Accumulation and Technical Change in Marxian Economics ( Professor Levine's Ph.D dissertation, Yale University, 1973 )

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73-26,673 LEVINE, David.Philip, 1948ACCUMULATION AND TECHNICAL CHANGE IN MARHAN

ECON3‘/IICS. Yale-University, Ph.D., 1973 Economics , theory

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University Micro 1ms,A XEROX Company, Ann Arbor. Michigan

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ACCUMULATION AND TECHNICAL CHANGE IN MARXIAN ECONOMICS Iewdxlfh Levine ll

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A Dissertation Presented to the Feeulty of the Graduate Sohool of Yale University in Candidacy for the Degree of Doctor of Philosophy

1973

o

ACCUNULATION AND TECHNICAL CHANGE IN MARXIAN ECONOMICS

EByid.P. Levine

A Dissertation Presented to the Faculty of the Graduate Sohool of Yale University in Candidacy for the Degree of Doctor of Philosophy

1973

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Summary

The object of this dissertation is to establish the sense in which there exists a distinctively "Marxian" theory of capital accumulation. More specifically, it is an attempt to uncover the salient features of the Marxian theory and to show the manner in which it distinguishes itself'fttn1@he modern, "neo-Keynesian", theory of Michal Kalecki, Joan Robinson, and Nicholas KaldoriQ)The first part of the thesis contains a detailed exposition of the internal logic of the Marxian.analysis and establishes the extent to which coherence, in a fonnal sense, may be attributed to that theory. This discussion centers on the theories of employment and profits. Chapter 2 considers the analysis of technical change and proposes a Marxian theory of technical progress which ferns the foundation of the theories of accumulation and distribution. The process of technical change is seen to be inseparable from the processes of competition, concentration of capital, and the gncsth of firns. The analysis of technical change also provides the logical basis for the deduction of the Marxian tendency for the organic composition of capital to rise. Chapter 3 y takes up first the theory of wages and considers the implications of the Marxian treatment of the interrelation of homey wages, real wages, and the rate of exploitation as well as the interrelation of competition, technical change, and distribution.@§Part II of this chapter, which forms a centerpiece to the entire discussion, deals explicitly with the differences between the Marxian and neoekeynesian theories of accumulation. These differences are located in the treatment of technical change and the relation of income distribution to accunmdar tion. The thesis concludes with an exposition of the entire Marxian theory of economic growth viewed as a systematic whole and incorporating corrections of various errors in Marx's original exposition uncovered in the preceding discussion. The dissertation also includes brief appendices discussing Kaldor's theory of growth and the theory of imperialism.

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Contents

Introduction

iv

Acknowledgements

L

, I u ~

1.

x

The Theory of Accumulation

1

1 $-

P’ I. The General Law of Capitalist Accumulation

.

1. The Demand for Labor 2. Accumulation with a Constant Organic Composition of Capital 3. Technical Change and the Organic Composition of Capital H. The Genera1.La of Capitalist Accumulation

II. Values, Prices and Accumulation

5 x

B 17

so ,_ 37 us

r.-- ‘

if The Conceptual Framework

us

1. The Role of Values

us

2. The Rate of Profit and the Transformation fttn1Va1ues to Prices 3. Prices of Production Accumulation, Distribution and Employment

55 59 78

1. Expanded Reproduction at the Level of the

Economy As a whole 2. Complications of Price Analysis I-—The Rate of Profit

'

3. Conplications of Price Analysis II--The Theory of Employment

2.

78 as lou

Conclusion

110

List of Variables

nu

The Analysis of Technical Change

117

I. Outline of a Theory of Technical Change

119

II. Technical Change in.Marxian Economics

160

1

-

3,

Aspects of the Behavior of Capitalist Economies Il-

'Ihe Theory of wages

II. Marx and the Modern Theory of Econcmic Growth

182 186 226

III. The Theory of the Growth of the Capitalist

Economy

248

Appendices A.

Kaldor's Theory of Growth

288

B.

A Note on the Theory of Imperialism

291 (

List of Works Cited.

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Introduction

Marxian economic theory has received increased attention in recent years. gin part this has been an outgrowth of the general rehabilitation of "Classical" economics which has attended the greater importance now being attached to problems of economic" growth and capital accumulation.

part this rehabilitation (although it

may be questioned whether that term is appropriate in this context} T has also resulted from a certain disaffection in some circles with the modern, neo-classical approach to economic problems. economics has felt a renewed impact

Modern

the direction of Classical

and Marxian theory, an impact which is especially great in the case of certain followers of Keynes.

Similarly, the work of Marxian

economists has been strongly influenced by neo—classical ways of " thinking (see, for example, Lange (1935)).

Marx, more often than‘

not, is seen through neo-classical eyes, or at least, through those strongly influenced by non-Marxian theories. Whatever the relative merits of the different ways of dealing with Marx, it is appropriate, at this time, to look more closely into (what _

Marx actually had to say concerning some of the problems of capital accumulation and income disocibtxtion) and also to try to discern the peculiarly Marxian approach to and treatment of some "1rode1=n" questions.

This is , quite obviously, not the first time that anyone

has attempted to uncover exactly what Marx had to say concerning im-

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analysis to be presented here. of a prolegomenon.

