AT last I have the pleasure of making public this third volume of the main work of Marx, the closing part of his economic theories. When I published the second volume, in 1885, I thought that the third would probably offer only technical difficulties, with the exception of a few very important sections. This turned out to be so. But that these exceptional sections, which represent the most valuable parts of the entire work, would give me as much trouble as they did, I could not foresee at that time any more than I anticipated the other obstacles, which retarded the completion of the work to such an extent.
In the first place it was a weakness of my eyes which restricted my time of writing to a minimum for years, and which permits me even now only exceptionally to do any writing by artificial light. There were furthermore other labors which I could not refuse, such as new editions and translations of earlier works of Marx and myself, revisions, prefaces, supplements, which frequently required special study, etc. There was above all the English edition of the first volume of this work, for whose text I am ultimately responsible and which absorbed much of my time. Whoever has followed the colossal growth of international socialist literature during the last ten years, especially the great number of translations of earlier works of Marx and myself, will agree with me in congratulating myself that there is but a limited number of languages in which I am able to assist a translator and which compel me to accede to the request for a revision. This growth of literature, however, was but an evidence of a corresponding growth of the international working class movement itself. And this imposed new obligations on me. From the very first days of our public activity, a good deal of the work of negotiation between the national movements of socialists and working people in the various countries had fallen on the shoulders of Marx and myself. This work increased to the extent that the movement as a whole gained in strength. Up to the time of his death, Marx had borne the brunt of this burden. But after that the ever swelling amount of work had to be done by myself alone. Meanwhile the direct intercourse between the various national labor parties has become the rule, and fortunately it is becoming more and more so. Nevertheless my assistance is still in demand a good deal more than is agreeable to me in view of my theoretical studies. But if a man has been active in the movement for more than fifty years, as I have, he regards the work connected with it as a duty, which must not be shirked, but immediately fulfilled. In our stirring times, as in the 16th century, mere theorizers on public affairs are found only on the side of the reactionaries, and for this reason these gentlemen are not even theoretical scientists, but simply apologists of reaction.
The fact that I live in London implies that my intercourse with the party is limited in winter to correspondence, while in summer time it largely takes place by personal interviews. This fact, and the necessity of following the course of the movement in a steadily growing number of countries and a still more rapidly increasing number of party organs, compelled me to reserve matters which brooked no interruption for the winter months, preferably the first three months of the year. When a man is past seventy, his brain's fibers of association work with a certain disagreeable slowness. He does not overcome interruptions of difficult theoretical problems as easily and quickly as formerly. Thus it came about that the work of one winter, if it was not completed, had to be largely done over the following winter. And this took place particularly in the case of the most difficult section, the fifth.
The reader will observe by the following statements that the work of editing the third was essentially different from that of the second volume. Nothing was available for the third volume but a first draft, and it was very incomplete. The beginnings of the various sections were, as a rule, pretty carefully elaborated, or even polished as to style. But the farther one proceeded, the more sketchy and incomplete was the analysis, the more excursions it contained into side issues whose proper place in the argument was left for later decision, the longer and more complex became the sentences, in which the rising thoughts were deposited as they came. In several places, the handwriting and the treatment of the matter clearly revealed the approach and gradual progress of those attacks of ill health, due to overwork, which at first rendered original work more and more difficult for the author and finally compelled him from time to time to stop work altogether. And no wonder. Between 1863 and 1867, Marx had not only completed the first draft of the two last volumes of Capital and made the first volume ready for the printer, but had also mastered the enormous work connected with the foundation and expansion of the International Workingmen's Association. The result was the appearance of the first symptoms of that ill health which is to blame for the fact that Marx did not himself put the finishing touches to the second and third volumes.
I began my work on these volumes by first dictating the entire manuscript of the original, which was often hard to decipher even for me, into readable copy. This required considerable time to begin with. It was only then that the real work of editing could proceed. I have limited this to the necessary minimum. Wherever it was sufficiently clear, I preserved the character of the first draft as much as possible. I did not even eliminate repetitions of the same thoughts, when they viewed the subject from another standpoint, as was Marx's custom, or at least expressed the same thought in different words. In cases where my alterations or additions are not confined to editing, or where I used the material gathered by Marx for independent conclusions of my own, which, of course, are made as closely as possible in the spirit of Marx, I have enclosed the entire passage in brackets and affixed my initials. My footnotes may not be inclosed in brackets here and there, but wherever my initials are found, I am responsible for the entire note.
It is natural for a first draft, that there should be many passages in the manuscript which indicate points to be elaborated later on, without being followed out in all cases. I have left them, nevertheless, as they are, because they reveal the intentions of the author relative to future elaboration.
Now as to details.
For the first part, the main manuscript was serviceable only with considerable restrictions. The entire mathematical calculation of the relation between the rate of surplus-value and the rate of profit (making up the contents of our chapter III) is introduced in the very beginning, while the subject treated in our chapter I is considered later and incidentally. Two attempts of Marx at rewriting were useful in this case, each of them comprizing eight pages in folio. But even these were not consecutively worked out. They furnished the substance of what is now chapter I. Chapter II is taken from the main manuscript. There were quite a number of incomplete mathematical elaborations of chapter III, and in addition thereto an entire and almost complete manuscript, written in the seventies and dealing with the relation of the rate of surplus-value to the rate of profit, in the form of equations. My friend Samuel Moore, who had done the greater portion of the translation of the first volume, undertook to edit this manuscript for me, a work for which he was certainly better fitted than I, since he graduated from Cambridge in mathematics. By the help of his summary, and with an occasional use of the main manuscript, I completed chapter III. Nothing was available for chapter IV but the title. But as the point of issue, the effect of the turn-over on the rate of profit, is of vital importance, I have elaborated it myself. For this reason the whole chapter has been placed between brackets. It was found in the course of this work, that the formula of chapter III for the rate of profit required some modification, in order to be generally applicable. Beginning with chapter V, the main manuscript is the sole basis for the remainder of Part I, although many transpositions and supplements were needed for it.
For the following three parts I could follow the original manuscript throughout, aside from editing the style. A few passages, referring mostly to the influence of the turn-over, had to be brought into agreement with my elaboration of chapter IV; these passages are likewise placed in brackets and marked with my initials.
The main difficulty was presented by Part V, which treated of the most complicated subject in the entire volume. And it was just at this point that Marx had been overtaken by one of those above-mentioned serious attacks of illness. Here, then, we had no finished draft, nor even an outline which might have been perfected, but only a first attempt at an elaboration, which more than once ended in a disarranged mass of notes, comments and extracts. I tried at first to complete this part, as I had the first one, by filling out vacant spaces and fully elaborating passages that were only indicated, so that it would contain at least approximately everything which the author had intended. I tried this at least three times, but failed every time, and the time lost thereby explains most of the retardation. At last I recognized that I should not accomplish my object in this way. I should have had to go through the entire voluminous literature of this field, and the final result would have been something which would not have been Marx's book. I had no other choice than to cut the matter short, to confine myself to as orderly an arrangement as possible, and to add only the most indispensable supplements. And so I succeeded in completing the principal labors for this part in the spring of 1893.
As for the single chapters, chapters XXI to XXIV were, in the main, elaborated by Marx. Chapters XXV and XXVI required a sifting of the references and an interpolation of material found in other places. Chapters XXVII and XXIX could be taken almost completely from the original manuscript, but chapter XXVIII had to be arranged differently in several places. The real difficulty began with chapter XXX. From now on the task before me was not only the arrangement of the references, but also a connecting of the line of reasoning, which was interrupted every moment by intervening clauses, deviations from the main point, etc., and taken up incidentally in quite another place. Thus chapter XXX came into existence by means of transpositions and eliminations utilized in other places. Chapter XXXI, again, was worked out more connectedly. But then followed a long section in the manuscript, entitled "The Confusion," consisting of nothing but extracts from the reports of Parliament on the crises of 1848 and 1857, in which the statements of twenty-three business men, and writers on economics, especially relative to money and capital, gold exports, over-speculation, etc., are collected and accompanied here and there with short and playful comments. In this collection, all the current views of that time concerning the relation of money to capital are practically represented, either by answers or questions, and Marx intended to analyze critically and satirically the confusion revealed by the ideas as to what was money, and what capital, on the money-market. I convinced myself after many experiments that this chapter could not be composed. I have used its material, particularly that criticized by Marx, wherever I found a connection for it.
