On Wed, 25 Apr 2001, Rakesh Narpat Bhandari wrote: > I gave a simple example of how with a reduction in production time > the variable capital advanced may be reduced and the profit rate > thereby improved. this raises the question of how the latter is to > explained. We have considered three options: 1. the rate of > exploitation has increased, 2. the organic composition of capital has > been reduced, and 3. turnover or production time itself has lessened. > I am uncomfortable with 3 as a complete explanation. > > You now suggest #2 as the answer. But this seems to be the wrong one. > With the variable capital advanced cut in half and the flow of > variable capital per production cycle also halved, the relation of c > to v should if anything increase.... I think the fundamental problem here lies (as Paul has suggested) with the concept of a "stock of variable capital" (and associated issues of measurement of the OCC). There's really no such thing as a stock of v: there are only stocks of money, means of production, and finished or semi-finished output. Let's go back to basics. The rate of profit is the ratio of the annual profit flow (which I'll assume to be the same as the annual flow of surplus value, s) to the capital stock, K. The annual surplus value can be written as (s/v) * v, where s/v is the "real" or Vol. I rate of surplus value and v is a flow concept, namely the variable capital employed over the year (not the variable capital "advanced"). So now, writing r for the rate of profit: r = s/K = (s/v)*v / K = (s/v) / (K/v) The rate of profit is positively related to the "real" rate of surplus value, and inversely related to the OCC expressed as the ratio of capital stock to the annual flow v. Now consider an innovation that cuts turnover time or "production time". To isolate the effect in question we imagine that the innovation does not reduce the labour time (worker-hours) required to produce one unit of the product. For instance, suppose a wine-maker comes up with a new additive that enables them to cut the time of fermentation and maturation without hurting quality, so that the calendar time from "grapes in" to "bottles of wine out" is cut in half, while the number of worker-hours embodied in a bottle of wine remains unchanged. (In practice, of course, it's likely the latter would be reduced too, but that's a different matter.) The annual v remains unchanged by the innovation, but K will be reduced: the stock of semi-finished wine on hand is reduced. Thus the OCC, properly measured, falls, and the rate of profit increases for any given rate of surplus value. Another perspective on the innovation is that it will reduce "variable capital advanced" (the capitalist now need "advance" only half the wages that he used to) and hence raise the annual rate of surplus value. But this doesn't explain the increase in the rate of profit, it's just an arithmetical side-effect. What's "really happened" is that K has fallen relative to annual v. For a given amount of labour going on in the winery each year (v), and a given amount of surplus labour performed and surplus value produced (s), there's now less embodied labour sitting around in the form of not-yet-ready wine (K). Allin.
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