NationMaster - Encyclopedia: Organic composition of capital

The organic composition of capital (OCC) is a concept created by Karl Marx in his critique of political economy and used in Marxian economics as a theoretical alternative to neo-classical concepts of factors of production, production functions, capital productivity and capital-output ratios. Marxism takes its name from the praxis (the synthesis of philosophy and political action) of Karl Marx and Friedrich Engels. ... Image File history File links Karl_Marx. ... This article or section does not cite any references or sources. ... Das Kapital (Capital, in the English translation) is an extensive treatise on political economy written by Karl Marx in German. ... Marxs theory of alienation (Entfremdung in German), as expressed in the writings of young Karl Marx, refers to the separation of things that naturally belong together, or to antagonism between things that are properly in harmony. ... This article or section does not cite any references or sources. ... Class consciousness is a category of Marxist theory, referring to the self-awareness of a social class, its capacity to act in its own rational interests, or measuring the extent to which an individual is conscious of the historical tasks their class (or class allegiance) sets for them. ... In Marxist theory, commodity fetishism is an inauthentic state of social relations, said to arise in complex capitalist market systems, where social relationships are confused with their medium, the commodity. ... Communism is an ideology that seeks to establish a classless, stateless social organization based on common ownership of the means of production. ... Cultural hegemony is a concept coined by Marxist philosopher Antonio Gramsci. ... The rate of exploitation is a concept in Marxian political economy. ... Marxs theory of human nature occupies an important place in his critique of capitalism, his conception of communism, and his materialist conception of history. Marx has sometimes been held to deny the existence of any human nature, though this view is now generally accepted to be mistaken. ... Political Ideologies Part of the Politics series Politics Portal This box: An ideology is an organized collection of ideas. ... The proletariat (from Latin proles, offspring) is a term used to identify a lower social class; a member of such a class is proletarian. ... Reification (German: Verdinglichung, literally: ver-, over + ding: thing + -lichung: as english, -ify) is the consideration of an abstraction or an object as if it had human or living existence and abilities; at the same time it implies the thingification of social relations. ... Relations of production (German: Produktionsverhaltnisse) is a concept frequently used by Karl Marx in his theory of historical materialism and in Das Kapital. ... Socialism refers to a broad array of doctrines or political movements that envisage a socio-economic system in which property and the distribution of wealth are subject to control by the community. ... Note: Marxian is not restricted to Marxian economics, as it includes those inspired by Marxs works who do not identify with Marxism as a political ideology. ... Labor power (in German: Arbeitskraft, or labor force) is a crucial concept used by Karl Marx in his critique of political economy. ... The law of value is a concept in Karl Marxs critique of political economy. ... Means of production (abbreviated MoP; German: Produktionsmittel), also called means of labour are the materials, tools and other instruments used by workers to make products. ... In the writings of Karl Marx and the Marxist theory of historical materialism, a mode of production (in German: Produktionsweise, meaning the way of producing) is a specific combination of: productive forces: these include human labor-power, tools, equipment, buildings and technologies, materials, and improved land social and technical relations... For the specific theoretical justifications behind the Great Leap Forward and the Five Year Plans, see Theory of Productive Forces. ... Surplus labour is a concept used by Karl Marx in his critique of political economy. ... Surplus value, according to Marxism, is unpaid labour that is extracted from the worker by the capitalist, and serves as the basis for capitalist accumulation. ... In Karl Marxs economics the transformation problem is the problem of finding a general rule to transform the values of commodities (based on labour according to his labour theory of value) into the competitive prices of the marketplace. ... Wage labour is the socioeconomic relationship between a worker and an employer in which the worker sells their labour under a contract (employment), and the employer buys it, often in a labour market. ... Even though anarchist communism and Marxism are two very different political philosophies, there is some similarity between the methodology and ideology of some anarchists and some Marxists, and the history of the two have often been intertwined. ... The capitalist mode of production is a concept in Karl Marxâ€™s critique of political economy. ... Class struggle is class conflict looked at from a Marxist, libertarian socialist, or anarchist perspective. ... The dictatorship of the proletariat is a term employed by Karl Marx in his 1875 Critique of the Gotha Program that refers to a transition period between capitalist and communist society in which the state can be nothing but the revolutionary dictatorship of the proletariat. The term refers to a... Primitive accumulation of capital is a concept introduced by Karl Marx in part 8 of the first volume of Das Kapital (in German: ursprungliche Akkumulation, literally original accumulation or primeval accumulation). Its purpose is to help explain how the capitalist mode of production can come into being. ... A communist revolution is a social