Next follows in tolerable order the material which I have placed in chapter XXXII. But this is immediately followed by a new batch of extracts from reports of Parliament on every conceivable subject germane to this part, intermingled with comments of the author. Toward the end these comments are mainly directed toward the movement of money metals and the quotations of bills of exchange, and they close with miscellaneous remarks. On the other hand, chapter XXXV, entitled "Precapitalist Conditions," was fully elaborated.
Of all this material, beginning with the "Confusion," and using as much of it as had not been previously placed otherwise, I made up chapters XXXIII to XXXV. Of course this could not be done without considerable interpolations on my part in order to complete the connections. Unless these interpolations are of a merely formal nature, they are expressly marked as belonging to me. In this way I have succeeded in placing all the relevant statements of the author in the text of this work. Nothing has been left out but a small portion of the extracts, which either repeated statements already made previously, or touched on points which the original manuscript did not treat in detail.
The part dealing with ground-rent was much more fully elaborated, although not properly arranged. This is apparent from the fact that Marx found it necessary to recapitulate the plan of the entire part in chapter XLIII, which was the last portion of the section on rent in the manuscript. This was so much more welcome to the editor, as the manuscript began with chapter XXXVII, which was followed by chapters XLV to XLVII, whereupon chapters XXXVIII to XLIV came next in order. The greatest amount of labor was involved in getting up the tables for the differential rent, II and in the discovery that the third case of this class of rent, which belonged in chapter XLIII, had not been analyzed there.
Marx had made entirely new and special studies for this part on ground rent, in the seventies. He had studied for years the originals of the statistical reports and other publications on real estate, which had become inevitable after the "reform" of 1861 in Russia. He had made extracts from these originals, which had been placed at his disposal to the fullest extent by his Russian friends, and he had intended to use these notes for a new elaboration of this part. Owing to the variety of forms represented by the real estate and the exploitation of the agricultural producers of Russia, this country was to play the same role in the part on ground rent that England did in volume I in the case of industrial wage-labor. Unfortunately he was prevented from carrying out this plan.
The seventh part, finally, was fully written out, but only as a first draft, whose endlessly involved periods had to be dissected, before they could be presented to the printer. Of the last chapter, only the beginning existed. In it the three great classes of developed capitalist society, land owners, capitalists and wage laborers, corresponding to the three great forms of revenue, and the class-struggle necessarily arising with their existence, were to be presented as the actual outcome of the capitalist period. It was a habit of Marx to reserve such concluding summaries for the final revision, so that the latest historical developments furnished him with never failing regularity with the proofs of the correctness of his theoretical analyses.
The quotations and extracts corroborating his statements are considerably less numerous than in the first volume, as they already were in the second. Wherever the manuscript referred to statements of earlier economists, only the name was given as a rule, and the quotations were to be added later. Of course, I had to leave this as it was. Of reports of parliament only four have been used, but these were abundantly exploited. They are the following:
1) Reports from Committees (of the Lower House), Volume VIII, Commercial Distress, Volume II, Part I, 1847-48. Minutes of Evidence. Quoted as "Commercial Distress, 1847-48."
2) Secret Committee of the House of Lords on Commercial Distress, 1847. Report printed 1848. Evidence printed 1857 (because it was considered too hazardous in 1848).—Quoted as "Commercial Distress, 1848-57."
3) 8 4) Report, Bank Acts, 1857.—The same, 1858.—Reports of the Committee of the Lower House on the Effect of the Bank Acts of 1844 and 1845. With evidence.—Quoted as "Bank Acts," or "Bank Committee," 1857 or 1858.
I hope to start on the fourth volume, the history of theories of surplus-value, as soon as conditions will permit me.
In the preface to the second volume of Capital I had to square accounts with those gentlemen, who were making much ado over the alleged fact that they had discovered in the person of Rodbertus the "Secret source and a superior predecessor to Marx." I offered them an opportunity to show what the economics of Rodbertus could accomplish. I asked them to demonstrate the way "in which an equal average rate of profit can and must come about, not only without a violation of the law of value, but by means of it." These same gentlemen, who were then celebrating the brave Rodbertus as an economist star of the first magnitude, either for subjective or objective reasons which were as a rule anything but scientific, have without exception failed to answer the problem. However, other people have thought it worth their while to occupy themselves with this problem.
In his critique of the second volume ( Conrad's Jahrbücher, XI, 1885, pages 452-65), Professor Lexis takes up this question, although he does not pretend to give a direct solution of it. He says: "The solution of that contradiction" (namely the contradiction between the law of value of Ricardo-Marx and an equal average rate of profit) "is impossible, if the various classes of commodities are considered individually, if their value is to be equal to their exchange-value, and this again equal or proportional to their price." According to him this solution is possible only, if "the determination of value for the individual commodities according to labor is relinquished, the production of commodities viewed as a whole, and their distribution among the aggregate classes of capitalists and laborers regarded from the same point of view....The laboring class receives but a certain portion of the total product,...the other portion falls to the share of the capitalists and represents the surplus-product, as understood by Marx, and accordingly...the surplus-value. The members of the capitalist class divide this entire surplus-value among themselves, not in proportion to the number of laborers employed by them, but in proportion to the amount of capital invested by each one. The land is thereby regarded as belonging in the class of capital-value." The Marxian ideal values determined by the units of labor incorporated in the commodities do not correspond to the prices, but may be "regarded as points of departure of a movement, which leads to the actual prices. These are conditioned on the fact that capitals of equal magnitude demand equal profits." In consequence some capitalists will secure higher prices for their commodities than the ideal values, and others will secure less. "But since the losses or gains of surplus-value mutually balance one another in the capitalist class, the total amount of the surplus-value is the same as though all prices were proportional to the ideal values."
It is evident that the problem has not been solved by any means through these statements, but it has been at least correctly formulated, although in a somewhat loose and shallow manner. And this is, indeed, more than we had a right to expect from a man who prides himself somewhat on being a "vulgar economist." It is even surprising when compared with the handiwork of some other vulgar economists, which we shall discuss later. The vulgar economy of Lexis is of a rather peculiar nature. He says that the gains of the capitalist may be derived in the way indicated by Marx, but there are no reasons that would compel us to accept this view. On the contrary, vulgar economy is said to have a simpler explanation, namely the following: "The capitalist sellers, such as the producer of raw materials, the manufacturer, the wholesale dealer, the retail dealer, all make a profit on their transactions, each selling his product at a higher price than the purchase price, each adding a certain percentage to the price paid by him. The laborer alone is unable to raise the price of his commodity, he is compelled, by his oppressed condition, to sell his labor to the capitalist at a price corresponding to its cost of production, that is to say, for the means of his subsistence....Therefore the capitalist additions to the prices strike the laborer with full force and result in the transfer of a part of the value of the total product to the capitalist class."
Now it does not require much thought to show that this explanation of vulgar economy for the profits of capital amounts to the same thing as the Marxian theory of surplus-value. For Lexis thus admits that the laborers are in just that forced condition of oppression which Marx has described; that they are just as much exploited here as they are according to Marx, because every idler can sell commodities above their value, while the laborer alone cannot do so; and that it is just as easy to build up a plausible vulgar socialism on this theory, as it was to build up another kind of socialism in England on the foundation of Jevons' and Menger's theory of use-value and marginal profit. I strongly suspect that Mr. George Bernard Shaw, were he familiar with this theory of profit, would eagerly extend both hands for it, discard Jevons and Karl Menger, and build on this rock the Fabian church of the future.
