ON THE LABOR THEORY OF VALUE:
The ‘Markup’
and
The ‘Workerless Society’
“He believes he has proved the untenability of economic Marxism, and confidently announces that ‘the beginning of the end of the labor theory of value’ has been inaugurated…Since his criticism deals with principles, since he does not attack isolated and arbitrarily selected points or conclusions, but questions and reflects as untenable the very foundation of the Marxist system, possibility is afforded for a fruitful discussion.” [1]
If not labor, then what
“Though he did not put his conclusion in this way, Steedman was essentially saying that Marx cannot be right that labour is the only source of surplus…The inconsistencies Steedman established undermined Marx’s sequence of claims that labour is the only source of value, that value is the only source of profits, and that value determines price.” [2]
I had heard of Ian Steedman’s assertion[3] that it is not necessary to make reference to value in order to determine prices. I have not read his book. However, without reading it, if such a notion as his leads to a conclusion that new value does not spring forth from labor and labor alone, as Steve Keen asserts above, then such a notion can be challenged. The below does not set out to sketch a ‘positive’ proof of the assertion that labor, and labor alone, is the source of all value. Instead, it is essentially a ‘negative’ undertaking in that it seeks only to demonstrate that without labor there is no new value created.
In a paper kindly hosted by Marxmail[4] I previously examined a somewhat similar proposition and found that the elimination of the labor force in one sector produced, as it ought, less purchasing power, and given an output that remained the same, supplemented as it was by the products of a workerless factory, systemic deflation and a fallen general rate of profit (P’). Carried out to its expansio ad absurdum ‘logical’ conclusion i.e. the elimination of the workforces of the remaining sectors, it is here argued that the only ‘purchasing power’ that could possibly be produced would therefore be the portion of the commodity-value designated, by the capitalist, as profit (italics). ‘Profit’ is italicized so as to indicate that, as the exploitation relationship in Marx’ theory of surplus-value, the requirement for the very existence of profit, is (with the workers) gone, we must call it something else or indicate in some way (italics perhaps) that, though we might continue to call this portion of commodity value ‘profit’, it is a horse of a different color for it would merely be a mark-up over the costs-of production that each of the ‘capitalists’ (italicized for the same reason as ‘profit’ above), the only ones left with ‘purchasing power’, would mutually charge each other and thereby benefiting none. This story has been best told in the account of the alleged encounter wherein Walter Reuther of the United Auto Workers responding to a proud and haughty Henry Ford as Ford, while showing off his latest labor-reducing machinery, exclaimed “Well…Walter, how are you going to get them to go on strike?” Reuther is said to have responded with this rejoinder, “Well…Henry, how are you going to get them to buy Fords?”
Nevertheless, using Marx’ investigations of exchange between departments[5] in the ‘reproduction schemes’ he crafted in Vol 2, the proposition that new value can be created and realized, without the existence of the productive power of living labor, is below examined.
Sans workforce there might be two possibilities, in the capitalist mind, for the existence of ‘profit’. These are:
– an addition to price above value imposed as a matter of the capitalist’s will; or, ‘markup’[6]; and,
- (at least a part of) value stems directly from the constant capital[7]
Let us see, using the most basic math, how these might play out. To do so we will examine the exchanges within and between the two great departments of production. And while the math may be simple the conceptual difficulties, at times, can be challenging and it is hoped that the tabular description of such exchange below might ease and facilitate.
Morlocks and Eloi
We will assume an economy that is in a simple reproductive equilibrium. By that is meant that the capitalists are Morlocks and not Shylocks i.e. they consume, with no accumulation, all of the goods produced for them by their workers, the Eloi. Analysis of the formers transmutation into Shakespearean less-than-grand acquisitors accomplished a la alchemy of accumulation awaits another assignment.[8] So as to make this simple reproduction more interesting we will, as Marx did[9], postulate the existence of a third sector, really a sub-sector:
Consider a closed market consisting of two departments with the first manufacturing means of production (Dept I); and, the second producing means of consumption (Dept II) with this last divided between the productive forces allocated towards the production of ‘necessaries’ (Dept IIA) of both capitalists and workers of both departments; and, those utilized for the creation of the items of ‘luxuries’ (Dept IIB) for the capitalists alone of both departments.
