What does Marx mean with 'variable capital'? [Archive]

M_Rawlins

21st June 2004, 14:23

Who gives a fuck? There are women out there man, pull yourself together..

:lol: he's got a point, this is the non-political section of the board, i think this would be more suited to the "new to it all" part of the forum...

Anyway comrade, there's a definition of variable and constant capital on Marxists.org, in the glossary section (who would have thought it would be there?). Just incase you are the lazy type, it's quoted below....

Variable and Constant Capital

Constant capital is the value of goods and materials required to produce a commodity, while variable capital is the wages paid for the production of a commodity. Marx introduced this distinction because it is only labour-power which creates new value.

The constant capital includes that proportion of capital invested in the materials and components purchased but then embodied in the product when it is sold, as well as the materials, tools, machinery etc., which are used up, bit by bit in the course of production. If a million dollar machine, for example, is used in the production of 10,000 cars in the course of a year, before being worn out and replaced, then effectively every car has $100 worth of that machine in it. Thus constant capital includes both fixed and unit costs. The point is that no matter how much materials and components and machines are bought and sold, they do not create any new value. Whether they are stored in a warehouse before being sold, or used in factory, it makes no difference. Whatever value they had when a capitalist buys them for use in production, they still have the same value afterwards.

Variable capital means that proportion of capital which is invested in wages, in the purchase of labour-power. Marx called this capital “variable” because it is this proportion of capital which, if it is used wisely may produce a new, surplus value in the course of the labour process, over and above the “necessary labour time” which the worker needs to live and is paid in the form of wages. This investment is the only one which creates new value, because the worker is able to produce more than he needs in order to live.

So for example, let us suppose a worker earns $100 and consumes $1000 worth of materials and components to produce a product which is sold for $1300. This value could be represented as constant capital ($1000) + variable capital ($100) + surplus value ($200). That $200 of surplus value was added to the product solely by the activity of the worker. That is, of the capitalist’s investment of $1100, only the variable capital, $100, expanded.

Marx represented this relation symbolically:

c + v -› c + v + s

The ratio of constant to variable capital, (c/v), he called the “organic composition of capital”; the ratio of surplus value to wages, (s/v), he called the rate of surplus value, or the rate of exploitation of labour, and s/(c + v) the rate of profit.

The contradiction brought out by this analysis is this. Every capitalist works might and main to reduce the wages bill, and turn over as much material as he can, investing in expensive machinery and increasing c to cut labour costs, v; this produces a general increase in the “organic composition of capital”, c/v. However, since it is only the variable capital that produces profit, the result is a falling rate of profit.