Module 4 - Part 1: Industrial Profit

[@YashArya01]

Central question of Vol 3: How is the realized Surplus Value distributed in the Capitalist society? 4:05 Different fragments of Capital and how Surplus Value is distributed among them. 1. Industrial Capital --> Produces Surplus Value --> Receives part of the SV called "Industrial Profit". 2. Merchant Capital --> Realizes Surplus Value --> Receives part of the SV called the "Merchant/Commercial Profit" 3. Money Capital --> Loans money to Industrial and Merchant Capital --> Receives part of the SV called "Interest" 4. Resource Owner --> Loans some resource (such as land) to the Industrial and Merchant Capital --> Receives part of the SV called "Rent". Regardless of the form of Surplus Value and who it goes to, the ultimate source of Surplus Value remains the unpaid labor of workers (exploitation). Industrial and Merchant Profits come from a Competitive process. Interest and Rent come from a Bargaining process. 14:35 INDUSTRIAL PROFIT Any capitalist involved in the production of a commodity is an Industrial Capitalist. There is a two step argument to understand Industrial Profits. Step 1: Movement of Surplus Value from some industry to other as a result of a competitive process. * To understand this, we need to look at differences in the Organic Composition of Capital (C / V ratio) across industries. Recall: C = Fixed Capital; Money spent on purchasing Means of Production (MP), V = Variable Capital; Money spent as wages on purchasing Labor Power (LP) * Low OCC = Low C/V ratio = More money spent on LP than on LP = High Surplus Value (Since only Labor generates Surplus Value) = Higher Rate of Profit * High OCC = High C/V ratio = Low Surplus Value = Lower Rate of Profit * In the long run equilibrium, Capital moves from an industry with lower profits to an industry with higher profits, giving us an "Average Rate of Profit" and a set of prices that supports this average profit called the "Average Prices of Production". * As Capital moves in one direction, Surplus Value can be seen as moving in the other direction: from an industry with higher profits to an industry with lower profits. (Personal note: A Capitalist doesn't care whether higher profits come from investment in MP or LP. They care about their total cost compared to their total revenue. It is true that in the long run capital moves from an industry with low profits to an industry with high profits, but this is not the same as movement from a Low OCC to a High OCC). 26:20 An example to understand the above process better (Vol 3, Ch 9) In Step 2 of the argument (next video) we see how part of the profit realized by the Industrial Capitalist is transferred to the Merchant Capitalist.