In reality, this theory is merely a transcript of the Marxian. What is the fund out of which all these additions to the prices are paid? The "total product" of the working class. And it is due to the fact that the commodity "labor," or, as Marx has it, "labor-power," must be sold below its price. For if it is a common quality of all commodities to be sold at a price above their cost of production, with the sole exception of labor, then labor is sold below the price which is the rule in this world of vulgar economy. The extra profit thus accruing to the capitalist, or to the capitalist class, then arises in the last analysis from the fact that the laborer, after he has made up for the price of his labor-power by reproducing it, must produce a surplus-product for which he is not paid, in other words, he produces surplus-value representing unpaid labor. Lexis is very careful in the choice of his terms. He does not say anywhere outright that this is his own conception. But if it is, then it is evident that he is not one of those vulgar economists, every one of whom is, as he says himself, "a hopeless idiot in the eyes of Marx," but that he is a Marxian disguised as a vulgar economist. Whether this disguise is consciously or unconsciously adopted, is a psychological question which does not interest us at this point. The man who can find this out may also be able to discover how it is that some time ago a man of Lexis' intellectual endowments could defend such nonsense as bimetallism.
The first one who really attempted to answer this question was Dr. Conrad Schmidt in his pamphlet entitled, The Average Rate of Profit, Based on Marx's Theory of Value, Stuttgart, Dietz, 1889. Schmidt seeks to reconcile the details of the formation of commodity prices with the theory of value and with an average rate of profit. The industrial capitalist receives in his product, first, an equivalent for the capital advanced by him, and second, a surplus-product for which he has not paid anything. But in order to earn his surplus-product, he must advance capital for its production. He must employ a certain quantity of materialized labor for the purpose of appropriating this surplus-product. For the capitalist, the capital advanced by him represents the quantity of materialized labor which is socially necessary for the production of his surplus-product. This applies to every industrial capitalist. Now, since commodities, according to the theory of value, are exchanged for one another in proportion to the social labor required for their production, and since the labor necessary for the manufacture of the capitalist's surplus-product is accumulated in the capital of the capitalist, it follows that surplus-products are exchanged in proportion to the capitals required for their production, and not in proportion to the labor actually incorporated in them. Hence the share of each unit of capital is equal to the sum of all produced surplus-values divided by the sum of the capitals employed in production. Accordingly, equal capitals yield equal profits in equal times, and this is accomplished by adding the cost price of the surplus-product figured on the basis of the average profit to the cost price of the paid product and selling both the paid and unpaid product at this increased price. Thus the average rate of profit arises in spite of the fact that, according to Schmidt, the average prices of commodities are determined by the law of value.
This is a very ingenious construction. It is made entirely after the Hegelian model, but it has this in common with the majority of the Hegelian constructions that it is not correct. It makes no difference whether the surplus-product or the paid product is considered. If the theory of value is to be applied directly to the average profit both of these products must be sold in proportion to the socially necessary labor incorporated in them. The theory of value is aimed at the very outset against the idea, derived from the capitalist mode of thought, that the accumulated labor of the past, which is embodied in capital, could be anything else but a certain quantity of finished values, namely also a creator of values greater than itself, seeing that it is an element in production and in the formation of profit. The theory of value demonstrates that living labor alone has this faculty of creating surplus-values. It is well known that the capitalists expect to reap profits in proportion to the magnitude of their capitals, looking upon their advances of capital as a sort of cost price of their profits. But if Schmidt utilizes this conception for the purpose of harmonizing by means of it the prices calculated according to the average rate of profit and those based on the theory of value, he thereby repudiates this theory of value, for he embodies in it as one of its factors a conception which is wholly at variance with it.
Either accumulated labor creates values the same as living labor, and in that case the law of value does not apply.
Or, it is not a creator of values, and in that case Schmidt's demonstration is irreconcilable with the law of value.
Schmidt was misled into straying into this bypath when being quite close to the solution, because he believed that he would have to find as mathematical a formula as possible, by which the agreement of the average price of every individual commodity with the law of value could be demonstrated. But while he has followed a wrong path in this instance, close to the real goal, he shows by the rest of his booklet that he has very understandingly drawn other conclusions from the first two volumes of Capital. His is the honor of having found by independent effort the correct answer given by Marx in the third part of the third volume of his work for the hitherto inexplicable sinking tendency of the rate of profit; and of having furthermore correctly shown the genesis of commercial profit out of industrial surplus-value, and of having made a series of statements concerning interest and ground rent, by which he has anticipated things developed by Marx in the fourth and fifth part of the third volume of his work.
In a subsequent article ( Neue Zeit, 1892-93, Nos. 4 and 5), Schmidt tries another way to solve the problem. It amounts to the statement that competition brings about an average rate of profit by causing the emigration of capital from lines of production with profit below the average to lines with profit above the average. There is nothing new in the statement that competition is the great equalizer of profits. But Schmidt tries to prove that this leveling of profits is identical with a reduction of the selling price of commodities produced in excess to a measure in keeping with a price which society can pay for it according to the law of value. The analyses of Marx in this work show sufficiently why this way could not lead to any solution.
After Schmidt, it was P. Fireman who attempted a solution of the problem ( Conrad's Jahrbücher, dritte Folge, III, page 793). I shall not discuss his remarks on some of the other aspects of the Marxian analyses. He starts out from the mistaken assumption that Marx wishes to define where he is only analyzing, or that one may look in Marx's work at all for fixed and universally applicable definitions. It is a matter of course that when things and their mutual interrelations are conceived, not as fixed, but as changing, that their mental images, the ideas concerning them, are likewise subject to change and transformation; that they cannot be sealed up in rigid definitions, but must be developed in the historical or logical process of their formation. From this it will be understood why Marx starts out in the beginning of his first volume, where he makes the simple production of commodities his historical premise and then proceeds from this basis to capital, from a simple commodity instead of its ideologically and historically secondary form, a capitalistically modified commodity. Fireman cannot understand that at all. I prefer to pass over these and other side-issues and proceed at once to the gist of the matter. While the author is taught by the theory that surplus-value is proportional to the labor-powers employed, provided a certain rate of surplus-value is given, he learns from experience that profit is proportional to the magnitude of the total capital employed, provided a certain average rate of profit is given. Fireman explains this by saying that profit is merely a conventional phenomenon (which means, in his language, that it belongs to a definite social formation with which it stands and falls). Its existence is simply dependent on capital. If this is strong enough to secure a profit for itself, it is also compelled by competition to bring about the same rate of profit for all capitals. In other words, capitalist production is impracticable without an equal rate of profit. Assuming this to be the mode of production, the quantity of profit for the individual capitalist can depend only on the magnitude of his capital, if the rate of profit is given. On the other hand, profit consists of surplus-value, of unpaid labor. And how is the transformation of surplus-value, determined in quantity by the degree of labor exploitation, into profit, determined in quantity by the magnitude of the employed capital, accomplished? "Simply by selling commodities above their value in all lines of production in which the ratio between...constant and variable capital is greatest, and this implies on the other hand that the commodities are sold below their value in all lines of production in which the ratio between constant and variable capital is smallest, so that commodities are sold at their true value only in lines of production in which the ratio of c:v represents a definite medium magnitude....Is this discrepancy between the prices and values of commodities a refutation of the principle of value? By no means. For since the prices of some commodities rise above value to the same extent that the prices of others fall below it, the total sum of prices remains equal to the total sum of values...the incongruity disappears in the last instance." This incongruity is a "disturbance"; and "in the exact sciences it is not the custom to regard a calculable disturbance as a refutation of a certain law."