Thus there are 3 sectors:
I. Means of production-products which make products
IIA. ‘Necessaries’-products consumed by workers and capitalists
IIB. ‘Luxuries’ –products consumed by capitalists alone
According to Marx[10], the value of the produce of each of these sectors, indeed of any product of any sector in a system of capitalist production, consists of the value of the constant capital (c) used up, the value of the labor-power (v)[11] employed, and the value of the surplus (s) produced by that labor-power in action, labor.
Dept I Dept IIA Dept IIB
c c c
v v v
s s s
Digressing for the moment and using an economy in which Dept II is viewed as a whole (i.e. not divided into IIA and IIB):
Dept I Dept II
c c
v v
s s
a reading of Chapter XX of Vol 2 indicates that, for simple reproduction to take place, the following relationships are so:
Products equal to the value of
Ic are replaced within Department I itself and never enter circulation outside of that department i.e. Ic is consumed internally[12];
likewise, the value of the products equal to
IIv is consumed by the workers within Department II[13].
Therefore it remains to account for (Iv and Is) and II c. For simple reproduction the value of the produce of these two must be equal to each other:
Iv + Is = IIc[14]
For this demonstration’s purposes we will assume that the entire constant capital is used up goes over into the products produced.[15] Further a surplus-value rate (s’) of 100% is also assumed. That is for every 1 hour the worker recapitulates his wage (v), he logs 1 hour gratis (s) for the Morlock:
s’ = s/v
that is
s’ = 1/1 = 100%
It is now possible to construct a scheme with our three sectors and, as Marx has already done just this, we can use the figures from Vol 2’s Chap XX. Sections 2 and 4.[16] This we will term:
SCHEME
A
Dept I Dept IIA Dept IIB
4000c 1600c 400c
1000v 400v 100v
1000s 400s 100s[17]
The totals produced are 6000c, 1500v and 1500s. These respectively replace the constant capital of both Dept I (4000c) and Dept II (2000c); and, provide the means of subsistence for both workers (1500v) and capitalists (1500s).
Let us look a bit more closely at this. In doing so, conceptually, it may help matters to look upon the numbers as not only as value amounts ($)[18] but also as output units (#). That is, we might, for sake of convenience, posit a 1 to 1 relationship between value and output (1$ = 1#):
Department I has produced a total
of 6000 in means of production. Of these
6000, 4000 Ic have been fashioned in a manner so as to replace its own constant
capital; 2000 (Is + Iv) so as to replace (via trade)
Dept II (as a whole) has fashioned 3000 in means of subsistence. Of these 3000,
2400 IIA (‘necessaries’) have been fashioned as subsistence shared by both workers and capitalists[19]; and, 600 IIB (‘luxuries’) to be partaken, at leisure, only by the favored.
Internal consumption within and exchange between the sectors is as follows:
DI___ DIIA DIIB
4000 Ic is consumed internally in Dept I 4000c
1000 Iv exchanges for 1000 of IIAc’s 1600 1000v 1000c
600 Is exchanges for 600 IIAc 600s 600c
400 Is exchanges for 400 IIBc 400s ___ 400c
4000c 1600c 400c
1000v
1000s ___
___
6000 1600 400
What has thus been allocated is all of Dept I’s constant capital (4000 Ic) and all of Dept I’s wages (1000 Iv) and surplus-value (1000 Is), totaling 6000, and all of Dept II’s constant capital consisting as it does of 1600 IIAc and 400 IIBc totaling 2000. What needs be accounted for is the v + s of both Dept IIA and IIB each equal to 500 and thereby totaling 1000:
Within Dept II
DIIA DIIB
400 IIAv is consumed internally by the workers IIA 400v
240 IIAs is consumed internally by the capitalists IIA 240s
100 IIAs is exchanged for 100 IIBv 100s 100v
60 IIAs is exchanged for 60 IIBs 60s 60s
40 IIBs is consumed internally by the
capitalists IIB ___ 40s_
400v 100v
400s 100s
800 200
DI__ DIIA DIIB
Grand Total 6000 2400 600
As the rate of profit (P’) is the produced surplus-value (s) divided by the total capital arrayed (c + v), or P’ = s/c+v, the
Rate of Profit (P’) of the entire economy = 1500s/7500c+v = 20%
P’ Dept I = 1000s/5000c+v = 20%
P’ Dept IIA = 400/2000c+v = 20%
P’ Dept IIB = 100s/500c+v = 20%
The entire social product of all departments and of each and
every department, indeed each and every portion of the product’s cost-price (c
+ v) might be taken to appear as if having been ‘marked up’[20]
by 20%; and, therefore, since both workers and capitalists have equal amounts
of purchasing power it would seem that the workers and the capitalists would
each, pro rata to their purchasing power (PP), share 1/2 the burden of the
‘mark-up’ which by its nature accrues solely to the latters, however. Let us see how it is that this works out and
whether the ‘markup’ theory of profit holds water (i.e. can it produce the
surplus totaling 1500s that has accrued to the capitalists).
