organic composition of capital
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organic composition of capital(MARXISM) the ratio between the mass of the means of production relative to labour employed in the production process, measured in value terms. It is therefore the ratio between CONSTANT AND VARIABLE CAPITAL. A closely related term in MARX's analysis is the technical composition of capital (the ratio of machines and plant to labour), which is not measured in value terms, and which seems to be a more straightforward concept but which in fact cannot be measured.
Central to Marx's analysis of the dynamic of capitalism is that there is a tendency for the organic composition of capital to increase. Increased competition between capitalists leads to individual capitalists attempting to increase the productivity of labour power and decrease the value of commodities via increased investment in machinery, constant capital. The value of constant capital increases more than the value of variable capital which is expended on labour power. The full implication of this process, as seen by Marx, is that it lies behind the TENDENCY TO DECLINING RATE OF PROFIT, since with less capital expended for labour power, which produces SURPLUS VALUE, and from which profit is derived, the rate of profit will fall (surplus value divided by constant and variable capital, S/C + V) as more capital is employed but less labour power. This will tend to occur even though the rate of SURPLUS VALUE (surplus value divided by variable capital, S/V) and the overall volume of profit will usually increase from the use of machinery.
The problems associated with this concept have led even sympathetic observers to argue that Marx does not achieve what he set out to do in Das Kapital: to show scientifically why capitalism ‘digs its own grave’. Within Marxian analyses there have been various attempts either to show that Marx's original analysis does achieve its purpose, or that it is possible to complete the analysis satisfactorily.
Organic Composition of Capital
the value composition of capital, that is, the ratio of constant capital (c) to variable capital (v) determined by the technical composition of capital and mirroring the changes in that technical composition. The organic composition of capital expresses the social aspect of production—the presence of capitalist relations in production. The technical composition of capital is the relationship between the mass of means of production and human labor. It depends on the distinctive features of a given branch of industry or enterprise and on a country’s level of economic development.
One of the economic indexes reflecting the technical composition of capital is the amount of capital available per worker, a measure of capital intensity expressed as the ratio of constant capital, in stable price terms, to the number of workers employed. During the long historical period of capitalist development this index grew continually, but in the 20th century its growth has slowed down considerably. Thus, by this measure, from 1869 to 1919 capital intensity in manufacturing in the USA increased by a factor of more than 4, while from 1919 to the early 1970’s it grew by a total of only 55 percent. The slowdown in the growth can be explained primarily by the fact that the scientific and technological revolution creates conditions in which each unit of productive capacity becomes relatively cheaper, and the proportion of passive elements in fixed capital (industrial buildings and structures) decreases. The slower growth in the index of the technical composition of capital is also related to the reduction in the quantity of materials needed to produce the same goods that results from more efficient utilization of raw materials, semifinished goods, and other supplies. In this connection, the increased productivity of labor is not accompanied by a corresponding increase in the value added to the products of labor.
There is a close interdependence between the value composition and the technical composition of capital. The higher the technical composition of capital, the greater the mass of constant capital per unit of variable capital. For any change in the technical composition of capital, the extent to which the organic composition shifts depends on the relative reduction in value of the means of production and nominal wages. The dynamics of the correlation between constant capital and the annual wage fund, for example in US manufacturing, illustrates the relationship between value composition and technical composition. Thus, although there was a steady rise in the index of the organic composition of capital in the 19th century, there has been a tendency toward stabilization and sometimes even decline in the 20th century. This tendency is indicated by the following figures: in 1879 the value of c was 2.38 times the value of v; in 1899, 3.62; in 1919, 4.12; in 1929, 3.67; in 1937, 3.51; in 1948, 2.49; and in 1953, 2.36.
Under the conditions of the scientific and technological revolution, when many branches of social production are being intensified and the efficiency of the means of production rather than the mass is growing, the gradual increase in the index of the technical composition of capital may not lead to an increase in the index of organic composition. Hence, changes in the organic composition of capital at the present stage show the effect of the complex and contradictory processes occurring in the technical composition of capital. At the same time, there are several sectors in the economies of the advanced capitalist countries that in the 1950’s, 1960’s, and 1970’s showed a steady rise in the index of the organic composition of capital. This growth is related to the achievement of tremendous savings in the use of labor in such areas as agriculture and mining. It is in these sectors that the link between technological change and changes in the organic composition of capital can be seen most clearly.
The growth in the index of the organic composition of capital predetermines many important features of the process of capitalist accumulation, in particular, the tendency toward declining average rates of profit. In its efforts to counteract this trend, modern state-monopoly capitalism does not limit itself to measures aimed at shortening the turnover period for advanced capital but seeks to increase labor intensity and consequently surplus labor by reducing required labor. Shifts in the organic composition of capital are accompanied by rising unemployment and worsening conditions for the working class.
REFERENCESMarx, K. Das Kapital, vol. 1. K. Marx and F. Engels, Soch., 2nd ed., vol. 23, ch. 23.
Marx, K. Ibid, vol. 25, part 1, chs. 13–15.
Politicheskaia ekonomiia sovremennogo monopolisticheskogo kapitalizma, 2nd ed., vol. 1. Moscow, 1975. Chapter 13, sec. 4.
I. L. GRIGOR’EVA