revolution inspired by the ideas of Marxism that aims to replace capitalism with communism, normally with socialism (public ownership over the means of production) as an intermediate stage. ... International Socialism redirects here. ... World revolution is a Marxist concept of a violent overthrow of capitalism that would take place in all countries, although not necessarily simultaneously. ... See also Marxian economics Marxist philosophy or Marxist theory designs work in philosophy which is strongly influenced by Karl Marxs materialist approach to theory or which is written by Marxists. ... Historical materialism is the methodological approach to the study of society, economics, and history which was first articulated by Karl Marx (1818-1883), although Marx himself never used the term (he referred it as philosophical materialism, a term he used to distinguish it from what he called popular materialism). Historical... According to many followers of the theories of Karl Marx (or Marxists), dialectical materialism is the philosophical basis of Marxism. ... Analytical Marxism refers to a style of thinking about Marxism that was prominent amongst English-speaking philosophers and social scientists during the 1980s. ... For other meanings of autonomism, see autonomism (disambiguation) page Raised fist, stenciled protest symbol of Autonome at the Ernst-Kirchweger-Haus in Vienna, Austria Autonomism refers to a set of left-wing political and social movements and theories close to the socialist movement. ... Marxist feminism is a sub-type of feminist theory which focuses on the dismantling of capitalism as a way to liberate women. ... The term Marxist humanism has as its foundation Marxs conception of the alienation of the labourer as he advances it in his Economic and Philosophic Manuscripts of 1844--an alienation that is born of a capitalist system in which the worker no longer functions as (what Marx terms) a... Structural Marxism was an approach to Marxist philosophy based on structuralism, primarily associated with the work of the French philosopher Louis Althusser and his students. ... Western Marxism is a term used to describe a wide variety of Marxist theoreticians based in Western and Central Europe (and more recently North America), in contrast with philosophy in the Soviet Union. ... Libertarian Marxism is a school of Marxism that takes a less authoritarian view of Marxist theory than conventional currents such as Stalinism, Trotskyism, and other forms of Marxism-Leninism, as well as a generally less reformist view than do Social Democrats. ... â€˜Young Marxâ€™ is one half of the concept in Marxology that Karl Marxâ€™s intellectual development can be broken into two board categories, the other being â€˜Mature Marxâ€™. There is disagreement though as to when Marx thought began to mature, Lenin claimed Marxs first mature work as â€œThe Poverty... Karl Heinrich Marx (May 5, 1818, Trier, Germany â€“ March 14, 1883, London) was a German philosopher, political economist, and revolutionary. ... Friedrich Engels (November 28, 1820, Wuppertal â€“ August 5, 1895, London), a 19th-century German political philosopher, developed communist theory alongside his better-known collaborator, Karl Marx, co-authoring The Communist Manifesto (1848). ... Karl Kautsky (October 18, 1854 - October 17, 1938) was a leading theoretician of social democracy. ... G. V. Plekhanov Georgi Valentinovich Plekhanov (Ð“ÐµÐ¾Ñ€Ð³Ð¸Ð¹ Ð’Ð°Ð»ÐµÐ½Ñ‚Ð¸Ð½Ð¾Ð²Ð¸Ñ‡ ÐŸÐ»ÐµÑ…Ð°Ð½Ð¾Ð²) (December 11, 1856 â€“ May 30, 1918; Old Style: November 29, 1856 â€“ May 17, 1918) was a Russian revolutionary and a Marxist theoretician. ... â€œLeninâ€ redirects here. ... (Russian: Ð›ÐµÐ² Ð”Ð°Ð²Ð¸Ð´Ð¾Ð²Ð¸Ñ‡ Ð¢Ñ€Ð¾Ñ†ÐºÐ¸Ð¹, Lyov Davidovich Trotsky, also transliterated Leo, Lev, Trotskii, Trotski, Trotskij, Trockij and Trotzky) (November 7 [O.S. October 26] 1879 â€“ August 21, 1940), born. ... Rosa Luxemburg Rosa Luxemburg (March 5, 1870 or 1871 â€“ January 15, 1919, in Polish RÃ³Å¼a Luksemburg) was a Jewish Polish-born Marxist political theorist, socialist philosopher, and revolutionary. ... â€œMaoâ€ redirects here. ... Georg LukÃ¡cs (April 13, 1885 â€“ June 4, 1971) was a Hungarian Marxist philosopher and literary critic in the tradition of Western Marxism. ... Antonio Gramsci (IPA: ) (January 22, 1891 â€“ April 27, 1937) was an Italian writer, politician and political theorist. ... Karl Korsch (August 15, 1886 - October 21, 1961) was a German Marxist theorist. ... Max Horkheimer (front left), Theodor Adorno (front right), and JÃ¼rgen Habermas in the background, right, in 1965 at Heidelberg The Frankfurt School is a school of neo-Marxist social theory (which is more akin to anarchism than communism), social research, and philosophy. ... Louis Pierre Althusser (Pronunciation: altuË¡seÊ) (October 16, 1918 â€“ October 23, 1990) was a Marxist philosopher. ... Ernesto Guevara de la Serna (June 14,[1] 1928 â€“ October 9, 1967), commonly known as Che Guevara or El Che, was an Argentine-born Marxist revolutionary, medical doctor, political figure, and leader of Cuban and internationalist guerrillas. ... This article is on criticisms of Marxism, a branch of socialism. ... Karl Heinrich Marx (May 5, 1818, Trier, Germany â€“ March 14, 1883, London) was a German philosopher, political economist, and revolutionary. ... Political economy was the original term for the study of production, the acts of buying and selling, and their relationships to laws, customs and government. ... Note: Marxian is not restricted to Marxian economics, as it includes those inspired by Marxs works who do not identify with Marxism as a political ideology. ... In economics, factors of production are resources used in the production of goods and services. ... In microeconomics, a production function expresses the relationship between an organizations inputs and its outputs. ...

