Saturday, December 15, 2018

Capitalism incompatible with total automation/slavery


In the previous post, "Five questions on the last days of capitalism", I discussed the evolution and final fate of capitalism - which will be very different from the violent revolutionary end imagined by the Leninist left.

In this post I want to zero in on the exact mechanics of the final days of capitalism. Little of what follows is original, but it's seldom brought to prominence.

1. Start point: a model capitalist economy with competition

Our economy consists of a number of identical competitive companies serving an anonymous market. Each company spends per working period:
  • £10 on constant capital c (= depreciation, raw materials, premises etc), 
  • £4 on wages v (= 4 labourers at £1 each)
with a rate of surplus value s/v of 100%. This means that £4 of surplus value s is produced in the working period. So c = 10, v = 4, s = 4.

Revenue = c + v + s = 10 + 4 + 4= £18     -  4 labourers remember. Assume 18 objects are produced at £1 each.

Profit p = revenues - costs = £18 - (£10 + £4) = £4.

Rate of profit = profit/cost = p/(v) = 4/(10 + 4) = 2/7 = 29%.

2. The power of innovation

One of the companies buys some better machinery which bumps c up from 10 to 11 but which allows two workers to be eliminated. Their numbers look better:

c = 11, v = 2, s = 2 (same s/v) so c + v + s = £15.

Suppose that 18 objects are still produced in the working period. Initially the innovator can sell at the going market rate of £1 each - a total revenue of £18.

Revenue = £18. But his costs (c + v) = 11+2 = £13 are lower.

Profit = £18 - £13 = £5 .. and rate of profit = p/(c + v) = 5/13 = 38%.

This is far better than his business rivals (stuck at 29%).

3. Other companies follow the innovation

But all too soon other companies follow suit. Prices fall due to competition until each company finds that for itself:

New revenue = c + v + s =  £11 + £2 + £2 = £15

New profit = (c + v + s) - (c + v) = £15 - £13 = £2.

New rate of profit = p/(c + v) = 2/13 = 15%.

But the previous market equilibrium profit was 29%! Now each employer is worse off.

But the 18 objects now cost only £15, or 83p each. Consumers benefit from the wonders of competition and innovation driving productivity.

4. Robots now eliminate all labour

The robots are coming! A progressive innovator buys more automation which bumps c from 11 to 12 and which eliminates workers altogether.

c = 12, v = s = 0.

As before, 18 objects are produced in the working period and the going rate is still 83p each. Our innovator takes advantage of existing market pricing.

Revenue = £15 as before, but costs = £12 only (no wages).

Profit = £15 - £12 = £3 and the rate of profit = 3/12 = 25%.

An improvement over his competitors (who only see 15%) but again, they soon follow suit.

5. Everybody adopts total automation: no more wage bills

Competition drives prices down to costs (there is no surplus value s).

Revenue = 12 and cost = 12.

Profit = 0 and each object costs 12/18 = 66p. Except no-one is making any.

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Discussion

Slaves or robots: it makes no difference

I assert the above model holds whether the total automation is clever machinery, some humanoid AGI or a human slave.

Nonsense, you reply. A slave is just a worker where the employer is paying for food and shelter directly, rather than via wages.

Not so fast! The slave has to be bought as well as maintained - just like any other piece of capital equipment. What then is the cost of a slave in a competitive market?
The cost of a slave = expected-output-value - maintenance-costs (all discounted).
In one cycle above, assuming the slave is bought at price c and is as productive and exploited as a wage-worker (s/v = 1) then:

output-value produced by slave = (v + s) and maintenance-cost = v, so using the definition:
slave-cost = c = (v + s) - v = s                   - (values/costs here for one work cycle).
People (not slave-owners though) forget to include the initial cost of the slave, which already factors in the 'value' the slave will create.

Suppose cR represents the cost of the raw materials the slave works with and other non-slave constant capital costs. In a work cycle or period:
revenue = cR + value-added-by-the-slave = cR + (v + s)

costs = cR + slave-cost + slave-subsistence = cR + s + v.

Profit = revenue - cost = [cR + (v + s)] - [cR + s + v] = 0.

There have been capitalist economies with slave sectors of the economy

You say, there have been slave-owning sectors of capitalist economies, the antebellum south, and I remind you that this is well-trodden territory on the left.

Read more at this post: "Total automation under capitalism?" - the topic area is the theory of equalisation of the rate of profit between sectors with differing levels of automation and the concept of prices of production.

It's perfectly possible for sectors of a capitalist economy to transition to total automation (point 4 above). The automated sectors extract value produced by workers in other sectors through profit equalisation. But it's not possible for the whole economy to 'lose its workers'.

8. What kind of an economy can you have with total automation?

What does work, you ask. Absent complete overproduction capability ('abundance') of everything, there will be a need for exchange between different production units: commodity exchange at value via simple (or petty) commodity production. Like in the Roman empire, or during feudalism. In this mode of production, exchange is driven by the need for use-values. The dynamic is not profit maximisation.

One can only hope that innovation and dynamism in such an utterly-transformed society of the future is not stifled. Perhaps the AIs will have some objectives of their own? Not everything that is wonderful and creative in human affairs is driven by capital valorisation.

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You will have observed that the cost equation for a slave already incorporates elements of rent. Yet the treatment here is not definitive. As Poulantzas reminds us (Classes in Contemporary Capitalism, chapter 1), 'capital is not a thing'. In arithmetical examples social relationships are reified.

So I'm thinking that the 'expected value of future output' term in the value of a slave is similar to the way we value a share. Marx called this fictitious capital. Compare with the labour involved in delivering the slave as a market-commodity (reproduction, transport and transaction costs) which is how we normally value constant capital. Not sure how to bring these two paradigms together. On this rather opaque thought I must leave it.

Update: Reading Poulantzas (Classes in Contemporary Capitalism, Productive and Unproductive Labour: 2) I am reminded that slaves are not produced in factories.

Slave traders are engaged in non-productive labour and the commodity price form of the slave, like that of the bond or share, is not derived from some quantity of abstract social labour incorporated in it.

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My further posts on Marxist theory.

2 comments:

  1. "Not possible for whole economy to lose its workers"

    So this introduces the idea of a finite limit. The economy has sectors S1, …, Sn. It is possible for the economy to function Capitalistically with individual sectors (e.g. S1, S2) becoming "totally automated". However it cannot so function when S1, …, Sn are all totally automated. Does this not suggest the existence of a number K such that sectors S1, .., SK-1 can be totally automated and it all remains Capitalistic, but once sector SK becomes totally automated, down comes the Capitalistic system (sectors SK+1, …, Sn just cannot sustain an entire economy)?

    What does this end look like exactly? Is it a "silent" transition, or is it surrounded by yellow jackets, troops and mayhem on the streets?


    The idea of "shares in consultants" occurred to me too when I was involved in consultancy. Can everyone have their "Net present value of future earnings" calculated? This kind of calculation went into the whole Student Loan idea, I guess.

    ReplyDelete
    Replies
    1. As the post outlines, surplus value from the wage sector gets redistributed across the whole economy via profit equalisation. There's a spreadsheet at one of the links.

      Delete

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