[OPE-L:5447] Re: Re: Effect of turnover on the rate of profit

From: Allin Cottrell (cottrell@wfu.edu)
Date: Fri Apr 27 2001 - 16:17:08 EDT

In relation to my note


Rakesh wrote:

> I am not clear as to why circulating capital would be cut
> in half by a halving of production time. If by circulating capital
> we mean (say) raw materials, then the circulating capital per
> production period should not change. Twice as much raw materials
> would be used per year, no?

This is a bit more complicated that I thought.

Imagine that production actually proceeds in discrete cycles (this is
just a heuristic device) and suppose the original period of production
was one year.  Consider then the "sawtooth" pattern of work in
progress: it starts at zero on January 1, gradually rises to a maximum
at the end of the year, then falls to zero again as the output is
sold.  The stock of work in progress at any point in time embodies (a)
value added by the workforce in question and (b) the value of raw
materials, purchased from elsewhere, embodied in the work in progress.
The time-average of the value due to factor (a) alone is 6 months'
labour on the part of workforce.

Now we move to two cycles per year.  The sawteeth occur at twice the
frequency, and the time-average of the value of work in progress due
to factor (a) drops to 3 months' labour on the part of the workforce.
That's what I was focusing on in my note, when I suggested the value
of circulating capital would drop by half.  But what about factor (b),
the raw materials?  I guess I was assuming no raw materials are
purchased (or equivalently, production is fully vertically
integrated).  If raw materials are bought in, and their unit value has
not changed, this will offset the reduction in circulating capital
that I assumed.

I think the most "neutral" assumption is that the time-average of the
value of the stock of purchased materials won't be changed by the
doubling of labour productivity and halving of the "time of
production" (the annual throughput will be doubled, as Rakesh says,
but on average the materials sit around for only half the time).

In that case the reduction in the value of the stock of circulating
capital will be a weighted average of (a) a halfing, due to the factor
I focused on, and (b) no effect (due to the contribution from
purchased raw materials).


This archive was generated by hypermail 2b30 : Wed May 02 2001 - 00:00:06 EDT