On comparing the relevant passages of chapter IX with these statements, it will be seen that Fireman has indeed placed his finger on the salient point. But the undeservedly cool reception given to his able article proves that Fireman still needed many interconnecting links, even after this discovery of his, before he would have been enabled to work out a full and comprehensible solution. Although many were interested in this problem, they were all afraid of burning their fingers with it. And this is due not only to the incomplete form in which Fireman left his discovery, but also to the undeniable faultiness of his conception of the Marxian analyses and his critique of them based on his misconception.
Whenever there is an opportunity to make himself ridiculous by attempting a difficult feat, professor Julius Wolf of Zürich never fails to exhibit himself. He tells us ( Conrad's Jahrbücher, neue Folge, II, pages 352 and following) that the entire problem is solved by the relative surplus-value. The production of relative surplus-value rests on the increase of the constant capital as compared to the variable capital. "A plus in constant capital has for its premise a plus in the productive power of the laborers. Since this plus in productive power (by way of cheapening the necessities of life) produces a plus in surplus-value, the direct relation between an increase of surplus-value and an increasing share of the constant capital in the total capital is revealed. A plus in constant capital indicates a plus in the productive power of labor. Therefore, if the variable capital remains the same and the constant capital increases, surplus-value must also increase, and we are in agreement with Marx. This was the problem which we were to solve."
Now Marx says the direct opposite in a hundred passages of the first volume. Furthermore, the assertion that, according to Marx, relative surplus-value increases in proportion as the constant capital is augmented while the variable capital decreases, is so astounding that it defies all parliamentarian language. And finally Mr. Julius Wolf demonstrates in every line that he has neither relatively nor absolutely the least understanding of relative or absolute surplus-value. Truly he says that "at first glance one seems to be in a nest of incongruities," which, by the way, is the only true statement in his whole article. But what does that matter? Mr. Julius Wolf is so proud of his brilliant discovery that he cannot refrain from bestowing posthumous praise on Marx for it and advertising his own fathomless nonsense as a "renewed proof of the acuteness and farsightedness with which Marx has drawn up his critical system of capitalist economy."
But that is not the worst. Mr. Wolf says: "Ricardo likewise claimed that an equal investment of capital yielded equal surplus-values (profit), and that the same expenditure of labor created the same amount of surplus-value. And the question was: How does the one agree with the other? But Marx did not acknowledge this form of the problem. He has doubtless shown (in the third volume ), that the second statement is not necessarily a consequence of the law of value, or that it even contradicts his law of value and must, therefore,...be directly repudiated." And thereupon Wolf seeks to find out whether Marx or I made a mistake. Of course, it does not occur to him that he is the one who is wandering in darkness.
It would be an insult to my readers, and a total disregard for the humor of the situation, were I to lose one word about this gem of a passage. I merely wish to add this: With the same boldness, which enabled him to foretell even then what Marx "has doubtless shown" in the third volume, he avails himself of this opportunity to report an alleged gossip among the professors to the effect that Konrad Schmidt's above-named work was "directly inspired by Engels." Mr. Julius Wolf! In the world in which you live it may be customary for a man to challenge others publicly for the solution of some problem and to acquaint his private friends clandestinely with this solution. That you are capable of such a thing is not hard to believe. But that a man need not stoop to such mean tricks in the world in which I live, is shown by the present preface.
Marx had hardly died, when Mr. Achille Loria hastily published an article about him in the Nuova Antologia (April, 1883). He starts out with a biography of Marx full of misinformation, and follows it up with a critique of Marx's public, political and literary activity. He misrepresents the materialist conception of history of Marx and twists it with an assurance which indicates a great purpose. And this purpose was later accomplished. In 1886, the same Mr. Loria published a book entitled La teoria economica delta costituzione politica (The Economic Foundations of Society), in which he announced to his admiring contemporaries that the materialist conception of history, so completely and purposely misrepresented by him in 1883, was his own discovery. True, the Marxian theory is reduced to a rather Philistine level in this book. And the historical illustrations and proofs abound in mistakes which would not be pardoned in a high school boy. But what does that matter? He thinks he has established his claim that the discovery that always and everywhere the political conditions and events are explained by corresponding economic conditions was not made by Marx in 1845, but by Mr. Loria in 1886. At least this is what he has tried to make his countrymen believe, and also some Frenchmen, for his book has been translated into French. And now he can pose in Italy as the author of a new and epoch-making theory of history, until the Italian socialists will find time to strip the illustre Loria of his stolen peacock feathers.
But this is only an insignificant sample of Mr. Loria's style of doing things. He assures us that all of Marx's theories rest on conscious sophistry (un consaputo sofisma); that Marx was not above using false logic, even though he knew it to be so (sapendolitali), etc. And after thus biasing his readers by a whole series of such contemptible insinuations, in order that they may regard Marx as just such an unprincipled upstart as Loria, accomplishing his effects by the same shameless and foul means as this professor from Padua, he has a very important secret for the readers, and incidentally he touches upon the rate of profit.
Mr. Loria says: According to Marx, the amount of surplus-value (which Mr. Loria here mistakes for profit) produced in an industrial establishment under capitalism depends on the variable capital employed in it, since the constant capital does not yield any profit. But this is contrary to fact. For in practice the profit is not measured by the variable, but by the total capital. And Marx himself recognizes this (Vol. I, chapter XI) and admits that the facts seem to contradict his theory. But how does he get over this contradiction? He refers his readers to a subsequent volume which has not yet been published. Loria had previously told his readers with reference to this unpublished volume, that he did not believe that Marx had ever thought for a moment of writing it. And now he exclaims triumphantly: "Not without good reason did I contend that this second volume, which Marx always flings into the teeth of his adversaries without ever publishing it, might very well be a shrewd expedient, to which Marx always resorted whenever scientific arguments failed him (un ingegnoso spediente ideato dal Marx a sostituzione degli argomenti scientifici). And whoever is not convinced after this that Marx stood on the same level of scientific swindle with the illustre Loria, is past all redemption.
We have at least learned this much: According to Mr. Loria, the Marxian theory of surplus-value is absolutely irreconcilable with the fact of a general and equal rate of profit. But at last the second volume of Capital appeared. It contained my public challenge referring to this point. If Mr. Loria had been one of us diffident Germans, he would have felt a certain embarrassment. But he is a bold southerner, he comes from a hot climate and can claim that a cool nerve is a natural requirement for him. The question concerning the rate of profit has been publicly put. Mr. Loria has publicly declared that it is insoluble. And for this very reason he is now going to outshine himself by publicly solving it.
This miracle is accomplished in Conrad's Jahrbücher, N. F., vol. XX, pages 272 and following, in an article dealing with Konrad Schmidt's above-cited pamphlet. After Loria has learned from Schmidt how the commercial profit is made, he sees everything clearly. "Since a determination of value by means of labor-time gives an advantage to those capitalists who invest a greater portion of their capital in wages, the unproductive" (he means commercial) "capital can extort from these privileged capitalists a higher interest" (he means profit) "and thus bring about an equalization between the individual industrial capitalists....For instance, if each of the industrial capitalists A, B, C, use 100 working days and 0, 100, and 200 constant capital respectively in production, and if the wages for 100 working days amount to 50 working days, then every capitalist receives a surplus-value of 50 working days, and the rate of profit is 100% for the first 33.3% for the second, and 20% for the third capitalist. But if a fourth capitalist D accumulates an unproductive capital of 300, which extorts an interest" (profit) "equal in value to 40 working days from A, and an interest of 20 working days from B, then the rate of profit of the capitalists A and B will sink to 20% the same as that of C, and D with his capital of 300 will receive a profit of 60, or a rate of profit of 20%, the same as the other capitalists."
