In his example, 10 workers working a 12 hour day require 10 hours to reproduce their labour-power, producing 2 hours of surplus value. Total value equals 120. Wages equal 100 and surplus value 20. With a machine, they only require 6 hours to reproduce their labour-power. If 10 workers were employed on this basis – which could occur if they worked two 12 hour shifts – they would produce 120 hours of new value. But, the output would rise by 2/3.
These 10 workers would then reproduce their labour-power in 6 hours, so the total value of wages would amount to 60, and surplus value would also amount to 60. The difference being the higher volume of output.
But, Marx assumes that five workers are replaced as a result of the introduction of the machine. If we assume that prior to the machine the volume of output was equal to 1200 units, 1000 going to wages and 200 to surplus value, then now output would rise by two-thirds, as a result of the machine, but fall by half due to the halving of the workforce, so 2000/2 = 1,000 units. Previously, 10 workers required 1000 units, so now 5 workers require 500 units, leaving 500 units as surplus value. This conforms with Marx's model where now 5 workers work for 12 hours producing 60 hours of value.
“Of the value of 120, the capitalist gets one-sixth, or 20. In the second case, 5 labourers will produce a product for 5 Labourers (equal to 30 hours), and for the capitalist 30 hours. Of the 60 hours the capitalist now gets 30, that is, one half—3 times as much as before.” (p 216)
So, now 5 workers produce enough to reproduce their labour-power, as well as producing 30 hours of surplus value (500 units), whereas previously 10 workers produced only 20 hours of surplus value (200 units). What is to become of the five workers?
Marx says,
“It will be said that capital has also been released, namely, that which paid the five dismissed workers, who each received 10 hours (f or which they worked 12), that is, 50 hours in all, which could previously have paid the wages of five labourers and which [now] that wages have fallen to 6 hours can pay for 50/6 = 8 1/2 days’ labour. Therefore now the capital of 50 [hours’] labour that has been released can employ more labourers than have been dismissed.” (p 217)
Marx then analyses what is wrong with this conclusion.
But, Marx's analysis is not really satisfactory. First of all, the released variable capital is not 50 hours as Marx states, but 70 hours. Previously, 100 hours of value was required to reproduce the labour-power of the 10 workers, and now only 30 hours of value is required to reproduce the labour-power of the five workers. That is a release of 70 hours of variable capital, available to employ the five redundant workers.
But, as Marx correctly states, this 70 hours of value is not entirely released. In order for the rise in productivity to occur, a machine had to be introduced, and the cost of the machine requires capital, which is then to be deducted.
However, the machine likewise requires labour for its production, and this is additional labour. In itself this would account for additional employment, theoretically providing work for some or all of the five released workers. But, Marx is correct in the other points he raises in this connection. If we take the value of the machine, then we know from the analysis Marx and particularly Engels gave in Capital III, it will only be introduced if its value is less than the paid labour it replaces. The value of the wages of the five workers was 50 hours, so the value of the machine must be no more than 50 hours.
That a portion of this value is comprised of the value of the constant capital consumed in its production does not change matters, because this material etc. is itself the product of additional production, and new labour. However, Marx is correct that not all of its value is accounted for by wages. On the basis of the current rate of surplus value, set out in the example, we would have to conclude that half of the value reproduces labour, and half goes to surplus value.
If the machine has a value of 50 hours, this may divide into 25 hours to reproduce the labour used in its production, and in the constant capital consumed in its production, and 25 hours of surplus value. If, with the current value of labour-power it requires 30 hours labour to reproduce the labour of 5 workers, this 25 hours of labour-power embodied in the machine is equal to 4.16 workers.
Where Marx is right, in this respect, however, is that there is no reason why these 4.16 workers required for machine and associated production, should be or could be drawn from the five workers released from other production by the machine.
“The number of machine-building labourers [who built the machine is] smaller than the number of labourers discharged; nor are they the same individuals as those discharged.” (p 217)
But, Marx does not take into account the further consequences resulting from this change in production relations. Firstly, as demonstrated above, the release of capital is actually equal to 70 hours of labour, not 50 hours as Marx stated. So, if the machine has a value of 50 hours, and 25 hours is accounted for by labour-power, this provides employment for 4.16 workers. But, out of the 70 hours of released capital, 20 hours remain. At the current value of labour-power, 20 hours is sufficient to employ 3.33 workers.
That means the released capital is sufficient to employ 7.5 workers compared to the 5 that were released. But, that is not all. Previously, the capitalist appropriated 20 hours of surplus value, and now appropriates 30. Previously, the 20 hours of surplus value would have been enough to employ 2 additional workers. Now 30 hours of surplus value is enough to employ five additional workers.
In addition to that, the capitalists producing machinery and associated materials now appropriate 25 hours of surplus value, where previously they appropriated none. As a result this 25 hours of surplus value is enough to employ an additional 4.16 workers. In total, therefore, the net effect of the rise in productivity from the introduction of the machine is as follows.
Five jobs are lost initially, replaced by the machine. To produce the machine and component materials, (value 50 hours) 4.16 workers are employed. With the remaining 20 hours of released wages, a further 3.33 workers can be employed. The surplus value previously of 20 hours would have employed 2 workers, and the 30 hours of surplus value now employs 5 workers, a net increase of 3. The surplus value in the machine producing industry and associated industries is enough to employ an additional 4.16 workers.
So, 5 jobs are lost, but a net 14.65 jobs can be created from the released capital and additional surplus value, resulting from the rise in productivity. That gives a potential rise in employment of 9.65 workers. That is why the vast rise in productivity since Marx's time has not resulted in ever rising levels of mass unemployment, but has resulted in ever expanding capital accumulation and rising levels of employment.
In fact, for the reasons Marx describes, that this same rise in productivity reduces the value of fixed and circulating constant capital, the actual expansion of capital and production is even greater than suggested here because constant capital is also released, and the surplus value, now accumulates a greater mass of it. However, this process of accumulation is far from smooth, or crisis free, precisely for the reasons described above.
“The shifting of labour and capital which increased productivity in a particular branch of industry brings about by means of machinery, etc., is always only prospective. That is to say, the increase, the new number of labourers entering industry, is distributed in a different way; perhaps the children of those who have been thrown out, but not these themselves. They themselves vegetate for a long time in their old trade, which they carry on under the most unfavourable conditions, inasmuch as their necessary labour-time is greater than the socially necessary labour-time; they become paupers, or find employment in branches of industry where a lower grade of labour is employed.” (p 217-8)
But, as in Capital I, Marx then goes on to set out how the expansion of capital leads to the expansion of employment, the theoretical basis for which I have described above. Today, that has meant that for the first time in history, the working class is the largest class on the planet, and that has come with ever rising living standards, levels of education, health and well-being.
The criticism of capitalism is not that it creates permanent unemployment or poverty, but that the way it creates additional employment and wealth is chaotic and crisis ridden, so that it unnecessarily goes through periods where wealth is destroyed and large numbers suffer avoidable misery.
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