The ‘markup’ examined as played
out in the sphere of circulation
As noted in footnote 10, the value of any product, according to the Labor Theory of Value (LToV) and according to Marx, is given by the value of the machinery, tools, products, et al, or ‘dead labor’ (c), along with the value of the amount of labor-power (v) used up in its production. Labor-power in action as ‘living labor’ has the singular ability to add more value than it itself is worth. That additional value is the surplus-value (s). According to the ‘markup’ theory the additional value springs from an add-on to the capitalist’s costs-of-production (c + v). Previous treatments of the so-called ’transformation problem’ have centered upon the quantitative divergence of price from value. We will look at the little discussed phenomenon of a similar divergence but the examination will proceed from the positing of a qualitative difference existing between value and price.
We will set out from the assumption that quantitatively price = value i.e. that there is no divergence in the ‘transformation problem’ sense of the word. This simplification comes with the same codicils put forward above[21] in that divergence of price from value would make the argument a bit more complicated but would, in no way, undermine it.
Fro the standpoint of circulation, the surplus-value, produced in production (or coming as the result of the ‘markup’) is realized as profit when the item is sold. Having to do, at this point, with only the latter of these explanations, let us see how it is that the ‘markup’ is effectuated:
The ‘markup’ is a phenomenon that takes place after production and just prior to the commodity produced entering the sphere of circulation and thereby is a creature of this latter alone. The capitalist comes to market with goods that he has ‘marked up’ in his mind to yield a rate of profit that is, say, the average profit (P’). Now, how it is and how it has come to be that this average rate exists is, for the moment and anon, a matter of no concern to him. He will find, however, that his effective rate of profit will differ substantially from that which he has expected. For, on the one hand, in addition to the workers he sells to, workers who have no means of exacting such a tribute (‘markup’) in return, he must also come face to face with those of his own ilk and stripe, those who do have the wherewithal, the will, to enforce their own ‘mark-up’. It is at this point that the above promised divergence between value and price can be examined for, in the value-realization process (i.e. sale and purchase), the portion of commodity value representing the surplus reveals a Janus-faced persona when it comes to its price. Consider:
Value c + v + s
Price- c + v + (xsc + xsv)
where xsc = % market demand by capitalists; and, xsv = % market demand by workers
Value- c + v + s
Price- c + v + (sc)
To wit: the ‘markup’ in the former sphere is shouldered pro
rata by both workers and capitalists; while in the latter it is a burden
falling solely to the latters. With
this, there are consequences for the ‘markup’ theory, which shall be examined
first in the internal consumption and the exchanges
Within and with
Dept I
DI__ DIIA DIIB
4000 Ic is consumed internally in Dept I 4000c
1000 Iv exchanges for 1000 of IIAc’s 1600 1000v 1000c
600 Is exchanges for 600 IIAc 600s 600c
400 Is exchanges for 400 IIBc 400s 400c
In line 1, making the extrapolation of either
treating Dept I as a single capitalist who, in addition to making constant capital for Dept II also reproduces its own constant capital; or,
treating Dept I as two capitalists who mutually make each other’s constant capital; or,
treating Dept I as many capitals who interchange among themselves the elements of each other’s constant capital;
it can be deduced that the exchange(s) within this department either are characterized, in the first instance, by no ‘markup’; or, in the second and third instances, by mutual reciprocal ‘mark-ups’ which cancel each other. For sake of convenience we will refer to this phenomenon as occurring in intradepartmental consumptions and exchanges between capitalists as ‘Rule 1’.