The concept does not apply to all capital assets, only to capital invested in production (i.e. production capital). It is normally defined as the ratio of constant capital to variable capital. Constant capital (c), is a concept created by Karl Marx and used in Marxian political economy. ... Constant capital, or c, in Marxian political economy is one of the two forms that capital adopts in the workplace, in contrast to variable capital (v). ...

According to Marx, the OCC expresses the specific form which the capitalist mode of production gives to the relationship between means of production and labor power, determining the productivity of labor and the creation of a surplus product. This relationship has both technical and social aspects, reflecting the fact that simultaneously consumable use values and commercial exchange-values are being produced. It has been suggested that this article be split into multiple articles accessible from a disambiguation page. ... The capitalist mode of production is a concept in Karl Marxâ€™s critique of political economy. ... Means of production (abbreviated MoP; German: Produktionsmittel), also called means of labour are the materials, tools and other instruments used by workers to make products. ... Labor power (in German: Arbeitskraft, or labor force) is a crucial concept used by Karl Marx in his critique of political economy. ... Surplus product (German: Mehrprodukt) is a concept explicitly theorised by Karl Marx in his critique of political economy. ... In Marxian political economy, any commodity, i. ... In political economy and especially Marxian economics, exchange value refers to one of four major attributes of a commodity, i. ...

Marx calls this capital composition "organic", because it refers to the relationship between "living" and "dead" (or inert) elements in a capital investment. The "living element" is employed labour actively at work. The "dead" parts are the tools, materials and equipment worked with, which are the results of past labour (this analogy becomes a bit dubious e.g. in the case of agriculture and biotechnologies, or if slaves in a capitalist economy are regarded as analogous to machines).

Marx argues that a rising organic composition of capital is a necessary effect of capital accumulation and competition in the sphere of production, at least in the long term. This means that the share of constant capital in the total capital outlay increases, and that labor input per product unit declines. Ultimately, a rising OCC must depress the rate of profit. Most generally, the accumulation of capital refers simply to the gathering or amassment of objects of value; the increase in wealth; or the creation of wealth. ... Competition is the act of striving against another force for the purpose of achieving dominance or attaining a reward or goal, or out of a biological imperative such as survival. ... Constant capital (c), is a concept created by Karl Marx and used in Marxian political economy. ... The tendency of the rate of profit to fall, commonly abbreviated to TRPF, is a hypothesis in economics and political economy, generally accepted in the 19th century, but mostly rejected by mainstream economists today. ...

1 Definition
2 Ratios
3 Measures
4 Examples
5 The OCC and crises
6 Marx and Ricardo
7 Historical trends
8 Autonomism
9 See also
10 References

Definition

The concept is introduced in chapter 25 of Das Kapital, where Marx writes: Das Kapital (Capital, in the English translation) is an extensive treatise on political economy written by Karl Marx in German. ...