This essay is in the nature, therefore,

Whether a successful basis for a Marxian economics

has been established here, whether it is necessary or even possible for such a basis to be established, is for the reader to decide.

This essay retains one overriding weakness as a product df the manner in which it was written.

That is the lack, at any one point

in the discussion, of a systematic exposition of the entire theory of accumulation. |,_

Such an exposition is implicit in the discussion

but'is'heVer‘brought to bear on the organizational structure of the work as a whole.

In light of this lack of a systematization of the

treatmnt of the theory of accumulation,a brief summary outline of the different chapters might prove useful as an introduction to the dissertation as a whole.

.

-

R ‘ Chapter I presents the formal structure of the Marxian theory of accumulation along with the necessary conceptual apparatus of the theory.

It must be emphasized that the results of this discussion

are essentially formal and it is left for the second two chapters to consider the possibility of necessary laws of various kinds which govern the direction of movemnt of the different variables. fonmal discussion is divided into two parts.

The

In the first it is

assumed that connmddties exchange at their labor-values and the question of the interrelationship between accumulation, income H distribution and employnent is considered under different assumptions as to technical progress.

In part two a system of prices is

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vii

introduced; Marx's scheme of expanded reproduction is refornmlated on the assumption that comodities exchange at such prices as to equalize the rate of profit on capital advanced between industries. The question of the concept of capital employed by Marx is considered briefly as well as that of the status in the Marxian theory of the relation adduced by Marx between the average rate of profitpand the rate of surplus-value. Among the most important results of this chapter is the dependence of the entire Marxian theory of accumulation on specific assumptions concerning the character of technical change and the movement of the wage.

The theoretical basis of these assumptions is considered in

[ bchapters two and three. The problem of the fotnlof technical change and of its implications for the process of accumulation is the subject of chapter'2.

This

i

chapter does not contain a comrehensive theory of technical progress. It does, however, attempt to present, in outline, an analysis of technological change which is suggested by the Marxian theory.

for

Marx the very notion of what constitutes technical change is sorewhat distinct from.that comnx11x>nrdern theories of economic growth. An attempt is node in.this chapter to justify, on theoretical grounds, {Fhe tendency for Marx's "organic composition of capital" to increaset which tendency forms the central foundation of the entire Marxian theory of accumulation. Q .

The first part of chapter 3 considers the basic structure of the

Pecmdan theory of wages.

It does not, in itself, contain a compre-

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viii

hensive theory of wages but does attempt to isolate the weaknesses Qf the Marxian approach to the problem of tthe interrelation of money and real wages) and of the view of the competitive process which underlies this connection.

It is the thesis of this discussion

that there e:-dsts a basic inconsistency between (the conception of -the competitive process which Marx employs in his discussion of‘wageQ and (that conception which appears, at least implicitly, in his analysis of technical change.

It is at this point that it becomes necessary to

integrate certain "Keynesian" ideas into the Marxi_an theory. Part two of chapter 3 takes up the extent to which the Marxian and Keynesian theories interpenetrate and in what respects each can be considered to benefit from the insights of the other.

The dif-

ference between the Marxian theory and the neo-Keynesian remains an important problem.

E1 our discussion, the difference is seen,

at this level, to revolve around the issues of the characteristics of technical progress and its manner of integration into the theory of accumulation

on one side and the analysis of the relation

between accumulation and distribution on the other.

These are

.

precisely the issues which are revealed‘ to be central to the Marxian theory of accumulation itself in the formal discussion of chapter 1. Part three contains an exposition of the entire theory of accumulation in outline as it has been modified and corrected in the course of the previous discussion.

This remains a Marxian (2r_fA_t1__"1_e Marxian)

theory of accumulation although it is no longer in every respect the theory as Marx presents it.

in

The ability of the Marxian theory to

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deal with certain outstanding problems of economic theory (e.g. , the pelatim Of economic growth to the distribution of income) is also

Qonsidered.

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Acknwledgements

I would like, in the nanner of Ricardo, to first acknowledge two general intellectual debts incurred in the preparation'of this study.

Serious work in the field of Marxian economics has been

rare in recent years, and especially rare in the United States.

The

nost important exceptions to this are to be found in the work of Paul Baran and Paul Sweezy who, it might be said with little exaggeration, are alone responsible fo sustaining the very possibility of Marxian economics in the United States over the past twenty five years.

Any student of Marx, Marxist or non-Marxist, must acknowledge

the role which they have played in establishing the possibility and necessity of the serious study of Marxian economics. The study of Marxian economic thegry_has, to a certain extent at least, passed over in these years into the hands of nonrtbrxian economists.

Among those critics of Marx Joan Robinson stands alone

as a serious student of the problems of Marxian theory and as one who has made a significant contribution to Marxian economics.

She

should, in particular, be singled out in that she has always recognized the importance of an awareness of the interconnections and differences between different types of economic analysis (e.g., neoKeynesian, neo-classical, Marxian, and Classical).

Robinson has

also sustained the theoretical debate within orthodox theory over imortant and controversial issues (e.g.,the‘thecmypof_capital) and for that she deserves at least some praise if no reward.

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The recent renewal of interest in Marx has not always had its gxpFES5iOD in the study of Marxian economic theory.

