CAPITAL ACCUMULATION pppppppppppppp.pptx

Capital

1. Theory of capital Accumulation By Neha Anand VIPS,VSE

2. Marx Theory of capital Accumulation Depends on : Nature of production . Technological progress The manner of capital accumulation .

3. Nature of production 1. Marx asserted the labour which has the social chaterstics and create social relation in the process of production . 2. According to the Marx Land the natural resource or first resources that available to the labour 3. Raw material Available through the previous labour . 4. The instruments of labour was the set of things , which available between labour and in the process of labour development 5.Productivity of labour depend on the development in the economy Marx Gave importance to labour Land is the natural resources available to the labour

4. Nature of Production 6. Marx Production function can be written as Y= F (K,N,L,S,U) Y= F (K,N,L,S,U) Where : y = output K = capital stock N= land L= Labour S= social technological knowledge U= culture , social and institutional complex of society .

5. Course of Production 1. Value of Commodity in capitalists system included : Value=constant cap. + variable cap.+ surplus cap . 2. Now Marx Production Function can be rewrite as : Y=(q1+q2) L+kK+nN :…………………………… (1) Y=q1L+q2L+kK+nN-----(2) Where : q1l=Variable capital = ( LABOUR) q2L=Surplus capital /Profit Kk+Nn = Constant Capital = let have this sum as “ hH ” Y=q1L+q2l+hH---------(3) , responsive to the change in production , i.e. not fixed overtime Marx did not considered imporovemt in production as autonomus but rather it was the result of capital accumulation …. Value=constant cap. + variable cap.+ surplus cap . q1,q2 and Hh are the not fixed but actually changed overtime .

6. Technological Progress The additional capital formed in the from of capital accumulation serve as the vehicle of exploitation because improvements and discoveries are also made in the form of the labour displacement And new system generated where the gross investment is the actual result In other word he use the organic component of capital i.e.=C/V= kK+Nn /q1L Where C = constant capital-----( kK+nN ) V = variable capital-----q1L As the Organic Component tend to rise , lead to the more increses in gross investment ( when constant capital rise more than the varaible capital )

7. The demand of labour depend upon the rate of variable capital stock 1. Orgnic compostion = Constant / variable ------(1) 2. Rate of exploitation =s/v------(2) 3. Ratio = l/C labour to the capital Ratio , required in production process Supply of labour is determine exogenously i.e. population . As the technological Progress take place the exploitation become more and capital accumulation take place. It is also identified by the Marx the actual surplus value can’t be fully reinvested it is also used for the consumption purpose , by the capitalist . Reserve Army created

8. REPRODUCTION : The manner of capital accumulation The point of view of reproduction is central to Marx’s theoretical thinking about human society . For example : M-C-C’-M’( CAPITALIST MODEL ) The capitalist begins the transaction with money and the worker with labour power, And the two, like the exchange of any other commodity, strike a bargain. But the repetition of this transaction Gives it an entirely new and deeper significance .

9. REPRODUCTION : 1. The Capitalist at the end of the production cycle owns the commodity produced and can realize the full value of these commodities, including the surplus value in them. 2. The average worker at the end of the production cycle has reproduced himself without having anything left over. 3. Thus the capitalist is in a position to reproduce his activities on a larger scale, and the worker once again confronts the necessity of selling his labour power in order to survive. 4. As this process repeats itself, It becomes Clear that all the capitalists' value comes to be accumulated surplus value.

10. REPRODUCTION AND ACCUMULATION 1. In capitalist production a proportion of surplus value appropriated by capital is recommitted to the production process. We might call this monetary aspect of capital accumulation- M-C-C’-M’ The growth in the value of capital itself as a result of reinvestment of surplus value.

11. REPRODUCTION AND ACCUMULATION CASE 1: If the reinvested surplus value were merely to expand the capital’s existing operations , then, constant and variable capital will grow in the same proportion( OCC=CONTANT / VARIABLE, = 1 ) C’-M’……….. If Wages were to remain constant, the total labor power purchased( total employment) would grow at same rate . This (imaginary) situation Marx Calls expanded reproduction .

12. Expanded form : ( Two Type ) Simple Expanded reproduction : is the situation of the stationary state in which all that is produced is consumed , Additional investment is zero , no capital accumulation , no surplus is created.(CASE 1)

13. Reproduction system: There are two department of production and consumption Value of constant capital in department ( production side ) ( production side “ take place in constant capital” ) : C1+C2= C1+V1+S1-------(0) : C2=v1+s1.-----(1) This show s that the value of constant capital in department -2 must equal the value of commodity consumed by workers(V1) and capitalist (S1) in department -1….. Consumption side in both department is equal to output in department 2( c2+v2+s2) Consumption in department 1 and 2)= consumption in 2 : V1+s1+v2+s2= c2+v2+s2 : C2=v1+s1-----(2) Let assume that production take place due to the constant capital in the economy

14. Reproduction system : case 2: In the Marx Expended Reproduction scheme the Accumulation take place because the production in department 1(capitalist sector ) is greater than the demand for constant capital in both the department that is C1+v1+s1>c1+c2 V1+s1>c2 This show that accumulation is taking place which is being invested in employment more labour “V1” and the means of production “c1” in department 1 than in department 2 these in turn increases the surplus value ( s1)

15. REPRODUCTION AND ACCUMULATION But Real accumulation always invoves a transformation of the process of production. Capital is not satisfied simply to recreate on a larger scale what it has already achieved, Rather it presses to adopt new methods of production.