"In this chapter we consider the influence of the growth of capital on the lot of the labouring class. The most important factor in this inquiry is the composition of capital and the changes it undergoes in the course of the process of accumulation. The composition of capital is to be understood in a two-fold sense. On the side of value, it is determined by the proportion in which it is divided into constant capital or value of the means of production, and variable capital or value of labour-power, the sum total of wages. On the side of material, as it functions in the process of production, all capital is divided into means of production and living labour-power. This latter composition is determined by the relation between the mass of the means of production employed, on the one hand, and the mass of labour necessary for their employment on the other. I call the former the value-composition, the latter the technical composition of capital. Between the two there is a strict correlation. To express this, I call the value-composition of capital, in so far as it is determined by its technical composition and mirrors the changes of the latter, the organic composition of capital." Capital accumulation ... Constant capital (c), is a concept created by Karl Marx and used in Marxian political economy. ... Constant capital, or c, in Marxian political economy is one of the two forms that capital adopts in the workplace, in contrast to variable capital (v). ...

In his discussion, Marx leaves out of account components of capital other than labour-power and means of production invested in, such as the faux frais of production (incidental expenses). Faux frais of production is a concept used by classical political economists and by Karl Marx in his critique of political economy. ...

The full importance of the OCC emerges in chapter 8 of the third volume of Das Kapital [1] Das Kapital (Capital, in the English translation) is an extensive treatise on political economy written by Karl Marx in German. ...

Ratios

The value composition of capital (VCC) is usually expressed as a ratio of constant capital to variable capital, or ${c over v}$ . Other measures are also used in the Marxian literature. One is ${c over {s+v}}$ . This is the ratio of constant capital to newly-produced value (roughly, what modern economists call "value added"), i.e., surplus-value + variable capital and close to the concept of a capital/output ratio. Less common is the measure used by Paul M. Sweezy, i.e., ${c over {c+v}}$ , the ratio of constant capital to the total capital invested. Constant capital (c), is a concept created by Karl Marx and used in Marxian political economy. ... Constant capital, or c, in Marxian political economy is one of the two forms that capital adopts in the workplace, in contrast to variable capital (v). ... The production of surplus value, from Karl Marxs Capital in Lithographs, by Hugo Gellert, 1934 Surplus value is a concept created by Karl Marx in his critique of political economy, where its ultimate source is claimed to be unpaid surplus labour performed by the worker for the capitalist, serving... Constant capital, or c, in Marxian political economy is one of the two forms that capital adopts in the workplace, in contrast to variable capital (v). ... Paul Marlor Sweezy (April 10, 1910 â€“ February 27, 2004) was a Marxian economist and a founding editor of the magazine Monthly Review. ...

The total capital tied up by a capitalist enterprise of course includes more than fixed assets, materials and wages/salaries; it also includes liquid funds, reserves and other financial assets. For instance, an employer must normally reserve funds to pay for ongoing operating expenses, until these are recouped from product sales.

Measures

An empirical proxy measure for the technical composition of capital (TCC) is the average amount of fixed equipment and materials used per worker (Capital intensity), or the ratio of the average amount of equipment & materials used to the total hours worked. The value composition of capital (VCC) is usually measured by summing the value of fixed capital ("Cf") and intermediate expenditures (circulating capital or "Cc") and dividing the total by the value of labour costs (V). The estimation procedure is not simple, for example because compensation of employees includes more than wages and part of the tax levy constitutes an element of surplus value. Capital intensity is the term in economics for the amount of fixed or real capital present in relation to other factors of production, especially labor. ... Compensation of employees (CE) is a statistical term used in national accounts, Balance of Payments statistics and sometimes in corporate accounts as well. ... Surplus value, according to Marxism, is unpaid labour that is extracted from the worker by the capitalist, and serves as the basis for capitalist accumulation. ...