It has, as

often as not, been overtly hostile to all forms of theory.

I would

1ike,thereftre, to acknowledge the indespensible guidance of those individuals who have recognized the necessity for the study of Marxian economic theory.

Donald Harris and Nina Shapiro have_worked

with me from the inception of this project and have provided suggestions and criticisms of early drafts of the thesis.

I would like

to thank Richard Garrett for criticizing earlier drafts of the

i

dissertation and William Parker for suggestions concerning chapter 2 I would also like to thank Vahid Mowshirvani and Paul Sweezy who acted respectively as chairnen of and as advisor to my dissertation ixxnnittee.

_

The final draft was prepared by Julia.Levine.

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il-"'"——

Chapter l.

The Theory of Accumulation

The theory of accumulation, on the HD5t abstract level, has as its object the tracing out of the internal logic of the growth pro» cess, the specification of the essential structural relations which fbrnlthe basis of the growth of the economic sysiem.

These funda-

mental structural relationships are consistent wiih distinct forms of growth.

Such forts depend on the magnitude and direction of move-

nent of the different variables which describe the grcmmh.process. Joan Robinson (in The Apcumulation ofgCapital) indicates, very clearly, how the idea of economic growth in a capitalist economy contains distinct conceptions of differing types ofigrowth (described by Robinson as "Golden," "Platégpm," "Brp ge" ages,

tc.).

The

theory of accumulation, therefore, requires both a structural, or "formal" analysis and a "substantial" analysis of the magnitude and direction of movement of the critical variables.

This Chapter at-

tempts to meet the forner'of these requirenents.l The renaining chapters consider the latter-requirement. The focus of this Chapter is, therefore, a.sharply restricted one.

It is above all an attempt to investigate the internal logic

lln this Chapter the analysis is largely "fornal" or quantitative and takes the overall framework and fundanental laws of the economic process as "given." If it is not, therefore, less important it is nonetheless subordinate to the substantive analysis of the other chapters. One of the distinguishing features of neo—classi— cal economics is the merging of the whole of theory into this fcmnel dimension.

Cf. Lowe (195%).

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2.

Of the Marxian theory of accumulation, the formal relationships wmcn tie together quantitatively the different variables which Marx uses to analyze capitalist development

Through exposing the

;|_nne1“ workings of the theory of accumulation it becomes pOSSlblE to establish the logical coherence, in a formal sense, of the important laws of capitalist development which emerge from the analysis

e

question of the "€H1]_3l1"lC8l relevance" of the theory will not be taken up

Such a question would be premature, an any case, were it

to precede the process of laying bare the logic of the problem Neither Wlll possible alternative formulations be considered at this point

On the other hand, a strict adherence to the theoret-

.1.CEll framework and conceptual apparatus of Iiarx will be l'!'Ei_'1_ITC5.l1'1EC1 insofar as this framework 15 logically consistent and meaningful. __ . ,, . . 6). . "Corrections will be introduced where either the framework is found to be inconsistent on its own terms (9or concepts are found not to have a clear 1reaning within the Marxian theory itself.

Such

corrections will be attempted so long as they are seen to follow logically frc 1 lines of thinking which Marx himself emphasizes.

One

example of this is in the treatment of (the law of the tendency for the rate of profit to falli. This reduces to the consistent application of £I"Ia.rx's own assertion that the rate of profit must be analyzed at the level of "prices of production" rather than labor va.lue§.2

2. Below p. 59

. fl. g.

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3.

In the course of the analysis of this Chapter, certain.issues arise which will no doubt appear to be of strictly subordinate interest; issues such as the status of the notion of "variable cap~ ital" and of the relation of wages to capital.3

While the importance

of such problems in theneelves must be considered subsidiary, a core rect understanding of the Marxian theory of accumulation will still depend on their satisfactory resolution.

Certain problems, such as

that just nentioned, must also be treated with a measure of caution on the grounds that they represent an area of contact with alternative formulations of the growth process and therefore al1ow'for important distinctions between theories to emrge.

It should, perhaps, be

emphasized that no problems which pertain to the articulation of the central categories of economic analysis (in the example mentioned above, the category of variable capital) were considered trivial by berm.

It was, of course, necessary that individual questions be

relegated to the appropriate level of analysis and it may be said that in that sense the problem.of the_"advancementi of the wage is H . . . , a "secondary one, but this does not mean that it is in any absolute sense less important

The treatment of such problems is necessary

to the coherence of the theory as a whole

To deny the importance

of such questions is to wander very far indeed not only from.the .' 1 ' _ themselves. Ibrxian framework, but from- the requirenents of theory

3Belo.v p. 66 ‘it. §_e3.

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¢&n Part I we focus on the "General Law of Capitalist Accumulation" assuming with berx.that commdities exchange in proportion to the amount of "socially necessary labor time" which is required to produce them.

For purposes of our analysis this assumption appears

nost forcefully through the interpretation of the "average" composition of capital or the "composition of the total social capital" as expressing directly the'technology employed.“

we will interpret this

"Generel.Lam" narrowly as a long run theory of employment.

By so

doing, we do not mean to inply that this accurately reflects the law as a.whole but only one link, and that a.crucial one, in the argument igfart II is divided into two sections.

