[OPE-L:2248] Re: Where does Capital move to?

Alan Freeman (100042.617@compuserve.com)
Thu, 16 May 1996 10:30:55 -0700

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Re Bruce's #2184 and Andrew's #2154, etc
(1 of 2 points sparked by this discussion)

In the discussion on capital mobility, the not unimportant
question of superprofit seems to have taken a back seat.

I think capital actually moves, not to the sector with the
highest profit rate but the technology or 'process' with the
highest profit rate. This means that capital can and frequently
does leave a sector even although it has a high profit rate,
and migrate to a sector with a lower profit rate.

Thus, suppose the profit rate in agriculture is on average
15%, and in computer manufacture on average 25%. Capital
will nevertheless migrate to agriculture (abstracting from
barriers to entry) if a new process involving genetically
engineered wheat and various specialised fertilisers produces
twice as much wheat for the same costs, yielding a profit of
say 50%. For as long as the share of this new process in total
wheat production is sufficiently small, this superprofit will
remain and capital will flow from the apparently more
profitable to the apparently less profitable sector.

Profit on the new technology includes not just the average
profit on wheat production but a superprofit or differential
technical rent resulting from the superior wheat technology.

I think, as well as the real process, this is also Marx's
conception. In many places he explains the real dynamic
of capitalism is the pursuit of superprofit, the exceptionally
high profit that results from using a technology which is
more advanced than the average in the sector.