Roger noted:
> Inflation reduces real wages, not the value of labor power.
Yes but real wages are not perfectly elastic. Can't be reduced too far below the value of labor power, as historico-morally determined, due to workers' resistance. All this is determined in the human arena, and what may be a logical possibility (continuous reduction of the real wage by inflation) can still be impossible for a simple social reason, viz. the working class will fight to maintain the value of labor power already achieved and thereby force upon capital techno-organisational means by which to increase output and profits. I understand this to be Mattick's argument in the passage that has peeved you so, though I hardly understand what's objectionable about it.
Nor do I think he was wrong to distinguish between inflation as redistribution of an already existing mass of value upward and thus in this way increasing surplus value in the hands of capital from the actual production of a greater mass of value and surplus value through larger scale investments.
At any rate, the question comes back to the determination of the value of labor power, though within a Sraffian framework the concept itself is as logical as the idea of a yellow logarithm.
Unless we can figure out how the value of labor power is determined, we can't figure out whether wages have been below or above it, as Meek seems to have suggested. But didn't he become a Sraffian? So why was he bothering with a concept such as the value of labor power? And if the wages actually paid are the only real indicator of what this value of labor power is, then we're caught in tautology, no?
>But suppose you still find all of this unconvincing and cling to your
>wage-variable
>capital equation.
Not my equation. I have said variable capital is money wages paid to that labor power the use of which produces more value than itself. This rules out wages paid for that labor power the use of which does not have this value producing quality. Perhaps my distinction is not tenable? ___________________________________
Now to this FROP business:
To my mind, Marx's basic idea is something like this: an individual capitalist finds it possible and profitable to replace a lot of direct labor with less machine (indirect) labor per unit. His unit costs can be reduced this way. So he puts a lot upfront to buy this machinery and now hires relatively fewer workers, though their numbers will increase absolutely as a result of the large upfront investment.
Not only are his unit costs down, he now has a greater mass of units he can sell. Wow! Profits should boom: he's got more to sell that cost him less per unit to produce. What could be better!
If profits don't increase--and they usually will at least in the short term-- what the hell could be the problem?
Maybe he'll think dumping by foreigners has depressed prices 'unfairly' (he could cite Brenner's thesis about uneven development which means that foreigners are even further ahead 'in time' in terms of how much they have been able to reduce unit costs and thus bring prices below where he can make a profit); or there's a sudden shortage of money to circulate goods perhaps due to a bout of hoarding so realisation difficulties mount and interest rates rise; or wage increases or worker unruliness have vitiated the unit cost reductions he thought he had achieved.
But other than due to some such exogeneous shock (foreign competition, sudden money shortage/interest rate hike, worker upsurge), he'll be at a loss if he suffers profit rate losses or the profit mass does not seem to be increasing sufficiently to meet his growing capital expenditures while allowing him to maintain his lifestyle. After all, he's only carrying out the correct economic operation, as Marx himself emphasised (see quote below).
Of course trapped in the role of individual businessman what's not only invisible *but also meaningless* to him is the unintended consequence of such indvidually rational acts carried out in the price terms in terms of which he must act in the heat of the battle: the rise of constant to variable capital in the system as a whole which depresses the *general* rate of profit.
And what can be his reaction to a fall in the general rate of profit the deep structural reason for which is as invisible as it is irrelevant to him?
Of course nothing other than to again attempt to reduce his own unit costs by replacing in ever larger scale enterprises direct labor costs with less machine cost per unit and to then sell an ever larger mass of units. Yet in a system of positive feedback this only compounds the problem in the system as a whole even if it allows him temporary relief.
For capital, its only way out is a cul de sac.
Of course it's best to quote Marx in a passage which seems at once phenomological, structural and critically realistic (the whole of Marx's genius is here):
"The theoretical opinion regarding the first transformation of surplus value into profit, i.e., that each portion of capital yields surplus value into profit in a uniform way, expresses a practical state of affairs.
" However an industrial capital may be composed, whether a quarter is dead labour and three quarters living labour, or whether three quarters is dead labour and only a quarter sets living labour in motion, so that in the one case three times as mcuh surplus lbour is sucked out, or surplus value produced, as in the other--with the same level of exploitation of labour and ignoring invididual differences, which disappear anyway, since in both cases we are concerned only with the average compsoition of the sphere of production as a whole--in both cases it yields the same profit.
"The individual capitalist (or alternatively the sum total of capitalist in a particular sphere of production), whose vision is a restricted one, is right in believing that his profit does not derive just from the labour employed by him or employed in his own branch. This is quite correct as as far as his average profit goes.
"How much this profit is mediated by the overall exploitation of labour by capital as a whole, i.e., by all his fellow-capitalists, this interconnection is a mystery to him, and the more so in that even the bourgeois theorists, the political economists, have not revealed it.
"Saving of labour--not only the labour necessary to produce a specific product, but also the number of workers employed--and a greater use of dead labour (constant capital), appears a quite correct operation, and seems from the very beginning not to affect the general rate of profit and the average rate of profit in any manner.
"How therefore can living labour be the exclusive source of profit, since a reduction in the quantity of labor needed for production not only seems to affect the profit, but rather to be the immediate source of increasing profit, in certain circumstances, at least for the individual capitalist."
Capital 3, Vintage, p. 270
Now of course all along the rate of exploitation will be rising as well which slows down the fall in the rate of profit. But it's unreasonable to think say 2 workers, no matter how exploited, can produce as much surplus value as 12 once did.
There is of course a more serious challenge to Marx's fundamental theoretical idea here--that what technical change is actually rational (or viable) for an individual capitalist to carry out (i.e., profit rate enhancing tech change) does not indeed reduce the general rate of profit once its effects have rippled through the system as long as the real wage does not change. This is sometimes called the Okishio Theorem; it has been explained by Phillipe van Parijs for us general readers in *Marxism recycled* (Cambridge).
van Parijs' critique of Marx's own theory has been accepted in some form by most (from Robert Brenner to David Laibman) which has left the Bauer-Sweezy theory of underconsumption the most popular among leftists, though I understand there is a devastating critique of it by someone named Nicholas Georgescu-Roegen in a book called Analytical Economics.
best, rakesh