In modern national accounts, an empirical proxy of the flow of variable capital is the wage-payments associated with productive activity in an accounting period, and a proxy for constant capital (flow measure) is depreciation charges + intermediate consumption; a stock measure of constant capital would be the fixed capital stock plus the average value of inventories held during the period of account (usually a year). However, because the "circulating" component of constant capital (denoted "Cc") includes purchases of external services and other operating costs, the stock of Cc is sometimes measured as the flow of intermediate consumption divided by the average inventory level. Measures of national income and output are used in economics to estimate the value of goods and services produced in an economy. ... A stock in business and social accounting refers to the value of an asset at a balance date (or point in time), while a flow refers to the total value of transactions (sales or purchases) during an accounting period. ... A stock in business and social accounting refers to the value of an asset at a balance date (or point in time), while a flow refers to the total value of transactions (sales or purchases) during an accounting period. ... This article needs to be cleaned up to conform to a higher standard of quality. ... Intermediate consumption is an economic concept used in national accounts, such as the United Nations System of National Accounts (UNSNA) and the US National Income and Product Accounts (NIPA). ... Fixed capital is a concept in economics and accounting, first theoretically analysed in some depth by the economist David Ricardo. ... Intermediate consumption is an economic concept used in national accounts, such as the United Nations System of National Accounts (UNSNA) and the US National Income and Product Accounts (NIPA). ...

The variable capital actually tied up by an enterprise at any point in time will usually be less than the annual flow value, because wages can in part be paid out of revenues received from ongoing product sales. Thus, the capital reserves held by an enterprise for paying wages may, at any time, be only 1/10th or so of their annual flow value.

The most accurate quantitative estimates for the OCC refer to the outlays in specific sectors, e.g. manufacturing.

Examples

By any of these measures, the plant- and machinery-intensive oil industry would have a high organic composition of capital, while labor-intensive businesses such as catering would tend to have a low OCC. The OCC varies according to differences in production technology, between sectors of an economy, or according to changes in production technology over time. Pumpjack pumping an oil well near Sarnia, Ontario Petroleum (from Greek petra â€“ rock and elaion â€“ oil or Latin oleum â€“ oil ) or crude oil is a thick, dark brown or greenish liquid. ... A professionally catered event Catering is the business of providing food service at a remote site. ... By the mid 20th century humans had achieved a mastery of technology sufficient to leave the surface of the Earth for the first time and explore space. ...

The OCC and crises

The magnitude of the OCC is important in Marxist crisis theory because of its impact on the average rate of profit. The implication of a rise in the organic composition of capital is a declining rate of profit; for every new increase in surplus-value realised as profit from sales, an even larger corresponding increase in constant capital investment becomes necessary. Marxism is the political practice and social theory based on the works of Karl Marx, a 19th century philosopher, economist, journalist, and revolutionary, along with Friedrich Engels. ... Crisis theory is a debate within the Marxian theory of political economy. ... In economics, the profit rate refers to the relative profitability of an investment project or of a capitalist enterprise or for the capitalist economy as a whole. ... The production of surplus value, from Karl Marxs Capital in Lithographs, by Hugo Gellert, 1934 Surplus value is a concept created by Karl Marx in his critique of political economy, where its ultimate source is claimed to be unpaid surplus labour performed by the worker for the capitalist, serving...

But this represents only a tendency, Marx argues, because the fall of the rate of profit can be offset by counteracting influences. The main ones include: The tendency of the rate of profit to fall, commonly abbreviated to TRPF, is a hypothesis in economics and political economy, generally accepted in the 19th century, but mostly rejected by mainstream economists today. ...

buying constant capital inputs at a lower cost.
an increase in the rate of exploitation and productivity of labour power (including the intensity of work).
a reduction of the turnover-time of constant capital inputs.
the reduction of salaries and labour costs paid.
a pool of abundant cheap labor, at home or abroad.
foreign trade which reduces constant capital-input costs.
technological innovations which reduce constant capital-input costs.
the specific distribution of surplus-value as profit, interest, rent, taxes and fees, and the division between distributed and undistributed components of the new value added.
market expansion (more sales, in less time).
monopolistic or oligopolistic pricing of outputs, or in some way artificially raising output prices.
reduction of the tax burden
criminal methods to reduce costs and increase sales and profits

Because numerous different factors can affect profitability, the overall effects of a rising OCC on profitability therefore really have to be evaluated empirically in a longer time-span, e.g. 20-25 years. The rate of exploitation is a concept in Marxian political economy. ... Labor power (in German: Arbeitskraft, or labor force) is a crucial concept used by Karl Marx in his critique of political economy. ... The production of surplus value, from Karl Marxs Capital in Lithographs, by Hugo Gellert, 1934 Surplus value is a concept created by Karl Marx in his critique of political economy, where its ultimate source is claimed to be unpaid surplus labour performed by the worker for the capitalist, serving...