In the first, the essential

structural relationships implied by a system of "prices of production" will be considered.

The theory of accumulation will be refor-

mulated in the second section of this part on the assumption that commdities exchange according to such prices.

The General Law of

Capitalist Accumulation and the Law of the Tendency for the Rate of Profit to Fall will be reevaluated at this more;§oncrete“level of analysis.

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Marx (1867) pp. 612-13.

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5. L’ fr '1”,-J

K“ I.

The General Law of Capitalist Accumulation

Introduction

from the point of view of Classical Political Economys the theory of employment was indistinguishable from the theory of capital accunmlation.

"Capital" was seen as .iii_____, a fund of wages goods which went‘

exclusively for the hiring of workers.

5‘”" "*2 I

with a given.wage, the

greater the amount of capital the greater was employment.

The role

of the supply of labor*was essentially the passive one of placing an upper limit on the rate of accumulation,H Those nenbers of society who had no stock of neans of consumption with.which to support thenr selves were necessarily the constituents of the labor supply.

The

amount of labor supplied by each worker could be taken as given.

In-

sofar as a significant portion of the labor force was not employed out of capital (i.e., was "unproductive"),accumulation could.be seen as equivalent to the process of transferring labor from the unproduc tive to the productive sectors of the economy.

"That part of the

5By Classical Political Economy we have in mind,_following arx, those pre-Ptumian.schools of economics which took as their subject Hotter the "social relations of capitalist production." Chronologically, this school runs from.Hilliam Petty to David Ricardo in England, culminating in.the latter. A parallel school of French economists may also be included but is not considered explicitly here. ' JI-

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annual produce of the land and labor of any country which replaces a capital, never is innediately employed to maintain any but productive hands.

...Every increase or diminution of capital, therefore,

naturally tends to increase or diminish the real quantity of industry the number of productive hands,... .5 problem does not concern us here.

This latter aspect of the 7

._

we will in general assume that all

labor is productive and therefore that the supply of labor nay be taken as fixed in any given period.

The theory of employnent, then, $1-o fe-»-=»¢.‘.; Lfo

is the theory of the demand for labor and the theory of the demand for labor is the theory of capital accumulation. Marx grasped this element of Classical thought precisely: mulation of capital is ... increase of the proletariat."?

"Accu-

This

statement characterizes Qhe point of view of both Smith and Ricardd. On the other hand, Ricardo, in a farous addition to the third edition of his Principles of Political Economya presents a fragment of an alternative approach to the theory of emloyment.

Here employment

is analyzed as a problem bound up with the introduction of nechinery. This constitutes a sharp break with the typically Classical view on two counts.(DFirst, it introduces fixed capital explicitly into the analysis.

"Capital" is no longer simly a fund for hiring workers,

6Adam.Smith, the ggairn at Nations (1776) pp. 316 and 321. 7Marx (1867) p. 61H. 5Ricardo (1821) Chapter XKHI.

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it is also value tied up in machinery. (ghe second respect in which Ricardo's chapter on machinery constitutes a sharp break with Classical theory is in its "shogt run" character.

Here Ricardo breaks

with the Classical habit/of dealing with.employment through the ." __.‘

analysis of capital accumulation and focuses upon the direct consequences of the introduction of nschinery for the level of employment. He explicitly abstracts from accumulation. The Marxian treatment begins with the frenswork set out by Ricardo (ggrst, the Rijardian analysis of machinery is worked out in a nnre rigorous andfgeneral fashion while retaining the short-period assumptions. Ghaying done this, Marx atterwts to bring together the two I.

J

sides of she Classical theory(§g introducing technical change into I

the long run theory of employmnt.

The introduction of the notion

of the "organic comosition of capital" is crucial here.

Without

this concept it would be impossible to refornmlate the Classical theory of accumulation as(a theory of accumulation, technical change, and employmentu

The discussion of accunulation and the demand for labor is divided, by Marx, into two parts.

In both, it is assumed that the

supply of labor is more or less given. glhe first considers accumulation with an unchanging organic composition of capital. Gin the second, Fhrx introduces both technical change and a rising composition of capital.9 €given the first conditions of the problem the

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result of the analysis is, as one would expect, that the supply of ' G? labor is inadequate for a steady rate of accumulation. when the rising composition of capital is introduced the result is the exact opposite, the supply of labor displays a tendency to be superabundant.

In the following we will demonstrate that within Marx's

own framework (an absolute decline in the demand for labor) is inconsistent with(a sustained positive rate of accumulation and a rising organic composition of capitay.

In other words, so long as the

x

system is capable of maintaining a positive rate of accumulation it must also be capable of maintaining a positive rate of growth of the densnd for labor.

This result is not surprising.

On the contrary,

it is precisely what one should expect from a consistent theory of accumlation.

1- Bis Defend fer, -.. - -in

I1

Marx takes up the problem of the densnd for labor from the point of view of value analysis (where it is assumed that all ccnncdities exchange according to the relative anounts of average human labor required to produce them).

We shall follow him in this in our ini-

tial formulation of the problem.

Therefore, in the subsequent dis-

cussion all variables are to be interpreted as measured in labor

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9The justification for this association is the subject of Chapter 2.

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hours (except where it is otherwise indicated).

