2.4% a year only turn actually shrink in new millenium. (Figures cited from G. Carchedi’s “The Return From the Grave, or Marx and the Present Crisis)
The overaccumulation of capital can result in a growing demand for labor power to valorize this capital which leads to a rise in wages. This rise in necessary labor relative to surplus labor lowers the rate of profit and results in a general crisis of the system.
This overaccumulation means that a portion of the mass of capital must lay idle. It could be any portion of capital: new capital, old capital, etc. The specific section of the capitalist class that bears the brunt of devaluation is determined by contingent factors involving competition and the balance of powers between factions of the capitalist class. This element of the theory is not worked out fully by Marx either, though here and elsewhere (like his discussion of the cotton crisis in chapter 6) we get some good starts. The cost of devaluation is often socialized. In our current crisis the state and the tax payers have taken on the cost of absorbing the devaluation of the credit markets. Homeowners have sacrificed their homes to absorb the devaluation of capital. Labor-power is devalued as the reserve army of labor grows.
The fraternity of the capitalist class becomes factional struggles between portions of the capitalist class. Regardless of the specific result of this struggle, the result of the destruction/ devaluation of capital. Not only does a capitalist society produce value. It also produces devaluation. Devaluation can happen in many ways. An idle factory or machine looses value. Unemployed workers increase the industrial reserve army and drive down the price of labor power. Bad assets must be written down or sold at a loss. Bankrupt companies are sold at fire-sale prices.
The chain of payments breaks down. In Volume 1 Marx tells us that the process of converting money into commodities and back again is central to a commodity economy and that the use of money as a medium of exchange introduces an element of potential breakdown into the system of social reproduction. Money makes it possible that a purchase doesn’t always mean a sale, that supply doesn’t always create its own demand (as was claimed by Say’s Law). The credit system resolves many of the day-to-day potential irregularities of commodity exchange by allowing purchasers to spend money before they actually have it. But this entraps the entire economy in a chain of payments. This chain of payments becomes when a link in the chain is severed. Bottlenecks and shortages arise. Yet such problems only become system-wide when there is a general crisis of profitability in the system itself. I recently read a paper by Duncan Foley (often called a Marxist, though I hear rumored that Foley himself doesn’t answer to this label anymore, instead saying that it is “impossible to call oneself a Marxist or not.”) which focusses much of its attention on describing the fragility of the chain of payments in the current credit system, a system based on a precarious mess of collaterized debt obligations, mortgage-backed securities, credit default swaps, etc. But Foley’s fault is to substitute a hyper-focus on the financial system for a real theory of crisis. Marx tells us in Volume 1 that money (and thus the higher forms of credit money which seek to resolve the contradictions of the money form) only creates the possibility of a crisis. A real theory of crisis must look to the antagonistic social relations of a capitalist society, not just the psychology of financial interactions.
In developing a critique of those who deny the phenomenon of over-production Marx makes the following points. Overaccumulated capital takes many forms, one of which is commodities. Hence overproduction of commodities is a symptom of a larger problem, the overaccumulation of capital. This is not just a matter of an accidental disproportion between different sectors of the economy. The pressure to accumulate and increase the social productivity of labor acts as a general law upon all sectors. For those that say that overproduction can be avoided by capitalists consuming the surplus it must be pointed out that capitalists are in business not to consume the surplus as luxury goods but to productively consume the surplus in order to produce more surplus. This shouldn’t be confused as a rejection of one the main arguments against underconsumption theory (on a preliminary reading I made this mistake myself.) It is often argued that underconsumption is not a problem in itself because capitalists can buy the surplus from each other. This is a valid argument. Marx is critiquing the idea that this absorption of surplus can be an absorption for the personal consumption of the capitalist class. Capitalists must reinvest surplus to expand production. A limit to accumulation must therefore come from the inability to invest this surplus productively, not from an inability to purchase the surplus value.