16. This process of expansion of scale of production through growth of individual capital is called CONCENTRATION OF CAPITAL…….

17. To separate levels of analysis Marx distinguish between reproduction and accumulation properly

18. WAGES AND RESERVE ARMY OF LABOUR Accumulation has contrary effect on the demand of labor power Expansion of capital value through reinvestment of surplus value tends to increase the demand for labor power and this involves displacement of labor …. Displacement of labor through technical changes creates a pool of people who have been and usually needs to be employed as wage labour .

19. WAGES AND RESERVE ARMY OF LABOUR This pool of unemployed worker in characteristics feature of capitalist production and Marx calls this pool as FLOATING RESERVE ARMY OF LABOUR This pool is drawn Down When Accumulation Creates more job than it destroys and is replenished when the opposite happens

20. WAGES AND RESERVE ARMY OF LABOUR Those people who reproduces themselves outside the capitalist relations of production thus form a LATENT RESERVE ARMY People whose labor deteriorates or whose skills are never developed or become obsolescent And who exist on the extreme margins of social production and social life They form STAGNANT RESERVE ARMY.

21. CIRCUIT OF CAPITAL

22. 1 2 3 4 5

23. Down fall of capitalism 1.when the capitalist is replacing the workers by machines , he is killing the goose that laid the golden eggs . Thus there is continuous reduction in surplus value. 2. Marx believe that technological progress tends to increases the organic composition of capital , since the rate of profit inversely related to the organic composition of capital . The former tends to decline with accumulation Organic component = constant / surplus …(0) profit ® = surplus / variable capital Profit * variable = surplus , organic composition of capital =constant / profit * variable ..(1) 3. Marx explained this tendency of falling rate of profit in terms of the following equation : a.The rate of profit ® varies inversely with organic composition of capita; and directly with the rate of surplus value ( rate of exploitation (s/v)), therefore , the rate of profit r rises with the rate of surplus value s/v and fall with the organic composition of capital c/v .

24. Marx falling rate of profit is explained in below : : In the figure the amount of capital is taken on the horizontal axis and total output on the vertical axis Marx move on the presumption that as the capitalist use more machinery ( constant capital ) , they keep the supply of labour constant . s1 s2 Wage rate A PROFIT K1 K2 B Wages T1 T2 T P- Op = TP OT = WAGES TT1= K1 “A”OUTPUT PROD. TT2 = K2 = at “B” output OCC=C/V—(1) ---- OK1/K1S1-----AS1-(PROFIT) -----AT OK1 OCC=--C/V----(2)---OK2/KISI ORK2S2----BS2(PROFIT) PROFIT =OK1= S/V=AS1/K1S1----(1) PROFIT = OK2=S/V=BS2/KISI ===(2)

25. The total output curve OP that slopes up to point A , total output increases at an increasing rate and after that at a dimishing rate.it means that as more machines are installed while keeping the supply of labor constant , the law of dimishing return operates . Total wages bill is constant at OT and the horizontal line TW shows constant supply of labour as the amount of capital increrese . A tangent TT1 touches the total output curve OP at point A. And a perpendicular AK1 from A cuts the TW line at S1, similarly on the other line TT2 from T cuts the OP curve from below at B and a perpendicular BK2 , from it cut the line at S2. With OK1 , capital on machinery , total output AK1, total profit to capitalists is AS1 and total wages are S1K1 . The rate of profit is alpha = AS1/TS1 , If to increases the rate of profit , capitalist uses more capital than OK1, the rate of profit decline . When OK2 Capital is used , the rate of profit alpha” =BS2/TS which is less than AS1/TS1 . THUS WHEN MORE CAPITAL IS USED ON MACHINERY , THE RATE OF PROFIT ACTUALLY DECLINE …………………………..

26. Theory of Distribution : By Marx ………… : BY Neha Anand VSE , VIPS REALTED TO Ricardo --------------

27. The Marx theory of distribution is derived from the Ricardo theory . Even though his analysis reaches conceptually opposite conclusion about the behavior of the distributive share in total product . According to Marx theory : labor is the alone that is the ultimately sources of all value . Raw material not create value , they merely transfers their own value of commodity . But labor create labour power which is used in production process . The value of labour power is determined by the cost of reproduction of labour , i.e. why by the value of goods and services that are required to maintain the labour at the minimum subsistence level . Labour will get only the subsistence wages 3. The value of labour implies he supply price of labour -----the price at which worker offer their labour for use by the capitalist in the production process .