The mutual reciprocal ‘mark-ups’ are more readily seen in the 3rd and 4th lines, the inter-departmental exchanges involving Dept I: each ‘sale’ is exactly compensated by a ‘buy’. What one loses in the former is matched by what is gained in the latter. There is no gain from the ‘mark-up’. The capitalists having mutually charged each other the 20% ‘mark-up’ there is no need to consider this anymore, at this point, for a ‘fair’ robbery is really no exchange.[22] There is and can be no ‘mark-up’ qua markup (i.e. profit) in these equal exchanges between departments amongst capitalists. This is ‘Rule 2’. As we are assuming a simple reproductive economy in equilibrium (wherein all that is produced is consumed at prices yielding just so the general rate of profit (P’)), the exchanges between the capitalists play out such that the ‘mark-ups’ mutually cancel each other out. There is no ‘profit´ that can be had from these exchanges.
It is in the 2nd line (1000 Iv exchanges for 1000 of IIAc’s 1600) that the ‘markup’ appears to realize surplus-value for deducting the 20% of commodity-value attributed to it, it seems as if 166.66 is the value of the ‘markup’. For the price is the value of the product (x) plus the percentage ‘markup’ (in this case 20% of the value or .2x). Or,
x + .2x = 1000
x = 833.33
This ‘profit’ obtained from the ‘markup’ would accrue
to the capitalists of Dept IIA. Next we
turn to the exchanges occurring
Within
Dept II
DIIA DIIB
400 IIAv is consumed internally by the workers IIA 400v
240 IIAs is consumed internally by the capitalists IIA 240s
100 IIAs is exchanged for 100 IIBv 100s 100v
60 IIAs is exchanged for 60 IIBs 60s 60s
40 IIBs is consumed internally by the
capitalists IIB 40s
Lines 2 and 5 drop out of the picture in accordance with ‘Rule 1’.
Lines 3 and 4 drop out of the picture in accordance with ‘Rule 2’.
We are left only to examine line 1. As in Line 2 of the table of exchanges “Within and with Dept I” above, the ‘markup’ does appear to realize surplus-value as
x + .2x = 400
x = 333.33…
meaning that the ‘markup’ realizes 66.66… in ‘profit’ which accrues as above to the capitalists of Dept IIA. This, in conjunction with the 166.66… previously racked up by the exchange within and with Dept I yields a total ‘markup’ equal to 233.33. We began this section with the notion of ascertaining whether or not it could be demonstrated that by means of the ‘markup’ some 1500s could be generated. It is obvious that this is not the case as there is obviously something wrong with this conception as to how it is that profit arises.
Marginally Efficient Capital
Assuming perhaps, at best an Eloi exodus, at worst a Morlockian holocaust,[23] in response to which the capitalists replace them with an equal value of constant capital. The means that the existing allocation of factors
Dept I Dept IIA Dept IIB
4000c 1600c 400c
1000v 400v 100v
has been transformed into
Dept I Dept IIA Dept IIB
5000c 2000c 500c
The capitalists, truly no longer Morlocks qua Morlocks, but stuck in their ways, perchance struck by nostalgia and pining for the wage-slave good ole ante bellum days, nonetheless continue in the fantasy of their ways and, at a convened grand conclave, ‘democratically’ (i.e. 1$/1vote) vote to continue the mark-up (no parenthetical) of their products as before:
SCHEME
B
Dept I Dept II A Dept IIB
5000c 2000c 500c
1000s 400s 100s
On the surface, everything[24] is as was, “And that is ‘good’”, so sayeth the one, so sayeth them all, for the anticipated
Rate of ‘Profit’ (P’) of the entire economy + 1500s/7500c = 20%
P’ Dept I = 1000s/5000c = 20%
P’ Dept IIA = 400/2000c = 20%
P’ Dept IIB = 100s/500c = 20%
But wait. One of these illuminati, when much younger, having occasioned to have chanced upon Marx’ admonition of the necessity of “Iv + Is = IIc”, advises the gathered that disproportionality[25] exists in the system for Is (there no longer being any Iv) in the capitalists’ new reproduction scheme (and the word here is most appropriate) is only equal to 1000 while IIc (for IIA and IIB) sits at 2500 and thus not enough constant capital would be reproduced for Dept II. Ooops!!! Obviously, something has to be done. Again, to the fore steps forward “Sir Reader of Marx” who advises that because the new system has a now greater prevalence of constant capital that a re-ordering of production must take place “to save the system from itself”. These words, the capitalists have heard many times before from varying assortments of “Chicken Littles!” and strike no fear into the utterer of the castigation, the brave “Sir Long Run” who has waved off the commentary of Marx and Grossmann and many lesser “Littles”. The gathered convene into a gnawing consensus that the words and warning of “Sir Reader” must be acknowledged and acted upon and a great shift of capital and capitalists takes place with the old array of productive forces of:
Dept I Dept II A Dept IIB
5000c 2000c 500c
transformed into:
Dept I Dept II A Dept IIB
6250c 1000c 250c
The members of The Council of Morlockians agree that 20% is still a fair ‘mark-up’ and wonder if the problem with disproportionality has been solved. A quick bit of math by “Sir Reader informs that with the agreed-upon ‘mark-up’ will indeed solve this little problem for computations show that with the additions of the 20% ‘mark-up’ the values[26] of the varied departments will be:
SCHEME C
Dept I Dept II A Dept IIB
6250c 1000c 250c
1250s 200s
50s
And the constant capital of Dept II would indeed be reproduced. And all seemed right in Morlock land for:
DI DIIA DIIB
6250 Ic is consumed internally in Dept I 6250c
1000 Is exchanges for 1000 of IIAc 1000s 1000c
250 Is exchanges for 250 IIBc 250s 250c
160 IIAs is consumed internally 160s
40 IIAs is exchanged for 40 IIBs 40s 40s
10 IIBs is consumed internally _____ _____ 10s 6250c 1000c 250c
1250s 200s 50s Grand Total 7500 1200 300
All that was produced has been consumed.