Marx begins with

the short-run implications of the introduction of machinery in an individual industry.

In his discussion of the "Theory of Compensa—.

tion as Regards the Working People Displaced by Machinery"10 Marx attempts to clarify and give added force to Ricardo's conclusion concerning the possibility of machinery displacing laborers.

Pbrx

does so, however, on the highly restrictive assumption that the total output, in physical terms,_isHgiyep for the individual finnull we will therefore bypass this part of Marx's analysis and treat the densnd for labor from.the outset as a function of accumulation. The essence of the problem.can be expressed in the following manner.l2

Given the arount of capital which capitalists as a whole

intend to invest in production, the denend for labor is governed by the number of labor hours which it is necessary to employ at each level of investnent of fixed capital and raw neterials.

"To set in

notion the part of social wealth.which is to function as constant capital, or, to express it in.a material form, as means of production, a definite HESS of living labor is required.

This sass is

given technologically."13 And further, "a definite technical relation depending on the special nature of the labor applied is

lOMarx' (1867) pp. use-nus 11Q_i_.§_., p. uuz. l2The frenework employed here is similar to that of Eagly (1972). l3Marx (1867) p. 610.

FF"

10.

established between the quantity of labor and the quantity of means of production to which this labor is to be applied.Flu

The denand

for workers (labor—power) is jointly determined by the demand for labor (actual labor hours) and the number of hours provided by each worker in a given period of time.

"

Let 0 represent the value of total output, V the value of‘ the variable capital (the wages bill) , and C the value of constant capital (total fixed capital plus raw materials costs).

The amount

of surplus-value (S) is the difference between the value of the output and the value of the inputs (variable capital plus the used up -part of the constant capital).

i

(1)

.S=O-(V+c5C)

where 6 is the proportion of constant capital used up in a given PE riod

Total capital (Q) is the sum of constant and variable capital

(2)

Q = C + V.

The difference between the total hours required to produce the output (the value of the output = HO) and the total hours of

14 a.

Marx (189%) ‘p. us.

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required to produce the output (the value of the constant capital used up in production = 5C) is equal to the total hours worked in a given period (H).

H = 0 - 6C

which together with (1) implies

H = S + V. K

The demand for labor (which, in this case, equals total employment) is the ratio of total hours per period to (hours per man per period (h)j _.fl.

D = H/h

where D = total number of workers employed. /'

r

|-"I

g4 h is equivalent to the length of the working period (working day,

E

working week , etc. ).

(3)

b=(s+v)/h = V(c + 1)

where e (=8/V) is the rate of exploitation or rate of surplus-value. The organic composition of capital (A) is the ratio of constant to variable capital:

’

(Q)

a

A = C/V.

»

‘II--""

12.

Combining (2), (3), and (4) gives us the determination of the demand for labor_inwtergp_of_the key variables of the system:

E(s + l)

D:

)\+

which implies

I

I

l

.

A

'-

s = D/D = Q/Q + §I1-:__T.|II'\-'_‘_|'T- ____ ,_—;_> —"--,.-r q I '_‘ - Y

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if -r—-

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91.

intersectoral effects of the redistribution of investment between Constant capital and variable capital when there is a change in the embodied labor ratio.

We will also, for the sake of conven-

ience, replace (13) with

(13a)

P2 = 1

or

P = Pl . 4‘

On.these assumptions equation (30) reduces to

r 2 P 2 1.11.2 - I‘[IIIEP 2 +(1-u)¢PAl-P2.2-5P 2 A112]

(30a)

-s(6P 2 A2+l) -_ O.

While it is still difficult to interpret the relationship algebraically it is now possible to solve it for arbitrarily chosen values of the parameters.

As it turns out, under these assumptions

the relation between the coposition of capital in each sector (in this case the use of the embodied labor ratio did not significantly alter the form of the relationship) and the rate of profit follows a pattern which is not radically different from the one which Marx derives on the basis of the simpler relationship (ll).

In fact,

over certain ranges of the function the inverse relationship is quite nerked and over the entire range the simpler relationship

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92.

which was derived at the level of value analysis turns out to be an adequate approximation for the complicated expression which we derived at the level of prices.

It is clear from inspection of

(30a) that for positive Ki and e the relationship between either of the Ki and r must be in every case hyperbolic in form (the dis— criminant is in all such cases greater than zero).

It is nonethe-

less difficult to deduce the specific placement and form of~the hyperbole for the general case. The relationship under different assumptions is depicted in Figures 3-ll.

The conclusion is that higher compositions of capi-

tal.will be associated with lower rates of profit where the rate of exploitation, rate of depreciation, and proportion of surplusvalue invested are held constant.

This is the case regardless of

whether the increase in the composition of capital is restricted to either of the individual sectors or is characteristic of both. On the other hand, as might be expected, a higher rate of exploitation in association with a given composition of capital in each sector imlies a higher rate of profit. Even.with the rise in the compositions of capital the rate of profit will not fall, in general, to zeros

The function appears

to be asymptotic at some positive value of r depending on the levels of c,,6 and c. If we interpret the rise in the composition of capital as increases over time in association with increases in the rate of -i-ii

an

0

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0 and 1E§ i“~[:1uction (or technical) units but rather should be seen as

lvolting financial or economic units each of which is

integrated into and, in important respects, dominated by, the developmnt of the economy as a whole. The dynamic process described here is pictured in Diagram l. !