With such astonishing dexterity l'illustre Loria solves sleight of hand fashion the same question which he had declared insoluble ten years previously. Unfortunately he did not betray to us the secret of the way in which the owners of the "unproductive capital" obtain the power to extort from those industrials their extra-profit exceeding the average rate of profit and to keep it in their own pockets in the same way in which the land owner pockets the surplus-profit of the capitalist farmer as ground rent. For according to this the commercial capitalists would be levying upon the industrials a tribute analogous to ground rent and thereby bring about an equalization of the rate of profit. Now, the commercial capital is indeed a very essential factor in the equalization of the rate of profit, as nearly everybody knows. But only a literary adventurer, who in the bottom of his heart cares naught for political economy, can venture the assertion that commercial capital has the magic power to absorb all profits above the average rate of profit, even before this average rate has become established, and to convert it into ground-rent for itself without even requiring any real estate for this purpose. Nor is the assertion less astonishing that commercial capital has the gift of discovering those industrials, whose surplus-value just covers the average rate of profit, and that it considers it an honor to mitigate the fate of those luckless victims of the Marxian law of value by selling its products to them free of charge, without asking as much as a commission for it. What a mountebank a man must be in order to imagine that Marx had to have recourse to such miserable tricks!
But Mr. Loria does not shine in his full glory, until we compare him with his northern competitors, for instance with Mr. Julius Wolf, who was not born yesterday, either. What a small coyote Mr. Wolf seems to be, even in his big volume on Socialism and the Capitalist Order of Society, compared to that Italian! How clumsily, I am almost tempted to say modestly, does he stand forth beside the noble check of the maestro who pretends as a matter of course that Marx is just such a sophist, poor logician, liar and mountebank as Mr. Loria himself, that Marx bamboozles the public with a promise of completing his theory in some future volume which he neither will nor can write, as he very well knows, whenever he gets into a tight place! Unlimited nerve coupled to the smoothness of an eel when slipping through impossible situations, a heroic imperviousness to kicks received by him, a hasty appropriation of the accomplishments of others, an importunate charlatanry of advertising, an organization of fame by the help of a clique of friends—who can equal him in all these?
Italy is the land of classic lore. Since the great time when the morning glow of the modern world rose over it, it produced magnificent characters of unequalled classic perfection, from Dante to Garibaldi. But the time of its degradation under the rule of strangers also bequeathed classic character-masks to it, among them two especially sharply chiseled types, that of Sganarelli and Dulcamara. The classic unity of both is embodied in our illustre Loria.
In conclusion I must take my readers across the Atlantic. Dr. (med.) George C. Stiebeling, of New York, also found a solution of the problem, and a very simple one at that. It was so simple that no one on either side of the ocean cared to take him seriously. This aroused his ire, and he complained about this outrage in an endless number of pamphlets and newspaper articles, on both sides of the great water. He was told in the Neue Zeit that his solution was based entirely on an error in his calculation. But this did not disturb him in the least. Marx had also made many errors of calculation, and yet he was right. Let us, then, take a closer look at Dr. Stiebeling's solution.
"Take two factories working with equal capitals for an equal length of time, but with different proportions of their constant and variable capitals. The total capital (c + v) will be regarded as equal to y, and the difference in the proportion of the constant to the variable capital equal to x. In the first factory, y is equal to c + v, in the second y is equal to (c - x) + (v + x). The rate of surplus-value is therefore in the first factory equal to m/v, and in the second factory equal to m/v-x. I designate as profit (p) the total surplus-value (m), by which the total capital y, or c + v, is augmented in the given time, in other words, p is equal to m. Hence the rate of profit in the first factory is equal to p/y, or m/c+v, and in the second factory likewise equal to p/y, or m/(c-x)-(v+x), that is to say, it is also equal to m/c+v. The...problem solves itself in such a way that, on the basis of the law of value, equal capitals employing unequal quantities of living labor in equal lengths of time, a change in the rate of surplus-value brings about the equalization of an average rate of profit." (G. C. Stiebeling, The Law of Value and the Rate of Profit, New York, John Heinrich.)
In spite of the beautiful clearness of the above calculation, we cannot refrain from asking Dr. Stiebeling this question: How does he know that the sum of surplus-values produced by the first factory is exactly equal to the sum of surplus-values produced in the second factory? He states explicitly that c, v, y and x, that is to say, all the other factors in the calculation, are equal in both factories, but not a word about m. It follows by no means that these two quantities of surplus-value are equal simply because he designates them both by m. On the contrary, this is precisely what must be proved, especially since Dr. Stiebeling also identifies the profit p without further ceremony with the surplus-value m. Now, only two possibilities present themselves. Either the m's are equal, both factories produce equal quantities of surplus-value, and therefore, since both capitals are equal, also equal quantities of profit. If so, then Dr. Stiebeling has taken for granted at the outset what he was called upon to prove. Or, one factory produces more surplus-value than the other, and in that case his entire calculation falls to the ground.
Mr. Stiebeling spared neither pains nor money in building upon this erroneous calculation of his mountains of other calculations and exhibiting them to the public. I can assure him, for his own peace of mind, that nearly all of his calculations are equally wrong, and whenever they are not, they prove something entirely different from what he set out to prove. He proves, for instance, by a comparison of the U. S. census figures for 1870 and 1880 that the rate of profit has actually fallen, but explains this fact wrongly, assuming that he has to correct Marx for working his theory with a never changing, stable, rate of profit. But the third part of the third volume of Capital shows that this "stable rate of profit" in Marxian economics is purely a figment of Dr. Stiebeling's brain, and that the falling rate of profit is due to causes which are just the reverse of those indicated by Dr. Stiebeling. No doubt Dr. Stiebeling has the best intentions, but a man who undertakes to discuss scientific questions should learn above all to read the works of the author, whom he wishes to study, just as they have been written, and especially not to find anything in them which they do not contain.
The outcome of the entire investigation, also in this question, shows once more that the Marxian school is the only one which has accomplished something in this line. When Fireman and Konrad Schmidt read this third volume, they will have good reasons for being well satisfied with the work done by each of them.
IN the first volume we analyzed the phenomena presented by the process of capitalist production, considered by itself as a mere productive process without regard to any secondary influences of conditions outside of it. But this process of production, in the strict meaning of the term, does not exhaust the life circle of capital. It is supplemented in the actual world by the process of circulation, which was the object of our analysis in the second volume. We found in the course of this last-named analysis, especially in part III, in which we studied the intervention of the process of circulation in the process of social reproduction, that the capitalist process of production, considered as a whole, is a combination of the processes of production and circulation. It cannot be the object of this third volume to indulge in general reflections relative to this combination. We are rather interested in locating the concrete forms growing out of the movements of capitalist production as a whole and setting them forth. In actual reality the capitals move and meet in such concrete forms that the form of the capital in the process of production and that of the capital in the process of circulation impress one only as special aspects of those concrete forms. The conformations of the capitals evolved in this third volume approach step by step that form which they assume on the surface of society, in their mutual interactions, in competition, and in the ordinary consciousness of the human agencies in this process.
The value of every commodity produced by capitalist methods is represented by the formula: C = c + v + s. If we subtract the surplus-value s from this value of the product, there remains only an equivalent for the value of the capital c + v expended for the elements used in the production of this commodity.
Take it that the production of a certain article requires the expenditure of a capital of 500 p.st., of which 20 p.st. are consumed by the wear and tear of instruments of production, 380 p.st. spent for materials of production, and 100 p.st. for labor-power. And let the rate of surplus-value be 100%. In that case the value of this product is equal to 400 c + 100 v + 100 s, or 600 p.st.
After deducting the surplus-value of 100 p.st., we have a remaining commodity-capital of 500 p.st., which is only an equivalent for the consumed capital of 500 p.st. This portion of the value of the commodity, which makes good the price of the consumed means of production and the price of the employed labor-power, replaces only the amount paid by the capitalist himself for this commodity and represents, therefore, from his point of view the cost price of this commodity.