“Sir Long Run” hawks and spits. For he has observed that this new schema has only generated some 1500 for the consumption fund whereas before the reallocation (Scheme A) the fund would have totaled 3000:
SCHEME A
Dept I Dept IIA Dept IIB
4000c 1600c 400c
1000v 400v 100v
1000s 400s 100s
And now there is only 1500:
SCHEME
C
Dept I Dept II A Dept IIB
6250c 1000c 250c
1250s 200s 50s
“Ahhh!, my friend, that is the price of proportionality,” observes “Sir J S Mill, 12th”, who viewing the eternality of this ‘steady state’[27] simple reproduction scheme, truly an ‘Absolute Idea’, smiles like a Hegel welcoming a white horse bearing Napoleon.[28] “Besides, we are rid of the (searches for word, then spits out) ‘workers’, thank God!” And it was true that without the…er “workers” who had been consuming (and wasting, in their minds) half the produce of their machines, that they were no worse off than before. They still had their 1500s only now with a larger proportion devolving (as it should be, they agreed) to the enlarged constant capital producing Department I.
And everybody was happy. Or are they? True, they no longer had to contend with, feed, and keep in their place the laggardly Eloi. But is was also true that the woebegones were no longer around to shoulder their half of the ‘mark-up’. But are there other consequences of this unintended consequence? Let us look in another way at this holy trinity, this triangle of trade, the exchanges between the departments of
SCHEME C
DI DIIA DIIB
6250 Ic is consumed internally in Dept I 6250c
1000 Is exchanges for 1000 of IIAc 1000s 1000c
250 Is exchanges for 250 IIBc 250s 250c
160 IIAs is consumed internally 160s
40 IIAs is exchanged for 40 IIBs 40s 40s
10 IIBs is consumed internally 10s
Leaving out items which are consumed internally by their respective capitalists (Lines 1, 4 and 6), and on which the mark-up is itself borne by the ‘marker-upper’ (per ‘Rule1’), we are left with the interdepartmental exchanges of Lines 2, 3 and 5:
DI DIIA DIIB
1000 Is exchanges for 1000 of IIAc 1000s 1000c
250 Is exchanges for 250 IIBc 250s 250c
40 IIAs is exchanged for 40 IIBs 40s 40s
And we are, alas, per ‘Rule 2’, back to the case of ’fair’ robbery being no (capitalist) exchange for on the first line, I has ‘marked up’ to IIA exactly what II has ‘marked up’ to I; in the second, the same goes for I and IIB; and, in the last what IIA gains in his sale to IIB is exactly compensated by what IIB gains from his sale to IIA.
It is a simple
matter. There has been no surplus-value
created and therefore none can be
realized because no additional value has been added through the
expenditure of labor-power in action as living labor. The
surplus must be real and not a figment of one’s imagination, a matter of one’s
will; just as much as nor can it be the living spawn, ghosts from the machines,
fashioned of labors already ‘dead’. It
must come from somewhere and that somewhere is none other than the hands and
minds, the brains and the sinews of human activity.
