But Mat you invoke two different factors here: inter capital rivalry and wage pressure both compel labor saving technological change. The former encourages firms to reduce unit costs. Mechanization allows a given sum of wage payments to be replaced with a lesser sum of costs, on a per unit basis, since the costs of new labor saving machinery is spread out over the greater quantity of use values of which the machinery has allowed production. This provides an individual capitalist with an immediate advantage over rivals. Rising wage pressure only adds motivation to this.
Marx argued that while such mechanization remained among the best ways for an individual capitalist to profit and remain solvent, it would have the effect of increasing the value of machinery relative to its valorization base--that is to the mass of direct labor which it could absorb. No matter how much the rate of exploitation increased over time, this upward pressure on the organic composition of capital (as Marx called it) would begin to reduce the average rate of profit in the system as a whole since (given the labor theory of value) direct labor expended is alone newly added value. As a result of the depression in the profit rate, Marx suggested that at some point the mass of profit would no longer adequate for continued accumulation. In a system of positive feedback, this would only encourage each individual capitalist to reduce unit costs even further by the very mechanization which the depression in the average rate of profit had been effected in the first place.
Here we see mechanization working at cross purposes. On the one hand, the machine is useful to the capitalist because it allows him to reduce unit values by substituting a lesser sum of indirect labor for a greater sum of paid direct labor on a per unit basis (of course if capitalists had to pay for the total labor performed, instead of simply labor power, the use value of the machine would even have a greater scope). On the other hand, the machine is useful in that it allows for the absorption of labor and surplus labor or (in other words) production of newly added value.
However, the less direct labor employed relative to total capital--that is, the more unit values are reduced--the more difficult it becomes for the capitalist to absorb surplus labor. For Marx, the central structural contradiction was that use value and unit value or the growth in material wealth and the rate of profit would tend to move in inverse direction.
Economists argue that Marx's intuition here proves wrong: it is impossible for labor saving technological change to reduce the rate of profit in the system as a whole. As a result of the reduction in unit values of outputs by the use of machinery, the unit values of the inputs and thus the costs of the other firms which use those outputs should fall; and this reduction in costs should then increase their rate of profit.
This leads to what is called the Okishio Theorem (as you know), and there is a sharp summary of it by Phillipe van Parijs in his book Recycling Marxism (Cambridge Univ Press--it is interesting that Robert Brenner accepts this theorem). Marx's theory is tested in terms of matrix algebra calculations which show according to the Perron Frobenius Theorem (I think, please correct me) that once the labor saving technological change works it way through the system as a whole, there will be a new unique profit rate (assuming the real wage does change in the process) and it will be higher in most cases.
While some Marxists question the theorem's relevancy since it assumes that the real wage remains constant in the course of capitalist development (see Duncan Foley Understanding Marx's Capital), other Marxists underline that the Okishio Theorem is an exercise in comparative statics: it takes the system before the techical change and it compares it to the same system after the technical change--one stationary state compared to another stationary state. It seems to be a form of ceteris paribus reasoning--that is, what happens to the system, c.p., after the introduction of this technical change. But the problem here is that the system does not wait, does not hold itself constant for as long as it takes the technical change to work its way through the sytem until a new stationary state is realized. This simply confuses the logical time implicit in this form of ceteris paribus reasoning with the historical time in which the real economy is located.
This confusion is most evident in the assumption that there are no true time subscripted variables in the new equilibrium state described by this method. That is, the inputs and outputs are assumed to be equal in price and value in the new stationary state--there are assumed to be stationary values. As Andew Kliman has sharply observed about the new equilibrium state, the inputs which enter into the capitalists costs as production is undertaken are assumed to be as low as the unit prices of the outputs which result from the technical change.
But in the real economy, technical change is continuous, prices are not stationary, and there is disruption to the system before any one innovation works its way through along the way to a new stationary state in which input and output prices are stationary. And if one allows for this much reality, the rate of profit can indeed fall from on going technical change. The Okishio Theorem is thus in Marxist estimation based on assumptions utterly foreign to not only Marx's vision of the dynamics of capital accumulation but also reality. For such a critique see Ben Fine, Theories of the Capitalist Economy, Andrew Kliman and Alan Freeman in Marx and Non Equilibrium Economics, ed. Freeman and Guglielmo Carchedi.
The mainstream political scientist Robert Gilpin has offered some sharp comments about the assumption of comparative statics in Global Political Economy: Understanding the International Economic Order (princeton, 2001). So in this case, the Marxists seem to be fighting not "bourgeois ideology" but only the sterile methods of economists, viz., comparative statics.
Yours, Rakesh
>
>-----Original Message-----
>From: Kelley Walker [mailto:kelley at interpactinc.com]
>Sent: Thursday, April 12, 2001 6:07 PM
>To: lbo-talk at lists.panix.com
>Subject: industrialization
>
>
>anyone have comments on this one? is this an expression of what yoshie
>attacks as bourgeois industrialization theory? isn't this what mat has
>been saying re why tehcnological innovation occurs?
>
>
> > Industrialization will be delayed by an abundant supply of cheap labor.
> > Industrialization [automation] is a response to a shortage of labor.