The "choice of technique" or technological possibilities' at two

I

(

point5 in tine is pictured in la.

Prom our point of view, the

I§chOiC€ of technique is a problem peculiar to the transition from ens technique to a new one.

For any technique there may be a

number of different possible scales of operation.

E

Our main con—-

cern at present is with the minimum efficient scale of operation 2'4

characteristic of the new technique.

I

We will, following Salter,

call that technique with the lowest costs possible aneng available techniques at a point in time the "best practice" technique.

W

e

|

have drawn the technical possibilities as represented by a smooth curve to illustrate the fact that each technique may be operated i

at different scales and to simplify interpretation.

There may,

in fact, be gaps representing ranges of the function (possible firm sizes) over which no technique may be profitably employed.

2'-l

Salter (1960) p. 23. |

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Technological Possibilities Size of finn \ \ \

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. I

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la

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unit costs

Actual Firms Size of fin“

_ _ _ _ _ _ _ _ _ _ _ _ ___

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unit costs

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I

|I

IHH.

I

Altennatively, there nay be overlaps where one firm size ney represent different techniques which are competitive over that rB ge-

b

The negative slope of the curve reflects the lower costs associated with larger scale of production.

Technical possibilities

in period l include those of the initial period and also addi: tional possibilities associated with larger capital investments, [mm techniques, and the expansion of the market.

The techniques
v), translated from the language of capitalism into that of the social labor process, means only that the higher the productivity of human labor, the shorter the time needed to change a given quantity of means of pro» duction into finished products. "This is the universal law of human labor. It has been valid in all precapitalist forms of production and will also be valid in the future socialist order of society."

'

Luxemburg (1913) pp. 321-22

Not only does Luxemburg reproduce here in a particularly extreme form.the position of Marx, but she goes further to assert that the increase in the composition of capital also means that the constant part is greater than is the variable. This principle, of the rising organic composition of capital,plays an important role in Luxemburg's theory of accumulation (ibid., pp. 335-H7) although the validity of the latter does not depend on the law as such. Luxenburg also reproduces Marx's position on the connection between the ness and the value of the means of production when.she argues that the "increase in the aggregate of use-values, moreover, indicates also a change in value relationships," (ibid., p. 335). It is superfluous to remark that Luxemburg nowhere supplies an explanation of the meaning, in this context, of the "aggregate of use values." The interpretation which we place on this position in the text is perhaps . the most useful and generous possible in light of the.confusion intrinsic to the notion of an aggregate of use-values. V

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r.-'1'

—q-

177.

the confusion on this point which is to be found in the Marxian theory.

The notion of a "mass" of capital does not, in Marx's

work, play the same debilitating role that it does in some neoclassical treatments of the problem.

Overall, Marx is perfectly

clear concerning the distinction between the value of commodities and their specific physical dimensions. 'I'he argument which this confusion tends to obscure, or perhaps to express imperfectly, is essentially the one advanced in Part L of our discussion (above, p.151).

Paul Sweezy, in an essay on

"Marx and the Industrial Revolution," brings together numerous statements from Marx's works which demonstrate that in Marx‘ s view, as Sweezy puts it "the essence of the industrial revolution was the replacement of hand work by machinery."53

Marx elaborates on

the meaning and significarxce of this position throughout the volumes of Capital.

According to Marx, in Modern Industry the

production process as a whole "is examined objectively, in itself, that is to say, without regard to the question of its execution by human hands, it is analyzed into its constituent phases; and the problem, how to execute each detail process and bind them all into a whole, is solved by the aid of machines, chemistry, etc."5Li

The

53Sweezy (1968) p. ll .

.

5uI*Ia.rx (186?) pp. Hl -I45, quoted in Sweezy,.op. _c_i_t_., p. 113.

1

‘-—

_,_.

178.

j_nt['0C1UClIiOI'l of machinery requires "the substitution of natural fcpces for human forces," in its system of machinery "Modern IndU.S1‘II‘V has a productive organism that is purely obj ective, in which the laborer becomes a mere appendage to an already existing material condition of production."55

The idea of a "system of

machinery" plays an essential role in the Marxian view of tdc1u1ical change.

It was not until Modern Industry succeeded in constru

C»

ting "machines by machines“ that it was able to "build up for it-E self a fitting technical foundation."56

It is the idea of systems

of machinery that contains Marx's answer to the argument that the increase in the organic composition of capital will be offset by the cheapening of the elements of constant capital.

For Marx

"what becomes cheaper is the individual machine and its component parts, but a system of machinery develops, the tool is not simply replaced by a single machine, but by a whole system, and the tools which perhaps played the major part previously, . .. are now assembled in thousands.

Each individual machine confronting the

worker is in itself a colossal assembly of instruments which he formerly used singly, i.g. , 1800 spindles instead of one.

But

in addition, the machine contains elements Whid'l the old instruIrent did not have.

Despite the cheapening of individual elements ,

the price of the whole aggegate increases enormously and the 55Mar:-{(1867) pp. HIM-15, quoted in Sweezy, op. pig, p. 113. 56Marx (1867) pp. H18-20, quoted ;i.n Sweezy, pp.__c_i_t. , p. lll.