In addition, it seems to
have not yet been grasped by advocates of any postulate that ascribes to
constant capital value-creation ability that in a capitalist commodity society
value is, on the one hand, as in any society, a measurement of the amount of
socially necessary and socially demanded, labor embodied in this or that or any
product; yet, on the other hand, in a capitalist commodity society this same
value will must be found and is only to be found existing alongside a
dialectical doppelganger, its complement, purchasing power (PP)[29]
in the form of revenues, without which the former (value) has no meaning, in
this context, as this latter (PP) is the social significant that what has been
produced ought have been produced. PP
that cannot be wished willed or whistled into existence but which must exist in
part as workers’ ‘paid’ labor, and in part as ‘unpaid’ labor appropriated as
surplus-value by the capitalists. These
are the workers’ contributions to the purchasing power pool and these two,
‘paid’ and ‘unpaid’ labors, are as much complements, as much mutually dependent
upon each other for each own’s existence, as value and purchasing power. There is no one without the other as by now
even Morlocks must understand.
Unsteady State
There is yet one more
final and telling blow to these propositions that can now be advanced. You may remembered being advised “it may help
matters to look upon the numbers as not only as value amounts ($) but also as
output units (#).[30] And thus when we looked at
SCHEME A
Dept I Dept IIA Dept IIB
4000c 1600c 400c
1000v 400v 100v
1000s 400s 100s
the total output in units
(#) was 9000. Now, it must be remembered
that when looking at
SCHEME C
Dept I Dept II A Dept IIB
6250c 1000c 250c
1250s 200s 50s
the second line was but
an agreed-upon ‘markup’ having existence only in the minds of the
Morlocks. And thus the physical output
of Scheme C was only 7500 units. Each
unit of value is no longer = 1 unit of output as now some 9000 units of
the former confront only 7500 of the latter.
1 unit of value now is able to purchase only .83 1/3 of a unit of
output. Put another way 1 unit of output
now commands purchasing power equal to 1.2 units of value. A terrible inflation, the source of which
befuddles all, has engulfed and bedeviled the Morlockian circulation
scheme. And, if this is not enough to
run their blood cold, consider the complications which must happen to their
system’s ability to reproduce itself in light of this discrepancy:
As the constant capital
of Dept I (equal to 6250) has to replace itself in full (in unit not value
terms) by some 20%, not coincidentally equal to Is, these 1250 must be
redirected to Ic raising its value to 7500and thereby drop out of the
exchange relationship with the constant capitals of Dept II. All this is quite okay as these departments
have exactly the same problem. No consumption
has been allowed, nor could be allowed, if the system is to reproduce
itself. In value terms we would
arrive at:
SCHEME D
Dept I Dept II A Dept IIB
7500c 1200c 300c
However, as we know,
thought experiments aside, no (in)human is going to starve himself to make a
point. So, say the consumptions indeed
take place after all the exchanges have taken place and the Morlocks are left
with
Dept I Dept II A Dept IIB
6250c (5208 1/3c) 1200c (1000c) 300c (250c)
To consume means that
their system must thereby continually shrink with each cycle of
production. To fully reproduce their scheme
the Morlocks must starve. It should be
noted that having seen the ‘Steady State’ evaporate, Sir J Stuart Mill pulls
out his sword and impales himself upon it.
JAI
[1] Rudolf Hilferding.
Preface to “Böhm-Bawerk's Criticism of Marx.”
http://www.marxists.org/archive/hilferding/1904/criticism/preface.htm
[2] Steve Keen.
“Debunking Economics.” Pluto
Press.
[3] “If one is attempting to explain prices and the profit rate then
‘labour theories’ are simply redundant.” “Marx After Sraffa and the
Open Economy (Some Notes)”
http://www.open.ac.uk/socialsciences/hetecon/2002/abstracts2002/steedman_i_full.pdf
[5] “The total product,
and therefore the total production, of society may be divided into two major
departments:
I.
Means of Production,
commodities having a form in which they must, or at least may, pass into
productive consumption
II.
.Articles of Consumption, commodities having a form in which they
pass into the individual consumption of the capitalist and the
working-class.” Marx. “Capital.