However, the cost of this commodity to the capitalist, and the actual cost of this commodity, are two vastly different amounts. That portion of the value of the commodity which consists of surplus-value does not cost the capitalist anything for the reason that it costs the laborer unpaid labor. But on the basis of capitalist production, the laborer plays the role of an ingredient of productive capital as soon as he has been incorporated in the process of production. Under these circumstances the capitalist poses as the actual producer of the commodity. For this reason the cost price of the commodity to the capitalist necessarily appears to him as the actual cost of the commodity. If we designate the cost-price by k, we can transcribe the formula C = c + v + s into the formula C = k + s, that is to say, the value of a commodity is equal to the cost price plus the surplus-value.
In this way the classification of the various values making good the value of the capital consumed in the production of the commodity under the term of cost price expresses, on the one hand, the specific character of capitalist production. The capitalist cost of the commodity is measured by the expenditure of capital, while the actual cost of the commodity is measured by the expenditure of labor. The capitalist cost-price of the commodity, then, is a quantity different from its value, or its actual cost-price. It is smaller than the value of the commodity. For since C = k + s, it is evident that k = C - s. On the other hand, the cost-price of a commodity is by no means a mere heading in capitalist bookkeeping. The actual existence of this portion of value continually exerts its practical influence in the actual production of the commodity, because it must be ever reconverted from its commodity-form, by way of the process of circulation, into the form of productive capital, so that the cost-price of the commodity must always buy anew the elements of production consumed in its creation.
However, the cost-price as a heading in bookkeeping has nothing to do with the formation of the value of a commodity, or with the process of self-expansion of capital. When I know that five-sixths of the value of a commodity worth 600 p.st., or 500 p.st., represent but an equivalent for the capital consumed in its production and suffice only for the purchase of new material elements of the same capital, I know nothing as yet of the way in which these five-sixths representing the cost-price of the commodity are produced, nor do I know anything about the production of the last sixth which constitutes its surplus-value. Nevertheless we shall see in the course of our analysis that the cost-price plays in capitalist economics the false role of a category in the actual production of values.
Let us return to our example. Take it that the value produced by one laborer in an average social working day is represented by 6 shillings in money. In that case the advanced capital of 500 p.st. consisting of 400 c + 100 v represents the values produced in 1666 2/3 working days of ten hours each. Of this amount 1333 1/3 working days are crystallized in the value of the means of production amounting to 400 p.st. (400 c), and 333 1/3 working days are crystallized in the value of labor-power amounting to 100 p.st. (100 v). Having assumed a rate of surplus-value of 100%, the production of the new commodity costs an expenditure of labor-power amounting to 100 v + 100 s, or 666 2/3 working days of ten hours each.
We know, then, as shown in volume I, chapter VII, that the value of the newly created product of 600 p.st. is composed, 1), of the reappearing value of the constant capital of 400 p.st. expended for means of production, and 2), of a newly produced value of 200 p.st. The cost-price of the commodity, or 500 p.st., comprises the reappearing 400 c and one-half of the newly produced value of 200 p.st., that is to say 100 v. In other words, it comprises two elements of the value of the commodity which are of widely different origin.
Owing to the appropriate character of the labor expended during 666 2/3 working days of ten hours each, the value of the means of production consumed in this process, to the amount of 400 p.st., is transferred to the product. This previously existing value thus reappears as an element of the value of the product, but is not created in the process of production of this commodity. It exists as an element of the value of this commodity only for the reason that it previously existed as an element of the invested capital. The expended constant capital, then, is replaced by that portion of the value of the commodity which this capital transfers to the commodity of its own accord in the labor-process. This element of the cost-price, therefore, has an ambiguous meaning. On the one hand it passes into the cost-price of the commodity, because it is an element of that portion of the value of the commodity which replaces consumed capital. And on the other hand it forms an element of the value of the commodity only for the reason that it is the value of consumed capital, or because the means of production cost a certain sum.
It is different with the other element of the cost-price. The 666 2/3 working days expended in the production of the commodity create a new value of 200 p.st. One portion of this new value replaces only the advanced variable capital of 100 p.st., which is the price of the labor-power employed. But this advanced capital-value does not participate in the creation of the new value. So far as the advance of capital is concerned, labor-power counts as a value. But in the process of production, labor-power performs the function of creating value. The place of the mere value of labor-power in the advance of capital is taken in the actual process of productive capital by living labor-power which creates value.
This difference of the various elements of the value of a commodity which constitute the cost-price becomes evident whenever a change takes place either in the amount of the value of the expended constant capital or in that of the expended variable capital. For instance, let the price of the same means of production, or of the constant portion of capital, rise from 400 p.st. to 600 p.st., or fall to 200 p.st. In the first case it is not only the cost-price of the commodity which rises from 500 p.st. to 600 c + 100 v, or 700 p.st., but also the value of the commodity which rises from 600 p.st. to 600 c + 100 v + 100 s, or 800 p.st. In the second case, it is not only the cost-price which falls from 500 p.st. to 200 c + 100 v, or 300 p.st., but also the value of the commodity which falls from 600 p.st. to 200 c + 100 v + 100 s, or 400 p.st. Because the expended constant capital transfers its own value to the product, therefore the value of the product rises or falls with the absolute magnitude of that capital-value, other circumstances remaining the same. But on the other hand let us assume that, other circumstances remaining the same, the price of the same amount of labor-power rises from 100 p.st. to 150 p.st., or falls from 100 p.st. to 50 p.st. In the first case, the cost-price rises indeed from 500 p.st. to 400 c + 150 v, or 550 p.st., and in the second case it falls from 500 p.st. to 400 c + 50 v, or 450 p.st. But in either case, the value of the commodity remains unchanged at 600 p.st. In the first case it is 400 c + 150 v + 50 s, in the second 400 c + 50 v + 150 s, but in either case it is 600 p.st. The advanced variable capital does not transfer its own value to the product. The place of its value is taken in the product by a new value created by labor. Therefore a change in the value of the absolute magnitude of the variable capital, to the extent that it expresses merely a change in the price of labor-power, does not alter the absolute magnitude of the value of the commodity in the least, because it does not alter anything in the absolute magnitude of the new value created by living labor. Such a change influences only the relative proportion of the magnitudes of the two elements of the new value, one of which forms surplus-value, and the other of which makes good the variable capital and passes into the cost-price of the commodity.
The two elements of the cost-price, in the present case 400 c + 100 v, have only this in common that they are both of them elements of the value of the commodity replacing advanced capital.
But this actual condition of things must necessarily look reversed from the point of view of capitalist production.
The capitalist mode of production is distinguished from a mode of production based on slavery by this fact among others that in the former the value, or the price, as the case may be, of labor-power assumes the form of the value, or price, of labor itself, that is to say, the form of wages. (Volume I, chapter XIX.) The variable portion of the advanced capital, therefore, presents itself as a capital advanced in wages, as a capital-value paying for the value, or price, of all labor expended in production. Take it, for instance, that an average social working day of ten hours is represented by 6 shillings of money. In that case the advance of a variable capital of 100 p.st. expresses in money the value of a product created in 333 1/3 ten-hour days. But this value, being an element of the advance of capital for the purchase of labor-power, is not an element of the productive capital in the actual performance of its function. Its place in the process of production is taken by living labor-power. If the degree of exploitation of this labor-power is 100%, as it is in our illustration, then it is expended during 666 2/3 ten-hour days, and thereby adds to the product a new value of 200 p.st. On the other hand, the variable capital of 100 p.st. figures in the advance of capital as a capital invested in wages, or as the price of labor performed in 666 2/3 ten-hour days. Dividing 100 p.st. by 666 2/3, we obtain 3 shillings as the price of a working day of ten hours, equal in value to the product of five hours' labor.
Now, if we compare the advance of capital on one side with the value of commodities on the other, we find the following condition of things:
I. Capital advanced 500 p.st., consisting of 400 p.st. of capital expended in means of production (price of means of production) plus 100 p.st. of capital expended in wages (price of 666 2/3 working days, or wages for the same).
II. Value of commodities 600 p.st. of which 500 p.st. represent the cost-price (400 p.st. price of expended means of production plus 100 p.st. price of expended 666 2/3 working days) plus 100 p.st. surplus-value.
