Economic and Philosophic Manuscripts

[Questionable]

I need help understanding a passage from Economic and Philosophic Manuscripts of 1844 by Marx.

"Then again by keeping secrets in manufacture, which enable the capitalist to reduce the costs of production and supply his commodity at the same or even at lower prices than his competitors while obtaining a higher profit. (Deceiving by keeping secrets is not immoral? Dealings on the Stock Exchange.) Furthermore, where production is restricted to a particular locality (as in the case of a rare wine), and where the effective demand can never be satisfied. Finally, through monopolies exercised by individuals or companies. Monopoly price is the highest possible."

Okay, I understand how monopolies come into existence by way of accumulation and concentration of capital, but what about the first two? What exactly are these "secrets" that Marx refers to the bourgeoisie using? Can someone give me an example? Furthermore, what does he mean by a place where production is restricted to a locality, and what does he mean by an "effective demand" than can never be satisfied?

[citizen of industry]

For example, if my company developed a type of machinery that was more productive than industry standard, and could allow me to increase productivity at a lower cost. Or if my company discovered a synthetic kind of raw material that was cheaper than the norm, I could undercut you and get a higher market share, while making the same profits. I would attempt to keep those developments as trade secrets. Or if I had insider information that could allow me to speculate on the stock market, I would keep that information secret.

With production limited to locality, Marx uses the example of wine. Think champagne. "champagne" can only be produced in the town of Champagne. If you produce it elsewhere it must be called "sparkling wine." Champagne is more expensive. Or Aomori Apples. You can't produce Aomori apples except in Aomori prefecture. So the effective demand cannot be satisfied, those apples can command a higher price than apples grown in China or elsewhere. But those are luxury products. Strictly speaking, think of a rare element or mushroom or something that only exists in one country. That country (or whatever business operating there) commands a monopoly price.

Also, I didn't recall Marx dealing with monopoly as early as 1844. I thought the first time was in Wage Labour and Capital. Thanks!

[Blake's Baby]

EDIT: OK, Siembra Socialismo has answered this as well... but I was typing as SS replied...

Right: it isn't totally clear what the problems are that you're having because the passage seems pretty clear to me, but:

Marx was writing in the early 1840s, when capitalism was still in its infancy. It was only a few years since the Luddite Riots in England for instance, when weavers (who had up until that point been self-employed craftspeople) began smashing up new machinery which they thought was taking their jobs, and which was definitely tying them more firmly to capitalist bosses rather than running their own work. New machines and new techniques were in the process of revolutionising productrion; the 'secrets' Marx is refering to are refinements and indeed revolutions in production. If Company A develops a machine that trebles the output of one worker per hour, but that company's competitors are using the old machines, Company A is producing more for less. The capitalist's costs are lessened. So Mr Arkwright of Arkwright Mills is producing at a lower cost than Mr Burridge's company and Mr Clutterbuck's company. Until Burridge and Clutterbuck are able to revolutionise their own production Arkwright has a distinct advantage. So Arkwright keeps his machine (or process, or whatever) secret.

'Where production is restricted... as is the case of a rare wine' - well, wine is made from grapes and grapes are grown in particular locales and some different grape varieties are better suited to particular soil conditions and weather patterns... so the produce of some areas - and some times - is better for making wine than the produce of other areas and times. This leads to situation where one bottle of wine is not necessarily equal to another bottle of wine. The Chateau d'Artagnan 1968 is not necessarily as good as the Chateau d'Artagnan 1970, but both may be better than the Chateau de Bonne-bonne of 1968 or 1970. If any wine is what's being measured, then the really rough bottle of homemade wine from the farmhouse down the road is just as good as the Chateau d'Artagnan 1970 which is no better than the stuff the students at the University are brewing in the airing cupboard; but if you're measuring quality rather than quantity then the Chateau d'Artagnan 1970 is better than the stuff from the big plastic bucket.

Likewise, if a certain product only grows in a certain place then its supply will be limited. Truffles might be more popular, but cheaper, if they had a wider distribution. But they're quite rare.

So, linking in to 'effective demand' - it may be that almost everyone would prefer Chateau d'Artagnan 1970, and truffles, rather than Chateau de Bonne-Bonne (whatever year they can get) and field mushrooms. So their 'effective demand' can be considered to be 5 billion+ people. But because Chateau de Bonne-Bonne (year undetermined) and field mushrooms are easier to get than Chateau d'Artagnan and truffles, they fill the gap of 'effective demand'. After all, only 20,000 bottles of Chateau d'Artagnan were ever made (and 19,000 of those have already been drunk, there's only 1,000 left in the world), and truffles grow wild in a few locales, so there's a few hundred kilos on the market - whereas Chateau de Bonne-bonne has produced more than 30 million bottles in the last 45 years, and there are millions of tonnes of field mushrooms available.

If you can control or even significantly influence the supply of something (because it's incredibly rare, or because you have some revolutionary way of producing it more cheaply than your competitors) you are at a distinct advantage. You can screw the consumer, by jacking up the end price (no-one can compete because you have a unique product, like the Chateau d'Artagnan) or you can screw your competition by slashing the price (Arkwright's Mill produces 300 metres per worker per hour, Burridge and Clutterbuck only produce 100 metres per worker per hour so you can sell yours for half the price of theirs and still make a profit). Either way is an increase in profit for the capitalist - in one place, by monopolising the market through scarcity (you have the only supply), in the other case in monopolising it through abundance (your competitors have to revolutionise their production or go out of business, in the meantimne your goods are out-selling theirs 5-to-1; because of the initial profits you could afford to install a dozen more machines and now you've doubled your workforce and are producing 6 times what you were before).