Rakesh quoted the passage I had previously quoted
from Chapter 7 of Vol. 3 (p. 238) in which Marx
clearly and explicitly said that the original capital is
revalued as a result of technological change.
And then Rakesh argued:
>
> By physical capital, I think Marx means only raw materials or more
> generally circulating capital costs. In the previous chapter, esp. the
> section on revaluation and devaluation of capital, he specifies that he is
> analyzing how changes in the reproduction costs of raw materials can effect
> the rate of profit, independently of changes in the rate of surplus value.
> If the reproduction costs of a raw material fall, the more capital tied up
> in this specific 'circulating' form, the more the profit rate will be
> raised. Yes, in this case the cheapening of constant capital raises the
> rate of profit on both old and new investment.
However, I don't think Rakesh is right about this. The
paragraph quoted begins as follows, which states that the
revaluations apply to both the fixed and the circulating
constant capital.
Fluctuations in the rate of profit that are
independent of changes either the capital's organic
composition or its absolute magnitude
are possible only if the value of the capital
advanced, WHATEVER MIGHT BE THE FORM - FIXED
OR CIRCULATING - in which it exists, rises or falls
as a result of an increase or decrease in the
labor-time necessary for its reproduction, an
increase of decrease that is independent of the
capital already in existence.
Similarly, in Chapter 6 to which Rakesh refers, Marx
again specified that he is talking about both fixed and
circulating capital, not just circulating capital (although
most of the discussion is about circulating capital, the
general point applies to both). On p. 206 (Penquin
edition):
The revaluation of devaluation of capital value may
affect either constant or variable capital or both,
and in the case of constant capital, IT CAN
RELATE EITHER TO THE FIXED OR THE CONSTANT
PORTION OR BOTH.
The case of constant capital we have to consider
BOTH raw materials ... AND ALSO MACHINERY AND
OTHER FIXED CAPITAL.
The word "constant" at the end of the first sentence
above appears to be a misstatement that should be
"circulating". But in any case, it is clear that the
revaluation that Marx is talking about may affect the
fixed capital (the machinery, etc.) as well as the
circulating capital.
Marx then discussed for the next two pages the case of
circulating constant capital, and then briefly discussed
the revaluation that takes place in the fixed constant
capital ("the machinery and fixed capital in general") as a
result of technological change (beginning at the bottom of
p. 208). Here Marx mentioned:
The constant improvements that ROB EXISTING
MACHINERY, FACTORIES, ETC. OF A PART OF ... THEIR
EXCHANGE-VALUE.
Marx went on to say:
This process is particularly significant at times
when new machinery is first introduced, before it
has reached a certain degree of maturity, and
where it is thus constantly becomes outmoded
before it has had time to reproduce its value.
Next comes the paragraph that Rakesh mentions in
particular which includes the sentence about
bankruptcies. Here Marx said:
Once machines, factory buildings or any other kind
of fixed capital have reached a certain degree of
maturity, so that they remain unchanged for
a long while at least in their basic construction, a
further DEVALUATION takes place as a result of
improvements in the method of reproduction of
this FIXED CAPITAL. THE VALUE OF MACHINES,
ETC. NOW FALLS not because they are quickly
supplanted or partially devalued by newer, more
productive machines, etc., but because they can
now be reproduced more cheaply. This is one of
the reasons why large enterprises often flourish
only under their second owners, after the first have
gone bankrupt. The second owner, by buying them
cheaply, starts production with a smaller outlay of
capital.
Rakesh then comments on this passage:
> However, Marx is clear that the situation is more difficult "once machines,
> factory, buildings or any other kind of fixed capital have reached a
> certain degree of maturity, so that they remained unchanged for a long
> while at least in their basic construction [and]a further devaluation takes
> place as a result of improvements in the method of fixed capital." For
> Marx, this devaluation induces the bankruptcy of smaller and/or older
> firms--the destruction of value tied up in fixed capital, machines,
> factory; larger firms "often flourish only under their second owners, after
> the first have gone bankrupt. The second owner, by buying them cheaply,
> starts production with a smaller outlay of capital." (C, III, p. 209). It
> seems to me inconceivable that firms could go bankrupt if devaluations of
> constant capital simply raised the rate of profit for all firms. It is also
> inconceivable that the rate of profit for the second owners would be raised
> if there was significant destruction to the use value of the fixed capital
> they have picked up for a song.
>
> Rakesh
I agree (and have agreed all along) that the devaluation
of capital is not a painless process which simply raises
the rate of profit. This devaluation of capital involves a
loss of capital. Furthermore, this loss of capital may be
severe enough to cause bankruptcies. Bankruptcy is one
of the ways that the devaluation of capital is carried out.
However, and this is the crucial point, the rate of profit
that Marx is analyzing - in Chapter 6 and in Part 3 on the
falling rate of profit - still assumes that this devaluation
has taken place and is continually taking place, by
bankruptcies or by other means. The rate of profit that
Marx is analyzing is not the "historical cost" rate of profit
in which the fixed constant capital is not affected by
technological change. The point of Chapter 6 is the effect
of changes in the value of constant capital on the rate of
profit and the above seems clear to me that these
changes include changes in the value of the fixed constant
capital, as well as the circulating constant capital. The
revaluation of the fixed constant capital is "more
difficult," as you say, but Marx still assumes that it takes
place, one way or another.
I would also add that this particular problem - the loss of
capital due to devaluation caused by technological change
- seems to have been largely solved in late 20th century
capitalism by a declining value of money, so that the
evaluation of constant capital in current costs results in
capital gains rather than capital losses. However, I do not
think that this makes Marx¹s theory any less valid,
because I do not think that Marx¹s theory is based on the
contingent factor of whether or not the value of money is
declining.
What all this suggests to me, once again, is that Marx's
theory in Capital, including his theory of the falling rate
of profit, is a very high level of abstraction. And that a
lot of further work has to be done in order to use this
abstract theory as the basis for more concrete analyses.
After all, "crises" was the subject of the sixth and final
book of Marx's six book plan, which remains to be
written.
So, Rakesh, thanks again for your stimulating comments.
I look forward to further discussion.
Comradely,
Fred
P.S. By the way, Andrew (as I understand him) agrees
that the value transferred from the fixed capital (i.e. the
FLOW of fixed constant capital, or depreciation) is
revalued as a result of technological change, along with
the flow of the circulating constant capital. However,
Andrew argues that the STOCK of fixed constant capital is
NOT revalued.
I have argued that this interpretation is logically
inconsistent and contradictory. If the flow of fixed
constant capital (i.e. depreciation) is reduced as a result
of technological change, then less capital will be
recovered over the lifetime of the machine, etc.
Therefore, the value of the stock of fixed constant capital
will now be ACTUALLY WORTH LESS because less capital
will be recovered. The value of the stock of constant
capital depends on the value of the flow of constant
capital.
Of course capitalists may continue to carry the stock of
fixed capital on its accounting books at the original
historical costs. But this does not change the reality. The
stock of fixed constant capital is now worth less as a
result of technological change.