Lecture 5 The accumulation of capital 1 The

Lecture 5. The accumulation of capital 1. The substance and types of reproduction. 2. The substance and factors which determine the magnitude of accumulation. 3. Technical, value and organic composition of capital and tendencies of their dynamics. 4. Forms of accumulation. Centralization and concentration of capital. 5. The accumulation of capital and the employment. Unemployment and its forms.

Necessity of reproduction process • The main condition of society development is satisfaction of need with the help of material commodities which have to be produced. • As well as society can’t finish to satisfy its needs, its impossible to stop material commodities production. • So, for stable society existence and development production process has to be continuous.

Essence of reproduction process • Reproduction – it is continuous production process. • In the process of reproduction such elements are reproduced: means of production, means of consumptions, labor power and system of production relations.

Types of reproduction • Simple reproduction – is resumption of production process at the same scale. • Extended reproduction - is resumption of production process at the large scale. • Constricted reproduction – is resumption of production process at the constricted scale.

Types of reproduction • Extended reproduction is typical for developed capitalism. • Simple reproduction – for pre-capitalistic modes of production. • Constricted reproduction – is typical for periods of economic crisis, depression and other shocks, caused economic or noneconomic factors.

Accumulation of capital • To understand the essence of accumulation lets consider schemes of simple and extended reproduction

Scheme of simple reproduction • In 1 st year capitalist advanced 200 с and 100 v, m‘=100%. • 1 year: 200 с + 100 v + 100 m = 400 w • Under conditions of simple reproduction capitalist consumes m totally and in other years continues production at the same scale: • 2 year: 200 с + 100 v + 100 m = 400 w • 3 year: 200 с + 100 v + 100 m = 400 w

Scheme of extended reproduction • In 1 st year capitalist advanced 200 с and 100 v, m‘=100%. • 1 year: 200 с + 100 v + 100 m = 400 w • Under conditions of extended reproduction capitalist part of (40)m consumes and other part (60)m – return back to production process, distributing between с and v: • 2 year: 240 с + 120 v + 120 m = 480 w

Accumulation of the capital • In simple reproduction the whole m is directed to private needs of capitalist satisfaction – or to consumption fund (Fс). • In extended reproduction m is divided into two parts. One part is directed into Fc, the other part – to accumulation fund (Fa), i. e. attached to functioning capital.

Accumulation. Rate of accumulation • So, accumulation of the capital – is the process of m capitalization or adding of m to the functioning capital. • Rate of accumulation (n‘) – is ratio between Fa and magnitude of m. n‘ = (Fa/m)100%

Factors which determine the magnitude of accumulation • 1. Magnitude of advanced capital: in the case of advanced capital, ceteris paribus, increase there is growth of m also, so magnitude of accumulation increases too. • .

Factors which determine the magnitude of accumulation • 2. Rate of surplus value: in the case of m‘ increase, ceteris paribus, magnitude of accumulation increases too. And on the contrary.

Factors which determine the magnitude of accumulation • 3. Rate of accumulation. The highest rate of accumulation, ceteris paribus, will stimulate the largest part of m to capitalization. And vice versa.

Factors which determine the magnitude of accumulation • 4. Social labor productivity – increase of SLP decreases means of consumption and value of labor power as well. As a result there is increase of m and magnitude of accumulation.

Composition of capital • In the process of capital accumulation not only changes of its magnitude appears but also changes of its structure. So, there are: • 1) technical; • 2) value; • 3) organic composition of capital.

Technical composition of capital • – it is ratio between quantity of means of production and labor power. • ТC = quantity of MP/quantity of LP • ТC = 10/5 • In the process of capitalism and scientific progress development part of the capital represented by MP increases. So, technical composition of the capital increases too.

Value composition of capital • – it is ratio between value of means of production and labor power. • VC = с/v • VC = 1000$/500$ • There is a close connection between TC and VC. As a rule, changes in TC change VC as well. But there are situations when VC changes without changes in TC. For example, with equipment prices increase VC increases too but TC is constant.

Organic composition of capital • To express dependence between TC and VC “organic composition of capital” is used. • OC – it is value composition of the capital, which reflects changes of its technical structure. • ОC = с/v • For example, if VC is 1000$/500$, so OC is 2/1 • With scientific progress development OC increases.

Concentration of capital • There are 2 main forms of accumulation: concentration and centralization of capital. • Concentration - is a process of individual capital increase by capitalizing of surplus value. • Concentration is limited by magnitude of individual capital from one side and velocity of production process from another side.

Centralization of capital • Centralization - is a process of capital increase by uniting of several individual capitals. • Centralization of capital gives possibility to increase velocity of capital accumulation because of mass of surplus value increase.

Increase of OC and unemployment • With scientific progress development organic composition of capital has a tendency to increase. • It means that number and value of constant capital elements increases but number and value of labor power decreases. • So a big number of workers looses their working places and industrial reserve army is formed. This process can be also named as relative surplus population or unemployment. • Unemployment – situation in economics when supply of LP is higher than demand on it.

Forms of unemployment (by Marx): • 1. Floating • 2. latent • 3. Stagnant

Floating unemployment • - appears when part of workers lose or receive working places according to stages of economic cycle (crisis, depression, increase). • For example, on the stage of the crisis and depression the level of unemployment is extremely high, because a big number of factories and plants are closed. Workers of these enterprises’ have to find a new place of work. • In “Economics” such unemployment is called cyclic.

Latent unemployment • - appears mostly in the sphere of agriculture when simple commodity producers have to migrate to big cities searching for a job. • Such unemployment was typical for industrial stage of capitalistic production. • In “Economics” such unemployment is called “seasonal”.

Stagnant unemployment • - appears when part of workers loses working places and can`t find a job during a long period of time and sometimes even stop to search a job. • In this case such workers lose their skills, qualification and even social status, .