179.

/increase inf productivity consists in the continuous expansion of Ecchinery."57

It is at this point that the connection between

technical change, the rise in the organic composition.of capital, and the increasing size of individual capitals comes out most forcefully.

"... whilst centralization thus intensifies and ac-

celerates the effects of accumulation, it simultaneously speeds those revolutions in the technical comosition of capital.which raise its constant portion at the expense of its variable portion ... ."58

.

The introduction of large systems of machinery

requires the mobilization of large amounts of capital.

The latter

is accomplished through concentration and centralization.

The prov

cesses of accumulation, technical change, competition, and the concentration and centralization of capital are thereby inseparably linked for Marx.

Competition is synonymous with the cheapening

of commodities an therefore with technical change and concentration.

Technical change in its turn stimulates the concentration

and centralization of capital which "extends and speeds" the revolutionizing of the means of production and the increase in the organic composition of capital.

This rise in the organic

comosition of capital summarizes, for Marx, the contradictions intrinsic to the developnent of capitalism as an historically distinct mode of production.

57Marx (1971) p. ses. 58Marx (1867) p. 52s.

The rising coposition of capital

Ir

_.-,

130.

contradicts the determination of value by labor time, the fundanental law of capitalist economic organization, while remaining subject to that law.

with the rise in the composition of capital

surplus-labor ceases to be the condition for the development of wealth in general.

In this way capital becomes a "contradiction

in process" reducing the living labor required for production to a minimum while maintaining labor time as the "sole source and sole measure of wealth."59 As Sweezy emphasizes, Marx views this entire process in its historic dimension.

"And it is clear as noon-day" Marx argues

"that nachines and systems of machinery, the characteristic ins struments of labor of Modern Industry, are incomparebly more loaded with value than the implements used in handicrafts and nanufactures."60

This suggests that the argument that Marx has

in mind is very close to our own.

It is the mechanization of

production in the early period of capitalist development that Marx takes as his model for the analysis of technical change. The elimination of the function of the "detail laborer," the analysis of the production process into its constituent moments "without any regard to their possible execution by the hand of

59

Marx (1857-185$) pp. 220-223, Vol. II.

60Ma.rx (18-67) p. 52s.

181.

Han," the "rationalization" and "objectification" of the production process, and the emphasis on "machines and systems of machinery" of Modern Industry return us to our original argument concerning the increases in the amount of fixed capital, in value terms, implied by the replacement of workers by machinery.

Even the argument con-

cerning the "nass" or means of production is representativehof this understanding of technical progress.

Mrx, himself, recognized the

various "counteracting forces" which we have considered.(mainly ‘ under the heading of the rationalization of production), and he possibly gave thenltoo little attention; but this does not serve to discredit the fundamental insights of his theory of technical progress.

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--—"-—-—--——-_-|-I".-. l-l--a-__..-

-

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182.

chapter 3.

Aspects of the Behavior of Capitalist Economies

Sumafy This Chapter contains a critique of Marx's theory of the relation of wages to prices, a discussion of the modern, "neo—Keynesian" theory of accumlation and of its most important weaknessesa and an expOSitiOD of the Marxian theory of accumulation on the most general level.

The discussion seeks to establish the following points:

(1) that there is a distinctively Marxian theory of accumulation‘

based on Marx's own analysis of technical change; (2) that Marx's failure to work this theory out in an adequate ftmntwas due, on the theoretical level, to a dualism.in his conception of the com~ petitive process and his failure to employ his own analysis of technical change and competition to the problem of wages and prices; (3) that the Marxian theory of accumulation, correctly formulated, contains a solution to the central problem of modern growth theory:

that of the relation of accumulation to the

distribution of incone. The analysis which we present is not new and consists of a reformulation of the work especially of Steindl whose theory, once formulated within the Marxian framework, is seen to differ little from.that of Dtumt.

The final section of this Chapter con-

tains a summary statement, in outline, of the entire Marxian theory of accumulation.

It places the entire preceding discussion in an

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.

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183.

Qverall framework and gives it, for the first time, at least the rudiments of a systematic form. I \

Introduction

F I

At a previous point in -our discussionl we argued that the rate

I

of exploitation is not intended by Marx, in the first instance,

I

to determine the rate of profit. \ l I

It is , rather, a more profound

expression for that relation which is expressed in the rate of profit in a mystified fashion.

In other words, the notion of a

rate of exploitation is intended to solve a qualitative problem in the theory of distribution, one which involves the meaning of the important categories of the distribution of income in capitalist economies.

'I'here is, however, on another level, a quanti-

tative problem concerning movements in the wage and in the rate of profit over time.

While it is possible to deal with the quanti-

tative problem independently of an explicit treatment of the qualitative one , there is always , within any theory of distribution, an implicit judgnent as to the meaning of the categories employed.

And these judgments are by no means in every case

equivalent.

lChapter 1, Part 2, pp. as-sa.

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If we take, for example, the propositio that the rate of interest is determined by the marginal physical product of capital, this quantitative relation also expresses the qualitative judgment that the rate of interest is the outgrowth of the means \

of production physically defined and is therefore independent of '

any specific social relations of production, or any historically defined mode of production.

