- 25 Nov 2016 04:17
#14741773
I'm reading An Introduction to Marxist Economic Theory, by Ernest Mandel, and I have a question or two about what exactly causes the cyclic nature of capitalism.
Let me give my best guess. In a capitalist society, as the forces of production increase, so does the organic composition of capital, represented as the ratio of constant capital—the totality of automated labor—to variable capital—the totality of labor produced by the proletariat. When labor becomes more automated, the average rate of profit in turn declines. This is because constant capital is a longer-lasting, therefore more costly, investment than variable capital.
Now capitalists try to counterbalance the decline in their profits by increasing their surplus value rate, represented as the ratio of surplus value to variable capital. This they do by reducing variable capital—that is, by lowering wages or laying off workers. But as workers' wages decrease, so does society's purchasing power.
Of course, decline in purchasing power leads to overproduction, which leads only to more layoffs—hence periodic crises. So is increasing automation the chief reason for capitalism's cyclicality? Or could it be something else entirely?
Let me give my best guess. In a capitalist society, as the forces of production increase, so does the organic composition of capital, represented as the ratio of constant capital—the totality of automated labor—to variable capital—the totality of labor produced by the proletariat. When labor becomes more automated, the average rate of profit in turn declines. This is because constant capital is a longer-lasting, therefore more costly, investment than variable capital.
Now capitalists try to counterbalance the decline in their profits by increasing their surplus value rate, represented as the ratio of surplus value to variable capital. This they do by reducing variable capital—that is, by lowering wages or laying off workers. But as workers' wages decrease, so does society's purchasing power.
Of course, decline in purchasing power leads to overproduction, which leads only to more layoffs—hence periodic crises. So is increasing automation the chief reason for capitalism's cyclicality? Or could it be something else entirely?
"Do not wait for the Last Judgment. It takes place every day."
Albert Camus, The Fall
Albert Camus, The Fall