Moral wear and tear
The moral wear of means of production referred to in the Critique of Political Economy by Karl Marx the fact that goods without giving their use value (ie their usefulness) lose, still a part or their entire value can lose by through the technical progress , the conditions their production can be improved.
If morality is the manners and customs of a people, then moral wear and tear can be understood as a loss that occurs because the customs and habits of a people change, in the economic area the way in which goods are manufactured. Changes in fashion or the like could also be listed here (see also obsolescence ).
Example of fixed capital
If the value of a commodity, e.g. B. a machine for the production of shoes, like that of any other commodity according to the Marxian labor value theory is determined by the average labor time necessary for their production, then this machine loses value if the production conditions of shoe manufacturing machines change during its lifetime such that z . As a result of technical innovation , for example , less working time is suddenly required to manufacture such machines than before. This loss of value occurs even though the machine maintains its technical performance. The loss of value that occurs because the machine gradually wears out in the production process can, in contrast to moral wear and tear, be described as physical wear. Marx speaks of “material wear and tear” in contrast to “moral wear and tear, so to speak”.
If the value of money remains the same, moral wear and tear has the effect in this example that the price of the shoe manufacturing machine , the exchange value of the shoe manufacturing machine expressed in monetary units, suddenly falls. A recent example is the drop in the price of calculating machines .
Example of circulating capital
If a shoe factory stores shoes so that they can later be sold to dealers, then these shoes lose their value if the production conditions for shoe production change during the storage period in the shoe industry to the extent that technical innovations suddenly reduce working time for the production of shoes is required than before. This loss of value occurs even though the quality of the shoes has not decreased. The loss of value that occurs because the shoes in the warehouse may be materially damaged can be described as physical (Marx: material) wear and tear as opposed to moral wear.
If the value of money remains the same, moral wear and tear has such an effect in this example that the price of shoes, the exchange value of shoes in monetary units, suddenly falls.
Special case of money
Money is a special case with circulating capital. Companies keep money in their coffers in certain quantities. In Marx's time the gold standard still ruled , gold was the money commodity. If, as a result of technical innovations in gold production, gold can suddenly be produced with less working time than before, then gold and the money based on gold suddenly lose value - monetary devaluation .
If the value of the other commodities remains the same, moral wear and tear has such an effect in this example that the price of the other commodities, the exchange value of the commodities expressed in monetary units, suddenly increases. There is a general increase in prices.
Effects on capital
Just as the capitalist must take into account the physical wear and tear of his goods in his economic calculations, he must also take into account the effects of moral wear and tear.
Circulating capital
Suppose a shoe retailer buys shoes in stock in order to gradually sell them. If there is moral wear and tear on the shoes, the shoe retailer suffers a loss of capital. He has bought the shoes at a high value and can now only sell them at their new low value.
money
If monetary devaluation is not properly taken into account, fictitious prizes may be shown. If the value of money falls, the value of shoes remains the same, then the price of shoes rises, the shoe manufacturer makes ever higher profits in terms of money, not in terms of value.
If there are no fictitious profits, the shoe manufacturer must take into account that the prices of the means of production will also rise. The price of a shoe making machine of a certain quality increases. The shoe manufacturer takes this into account by increasing the depreciation on his old shoe manufacturing machine in line with the rate of price increase so that the money is also available for the replacement.
Fixed capital
One can analytically isolate the effect of moral wear and tear by abstracting from physical wear and tear, i.e. looking at machines that do not physically wear out, but last forever.
Suppose a shoe manufacturer buys a shoe manufacturing machine. If there is moral wear and tear on the shoe-making machine, the shoe manufacturer suffers a loss of capital, he bought the shoe-making machine at a high value and could now sell it at its new low value. There is always new moral wear and tear when the machine can be manufactured in an even shorter working time.
