Fixed Capital

The models of accumulation need to take account of the fact that fixed capital carries over from one time period to another.

Not all instruments of labour are fixed capital, e.g. items used in final, rather than production, consumption, such as knives & forks, & houses, are part of the ‘consumption fund’.

Plant & equipment, & physical infrastructures of production are constant capital & fixed capital.
Raw & auxiliary materials are constant capital, but also circulating capital.
Labour power is variable capital & circulating capital.

The Circulation of Fixed Capital

Fixed capital continues to circulate as value while remaining materially locked within the confines of the production process as a use-value.

The value of the machine adjusts in the course of its lifetime; it is an unstable magnitude.

The ‘value’ of fixed capital can be determined in three ways:

  1. By the initial purchase price
  2. By the surplus value it helps produce
  3. By the replacement cost

A capitalist discards a machine not because it is worn out physically, but because a higher profit can be had by replacing it.

The Relations Between Fixed & Circulating Capital

Because fixed capital loses its value when not in use, a continuous flow of circulating capital – both labour power & raw materials – is a necessary condition for the realisation of its value.

Capital can respond to overaccumulation by switching to fixed capital formation.
But sometime in the long run, problems of overaccumulation are bound to re-emerge, perhaps on a larger scale in the devaluation of capital itself.

Straight-line value transfer cannot hold as an adequate description of fixed capital circulation.
Perpetual revolutions in technology can mean the devaluation of fixed capital on an extensive scale.

Monopolisation, government sponsorship of R&D, & legal constraints play important roles in regulating the pace of technological change.

Some Special Forms of Fixed Capital Circulation

Fixed capital is more than machines.
It is also ships & docks, railways, dams & bridges, water supply & sewage systems, power stations, factory buildings & warehouses, & the like.

The longer fixed capital lasts, the more likely it is to devalued through technological change.

The credit system plays an important role in funding large fixed capital projects.

The Consumption Fund

Commodities that are not consumed directly, but serve as instruments of consumption, such as fridges, washing machines, TV’s, houses, parks, etc.

Many of these rely upon the credit system & so risk borrowers defaulting, e.g. house repossession.

Over-indebtedness in relation to the consumption fund can be just as serious as over-investment in fixed capital.
Claims on future revenues derived from future labour can far exceed the value-creating capacities of that future labour.

The Built Environment for Production, Exchange & Consumption

Includes factories, offices, shops, warehouses, dams, roads, railways, docks, power stations, schools, hospitals, parks, etc.

And the land itself must ultimately function as fixed capital.

Fixed Capital, the Consumption Fund & the Accumulation of Capital

Capitalists cannot for long look to capture the benefits of technological change without forming fixed capital.

A consumption fund is likewise necessary to the reproduction of labour power.

The formation of fixed capital & the consumption fund have dramatic effects upon the process of accumulation.

The overaccumulation of capital entails the production of surpluses of labour power, commodities & money capital.

Fixed capital is value imprisoned within a specific use value.
It must command future labour if its value is to be realised.


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