Question

Answer all parts of this question in terms of Marx’s labor theory of value. The labor value of the wages necessary to produce a ton of bricks is 5 hours. The labor value of the constant capital necessary to produce a ton of bricks is 4 hours. The labor value of the surplus which goes to the capitalist owner of the brick factory is 3 hours for every ton of bricks.  

a. What is the labor value of a ton of bricks?

b. What is the organic composition of capital used in producing bricks?

c. What is the rate of surplus value in producing bricks? What is the Marxian rate of profit for producing bricks?

d. If the rate of surplus value in the iron industry is the same as that in bricks, but the organic composition of capital is 50% greater, can the profit rates be the same? Explain.

Answer 1

From the questions: C = value of constant capital = 4

V = value of labour wages = value of variable capital = 5

S= value of surplus = 3 (all in hours per tonne of bricks)

a) labour value for a tonne of bricks = value of variable capital = V = 5

b) value of organic composition of capital = value of constant capital/ value of variable capotal = c/v = 4/5

c) Rate of surplus value = surplus value/ variable capital = s/v = 3/5

Rate of profit = surplus value/ constant capital + variable capital = s/(c+v) = 3/(4+5) = 3/9 = 1/3

d) This can be explained in light of the theory of declining rate of profit as per Marxian Theory. This states that the rate of profit can be expressed as the ratio of surplus value to the organic composition of capital

thus rate of profit (R) = Surplus value (S)/ Q (organic composition of capital) + 1 = s/(Q +1)

Which states that even if the surplus value remains constant, an increase in the organic composition of capital is expected to reduce the rate of profit. In marxian theory in particular, competition drives captalists to use labour saving technology in order to increase the surplus value (higher labour productvity or less no. of labour hours used would imply a higher surplus value) but this technological advancemene displacemnt of labour creating a pool of labourers without any jobs known as the reserve army of labour. This reserve army of labour helps to increase the exploitation of laborers by offering them even lower wages. But this displacement of labour implies a reduction in the variable capital (v) and hence an increase in the organic composition of capital ( q) (Since q = c/v). This increase in 'q' would lead to a declining rate of profit since rate of profit = r = s/(c+v) or = rate of surplus value/(1+q).

Thus even if the rate of surplus value remains unchanged, an increase in organic composition of capital can lead to a fall in the rate of profit.

Hence if the rate of surplus value is the same but the organic composition of capital (q) is twice as high, the rate of profit would be lower given the definition of the rate of profit in Marxian theory.