part 2 of 3

Mon Dec 31 08:43:31 MST 2001

2. Organic Composition of Capital: "The Law of the Tendency of the Rate of
Profit to fall."
Dialectic of development of Capital from beginning to end.

"The Law of the Tendency of the Rate of Profit to Fall," captures in a
succinct form, the rise, growth and fall of capital as a specific property
relations engendering and based on a distinct mode of production.

Capitalism is the unity of labor and capital in the production process as the
basis of society. Society, presupposes a basic infrastructure of material
production and this infrastructure serves as the means by which human beings
are organized. Before capitalism made its appearance as a distinct social
system of production, wealth existed and commodity production existed.

One type of wealth was in the form of money and movable property. This money
became increasingly concentrated in the hands of merchants engaged in the
trade of products made by simple forms of labor, from spices to fine
clothing, but primarily luxury items demanded by the ruling classes of
society. Merchants were primarily men who had knowledge of trade routes and
used various forms of money as means of exchange. Merchant capital is called
merchant capital because it does not arise from or is dependent on the unity
of machinery (simple machines), labor and the existence of a portion of
society with no means of existence except the sell of their labor power.
Merchant capital is not "the capital of merchants" - traders or distributors
like Federal Express, but rather a stage of wealth existing before the
capitalist mode of production.

Merchant capital, like everything else contains a polarity, which resists and
accelerates the transformation of production. The is no such thing as a pure
process in life - only in our mind, and seeking laboratory purity will lead
to frustration on the part of the seeker. Merchant capital is transformed on
the basis of transformation of the production process. Merchant capital as a
form of wealth become increasingly transformed and wedded to the production
of commodities on an ever-increasing scale. Part of merchant capital appears
as banking capital by way of usury - money loaning, as distinct from the
hiring of labor for purposes of commodity production.

As capitalist commodity production passes from small-scale scattered
production - manufacture, to large-scale production requiring an external
energy source - external to human labor, the laws of its operations unfold.
The capital advanced and generated on the basis of this new system of
production acquires a distinct composition, even when vast sums are advanced
from the moneylenders in the hope of returning a profit. One portion of this
capital must be invested in the upkeep of buildings to house production,
machinery, scientific technique, etc. as distinct from the purchasing of
labor-power. The former is designated constant capital and the latter
variable capital.  As a unity of capital in the production process these two
categories are called the "organic composition of capital."

Whereas the merchant capitalist of old would purchase the product of the
individual producer, modern capital employed the individual producers and
began their amalgamation into a collective of commodity producers. Individual
skilled workers and then men who learnt the science of production began
improving machinery and creating new machines that enhanced the productivity
of labor. The incentive for the capitalist to utilize, purchase and invest in
new technology was competition and the need to produce cheaper and at a
greater rate in ratio to the amount of "hands" hired to make more profit and
conquer over rising competitors. Competition between capitalist arose as one
of the defining laws driving capitalist commodity production. Competition and
increasing the productivity of labor by using ever-greater quantities of
machinery changed the composition of capital or rather the ratio between
constant and variable components of capital as a social force.

Marx wrote, through Engels editing,

"The law of the falling rate of profit, which expresses the same, or even
higher rate of surplus value, states, in other words, that any quantity of
the average social capital, say, a capital of 100, comprises an ever larger
portion of means of labor and an ever smaller portion of living labor.
Therefore since the aggregate mass of living labor operating the means of
production decreases in relation to the value of these means of production,
it follows that the unpaid labor and the portion of the value in which it is
expressed must decline as compared to the value of the advanced total
capital. Or: an ever smaller allocated part of invested total capital is
concerted into living labor, and this total capital, therefore, absorbs in
portion to its magnitude less and less surplus-labor, although the unpaid
part of the labor applied may at the same time grow in relations to the paid
part. The relative decrease of the variable and increase of the constant
capital, however much both parts may grow in absolute magnitude, is, as we
have said, but another expression for greater productivity of labor."
(Capital Volume 3 page 216 International Publisher, fifth printing 1973)

