[OPE-L:4175] Re: Depreciation SOS

aramos@aramos.b (aramos@aramos.bo)
Sat, 8 Feb 1997 17:03:18 -0800 (PST)

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A one-week belated continuation of the dialog with John:

> Alejandro:
> (snip)
> For USA the machine is worn
> out and capitalist A must replace it at the end of 1993.
> When he bought the new machine, he finds that it is 50%
> cheaper and then borrow a credit for only 500f the
> precedent. His "amount for depreciation" at the end of 1994
> will be only one half of the precedent year, let us say
> $500, while this year capitalist B must still pay to the
> bank $1000.
> > Hence, again, Im not sure why A gave up his first
> > machine to purchase the other.

Alejandro again:

Because it is worn out. At the end of 1993 this machine
cannot match the technical standard to compete in this
market. For this market, that machine is simply scrap.

> Again, Im now clear about the overlap. But am unclear about
> why A has not enough funds to repay the banker. Perhaps we
> can borrow something from Andrews falling IRR in OPE-L 4096.

It is not capitalist A who cannot repay the banker, it is
capitalist B in 1994. In this year, capitalist A has a
new, cheaper machine. So, he charges less on account of
fixed capital which implies that the market price of the
commodity falls. Capitalist B cannot charge the amount that
he charged before for fixed capital but he still owes to
the banker the "forecasted depreciation" (Please see my
answer to Jerry that I am posting together with this).

> John:
> > Somewhere, Itoh points out that the use fixed capital,
> > fully depreciated, can be used to produce extremely
> > high profits.
> Alejandro:
> That could be the case of Costa Rican capitalists because
> they, using "scrap" bought in a USA junk-yard (probably by
> weight), can produce in Costa Rica. But this wouldnt be the
> example, simply because the machine has to meet a technical
> standard. If not, capitalist B becomes more productive.
> John:
> You raise an interesting point by "scrap." When does the
> machine truly become "scrap." For me, this occurs when
> the amount to be invested in the old process will bring
> a lower rate of profit than that same amount would fetch
> as an investment in a new machine. Here, of course, we
> would have to consider those "fix up" costs you mention
> as well as any unrecovered depreciation in the old
> old machine.

All this raises another problem. We are discussing on
"competitive situations". The case of the US "scrap"
carried to Costa Rica implies some kind of "monopolistic
situation". In the "protected" market, this "machine" is
more a "waterfall" than a "machine". In any case, what
would be the amout of LABOR TIME objectified in this scrap,
once it is in Costa Rica? Is it the amount represented by
the price paid by the capitalist? The "original" labor-time
had been already transfered to US commodities. If we think
that the machine is a "waterfall" we should think that,
actually, it does not contain labor-time, it is a kind of
"natural force".

Alejandro Ramos