Friday, December 07, 2012

Recent Dialogue on Technodepreciation & the Marxian "Law of the Tendency of the Rate of Profit to Fall"

Full Title:  Recent Dialogue on Technodepreciation as the Outer, Competition-Enforced Mechanism of the Marxian '"[Inner] Law of the Tendency of the Rate of Profit to Fall"'.

Dear Readers,

Below is a paraphrased excerpt from a recent dialogue in which I engaged, regarding the topic of the title of this blog-entry.

Q:  In what way is "technodeprciation" a "problem" for capitalism?

Is it not just a specific case of the more general phenomenon of the tendency for the rate of profit to fall?

M.D.:   Thank you for posing such an excellent question!

First, consider Marx's method, in his primary accounts of the Capital-process.

There, one can account for the law of the tendency of the rate of profit on capital to fall, reasoning from what is '"immanent in the concept of Capital'''.

There, that tendency arises in terms of the tendency of a RELATIVE growing "shortage" in the amount of surplus-value (s) generated, from surplus-labor -- i.e. from "variable capital" (v), which "varies" precisely by giving rise to surplus-value -- in relation to the value magnitude of the "constant capital" (c) -- which is "constant" precisely in that it yields no increment of "surplus value" -- which arises due to physical, "wear-and-tear" depreciation of capital plant and equipment, as well as due to the "pass through" ["transfer"] of the value of the raw materials and auxiliary materials consumed in the production process.

In that primary account, Marx uses the [gross] profit-rate formula, s/(c+v), which represents the breakthrough, by Marx's dialectical science of human praxis, of the delusions of the ideology of capital.

That ideology holds that not wage'd labor, but only capital [e.g., as invested plant and equipment, "fixed capital", K] generates a "return on capital investment" (r), so that the ideological "rate of profit" formula, in the minds of capitalists, is r/K, which conforms well with phenomenal "appearances" on the "surface" of capitalist society, but which misrepresents the capital process in its depths, at the core of capitalist society.

The Marxian profit-rate, s/(c+v), represents, precisely, the "net gain rate" or "net expansion rate" of capital value output at the end of a round of the capital [re-]production process, c + v + s, in relation to the capital-value input required to produce that output, c + v:

That is, the Marxian profit-rate is the ((Output - Input) / Input) ratio for capital[ist] production:

(O - I)/I   =   ( (c + v + s) - (c + v) ) / (c + v)   =   s / (c + v).

If, early in the epoch of the accumulation of industrial capital-value, when the level of the social forces of production is still relatively low, and, therefore, when relatively few, and less expensive, factory plants and tools are in use on average, the variable capital [wages] cost of production far exceeds the constant capital cost of production, so that surplus-value is abundant relative to constant capital value, making the potential Marxian profit-rate relatively large --

s/(c + v)

-- later in the epoch of industrial capital accumulation, as a core expression of the growth of the social forces of production [i.e., of the 'use-value productivity of capital'] under capitalism, through the pursuit of "relative surplus-value" [Marx], the mass of plant and equipment in use, RELATIVE to the mass of labor-power employed, lawfully tends massively to grow, with a tendency for the value-mass of constant capital also to ever further exceed the value-mass of variable capital as well, forcing therefore a RELATIVELY ever diminishing portion of surplus value to "spread ever more thinly over over" a vastly larger constant capital cost for the physical depreciation of massively expanded physical plant and equipment, and of raw materials, etc., consumed per unit time in production, due to rising productivity --

s/(C + v)

-- resulting in a fall in the rate [or ratio, or 'relatio'] of profit as surplus-value, s, relative to the total capital cost -- c + v -- of producing that surplus-value.

That summarizes Marx's primary explanation of the historical self-induced rise leading to historical self-induced fall of capitalism, in terms of the internal necessity of the capital-relation as the predominating social relation of production of capitalist society, the immanent, logically, theoretically-inferred but superficially-invisible process at the core of capitalist society.

But how does this core-process appear, visibly, at "the surface society"?

That is, what is Marx's secondary account of the fall of the rate of profit on capital as capitalists "see" it and measure it -- as r/K -- in terms of the way in which it is '''forced, as an apparent external necessity, upon each individual industrial capital, by mediation of the competition of capitals"'?

Marx did not live long enough to complete his written account of the later.

I have come to believe that it is the competition-enforced write-down of fixed-capital value -- enforced upon the owners of obsolescent fixed capital by unit-price and return-rate competition from the owners of technologically more advanced fixed capital -- that is the primary way in which the core "tendency of the [Marxian] rate of profit of capital to fall" becomes manifest to the capitalist, and influences his subsequent activity -- who does not think or "see" in terms of the deep, scientific, "short-cut" insights of the Marxian rate of profit, of constant capital, of variable capital, surplus-labor, and of surplus-value -- at the "surface of society".

It can be shown, under the assumption of quite normal later [present] capitalist conditions, and of relations of wo [technodepreciation-induced in-period [partial] write-off of [part of] the obsolescent old, capital-plant capital-value amount, Ko] to delta_rn [incremental return on capital investment due to [partially] replacing [part of] the old, obsolete capital plant and equipment written-off, with the new, more technologically more advanced capital plant and equipment], and to Kn, the in-period capital-costs of acquiring the new, more technologically advanced fixed capital plant and equipment, replacing the old, obsolete capital plant and equipment removed from use, that --

(ro + delta_rn - wo)/(Ko - wo + Kn)   <   (ro/Ko).

I am presently writing a book on this subject, detailing the reasons behind the views expressed above, so, for now, until that book is published, I will have to refer you to the "data" provided by the extensive quotes extracted from Marx's writings, and from the writings of Marx-influenced economists, and from the writings of capitalist economists, all on the topic of "technodepreciation", that are available via the following links --



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