Re John's OPE 1327 of 6/3/96:
I think John's point about the distinction between better and cheaper
machines is absolutely fundamental. I think it is the core of the reason
that the North is rich and the South is poor. I.e., very very important
indeed.
What is the simplest definition of a better machine? In my view it is
this: a better machine is a more productive machine.
Some machines are 'subjectively' better in that they have more chrome and
higher street cred. But for the capitalist, whose only concern is more
profit, the chrome and the street cred do not count. A 'better' machine
is one which makes more superprofit, and this is a machine which is more
productive. Specifically (and I think this is Marx's usage) it is a
machine which produces a larger quantity of use-values for the same input
of labour-power.
However, once it is put this way we have a problem because we have to ask
'better for whom'?
If I am the owner of a 486, and I am considering replacing it with
another 486, then I can realise no productivity gains. For me, the 486 is
not better. But if I am the owner of a 386, then I can realise
productivity gains by replacing it with a 486, because a 486 is faster
than a 386.
Therefore, a 486 is not better for the 486 owner, but it is better for
the 386 owner.
In this context there is no universal social definition of 'better' which
applies equally to all. This is a much-neglected fact. The roots of unequal
exchange lie, in my view, in the unequal distribution of improvements in
productivity which result from the dynamics of technical change. Because
this is a purely dynamic phenomenon, it does not appear in equilibrium
treatments.
All equilibrium frameworks assume a priori that there is only a single
ruling technology, that is, either everyone has a 486 or everyone has a
386. There cannot be any differential technical rent in an equilibrium
framework. In a sequential framework there is no prior assumption of the
universal distribution of a single technique and, on the contrary, it is
recognised that uneven distribution of technique, resulting in unequal
technical rent, is the driving force and motor of capitalist
accumulation.
This relates to a debate which took place earlier: why do the capitalists
replace their machines before they are worn out? It seems to me obvious
- though the issue was never settled - that there is no point for a
capitalist to replace a machine *simply* because it is cheaper.
It may help to rephrase this in the following way: how can a capitalist
draw *benefits* from replacing a machine? Or to put it more precisely,
*who* can benefit from replacing a machine?
My answer is: only the capitalist for whom it is better. Who takes the
losses from having to replace the machine? The capitalist for whom it is
not better. The unequal exchange of technical advance is a persistent
value transfer, disguised as moral depreciation, between these two groups.
First consider a new machine which is no more productive than an old one
I already possess. What advantage is there to me in buying a cheaper 486
when I already have a 486? Let's suppose I bought a 486 for $1200 a year
ago, and I can now get one for $600. The two options are, cost-wise:
option 1
========
buy a new cheap 486 and throw away the old one. Cost, $600. Advantages in
productivity or sales, nothing.
option 2
========
don't buy a new, cheap 486, and keep the old one. Cost, nothing. Advantages
in productivity or sales, nothing.
Neither option 1 nor option 2 can be altered by the fact that I already
have an old, expensive 486. I have already paid for it. I can't change
that. The money has already gone.
*Nor* are option 1 or option 2 altered by the fact that other
capitalists, who are not encumbered with old 486s, can now undercut me
after buying the new cheaper 486s. Even if technical progress destroys my
profits altogether, I still can get no benefits from *simply* buying a
cheaper machine. In other words, replacement at lower cost is not a way
out of bankruptcy.
I would argue thus: if the machine is 'better' then the capitalist can
realise a superprofit by buying it, that is, can make a technical rent.
But if my rival buys a 486 to replace a 286 (that is, if for her it is a
better machine) She *can* get an advantage from scrapping the 286.
Because the 486 lets her to produce *more* than the 286, for the same
labour inputs and the same raw materials. She can even produce cheaper
than me, because I paid $1200 for my machine but she paid only $600 for
hers.
This, I think, answers John's question as to why the 486 has a lifetime
of 4 years instead of its natural, physical lifetime.
You can't get an answer to this question if you only look at the one
producer. If there was only one 486 user in the world, then this 486 user
could indeed just use up the existing 486 until its bytes dropped off,
and then buy a new one, without suffering any loss in profits.
The loss in profits - which, I agree, is what forces scrapping -
originates *outside* the process that is using the machine. They arise
because new, upstart rivals can buy the cheap machines and undercut my
*sales*. Such a rival realises a productivity gain, because for her the
options have a new component, which for me they did not:
option 1
========
don't buy a computer at all. Cost: nothing. Advantages in productivity
or sales, nothing.
option 2
========
buy a computer. Cost: $600. Advantages in productivity substantial.
Notably, in *value* terms (but not physical terms) her product is now
*cheaper* than mine. She can raise productivity to my level. But *unlike*
me, who forked out $1200 for my computer, she can buy it for $600 and
undercut me.
That is, my profits drop because other makers of, say, software, can
undercut me by buying cheaper 486's and selling cheaper software. This
cuts into my profit margins because it reduces my selling price. Unless
my selling price falls, my profits will be intact.
It is thus the *external* circumstances which impose on me the necessity
to scrap my 486, not its cheapening as such. This re-enforces the point I
made earlier in reference to Andrew's post.
True, in the case of this kind of 'leapfrogging' there is no permanent
advantage to any purchaser of the new machines on average, because these
temporary differences iron out; next year I will be able to leapfrog my
sister by buying a Pentium Pro.
BUT there is one party who benefits *always*; that is the producer of
the cheaper machines.
This asymmetry, I think, is underestimated because the distinction is
quite subtle. It is nevertheless rather crucial.
If I use A's to make B's, then the B's will be cheaper if the A's are
better. That is what it means to have better A's. That is my definition
of a better A: it makes more B's for the same value inputs (or, the same
B's for less inputs, which is the same thing).
In what we described above, some producers benefit from buying A's and
some do not. But the maker of A's *always* benefit. Neither of the
producers discussed above *make* anything that raises productivity. They
only *buy* things that raise productivity.
In general, the North *makes* A's. The North specialises in making better
things, that is, it has a quasi-monopoly of selling technology; of
selling machines which raise the productivity of labour. The South *buys*
A's; this is a fundamental asymmetry in the relation between the two. It
can be shown that, in a dynamical analysis, this creates a permanent
differential technical rent to the benefit of the North.
In 'outsourcing' the North hives off those parts of a multinational
production proces which merely reproduce existing products (B's) and
sites them in the South. It almost never places centres of innovation in
the South. This, the 'core' business, stays in the North, where it can
earn a technical superprofit.
The result is that the South buys machines which are on the whole
cheaper, rather than better. It therefore suffers the full impact of
moral depreciation. This is why it is always running to stay where it is.
Alan