In this formula, the portion of capital invested in labor-power differs from that invested in means of production (such as cotton or coal) only by serving for the payment of a substantially different element of production. But it does not differ by serving in a different function in the process of creating the value of the commodities, and thereby in the process of self-expansion of capital. The price of the means of production reappears in the cost-price of the commodities, just as it figured in the advance of capital, and it does so for the reason that the means of production have been appropriately consumed. The cost-price of the commodities also contains the price, or wages, for the 666 2/3 working days consumed in the production of these commodities, which wages figured also in the advance of capital, likewise for the reason that this amount of labor has been appropriately expended. We see only finished and existing values, representing portions of the value of advanced capital which have passed into the value of the product, but no element representing newly created values. The distinction between constant and variable capital has disappeared. The entire cost-price of 500 p.st. now has the ambiguous meaning that it is that portion of the value of commodities worth 600 p.st. which makes good the capital of 500 p.st. expended in the production of these commodities, and that it owes its existence as a portion of the value of these commodities only to the fact of having previously existed as the cost-price of the consumed elements of production, namely means of production and labor, in other words, of having existed as an advance of capital. The capital-value reappears as the cost-price of commodities, because it had been expended as a capital-value.
The fact that the various elements of the value of the advanced capital have been expended for substantially different elements of production, namely for instruments of labor, raw materials, auxiliary substances, and labor, requires only that the cost-price of the commodities should buy a new supply of these substantially different elements of production. So far as the formation of this cost-price is concerned, only one distinction is appreciable, namely that between fixed and circulating capital. In our example we had set down 20 p.st. for wear and tear of instruments of labor (400 c being composed of 20 p.st. for wear and tear of instruments of labor and 380 p.st. for materials of production). Supposing the value of those instruments of labor to have been 1200 p.st. before the productive process began, it will exist after the production of the commodities in two forms, one of them being represented by 20 p.st. of the value of the commodities, and the other by 1200—20, or 1180 p.st., the remaining value of the instruments of labor in the possession of the capitalist, in other words, an element of his productive, not of his commodity-capital. On the other hand, the materials of production and wages, differ from the instruments of labor by being entirely consumed in the production of the commodities and transferring their entire value to that of the produced commodities. We have seen that the turn-over bestows upon these different elements of the advanced capital the forms of fixed and circulating capital.
The advance of capital, according to this, is 1680 p.st., consisting of 1200 p.st. of fixed capital plus 480 p.st. of circulating capital (380 p.st. of which are materials of production and 100 p.st. of which are wages).
But the cost-price of the commodities is only 500 p.st., namely 20 p.st. for the wear and tear of the fixed capital, and 480 p.st. for circulating capital.
This difference between the cost-price of the commodities and the advance of capital merely proves that the cost-price of the commodities is formed exclusively by the capital actually consumed in their production.
In the production of the commodities, instruments of production valued at 1200 p.st. are employed, but only 20 p.st. of this advanced capital are consumed in production. The employed fixed capital, then, passes only partially into the cost-price of commodities, because it is consumed only by degrees in their production. The employed circulating capital passes entirely into the cost-price of commodities, because it is entirely consumed in production. But what else does this prove than that the consumed portions of fixed and circulating capital, in the ratio of the magnitude of their values, pass uniformly into the cost-price of the commodities, and that this portion of the value of commodities originates solely with the capital consumed in their production? If this were not the case, it would be inexplicable why the advanced fixed capital of 1200 p.st. should not add, aside from the 20 p.st. which it loses in the productive process, also the other 1180 p.st. which it does not lose therein.
This difference between fixed and circulating capital with reference to the calculation of the cost-price affirms, we repeat, the apparent origin of the cost-price in the expended capital-value, or in the price paid by the capitalist himself for the expended elements of production, including labor. On the other hand, the variable portion of capital invested in labor-power is explicitly identified, under the head of circulating capital, with that portion of the constant capital which consists of materials of production, so far as the formation of value is concerned. And by this means the mystification of the process of self-expansion of capital is accomplished. 1
Hitherto we have considered only one element of the value of commodities, namely the cost-price. We must now occupy ourselves also with the other element of the value of commodities, namely the excess over the cost-price, or the surplus-value. In the first place, then, surplus-value is an excess of the value of a commodity over its cost-price. But since the cost-price is equal to the value of the consumed capital, into whose substantial elements it is continually reconverted, the additional value is an accretion to the capital expended in the production of the commodities and returning by way of the circulation.
We have seen previously that the surplus-value s owes its origin in point of fact to a change in the value of the variable capital v and is, therefore, really but an increment of variable capital. Nevertheless it is also an increment of the expended total capital c + v after the process of production has been completed. The formula c + (v + s), which indicates that s is produced by the conversion of a definite capital-value v, a constant magnitude, into a fluctuating magnitude by means of the labor-power paid by it, may also be represented as (c + v) + s. Before production began, we had a capital of 500 p.st. After production is completed, we have the same capital of 500 p.st. plus an increment of value amounting to 100 p.st. 2
However, the surplus-value is an increment, not only of that portion of the advanced capital which is assimilated by the process of production, but also of that portion which is not assimilated. In other words, it is an accretion, not only to the consumed capital which is made good by the cost-price of commodities, but also to the aggregate capital invested in production. Before the beginning of the production we had a capital valued at 1680 p.st., namely 1200 p.st. of fixed capital invested in instruments of production, only 20 p.st. of which are assimilated in the process by the commodities through wear and tear, plus 480 p.st. of circulating capital invested in materials of production and wages. At the close of the process of production we have 1180 p.st. remaining of the value of the productive capital plus a commodity-capital of 600 p.st. By adding these two amounts, we find that the capitalist now has values amounting to 1780 p.st. After deducting his invested total capital of 1680 p.st., the capitalist pockets a surplus of 100 p.st. In short, the 100 p.st. of surplus-value form as much an increment of the invested 1680 p.st. as of the 500 p.st., or that part of it which was assimilated by the production.
The capitalist understands well enough that this increment of value has its genesis in the productive manipulations of capital, that it is generated out of the capital. For this increment exists at the close of the productive process, while it did not exist at its beginning. So far as the capital assimilated in production is concerned, the surplus-value seems to arise equally from all its different elements consisting of means of production and labor. For all these elements contribute equally to the formation of the cost-price. All of them add their values, which are advanced as capital, to the value of the product, and they are not distinguished as constant and variable magnitudes. This becomes obvious, when we assume for a moment that all assimilated capital consisted either of wages exclusively, or of the values of means of production alone. In the first case, we should then have in place of the commodity-values 400 c + 100 v + 100 s the commodity-values 500 v + 100 s. The capital of 500, invested in wages, represents the value of all labor assimilated in the production of the commodity-value of 600 p.st., and therefore it constitutes the cost-price of this entire product. But the way in which this cost-price is formed, and in which the value of the expended capital is reproduced as a portion of the value of the product, is the only process in the formation of the value of this product known to us. We do not know anything of the way in which its surplus-portion of 100 p.st. is formed. It is the same in the second case, in which the value of the commodities would be equal to 500 c + 100 s. We know in either case that the surplus-value arises from a given value, because this value was advanced in the form of productive capital, no matter whether in the form of labor or of means of production. On the other hand, this advanced capital-value cannot form any surplus-value for the sole reason that it has been expended and constitutes the cost-price of the commodities. For the fact that it forms the cost-price of the commodities accounts precisely for the circumstance that it constitutes no surplus-value, but merely an equivalent replacing the expended capital. To the extent that it forms surplus-value it does so not in its specific capacity of expended, but of advanced and invested capital. In short, the surplus-value arises as much out of that portion of the advanced capital which makes good the cost-price of the commodities as out of that portion which is not made up by the cost-price. In other words, it arises equally out of the fixed and circulating components of the invested capital. The total capital serves substantially as the creator of values, the instruments of labor as well as the materials of production and labor. The total capital passes substantially into the actual labor-process, even though only a portion of it is assimilated by the process of self-expansion. This is, perhaps, the very reason why it contributes only in part to the formation of the cost-price, but totally to the formation of the surplus-value. However that may be, the outcome is that surplus-value arises simultaneously from all portions of the invested capital. This deduction may be materially abbreviated, by saying pointedly and briefly in the words of Malthus: "The capitalist expects equal returns on all parts of the capital advanced by him." 3
In its alleged capacity of an offspring of the advanced total capital, the surplus-value assumes the change of form known as profit. Hence a certain value is capital when it is advanced with a view to generating profit, 4 or profit results from the investment of a value as capital. If we designate profit by p, we may convert the formula C = c + v + s, or k + s, into the formula C = k + p, in other words, the value of a commodity is equal to the cost-price plus the profit.
