There is a disagreement about the overall effects of this devaluation--it
has been expressed before in an exchange between Andrew and Fred.
First, the profitability of those successfully shifting their profile to
the latest vintage may be enhanced. True, some individual firms, inflexible
and top heavy with the latest vintage plant, may have to be sacrificed but
this should only drive the species to a higher level of fitness:
"Simultaneously with the fall in the profit rate, the mass of capital
grows, and this is associated with the devaluation of existing capital,
which puts a stop to this fall and gives an accelerating impulse to the
accumulation of capital values." Capital 3, p. 357. Vintage
Second, there would be a boom in the dept producing those new machines
which are enforcing the scrapping or devaluation of the existing capital
The machine building boom should relieve excess capacity in Dept I which
in absorbing labor should not only pump more surplus value into the system
(even after accounting for the destruction of value on the old capital) but
also provide a greater market for Dept II.
John has challenged me to find evidence that Marx maintained any such
understanding. Haven't pieced it together yet. It does not seem to me that
Marx derives the falling profit rate from hyper competition among capitals,
leading continuously to greenfield investments by some that destroy more
value than they themselves produce--i.e., to too much destruction of
existing capital. If that hyper competition were really the basic problem,
then the state regulation of new investments should suffice to save the
system.
I actually think Marx is making almost the opposite argument. The economy
becomes monopolized, monopolies build up excess capacity with which to
thwart competitors, that excess capacity is not scrapped during downturns
the exit from which is thus no longer the hyper competitive building up of
new lost capacity that devalues the existing capital and gives an
accelerating impulse to new capital values, the excess capacity is instead
amortized through price fixing--leading to what Preobrazhensky called a
thrombosis in production. 'And if capital formation were to fall
exclusively into the hands of a few existing big capitals, for whom the
mass of profit outweighs the rate, the animating fire of production would
be totally extinguished. It would die out." Capital 3, p.368
As Michael P has put it, the monopolies may call upon the state to inflate
economy, thus preventing the downturns that would have otherwise forced
them to abandon existing capital and build the new low cost capacity that
would breathe fire into the accumulation of new values.
Yours, Rakesh