Insofar as the trajectory of capitalist development is, as Marx argues, ruled by the quest for extra surplus-value, the economic fate of the system can be summarised as an interaction between the tendency of the profit rate to decline, and the factors that counteract it: in other words, the permanent battle to reduce costs, increase sales and increase profits. The production of surplus value, from Karl Marxs Capital in Lithographs, by Hugo Gellert, 1934 Surplus value is a concept created by Karl Marx in his critique of political economy, where its ultimate source is claimed to be unpaid surplus labour performed by the worker for the capitalist, serving...

The hypothetical final result of the rising OCC would be full automation of the production process, in which case labour-costs would be near-zero. This is argued to herald the end of capitalism's functioning as both a profit generating economic system for capitalists, and as a social system, among other things because the capitalist system does not contain a means for distributing incomes other than that based on labour-effort. However, it is also possible that automation of material production displaces labour into the services sector. Provided sufficient income exists to purchase services, a service economy can grow. This article or section does not cite any references or sources. ...

Marx and Ricardo

The different organic compositions of capital of different branches of industry raised a problem for the classical economic schema of David Ricardo and others, who could not reconcile their labor-cost theory of price with the existence of differences in the OCC between sectors. The latter imply different profit rates in different industries. Also, while market competition would establish a ruling price level for a type of output, different enterprises would use more or less labour to produce it. For these reasons, values produced and prices realised by different producers would quantitatively diverge. David Ricardo (April 18, 1772 â€“ September 11, 1823), a political economist, is often credited with systematising economics, and was one of the most influential of the classical economists, along with Thomas Malthus, and Adam Smith. ... The labor theory of value (LTV) is a theory in classical economics concerning the value of an exchangeable good or service. ...

Marx either solved this problem with his theory of prices of production and the tendency for profitability differentials to be levelled out through competition, or he failed to solve it, according to which side of the debate over the transformation problem one finds convincing. Prices of production refers to a concept in Karl Marxs critique of political economy. ... The labor theory of value (LTV) is a theory in classical economics concerning the value of an exchangeable good or service. ...

Others see this "problem" (the development of a mathematical relationship between prices and labor-values) as a false one, rejecting the idea that Marx aimed to use his labor theory value to understand relative prices. Here the argument is that he aimed to reveal only the social nature or "deep structure" of capitalist society. The labor theory of value (LTV) is a theory in classical economics concerning the value of an exchangeable good or service. ...

In a third interpretation, Marx aspired both to relate values and prices, and offer a social critique, because both of these were necessary to make his case truly convincing. Here, the separate concepts of product-values and product-prices are regarded as essential for a theory of market dynamics and capitalist competition; it is argued that price behaviour in aggregate cannot be understood or theorised about at all without reference to value-relations, explicitly or implicitly.

Historical trends

There has been a lengthy theoretical and statistical dispute among economists about whether the organic composition of capital really does tend to, or has to rise historically, as Marx predicted, or, to put it differently, whether in aggregate technological progress has a "labor-saving bias", and causes the average profit rate to decline. Origins of theory According to Czech philosopher Radovan Richta, in his 1967 publication “Man and Technology in the Revolution of Our Day”, technology (which he defines as “a material entity created by the application of mental and physical effort to nature in order to achieve some value... The tendency of the rate of profit to fall, commonly abbreviated to TRPF, is a hypothesis in economics and political economy, generally accepted in the 19th century, but mostly rejected by mainstream economists today. ...

One sort of question asked is, why capitalists would introduce new technology, if doing so would result specifically in a lower profit rate on capital invested? Marx's reply is essentially that:

when a successful new technology or product is first introduced on the market, the pioneering producers typically obtain an additional profit (or superprofit), but when the use of the innovation spreads and is more generally applied, profitability declines for all producers.

competition between capitalists forces the introduction of new technologies, whether they like it or not, since the productivity gains of competitors threaten to put them out of business, or reduce their market-shares.

while average profit rates on capital invested may decline as a result, profit margins (or profit volumes) will increase, because more output can be produced and sold in a given accounting period, using the new technologies (implying unit-costs for products made will decline).