Two paragraphs later it is stated,

 "The law of the progressive falling of the rate of profit, or the relative
decline of appropriated surplus-labor compared to the mass of materialized
labor set in motion by living labor, does not rule out in any way that the
absolute mass of exploited labor set in motion by the social capital, and
consequently the absolute mass of the surplus labor it appropriates, may
grow; nor, that the capitals controlled by individual capitalists may dispose
of a growing mass of labor and, hence, of surplus-labor, the latter even
though the number of laborers they employ does not increase."

Marx and Engels analysis of capitalist commodity production proceeds from the
standpoint of the history and development of commodity production and
conclude that only human labor can create value. Machinery cannot create
value and value comes into existence at an early stage of commodity
production, before the appearance of capitalism and large-scale machinery.
Thus value is defined as the amount of socially necessary labor power in the
production of commodities. Value is not a social relationship that assumes a
material form in the process of production. Value is the amount of socially
necessary labor in the production of commodities. Value is not the price of
commodities or the price of labor-power. Value is the amount of socially
necessary labor in the production of commodities. Value is not labor power
but the amount of socially necessary labor expended in the process of
production. Value is not what someone thinks something is worth, but the
amount pf socially necessary labor expended in the process of production. Nor
is value a theoretical fiction, invented in the mind of a human being. .

    Unlike the time of merchant capitalist, whose wealth was derived from
trade and the purchase of product's from a producer of such goods, now the
worker himself has undergone a social transformation where his labor-power
appears as a commodity to be bought and sold on the open market, as the
result of being deprived of any other means of existence. Labor-power
acquires a value, which is the amount of socially necessary labor needed to
reproduce labor-power as labor-power. The value of labor-power is expressed -
manifested, in the price needed to maintain labor-power by the totality of
social capital and not one individual branch of industry or the national
wages of this country or that country. The law of the tendency of the rate of
profit to fall, reveals how and why the working class as a class is literally
polarized and enters a process of destruction and transformation at the hand
of capital and it is a remarkable presentation of the dialectics of the
social process.

    The logical result of Marx and Engels conclusion is that if capital could
theoretically unfold harmoniously without resistance from the working class,
it would collapse on its own weight because of the increasing absence of
living labor from the production process. This is just another way of saying
the gigantic power of the productive forces create commodities without any
buyers, because their labor has been rendered superfluous to social
production and there is no other way to earn exchange-values (wages) under
capitalism. The rate of profit of the total capital falls because there are
less buyers standing in the face of the mass of commodities. The rate of
profit must fall as a ratio of the total deployment of capital. This law
manifests itself in the fluctuation between supply and demand, although
supply and demand on its own does not establish the law of the tendency of
the rate of profit to fall. This is so because the total capital seeks the
areas of maximum profitability and when supply as an abstraction exceeds
demand, capital moves to the arena where the demand is relatively greater
than the supply.

    Capital does not merely cause oscillation in supply and demand, but
polarizes supply and demand and compels they to emerge as external poles. It
serves no purpose to discuss Marx without the dialectics of polarization,
transformation and synthesis. Every contradiction within capitalism becomes a
contradiction moving in antagonism. Capital creates an antagonism between
constant and variable capital. Antagonism can be resolved and abolished, but
not contradiction. An increase in the constant capital of the total social
capital means less labor-power is consumed in the process of production,
while the increase in constant capital is an increase because non-living
labor (not labor-power) in the form of technology is utilized increasing the
productivity of labor.