Vol. 2.” Chapter XX.
http://www.marxists.org/archive/marx/works/1885-c2/ch20_01.htm
[6] Markup is a term used in marketing to indicate how much
the price of a product is above the cost of producing and distributing the
product.”
http://en.wikipedia.org/wiki/Markup_%28business%29
“A major general retailer,
such as Walmart, may apply a set percentage for each product category (e.g.,
women’s clothing, automotive, garden supplies, etc.) making the pricing consistent
for all like-products. Alternatively, the predetermined percentage may be a
number that is identified with the marketing objectives (e.g., required 20%
ROI).” “Principles of Marketing: Setting Price.” http://www.knowthis.com/tutorials/principles-of-marketing/setting-price/4.htm
[7] “…if value is the essence of a commodity, then that
essence consists of both labor and commodities-it cannot be derived solely from
labour.” Keen. P289.
[8] Principles established in this paper would not be violated
by the existence of accumulation.
[9] “Exchange within Department II. Necessities of Life and Articles of
Luxury.” “Capital.” Vol 2.
Chapter XX. Section IV. http://marxists.org/archive/marx/works/1885-c2/ch20_01.htm#4
[10] “The value of every commodity produced in the capitalist
way is represented in the formula:
C = c + v + s.” “Capital.
Vol 3.” P25. http://www.marxists.org/archive/marx/works/1894-c3/ch01.htm
[11] Here it is assumed that we are dealing with ‘socially
necessary’, that is average, labor toiling under average conditions of
exploitation and to the extent such that its output is equal to the social
demand for it:
“In the value of the
product, the labors of the cotton-planter, of the spindle-maker, etc., and of
the spinner, are commensurable, qualitatively equal parts of general, human,
necessary value-creating labor, and therefore distinguishable only
qualitatively, and for that very reason quantitatively comparable by the length
of time, presupposing that it is socially necessary labor-time, for only the
latter is value-creating.”
Engels. “Synopsis of Capital.”
http://www.marxists.org/archive/marx/works/1867-c1/1868-syn/ch03.htm#1
[12] “Let us take the previous scheme (Book II, Chapter XX, II) for simple reproduction:
I. 4000c + 1000v + 1000s = 6000
= 9000
II. 2000c + 500v + 500s = 3000
According to this, the producers and landlords of II consume 500v + 500s = 1,000 as revenue; 2,000c remains to be replaced. This is consumed by the labourers, capitalists and those who draw rent from I, whose income = 1,000v + 1,000s = 2,000. The consumed product of II is consumed as revenue by I, and the portion of the revenue of I representing an unconsumable product is consumed as constant capital by II. It remains then to account for the 4,000c of I. This is replaced out of the product of I itself, which = 6,000, or rather = 6,000 - 2,000; for these 2,000 have already been converted into constant capital for II.” “Capital. Vol 3. P 838. http://www.marxists.org/archive/marx/works/1894-c3/ch49.htm
[13] As they have no need of purchase of the means of production of Dept I.
[14] “ It follows that, on the basis of simple reproduction,
the sum of the values of v + s of the commodity-capital of I (and therefore a
corresponding proportional part of the total commodity-product of I) must be
equal to the constant capital IIc, which is likewise taken as a
proportional part of the total commodity-product of department II; or I(v
+ s) = IIc. “Capital. Vol 2.”
Chap XX. Sec III. P402.
http://marxists.org/archive/marx/works/1885-c2/ch20_01.htm#3
[15] Akin to footnote 8, should we seek to examine this
proposition with only a portion of the constant capital being consumed in the
process of production and thereby going over into the value of the produced
commodities, the analysis would be mathematically a bit more convoluted but
would in no way violate the findings below.
[16] International
Publishers. NY. 1967.
Respectively P 397 and P406.
http://marxists.org/archive/marx/works/1885-c2/ch20_01.htm#2 and
http://marxists.org/archive/marx/works/1885-c2/ch20_01.htm#4
[17] We have assumed a system-wide rate of surplus-value (s’)
of 100%, therefore the produced surplus (s) is equal to the workers’ wages (v).
One might note that each
sector’s ‘organic composition’ (the ratio of constant (c) to variable (v)
capital) is the same i.e. 80c + 20v (in %).
And as in footnotes 6 and 9, this simplification, if replaced by
differing organic compositions, would again not counter pose itself to the
conclusions below.
[18] The reader may notice that $ normally a symbol for price
is used, in this case, for value. As the
organic compositions of each sector are the same, there is no need for
intermediary discussion of how differences in organic compositions ‘transform’
value into price for, with the unique (i.e. identical) compositions chosen,
value is equal to price.
[19] 2400 IIA = 1500 for workers, 900 for capitalists; 600 IIB
for capitalists alone.