The statistical and historical evidence about the Kondratiev waves of capitalist development from the 1830s onwards is certainly favourable to Marx's theory of the rising organic composition of capital. It is difficult to find industries where the secular historical trend is one of an increase in the share of wages in the total capital outlay. Generally, the opposite is the case. Superprofit (or surplus profit or extra surplus-value; in German: extra-Mehrwert), is a concept in Karl Marxs critique of political economy, subsequently elaborated by Lenin and other Marxist thinkers. ... In economics, Kondratiev waves, also called cycles or surges, occasionally also referred to as the K-waves, are the term for a regular S-shaped cycle in the modern world economy. ...

However, it has been argued that the value of physical capital is notoriously difficult to measure empirically in an accurate way; and statistical time-series for economic variables over long periods are also susceptible to errors and distortions. The owners of a business may not even know exactly what the physical assets they use are currently worth, or what their business is currently worth, as a going concern. That worth is hypothetical until such time as the business is sold and paid for. However, the modern trend in official accounting standards is certainly for assets to be valued more and more at their current market value, or current replacement cost, rather than at historic (original acquisition) cost. In statistics, signal processing, and econometrics, a time series is a sequence of data points, measured typically at successive times, spaced at (often uniform) time intervals. ...

In addition, during economic slumps, physical capital assets are subject to devaluation, lie idle or are destroyed, while workers become unemployed; the empirical effect is to reduce the organic composition of capital. Likewise, non-profitable war production can also lower the average OCC. Devaluation is a reduction in the value of a currency with respect to other monetary units. ...

Finally, a technological revolution can also radically change the proportions between constant and variable capital, reducing the cost of constant capital, and lowering the OCC. In that case, operating costs are reduced in a short span of time, or cheaper alternatives substitute for the inputs traditionally used.

Much less discussed in the economic literature is the effect on the organic composition of capital of the growth of the services sector in the developed countries. For example, does the widespread use of computers in labour-intensive services lower the OCC? The tertiary sector of industry (also known as the service sector or the service industry) is one of the three main industrial categories of a developed economy, the others being the secondary industry (manufacturing), and primary industry (extraction such as mining, agriculture and fishing). ...

Autonomism

This issue has only tended to be raised by Marxists working in tertiary sectors like administration (for example, the journal Processed World), or by Autonomist Marxists in their concept of the social factory. Autonomism, or Autonomist Marxism is a left-wing political movement and theory. ...

References

Karl Marx, "The General Law of Capitalist Accumulation". [2]

Anwar Shaikh, "Organic Composition of Capital" [3]
Anwar Shaikh and Ahmet Tonak, Measuring the Wealth of Nations. CUP
Angelo Reati, "The Rate of Profit and the Organic Composition of Capital in the Post-1945 Long Wave: The Case of British Industry from 1959 to 1981". Review [of the Fernand Braudel Centre], Volume IX, Number 4, Spring 1986.
Ramin Ramtin: Capitalism and Automation - Revolution in Technology and Capitalist Breakdown. Pluto Press, London, Concord Mass. 1991.
Angelo Reati, The Rate of Profit and the Organic Composition of Capital in West German Industry from 1960 to 1981, Reati, Angelo, Review of Radical Political Economics; 18(1/2), Spring/Summer 1986, pages 56-86.
Christian Girschner, Die Dienstleistungsgesellschaft. Zur Kritik einer fixen Idee. Kőln: PapyRossa Verlag, 2003.

Category: Marxist theory

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	The organic composition of capital (OCC) is a concept created by Karl Marx in his critique of political economy and used in Marxian economics as a theoretical alternative to neo-classical concepts of factors of production, production functions, capital productivity and capital-output ratios.
	The different organic compositions of capital of different branches of industry raised a problem for the classical economic schema of David Ricardo and others, who could not reconcile their labor-cost theory of price with the existence of differences in the OCC between sectors.
	In addition, during economic slumps, physical capital assets are subject to devaluation, lie idle or are destroyed, while workers become unemployed; the empirical effect is to reduce the organic composition of capital.

Organic composition of capital - Wikipedia, the free encyclopedia (2149 words)
	The composition of capital is to be understood in a two-fold sense.
	An empirical proxy measure for the technical composition of capital (TCC) is the average amount of fixed equipment and materials used per worker (Capital intensity), or the ratio of the average amount of equipment and materials used to the total hours worked.
	The different organic compositions of capital of different branches of industry raised a problem for the classical economic schema of David Ricardo and others, who could not reconcile their labor-cost theory of price with the existence of differences in the OCC between sectors.

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