Over and over we are reminded that capital produces for it’s own monstrous purposes, not in order to meet the needs of society. It develops the social productivity of labor not in order to make work easier but in order to increase the mass of surplus value. But at some point the development of this social productivity comes into conflict with the social relations of capitalism. The rising organic composition can no longer support capitalist accumulation. The wage-labor relation comes into crisis. All hell breaks loose and the capitalist class has to call upon the powers of the state (the coercive arm of the state ultimately exists to defend the social relations of capitalism) to rescue the social order. It seems to me that the FRP grows naturally out of Marx’s idea of a conflict between the forces and relations of production and that this, above all else, establishes it as the legitimate theory of crisis over underconsumptionism, overproduction, profit-squeeze, and all of the other “marxian” claimants upon this title. It is this idea that the development of the forces of production have rendered the social relations of capitalism obsolete that gives justification to the marxist political project of replacing capitalism with a saner, more human, mode of production.
IV. SUPPLEMENTARY REMARKS
The productivity of labor and the individual rate of profit of each sector develop disproportionately. This is partly the result of the anarchy of capitalist competition. But it is also a result of the different ways in which capital relies upon natural conditions. Agriculture, for instance, relies closely on natural conditions whose cycles, as we saw in the chapter on the cotton crisis, do not neatly fall in-line with the rhythm of accumulation. Later, in the chapters on rent, we will see Marx deal more in-depth with the relation of the internal logic of capital with the external rhythms and patterns of the natural world and the way these create all sorts of strange uneven development.
Engels inserts 2+ pages to remind us that the race to raise productivity doesn’t necessarily aim at reducing all human labor, just the paid portion.
There are several paragraphs repeating the arguments about the way in which the rising productivity of labor produces a concentration of capital as the amount capital one must own to begin production grows. (There is also a comment about Railroads not making average profits, a point I am still confused about.) But there will always be some industries which, for whatever reason, are not compelled to increase the organic composition. This slows the fall in the rate of profit. The production of relative overpopulation proceeds unevenly as well.
These remarks about the increasing size of capital end with Marx at his best:
“This social power no longer stands in any possible relation to that which the labour of a single individual can create. It becomes an alienated, independent, social power, which stands opposed to society as an object, and as an object that is the capitalist’s source of power. The contradiction between the general social power into which capital develops, on the one hand, and the private power of the individual capitalists over these social conditions of production, on the other, becomes ever more irreconcilable, and yet contains the solution of the problem, because it implies at the same time the transformation of the conditions of production into general, common, social, conditions. This transformation stems from the development of the productive forces under capitalist production, and from the ways and means by which this development takes place.”
Marx then discusses the way relative surplus value causes capitalists to compete to lower the socially necessary time by investing in innovation, thus raising the organic composition. This is the competitive, temporary relative surplus value that comes from producing below the socially necessary labor time. In my remarks on Chapter 13 I pointed out that it seemed like there might be two intersecting arguments about the falling rate of profit, one which stresses the rising mass of surplus value and the other which stresses this competition over relative surplus value. I myself had stressed the latter in my video on the FRP, but Marx seems to stress the former in chapter 13, even going so far as to imply that the relative surplus value argument didn’t belong at this point of the analysis. Yet here Marx develops the relative surplus value idea without relating it to the growing mass of surplus value idea. I suspect that a synthesis would hold the rising mass of surplus value as the dominant idea and relative surplus value as very strong secondary part of the argument. In the example of, say, a hypothetical economy under conditions of extreme monopoly and little competition (assuming that monopoly blunts labor-saving competition which is probably a bad assumption) the rate of profit would still fall because the growing mass of surplus value by itself would lead to a rising organic composition.
This disorganized collection of supplementary remarks ends with “3 cardinal facts of capitalist production”:
1.The concentration of means of production in a few hands thereby creating “social production capacities” whose fruits are appropriated by a tiny minority.
2. Private labors become organized as one social labor process.
3. World market.
The first two facts “abolish(es) private property and private labour, even though in contradictory forms.” If the increasing concentration of capital in Marx’s time seemed to “abolish private property” in the sense that the means of production were increasingly centralized and beyond the control of one individual, it is even more so today. In our current crisis we see that capital is immensely interconnected through the credit system and capital markets. We also see that private ownership of capital is hard to pinpoint. Who owns a corporation? Stockholders? The CEO? Who owns all of those sub-prime mortgages? Nobody knows! Capital is truly too big to be owned by any one person. It is truly “an alienated, independent, social power, which stands opposed to society as an object…” Yet it is “an object that is the capitalist’s source of power,” clearly seen by the way in which the capitalist class has colluded through the state to bail itself out.
