FW: The Value Inequality

["Devine, James" <jdevine@xxxxxxx>]

Title: FW: The Value Inequality

The following may be of interest to pen-l. I answer a value-theoretic question I received in the e-mail. I've edited it a bit.

------------------------
Jim Devine jdevine@xxxxxxx &  http://bellarmine.lmu.edu/~jdevine

> The fact that there are different organic compositions
> amongst the capitals employed, given a general rate of S',
> would lead to equally sized capitals yielding different
> amounts of surplus-value.  This S is, of course,
> redistributed such that the profits are apportioned amongst
> the capitals according to their magnitudes leading to equally
> sized capitals yielding equal profits over equal time
> periods. 

It should be noticed that the equalization of profit rates only occurs in equilibrium, a situation never attained for long. But the process of capitalist competition does involve a _tendency_ toward that equalization, and thus a tendency for prices not to be in proportion to values.  So in real-world examples, we can't presume that relative prices equal relative values.

> Now given an equal sized workforce this would
> obtain in the differing capitals being able to offer, all
> other things being equal, differing wage rates.

There can obviously be differing wage rates (for similar workers) between sectors but Marx's example assumes that the rate of surplus-value is equalized between sectors. The latter rises as the value of labor power falls (i.e., as real wages fall relative to value of consumer goods), so the value of labor-power is assumed equal among sectors (in equilibrium). Marx assumes that Adam Smith's idea of "compensating wage differentials" applies, i.e., that if a worker can get a job with better job conditions with the same wage (or the same conditions with a higher wage), he or she will move to that job, so that wages tend to equality for jobs offering the same conditions. This is an extreme assumption, but reflects Marx's view that workers aren't slaves or serfs (who can't move between jobs voluntarily).

The equalization of the rates of surplus-value often doesn't work, among other things because unemployment discourages people from simply quitting one job and getting another. So let's assume that there's a high-exploitation sector. If one sector has a higher rate of surplus-value than another (but they have the same organic composition of capital), it would have a higher value rate of profit before we bring in equalization of profit rates.

Not surprisingly, when we bring in capital mobility, business will move out of the high-wage sector into low-wage one. That is, it will move into the sector with the high rate of surplus-value. Just as with Marx's story of capital mobility equalizing profit rates in sectors with differing organics compositions, this would lower the prices and profit rates of the high-exploitation sector and lower the prices and profit rates of the low-exploitation sector (relative to the  situation before profit-rate equalization started).

[It's interesting that even though the more energetic exploiter initially gets a higher rate of surplus-value, he or she doesn't get any benefits in the end, except for any benefits that go to the capitalist class as a whole if one sector raises its rate of surplus-value and raises the social average. Of course, this capitalist wasn't thinking in terms of rates of surplus-value in the first place, since these are categories that are not and cannot be directly perceived by people within the capitalist system. ]

It's possible that we could see a sector with both high organic composition and a high rate of surplus-value. If the rate of profit that results is equal to that of other sectors, there would be no movement of capital into (or out of) that sector. Thus, we might see a bunch of sectors, with different organic compositions and different rates of surplus-value, so that if we compare sectors, the higher the organic composition, the higher the rate of exploitation. Instead of capital mobility and price changes equalizing the rate of profit, it's differences of the rate of exploitation that do so. In this case, values and prices of production would be correlated.

However, I don't think that high organic composition usually goes along with low wages. Capital intensity usually makes unionization more possible, at least if we're talking about _fixed_ capital.

 
Back to my friend's example:
> Assume two capitals A and B each 100 units of capital
>
> Assume A and B make competing items
>
> Assume market will purchase A + B at mean price of production

you mean that they are in the same sector? that's a completely different case from the situation I described above (which were variations on Marx's "transformation problem"). Within a sector, as Marx notes, it's very common for rates of profit to differ, because of different technical advantages and the like, even with similar prices.

 
> Assume constant [capital] goes over entirely in turnover of variable
>
> Assume each has 1 worker of average skill, education, etc. 
> (Abstract Human Laborer) for each unit of variable capital.
>
> Assume a S' of 20%
>
> Assume all profits re-invested proportionally to initial size
>
> Assume no increase in size of labor force for net cycle of production
>
> Where A = 75c, 25v    implies       s of A = 5     
> B = 50c, 50v implies s of B = 10    
>
> Price of production A = 105     B = 110

the price of production is the price for the market as a whole. What you present here are instead the "individual values" of the products of A and B (which would both differ from the social value of the product). These would be proportional to what might be called the "individual prices of production" -- and would differ from the actual (social) price of production of the industry.

> Market price A = 107.5    B = 107.5

right: they're selling at the same price. In a story that ignores the equalization of the rate of profit between sectors, the value of the product would equal 107.5, too.

The example seems one of "technological rents" (or some other kind of rents). One capitalist has a technical advantage over others, so that its individual value is below the social value (the lowest price it could charge is less than the price of production). Thus, it can sell at the price of production and make more profits than others (this called a "rent").

In the example, the "capital intensive" A would receive a bonus of 2.5 on top of its individual value (a restribution from B). This might create an incentive to engage in capital-intensive techniques, encouraging a trend of rising organic composition. But I'll have to think about it.

Alternatively, this company's work-force could get higher wages without pushing the price beyond the price of production, so they could gain (for awhile) without losing jobs. Of course, in the long run, the company could move its operations to China...  For more on this kind of stuff, see Howard Botwinick's book _Persistent inequalities: wage disparity under capitalist competition_(Princeton, N.J. : Princeton University Press, 1993).

Jim Devine