This fonnulation of the quantitative_

problem is therefore implicitly inconsistent with the Marxian analysis of the relation of the rate of profit to the rate of exploitation.

The dispute is not simply over the fonnal relation

of the rate of profit to the rate of exploitation, but of the substantial claim made by the Marxian theory that profits are a form of surplus-labor and.are therefore exclusively the product of |

labor.

F

.

If we take, by way of contrast, the proposition that the rate ,

of profit is governed by the rate of accumulation which is, in its turn, given by the "animal spirits" of an entrepreneurial class, then the rate of profit is tied to the behavior of'a spe-

5

cific social class and appears, at least implicitly, as inseparable from an historically detenninate mode of production.

This view is

therefore inconsistent--not only formally, but in terms of its substantial implications—-with that which relates the rate of profit to the narginal physical prtdust of capital. F

Is this "neo-Keynes-

iant view also inconsistent with the Marxian proposition that

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-—~

185. --"'“

IgOfltS are a fOI l0f surplus-labor?

Clearly it is not although

its advocates contend that the two propositions have no necessary and systematic theoretical links.

There is nothing in the be-

havioral relationship between the rate of profit and the rate of accumulation which.would deny the relation of profits to the exploitation of labor.

It has been argued by the more "radical"

of the neo-Keynesians that there exist systenetic links between the neo-Keynesian theory and the notion of the exploitation of -

1abor.2

4'

It is nonetheless true that the rate of exploitation

plays no role in:the neo—Keynesian theory.3

Is that theory, as

a solution of the quantitative problem of the class distribution of income, superior to the Marxian solution which appeals to the ideas of a rising organic coposition of capital and a given value of labor power?

The answer to this question is less clear

and it will be our purpose in the following discussion to consider the theory of accumulation and distribution in terse of the roles which are played by the Marxian categories (particularly the rate of exploitation) and by the neo-Keynesian relationship.

2Nell (1972). 3It is true that the notions of the "degree of monopoly" and of the "gross xargin" (Robinson, 1969b) bear a certain family resemblance to that of the rate of exploitation. There remain nonetheless inprrtant differences. 1

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r_*_,-ali-

186.

It is important to bear in mind, throughout this discussion, that what is at stake is the theory of the dominant tendencies in the novement of wages and profits over time and not the meaning and significance of those categories in capitalist economies. Regardless of the role which it is seen to play in the deterxdnation of incone distribution, the rate of exploitation remaips the key to our understanding of the central categories of the class distribution of income under capitalism.

I.

The Theory of Wages

An adequate theory of wages nay be expected to include a correct specification of the key forces which operate to determine the level of'wages and the movement of that level over time, together with a specification of the directions in.which these forces, themselves, nay be expected to move over time.

Prom such a theory

we do not expect the correct prediction of actual wage levels at given points in time in given geographical locations.

The specif-

ication of the crucial dynamic forces in the determination of the wage rate is not sufficient to specify its actual.novexent since this latter is subject to counteracting forces specific to particular historical circumstances.

1.. -

This is simply to point out that

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187.

the problem.of wages, even defined as a quantitative one, renains 3 theoretical question and is not thereby reduced to a purely emirical issue. In order to deal with wages on a theoretical level it is also necessary to deal with the relation of money wages, real wages, and what Marx calls the value of labor-power.

These three forms

of the wage express the different forces operating in the detere ndnation of the share of labor in the net product.

Money wages

are bound up with the determination of the level of prices and ‘ with the struggle in the labor market over the wage.

Real.wages

concern the condition of the working class and the impact of technical change on the workers.

The value of labor-power expresses

the role of the rate of profit and of the rate of surplus-value in the determination of nomey and real wages. Marx attempts to construct a theory of wages in precisely this sense--a systenatic treatment of the interaction of these forces and of their dominant trend over time.

He specifies the forces

involved in.wage deterndnation as well as their direction of mvenent over time.

He also analyzes the process by which the deter-

mination of money wages is translated into the deterndnation of real wages. satisfactory.

This is not to say that the analysis is altogether It is, however, a theory of wages and it is worth-

while evaluating it not only for whatever light its deficiencies may shed on the Marxian theory of accumulation, but also for purposes of reconstructing the theory of wages on a sounder footing.

11 '

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F.-_i,

In the first part of this section we consider the Marxian theory l

of accumulation as it relates to the determination of the wage. Subsequent to this we have appended as Part 2 a summary of the *

Marxian view of the relation of wages to prices.

A critique of

this analysis leads to a final discussion of competition and the role of technical progress in the determination of wages. -,

(1)

In Marx's theory of accumulation the wage is governed by the pressure of the reserve army of labor on the employed labor force; or, alternatively , by the proportion of unemployed labor to the labor force as a whole.“ This notion ties in well with the Marxian approach to the demand for labor.

Since Marx associates

a less than proportionate increase in the demand for labor with the grcwth of capital, he concludes that there will be continual downward pressure on wages as the supply of labor’ tends to in'

crease at a rate more rapid than the demand.

The notion of the

i

necessary costs of production of labor-power then comes into

I

play (as it did in Smith's treatment of the problem) as the minimum towards which the wage is continually being driven.

This is

k

“This analysis is traced out above, Chapter l, Part l. | .-1

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