INTRODUCING THE ELEMENT OF TURNOVER TO THE COMPOSITION OF CAPITAL
June 12, 2016 5 Comments
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June 12, 2016 5 Comments
THEPLANNINGMOTIVE.COM 
Comrade,
In attempting to both explain and measure the technical composition of capital you state:
“It is difficult of course to measure the growth in the means of production because of the diversified nature of machines, equipment and so on. One of the ways used to estimate this growth is plotting the value of these means of production against the number of workers using them. This is shown in the graph below. Means of production are here understood to be Fixed Assets plus Inventories.”
I think you are making a mistake in that you are using the accumulated value, the social quantity, to measure what Marx identifies as a physical quantity. So for example, if we wanted to talk about the technical composition of capital in the maritime industry we might hypothetically point out that the total deadweight tonnage in that industry has doubled in less than ten years while employment in terms of persons required per dead weight ton, or per ship, or hours per ton or ship has declined as a portion of the total capital. But we cannot compare the deadweight tonnage growth to the growth in the wages, in the variable capital. That the technical composition on an industry wide, and society wide basis HAS A RELATION to the value composition of capital, i.e. that capital accumulates faster than variable capital expands and this occurs due to the very nature of surplus value, to labor-power expressed as a commodity, is the tendency, the trend, that Marx seeks to encapsulate in his formulation of the organic composition of capital which determines the tendency of the rate of profit to decline.
I do not disagree with your comment. However, it is impossible to physically count this accumulation. Most workers are aware they are working with much more means of production than did their parents. The real point of the article is not this point which as I said was uncontroversial, it is the element of turnover which modifies the organic composition of capital. The two elements that enter into and compound the organic composition of capital are the technical composition and turnover. However it is the latter that has been ignored up to now. Have you had an opportunity to evaluate the turnover formula. It is only as good as the underlying data and it is heavily qualified. Nonetheless it is a useful measure allowing for a much better approximation of the dynamics of capitalism. My essential argument is that we cannot continue to ignore turnovers. The compounded organic composition of capital is a better fit to the rate of profit, better explains its movement and is beginning to give an insight into the anomalies surrounding the equalisation of the rate of profit.
Didn’t Marx explore the effect of turnovers on the rate of surplus value (I understand it is different than the rate of profit, but the general lesson tends to apply) in Capital Volume 2 Chapter 16?
Both Marx and Engels understood the importance of the effect of turnover on profit. This is described in both Volume 2 and 3 (Chapter 4.). More evidence of the importance Marx attached to turnover is found in his unpublished manuscripts. The problem is no Marx, bu those who followed him. Marxist scholars, both contemporary and dating back to the fifties. have in their majority either neglected or ignored turnover. This is understandable because of the difficulty in extracting turnover periods for whole industries and economies. But it is not acceptable. The result has been a great confusion. Without turnover times compensation cannot be reduced to variable capital. The result is they have been miscasting the rate of exploitation as the rate of surplus value, they have been basing the organic composition as the ratio between constant capital and compensation and of course miscalculating the rate of profit by excluding variable capital in total capital. It has been a catalogue of errors which has means their calculations are too inaccurate to be of use.
In effect we are only dealing with six variables to obtain the rate of profit. Gross Value Added, Net Value Added, constant capital, compensation, and surplus. The sixth variable is turnover derived from the equation based on Gross Value Added as the numerator and Net Value as the denominator. But it is the missing link. Without it compensation remains compensation and the rate of profit remains the rate of return. Please read the posting on this site entitled “THE FORMULA for converting Annual Wages into Variable Capital”. It is the formula that has enabled us to distil turnovers from the national accounts without which the investigation of its effect on capitalism would not be possible.
Thanks for the very in-depth reply that gives context to the post!