Economic crisis
With the threat of moral wear and tear, an investment in circulating or fixed capital may not be profitable for a capitalist . If the capitalist has an amount of money that he wants to invest as capital , then it pays off to hoard this amount of money and not invest it straight away, the greater the expected moral wear and the earlier the onset of moral wear and tear is to be expected. If the extent of the expected moral wear and tear is rather small and is to be expected later, on the other hand, the immediate investment in the still old machines or in the means of production at the higher values still prevailing pays off.
An economic crisis can arise when a large number of capitalists - for example in expectation of moral wear and tear - come to the decision to hoard their money-capital instead of investing it. If money is hoarded, the economic cycle is interrupted. The resulting disruptions can be so great that even later, when the cheaper machines are available, there is no investment due to the general uncertainty. The crisis then solidifies.
Peculiarity of the capitalist mode of production
In a communist society , too, it can happen that a good is created with a certain amount of work, and shortly afterwards it turns out that this good could have been produced in a shorter time. The workload was, so to speak, mistakenly high. Correspondingly, a communist society could postpone the production of a certain good in the expectation that technical progress would soon come which would allow the production of this good in shorter working hours. In contrast to a capitalist mode of production, however, it does not appear that money is hoarded and thus a crisis is triggered.
There were also comparable phenomena in pre-capitalist societies. There are a number of stories in which an inventor visits his ruler in order to present his invention to him and to receive a reward. In fact, the inventor is then beheaded because the rulers feared excessive social changes as a result of technological progress and consequently wanted to prevent them. A story from ancient Rome, from the banquet of Trimalchio , a part of the story of Satyricon , comes from Titus Petronius . Then an inventor went to the emperor to present his unbreakable glass. However, the emperor had him killed afterwards. He feared that if such a useful item were disseminated, gold, on which the Roman economy and the Roman state rested, would “be worth shit”. In capitalism , the attitude towards technical progress on the part of the ruling class has changed. However, here, too, the risk of moral wear and tear can lead to inventions being postponed for the time being, especially if the companies, as monopolies, already have a dominant market position.
Law of the tendency of the rate of profit to fall
With Karl Marx the law of the tendency of the rate of profit to fall as a consequence of technical progress results . This law is controversial inside and outside of Marxism. According to the simple and usual representation, the law results from the fact that the technical composition of capital increases, that is, in the course of technical progress more and more means of production are used. According to the labor value theory, however, the individual worker can only create as much value as he (e.g.) works daily. But there are natural limits to this, maybe ten, twelve or fourteen hours. Accordingly, the daily creation of new value by a worker is limited. But if the value of the means of production which the worker uses every day increases, and if more and more constant capital is required per worker, then the rate of profit must fall.
The formula for the rate of profit is:
In relation to the individual worker, the constant capital c continues to increase. The production of new value per period is of course limited upwards for the individual worker, as explained. This also limits the creation of surplus value m, which is part of the new value m + v, per worker. Consequently, the rate of profit p must eventually decrease.
Marx himself admits that the rise in the value composition of capital is weaker than the rise in the technical composition of capital, because the means of production can be produced in ever shorter periods of time, so that their value is constantly falling. The mass of the means of production per worker rises faster than the value of these means of production per worker.
While the rise in the technical composition of capital as a long-term tendency within and outside of Marxism is little disputed, the rise in the composition of values appears to be an arbitrary assumption because of the ongoing decline in the value of the means of production. On the one hand, technical progress can lead to moral wear and tear of the existing means of production; on the other hand, the reduction in the value of the means of production it triggers becomes the decisive cause from the point of view of the critics, which calls into question the “most important law of political economy” (Marx in the “ Grundrisse ”) represents.
Different types of moral wear and tear
case 1
On this issue, it should be noted that moral wear and tear can occur in a number of ways. So far, the moral wear and tear has been considered, which occurs because a certain machine with certain technical properties can be manufactured in a shorter working time, so that the previous machines lose their value accordingly. For example, a certain pocket calculator that had to be manufactured within a day at the beginning of the year can suddenly be manufactured in half a day at the end of the year. This halves the value of all pocket calculators.