    It is no longer enough for DaimlerChrysler, Ford of General Motors to
simply produce vehicles to remain and expand their total capital (profits),
rather each has specialized divisions that invest in investment as a source
of profits and increasingly merge with other business whose only connection
is profit making.  Automotive production is noted for its enormous fixed cost
structure - constant capital allocation, which is why a series of merges and
"economy of scale" is being sought to defeat or rather slow down the
incredible competitive pressure generated as an expression of the law of the
tendency of the rate of profits to fall. The auto manufacturers during boom
years generally employ 85% of their total production capacity. On what basis
does the demand to increase productivity arise in any industry under

    Another question injected into the discussion concerning the organic
composition of capital and the theory of the tendency of the rate of profit
to fall, is the question of labor as a commodity or labor as value.

    The development of commodity production contains laws that are distinct
from the law system that governs capitalist relations of production. The
abolition of capital relations of production would not and cannot abolish the
character of labor as value. Herein resides the revolutionary conclusion of
the organic composition of capital.

    What is required is the emergence of a new mode of production. Politics,
no matter how honorable or righteous cannot abolish an economic law. It is
only when the fundamental triumph of living labor over dead labor combined
with a new mode of production in which labor becomes more than less
superfluous to the production of commodities that commodity production begins
its exit from the stage of history. Labor in fact must assume the form of
value until the factors creating a new mode of production emerge, consolidate
and transform social relations on the basis of living labor mastery over dead

The specific trajectory and the outlines of this process have already emerged
and will be outlined in part 3.

For now it is important to establish the context in which the conception of
the tendency of the rate of profit to fall is used in Volume 3 of capital.
The context was not an analysis of the features of the impulses, which causes
profits to fall in one branch of industry versus another or for one
capitalist versus another, or for one sector of capital versus another. It is
of course true that a study of the specific features that manifest the law of
the tendency of the rate of profit to fall is needed as a specialized field
of study. However, the Pentagon will not allow us to use their supercomputers
for the exact computations to verify these principle features on a planetary
scale. Not because they are against computations, but because they want the
supercomputers for their own usage. Maybe the International Monetary Fund has
access to such computing power. The speculators have such an ability and
shift capital based on concrete analysis of economic conditions and then
still gamble that politics can achieve what statistics say is a bad beat!

  Engel's should have the honor of the closing remarks because he edited
volume there of Capital.

"The hypothetical series drawn up at the beginning of this chapter expresses,
therefore, the actual tendency of capitalist production. This mode of
production (stop, check it out, he says mode of production) produces a
progressive relative decrease of the variable capitals as compared to the
constant capital, and consequently a continuously rising organic composition
of the total capital. The immediate result of this is that the rate of
surplus value, at the same, or even a rising degree of labor exploitation, is
represented by a continually falling general rate of profit. . . . The
progressive tendency of the general rate of profit to fall is, therefore,
just an expression peculiar to the capitalist mode of production of the
progressive development of the social productivity of labor. This does not
mean to say that the rate of profit may not fall temporarily for other
reasons. But proceeding from the nature of the capitalist mode of production,
it is thereby proved a logical necessity that in its development the general
average rate of surplus value must express itself in a falling general rate
of profit. Since the mass of employed living labor is continually on the
decline as compared to the mass of materialized labor (dead labor. Added by
editor - me) set in motion by it, i.e., to the productively consumed means of
production, it follows that the portion living labor, unpaid and congealed in
surplus value, must also be continually on the decrease compared to the
amount of value represented by the invested total capital. Since the ratio of
the mass of surplus value to the value of the increased total capital forms
the rate of profit, this rate must constantly fall."

That darn Engels has a way with words. You have to close your eyes and think
of him, or rather his conclusions and the dialectics of the process.
Insinuations will get us no were rather quick. I always enjoy quick trips so
that I can take the next one.

Such is the meaning of the law of the tendency of the rate of profit fall
under capitalism.

Part 3:

Hw and why I was able to discern the outline of a new mode of production and
Jim wasn't and it was obvious after I got beat up by capital and had to take
my computer to work so that someone could show me how to make it work. Or,
getting beat up makes one ponder the specific dynamics of your bloody nose
and having to go to the dentist

Part 3 will come later, but I have to do some work around the house befor the
wife comes home.

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