28. 4. According to the Marx only sources of surplus value is the Labour i.e. exploitation of labour . “Theory of surplus value” : which in-turn explained the distribution of aggregate income wages and profit 5. Ownership of non- human means of production that the capitalis are able to extract surplus value . . Thus the share of profit in the total value of output depend upon the magnitude of surplus value extracted from it . According to the patterson “ The notion of surplus value is crucial to the Marxian theory of income distribution .surplus value is the sources of all profit and thus the amount of surplus that can be expropriated by the capitalist class will determine the relative share of profit in the income total .

29. Total value of output Total value of output = total value of capital and raw material / constant capital (c )+value of laboue power (v) i.e we paid wages to labour +surplus value (s) C+v+s = total value of output C= is the consumption of fixed capital , since raw material are intermediate products TV-C = Net output , which consist of value of the labour power or varaible capital and surplus value (s) V and S are the wage and profit Net output =V+S ………./(NNPAT FC)-----(0) DIVIDING (0) WITH V NO/V =V+S/V=1+S/V……(1) output per labour / percost =1+s/v(rate of exploitation ) ….(2) S/V = profit share /wage share : rate of exploitation , if the rate increases ,hence increases the profit share relative to share of the wages in the national income .

30. According to the Marx the force at work in a capitalist economic system bring about the increases in the rate of exploitation of labour . The basic force at work is the competition among the capitalist to increses the rate of explotation Accoding to the Ricardo population increses is the reason of substance wages but in marx reason is the presence of reserve army ( dd (l)< ss (l)) dd (l)< ss (l) : Marx assumed that capitalist enterprises progress at the expense of pre capitalist enterprise , more labour are realised through the disappreance of the non capitalist or handicraft units than are observed in the capitalist sector owing to the difference in productivity per head between two sectors

31. Acc to Marx The wage being fixed at the minimum subsistence level, the measure which bring about the increases in the output of labor will raise the rate of exploitation and therefore the profit of the capitalist According to the Marx ,Capitalist who own the material means of production complete with each other to increases the rate of exploitation (S/V) which is the same thing as the increase in profit share relative to wage share . Three ways to increases the surplus value or rate of exploitation ………. A. lengthening the working day. B. Increases the intensity of labor. C. Raising the physical productivity of workers through the technical progress.

32. As a result the competition among the capitalist seeking to increases the surplus value force them to accumulate capital , i.e. to make investment “ investment is important to have competition “ which is the motive for capital accumulation. but in Ricardo theory of distribution capitalist accumulate voluntarily so long as the rate of profit exceed the minimum necessary compensation. In Marx , capitalist develop at the cost of the workers “ the law of increasing misery of the working classes ……………………..

33. Ricardo : profit will decline and (real) wages will (constant )increases ….. Marx : Decline in the wages of the worker due to technical progress but fall in real wages ……… Acc to Marx , relative share of the profit will increases with the development of economy . i.c . system as a result of technical progress and capital accumulation , then decline in long run due to organic composition of capital …. Profit … however Ricardo , had a view that capital accumulation lead to fall in rate of profit i.e. due to dimishing return

34. Interpretation of results: OCC= C/C+V—(1) --------(1) tv = c+v Rate of profit = s/ c+v -----(2) P=S/C+V Multiply and divide “V” P=(S/V (multiply) (V)/(C+V))------(3) P=S/V * (1-C/C+V) --------(4) ----- 1-c/ c+v === c+v -c/ c+v -----------(5) Profit depend on the surplus value and organic composition of capital .

35. Marx always say that profit, rent and interest will be arise due to the surplus value, because those who have surplus power ,they have bargaining power due to which the land owner acquire rent , capitalist acquire interest . Rent as a social surplus value : as the capitalist has same technique of production then surplus value arise due to the different in productivity of land superiors resources , initially their will be no property right then overgrazing will happen and over time resource equalized and new social relation between the resources owner and capitalist . Resource owner will get surplus profit if they have superior land Marx analyze the concept of Absolute rent “ is a money charge for access to a resources exacted by a land owner independent of the relative productivity ……..

36. Interest : started from the Roman , is the amount of repayment got by the lender/ save in the economy I.e. M=M+ M , because of the competition , capitalist borrow in order to ensure his survival M-C-C’-M’, : INTEREST has 2 concept Capitalist point of view…. Labour point of view….. “no general principle that determine the level of the interest rate in relations to the profit rate.” Marx emphasis on the loan able fund theory by the capitalist ………..

37. Loan able fund theory .. Investment Interest Saving Output (saving and investment )