Case 2
In reality, however, it is often the case that the time it takes to manufacture a calculator remains the same, but suddenly a calculator can be manufactured that has a higher performance. In this case, too, the old pocket calculators lose their value, they suffer moral wear and tear, although the working hours in which they can be produced have not decreased at all. In the first case, technical progress had the disadvantage of moral wear and tear on the old pocket calculators, but also the advantage that the new pocket calculators could now be purchased more cheaply. In the present case, this advantage does not apply. The capitalist must save the same value as before in order to be able to buy a new pocket calculator, but one with a higher efficiency now.
Case 3
Finally, the case is conceivable that the working hours to manufacture a pocket calculator will even increase, but that this will be more than offset by the higher performance of these new pocket calculators. If a capitalist wants to purchase this new pocket calculator with a significantly higher performance - and the competition could force him to do so - then he now has to save even more capital than would have been necessary to replace the old one in order to be able to afford this new pocket calculator.
When the rate of profit rises ...
A numerical example should make a difference between case 1 and case 2 clear. Suppose a machine (shoe manufacturing machine) costs 1000 € (constant capital c). There are wage costs per period, which are to be paid in advance, also amounting to 1000 € (variable capital v). The turnover per period (the income from shoes sold) should be 2000 € (new value m + v). The result is a profit (surplus value m, the differences between surplus value and profit need not be discussed here) of 1000 € per period (sales minus wage costs). Apart from physical wear and tear, the machine lasts forever and there is no depreciation . The profit rate is 50% (1000 € m / (1000 € v +1000 € c)).
In case 1 there is moral wear and tear because the machine can be produced in shorter working hours. The value of the machine sinks, expressed in € the machine is no longer worth 1000 €, but less. In the extreme case, the value goes back to zero. The rate of profit would then be 100%, 1000 € profit m related to 1000 € wage costs v, c is zero. The development cannot go any further. The capitalist with the old machine suffers a constant loss of value, he experiences the moral wear and tear of his machine, but he is never really forced to give up. When he has digested the loss of value, his old machine - now valued lower - throws off the new rate of profit again.
This is different in case 2. The price of the new (shoe manufacturing) machine now remains at 1000 €, but the performance of the new machine is higher. Shoes with a total price of € 3000 can now be produced instead of the previous € 2000. The profit (turnover m + v minus labor costs v) increases to 2000 €. The new rate of profit m / (c + v) is 100%. Measured against this new rate of profit, the value of the old machine is now only € zero. In this case, the old machine would just produce a profit rate of 100%: € 1,000 profit related to € 1,000 wage costs.
If a machine is invented that can make even more shoes, then the price of the old machine should go below zero. If the capitalist wanted to sell his old machine, he would have to give the “buyer” money for it. The continued operation of the old machine is no longer profitable if profit rates above 100% are reached, because the highest possible profit rate of the old machine, when its value drops to zero, is 100%. If the rate of profit rises even more, then the old machine will be withdrawn from circulation, something that is not absolutely necessary in case 1.
... and the machine becomes more expensive
When Marx (or Marxists like Henryk Grossmann ) discusses the law of the tendency of the rate of profit to fall in Chapter 15 of Volume III of Capital , he is thinking primarily of Case 3. Marx suspects that higher profit rates are primarily for individual capitals can be achieved by investing in constant capital on an ever larger scale. Viewed in this way, there is not only a moral wear and tear of the existing means of production, the profits also wear out morally in the sense that it is clear from the outset that they have to be used to acquire ever larger machines if the individual capitalist wants to keep up in the race for higher profit rates . The paradox then consists in the fact that the higher and higher rates of profit are less and less sufficient to raise the higher and higher sums of capital that are required to make the increasingly enormous investments required in the course of technical progress. In this sense, one can speak of a "fall" in the average rate of profit.
As a result, more and more smaller companies are falling out of the race; only the big ones are left. Finally, competitive capitalism turns into monopoly capitalism .