[OPE-L:4953] Re: RRI and The Rate of Profit

john ernst (ernst@pipeline.com)
Thu, 8 May 1997 02:51:04 -0700 (PDT)

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Here I respond to Duncan's post of OPE-4935 in which
he commented on a previous post of mine (OPE 4833).


>1. When Marx himself describes the replacement of
>machines by machines, he clearly indicates that
>capital saving machines are introduced. Granted
>the passages where he does this are few but
>they do exist.

Duncan states:

I'm puzzled by this remark. I tend to see the falling rate of profit
discussion in Volume III of _Capital_ as closely connected to the relative
surplus value discussion in Volume I. Marx also sums the the "long run
tendencies of capital accumulation" by contrasting capitalist production
when it takes over relatively unproductive technologies from earlier modes
of production which imply a low rate of surplus value, a low value
composition of capital (ratio of fixed capital and inventories to value
added) and a high profit rate with the situation after capitalism has
molded the technology to its own needs, and reaches a situation with a much
higher rate of surplus value, a much higher value composition of capital,
and a much lower rate of profit. I don't see how Marx would conclude that
capitalist production gets to a higher value composition of capital by
introducing only capital-saving innovations.

John comments:

I am not surprised that my remark is puzzling to you. Your reading
of Marx's Vol. 1 and 3 was, at one point, mine. Hence, I am somewhat
sympathetic to your reading. However, as I stated above when Marx
directly discusses the replacement of machines by machines, it
is clear that such changes of technique are capital saving. This
by no means renders your reading invalid as the transition from
handicraft or manufacture to large scale industry and the capital
using techniques involved could overwhelm the capital saving
techniques to which I refer. However, there are, at least, three
ways we can arrive at a falling rate of profit while preserving
Marx's notion of capital saving innovation as machines replace

1. We could use the idea that constant capital is valued with
historic values (TSS).

2. We could note that the idea that social values of raw and
auxiliary materials do not fall as fast as the values of
other commodities as productivity increases and arrive at
a falling rate of profit in the same way Rosdolsky does.
(In the piece Ajit and I referred to recently, Schefold
mistakenly thinks this is somehow Marx's retreat to Ricardo
but it isn't.)

3. Since our nominal topic is "RRI and the Rate of Profit", it
seems appropriate that we acknowledge that an increasing
RRI, the basis on which capitalists' investment decisions are
made, is completely compatible with a falling rate of profit.
Indeed, with a rapidly increasing RRI and with the scrapping
of older, completely depreciated machines, the rate of profit
could fall given the "accelerated accumulation" Marx mentions in
Chapter 25 of Vol. I occurs.

Note that in all three of these ways of looking at the economy, we
would obtain a falling rate and be consistent with Marx's text.

John said:

>2. As relative surplus value is produced and the
>rate of surplus value rises, it becomes increasingly
>difficult to argue that capitalists are able
>to achieve lower cost prices simply by replacing
>living labor with dead labor. The task grows even more
>difficult if one also argues that as this occurs the
>constant capital to output ratio grows when the unit
>prices of inputs and outputs are the same.

Duncan remarked:

I agree with this, but I don't see the inconsistency with
the position I put forward.

John comments:

Nor do I. Indeed, I should have said a bit more here to explain
why I even brought this up. Put simply, using your notion of the
falling rate of profit, we would have to maintain that over time
the tendency for the rate of profit to fall weakens as capitalism

John stated:

>3. If we consider what Marx called "simple co-operation"
>as the basic manner in which technical change takes place,
>it is hard to imagine why in the period of large-scale
>industry the machines themselves are not to be treated as
>workers were in the period of manufacture. That is, in
>the period of manufacture by increasing the number of
>workers, dividing up the labor process, etc. capitalism
>forces the output to grow faster than the work force for
>the sake of ever-growing amounts of surplus value. Given
>mechanized production, the process of co-operation continues.
>Machines are replaced just as workers once were and for the
>same reason -- increased surplus value. More machines, larger
>machines and ever specialized machines replace those of the
>last generation. If the output grew faster than the work
>force in the period of manufacture, why should the output
>grow more slowly than the "machine force" in the period
>of large scale industry? (Measuring all this aside.)

Duncan remarked:

I don't understand how "simple cooperation", which applies to an immediate
division of labor among workers at a particular point of production can be
applied to machines.

John responds:

Here I think we differ a bit. The "Co-Operation" chapter in CAPITAL
is prior to that of "The Division of Labour and Manufacture" and
that of "Machinery and Modern Industry." Indeed, "co-operation is
the fundamental form of the capitalist mode of production." In
reading the chapter, I think we are to find the ways in which
productivity can be increased. The question is how this fundamental
form applies in the period of large-scale industry where we find
Marx discussing machines working in "co-operation" with one another.

In citing an example of the production of envelopes by machinery
Marx notes that

"Here, the whole process, which, when carried on as Manufacture,
was split up into, and carried out by, a series of operations, is
completed by a single machine, working a combination of various tools.
Now, whether such a machine be merely a reproduction of a complicated
manual implement, or a combination of various simple implements
specialized by Manufacture, in either case, in the factory,
i.e., in the workshop in which machinery alone is used, we meet
again with simple co-operation; and, leaving the workman out of
consideration for the moment, this co-operation presents itself to us,
in the first instance, as the conglomeration in one place of similar
and simultaneously acting machines." (Ch. 15,Sec. 1, paragraph 12,
p 379 Int. Edition)

Marx goes on to discuss how this simple co-operation of machines develops
into an automated system of production in which machines are seen to
be "co-operating" with each other.

John said:

>4. Given that Marx bias technical change requires rising
>real wages or, at least, the fear that they will rise, we
>should be able to point to previously abandoned techniques
>that will be reintroduced should those wages fall. My
>intuition tells me that Smith's pin factory will never
>reappear even if the wages for those 14 or so workers were
>set at 0.

Duncan commented:

First, it's rather rare in the history of capitalist production to see
extended periods of time with a falling product wage. But you might find
some cases. Certainly changes in relative prices can reactivate older
mining techniques, for example.

John remarks:
What I am saying is that given a "zero" product wage for workers in
Smith's pin factory, cheaper pins will be produced by workers paid at
the product wage of today. Now if the constant capital to output
ratio has increased pin production, its unclear to me how the pin of
today could be cheaper than those manufactured in the past.

John said:

>Having argued for characterizing Marx's notion of
>technical change as capital saving rather than capital
>using in the period of large scale industry, I am now
>faced with task of considering your recent piece as well
>as the results of Dumenil and Levy. So far, I do note
>that in neither work do we find many references to others
>who have done empirical work on the FRP. Here, I
>am not asking for overt or even covert attacks on others
>but rather for reasons why the paths of, say, Mage,
>Moseley, Wolf, Shaikh, etc. were not pursued.

Duncan commented:

I know all these authors, and in many ways I view myself as following at
least some of their paths. Marquetti and I didn't try to distinguish
productive and unproductive (which is a major focus of Moseley's, Wolff's,
and Shaikh and Tonak's work) labor because it's not possible with the data
set we were using.

John remarks:

Ok. Then why not use one of their data sets? But, perhaps I am
demanding too much given the data available. But to those of us who
do not do empirical work it would be helpful if the reasons for not
choosing the paths pursued by others were more explicit.