For Marx this increasing size and productivity is in direct contradiction with this out-moded social basis of private property. Yet this contradiction between forces and relations was clearly not mature enough in Marx’s time to mean the end of capitalism. Are things different in our time?
I think that this chapter was actually the main basis of Henryk Grossman’s work, ‘The Law of Accumulation…’, and I myself had essentially settled on a similar interpretation of it quite soon before I had begun reading his book (I will admit that it did take some re-reading and thought, as the chapter isn’t quite as clear as it could be, probably because Marx was more concerned with summing up his conclusions and could then get back to it in order to elaborate on everything, which he unfortunately couldn’t). Unfortunately, Grossman’s book isn’t fully translated into English (I had used a Spanish translation). To be brief this chapter is essentially connected with the point made back in Volume 1 in the chapters on accumulation with an increasing composition of capital and the reserve army of labour. Essentially, an increasing composition of capital means that, given the same amount of capital invested, less labourers must be hired. This is the repulsive force. However, on the other hand capitalism does accumulate, and hence set in motion a greater amount of labourers, despite the lower relative amount of expenditure on wages (this is also the basic source of the falling rate of profit with a rising mass of profit). While more labourers could be hired with a given mass of profit if the previous composition of capital were maintained, this composition of capital would now entail them producing at too low a rate of profit due to the spread of the more productive composition. This therefore sets an absolute limit to the amount of labourers which may be hired given a certain level of wages. For example, if one employed $100 in capital with a composition of capital 9:1, then one could only hire 1 labourer, whereas a composition of capital 5:5 would allow the hiring of 5 times more labourers, albeit now producing at a low enough rate of profit to not be worth the expenditure.
Grossman shows that the result of this is that a limit is set to the further accumulation of capital at a certain point in accumulation, where capitalists are unable to accumulate sufficiently to increase the mass of profit due to the limit imposed by the rising composition of capital. In other words, they cannot increase the mass of exploitable labour, but not because they have run out of labourers; Marx explicitly notes that the problem is not having too many labourers for the given means of production, but because the other labourers could only be hired, given a certain level of wages (this ultimately has a minimum limit in a given society), at too low a rate of profit (that is, by a capitalist lowering the composition of capital). This would, in fact, mean that the total population number would be more or less irrelevant, except inasmuch as a higher population may decrease wages (in any case, a wage decrease will allow capital to accumulate for longer) This speed which this takes to occur increases significantly at higher compositions of capital, as does the severity of the crisis; the implications of this as regards the progress of capitalism should be clear (Marx notes that capitalism, after crisis, starts once more, albeit now from a ‘higher level’, and in the Grundrisse formulates things similarly, when noting that the falling rate of profit hence leads to worsening crisis and finally the overthrow of capitalism). Of course, this is also attenuated somewhat by the spread of foreign trade and credit, which also reduce the amount of crises occurring due to other phenomena (credit, for example, is necessary for capitalism to distribute labour more or less proportionally between industries through the equalization of profit rates, as Marx later observes). In addition, fixed capital allows capitalists a reserve fund of accumulation, which means that they are quite able to accumulate (at least, until their fixed capital ends its tenure; Marx had as such connected the lifespan of fixed capital with the periodicity of the 10-year crisis cycle).
What you miss in this exposition, and did not explore adequately, is Marx’s question: “When would over-production of capital be absolute?” In this, I think, Marx introduces a new element into the discussion — not merely over-accumulation, but absolute over-accumulation. With this he asks us to peer back along all the material he has examined and consider them having reached their absolute limit. I think you should have given this serious consideration, because in it a number of curious post-World War II phenomenon become explicable — including Kliman’s work. (I name, in first place, the development of prices without a commodity standard and resulting persistent inflation.)
One other point raised by the problem of absolute over-accumulation is the emergence of superfluous labor time — which emergence Marx predicts, but gets a chance to explore. This category of labor time has not been explored to any degree by Marxists after him — with the notable exception of Moishe Postone.