[20] “It is now clear to the capitalist that this increment of
value springs from the productive processes undertaken with the capital, that
it therefore springs from the capital itself, because it is there after the
production process, while it is not there before it. As for the capital consumed
in production, the surplus-value seems to spring equally from all its different
elements of value consisting of means of production and labour. For all these
elements contribute equally to the formation of the cost-price.” “Capital. Vol 3.” Chap 1.
P35. Lawrence and Wishart.
Or, take Marx’ numerical
example wherein 5 capitals of differing organic compositions are seen as parts
of a single capital, perhaps 5 different production lines, and thus ‘marked up’
the same (in this case by 22%):
“If
we now again consider capitals I to V as a single total capital, we shall see
that, in this case as well, the composition of the sums of these five capitals
= 500 = 390c + 110v, so that we get the same average
composition = 78c + 22v, and, similarly, the average
surplus-value remains 22. If we divide this surplus-value uniformly among
capitals I to V, we get the following commodity-prices:
(Continued next page below.)
|
Capitals |
Surplus- |
Value of |
Cost-Price of |
Price of |
Rate of |
Deviation of |
|
+ 20v |
20 |
90 |
70 |
92 |
22% |
+2 |
|
II. 70c + 30v |
30 |
111 |
81 |
103 |
22% |
-8 |
|
III. 60c +
40v |
40 |
131 |
91 |
113 |
22% |
-18 |
|
IV. 85c +
15v |
15 |
70 |
55 |
77 |
22% |
+7 |
|
V. 95c +
5v |
5 |
20 |
15 |
37 |
22% |
+17 |
”
“Capital. Vol 3.” Vol 3.
Chap IX. Lawrence and
Wishart. P157. http://marxists.org/archive/marx/works/1894-c3/ch09.htm
This, the conversion of
value into price above, the allocation of profit in accordance with the general
rate of profit (P’) and in proportion to the size of the capital advance, is
the ‘transformation problem’.
[21] Above, footnotes 8 and 15.
[22] In the sense that capitalist exchange is done not for the
trade of use-values but for realization of surplus-value: “…under capitalist production it is not a
question of merely throwing a certain mass of values into circulation and
exchanging that mass for equal values in some other form, whether of money or
other commodities, but it is also a question of advancing capital in production
and realizing on it as much surplus value, or profit, in proportion to its
magnitude, as any other capital of the same or of other magnitudes…” Marx as quoted in Hilferding. Chapter 2.
http://www.marxists.org/archive/hilferding/1904/criticism/ch02.htm
[23] “The cotton trade has existed for ninety years.... It has
existed for three generations of the English race, and I believe I may safely
say that during that period it has destroyed nine generations of factory
operatives.” Ferrand’s Speech in the
House of Commons, 27th April, 1863.
Quoted in “Capital.” Vol 1. Chap X.
http://www.marxists.org/archive/marx/works/1867-c1/ch10.htm
[24] As in ‘profit’ is everything.
[25] “Marx’s schemes of reproduction are in no way a mere
abstraction, but a piece of economic reality, although the proportionality of
the branches of production postulated by these schemes can only be temporary,
and "spring as a continual process from disproportionality." Paul Mattick.
“Ernest Mandel’s Late Capitalism,” http://www.marxists.org/archive/mattick-paul/1972/mandel.htm
[26] ‘Values’ is italicized for while we use the same word, as we did in the previous section, to denote units (of capital (c), paid labor (v) and unpaid labor (s)) embodied in the product; now it is obvious that this value is something quite different as it is missing the labor elements. Perhaps, for this reason, the ‘s’, itself also rates italicizing.
[27] http://www.eoearth.org/article/Mill,_John_Stuart
[28] “So mighty a figure must trample down many an innocent
flower," Hegel warned, explaining that the hero could not be analyzed only
in relation to his own time, and to other men, but should be judged by the
progress of the Idea which he effects.”
John Crouch. “Hegel's Theory of
History and Napoleon Bonaparte.”
http://patriot.net/~crouch/artj/heg.html
[29] “The entire value portion of the annual product, then,
which the labourer creates in the course of the year, is expressed in the
annual value sum of the three revenues, the value of wages, profit, and
rent.” “Capital. Vol 3.” Chap XLIX.
P834. Lawrence and Wishart.
http://www.marxists.org/archive/marx/works/1894-c3/ch49.htm