The profit, such as it presents itself here, is the same as the surplus-value, only it has a mystified form, which is a necessary outgrowth of capitalist modes of production. The genesis of the mutation of values must be transferred from the variable portion of capital to the total capital, because no distinction is noticeable between the constant and variable capital in the assumed formation of the cost-price. Because the price of labor-power assumes on one pole the form of wages, surplus-value appears at the other pole in the form of profit.
We have seen that the cost-price of a commodity is smaller than its value. Since C equals k + s, it follows that k equals C - s. The formula C = k + s reduces itself to C = k, or commodity-value equal to cost-price, only when s is zero, a case which never occurs on the basis of capitalist production, although peculiar market combinations may reduce the selling price of commodities to the level of their cost-price, or even below it.
Hence, if a commodity is sold at its value, a profit is realized, which is equal to the excess of its value over its cost-price, or equal to the entire surplus-value incorporated in the value of the commodity. But the capitalist may sell a commodity at a profit even when selling it below its value. For so long as its selling price exceeds its cost-price, even though it may be below its value, a portion of the surplus-value incorporated in it is always realized and thus a profit made. The value of the commodities in our illustration is 600 p.st., their cost-price 500 p.st. If the commodities are sold at 510, 520, 530, 560 or 590, p.st., they are sold respectively at 90, 80, 70, 40, or 10 p.st. below their value, and yet a profit of respectively 10, 20, 30, 60, or 90 p.st. is realized by their sale. It is evident that selling prices may fluctuate considerably between the value of a commodity and its cost-price. The greater the surplus-element of the value of commodities, the greater is the practical playroom of these fluctuating intermediate prices.
This explains such phenomena of daily occurrence in competition as underselling, abnormally low prices in certain lines of industry, etc. 5 The fundamental law of capitalist competition, which political economy has not understood up to the present time, the law which regulates the general rate of profit and the prices of production determined by it, rests, as we shall see later, on this difference between the value and the cost-price of commodities, and on the resulting possibility to sell a commodity at a profit even below its value.
The minimum limit of the selling price of commodities is indicated by their cost-price. If they are sold below their cost-price, then the consumed elements of productive capital cannot be fully reproduced out of the selling price. If this sort of thing continues, then the value of the advanced capital disappears. This point of view is sufficient to incline the capitalist toward the opinion that the cost-price is essentially the inmost value of commodities, because it is the price required for the bare conservation of his capital. Furthermore, the cost-price of a commodity is the purchase price paid by the capitalist himself for its production, in other words, the purchase price determined by the process of production itself. For this reason, the surplus-value realized by the sale of a certain commodity appears to the capitalist as an excess of its selling price over its value, instead of an excess of its value over its cost-price, so that accordingly the surplus-value incorporated in a commodity is not realized by its sale, but arises out of the sale itself. We have thrown more light on this illusion in volume I, chapter V, under the head of "Contradictions in the General Formula of Capital." We merely revert at this point to that form in which it was reaffirmed by Torrens, among others, as an advance of political economy beyond Ricardo.
"The natural price consisting of the cost of production, or in other words, of the expenditure of capital in the production or manufacture of a commodity, cannot possibly include any profit....If a farmer advances 100 quarters of corn in the cultivation of his fields, and receives in return 120 quarters, the 20 quarters, being a surplus of the product above the investment, form his profit; but it would be absurd to call this surplus, or profit, a part of his expenditure....The manufacturer advances a certain quantity of raw materials, tools, and subsistence for labor, and receives in return a quantity of finished products. This finished product must contain a greater exchange-value than the raw materials, tools, and means of subsistence, by whose advance it was acquired." Torrens concludes, therefore, that the excess of the selling price over the cost-price, or the profit, is due to the fact that the consumers, "by a direct or circuitous exchange yield a certain larger portion of all ingredients of capital than it cost to produce them." 6
In fact, the excess over a certain magnitude cannot form a part of this magnitude. Therefore the profit, the excess of the value of a commodity over the expenditure of the capitalist, cannot form a part of this expenditure. Hence, if no other element than the advance of the capitalist enters into the formation of the value of a commodity, it is inexplicable that more value should come out of production than went into it, for something cannot come out of nothing. Torrens, however, dodges this creation out of nothing only by transferring it from the sphere of commodity-production to that of commodity-circulation. Profit cannot come out of the production of commodities, says Torrens, for otherwise it would already be contained in the cost of production, and that would not be a surplus over this cost. Profit cannot come out of the exchanges of commodities, replies Ramsay, unless it existed before this exchange. The sum of their values of the exchanged products is evidently not altered by their exchange. It remains the same as before this exchange. Incidentally we remark at this point, that Malthus invokes expressly the authority of Torrens, 7 although he himself explains the sale of commodities above their value differently, or rather does not explain it, since all arguments of this sort ultimately amount to the same thing as the one-time famous negative weight of phlogiston.
In a society ruled by capitalist production, even the non-capitalist producer is dominated by capitalist conceptions. In his last novel, Les Paysans, Balzac, who is generally remarkable for his profound grasp of actual conditions, aptly describes how the little peasant, in order to retain the good will of his usurer, performs many small tasks gratuitously for him and fancies that he does not give him anything for nothing, because his own labor does not cost him any cash outlay. The usurer, on the other hand, thereby kills two flies at one stroke. He saves a cash outlay for wages and gets the farmer more and more tangled in the net of the spider of usury, by gradually ruining him through the deviation of his labor from his own fields.
The thoughtless conception that the cost-price of a commodity constitutes its actual value, and that surplus-value arises by selling the product above its value, so that commodities would be sold at their value, if their selling price were equal to their cost-price, that is to say, equal to the price of the means of production plus wages incorporated in them, has been heralded to the world as a newly discovered secret of socialism by Proudhon with his customary charlatanry in the guise of science. In fact, this reduction of the value of commodities to their cost-price constitutes the basis of his People's Bank. We have demonstrated in a preceding chapter that the various elements of the value of the product may be materialized in proportional parts of the product itself. (Volume I, chapter IX, 2.) For instance, if the value of 20 lbs. of yarn is 30 shillings, containing 24 shillings of means of production, 3 shillings of labor-power, and 3 shillings of surplus-value, then this surplus-value may be represented by 1/10 of the product, or 2 lbs. of yarn. Now, if these 20 lbs. of yarn are sold at their cost-price, at 27 shillings, then the purchaser receives 2 lbs. of yarn for nothing, or the article is sold 1/10 below its value. But the laborer has performed the same amount of surplus-labor, only in this case it accrues to the benefit of the purchaser of the yarn, not to its capitalist producer. It would be a mistake to assume that if all commodities were sold at their cost-price the result would be the same as if they had all been sold above their cost-price, at their real value. For even if the value of labor-power, the length of the working day, and the degree of exploitation of labor were the same everywhere, the quantities of surplus-value contained in the values of the various kinds of commodities would be unequal, according to the different organic composition of the capitals advanced for their production. 8
THE general formula of capital is M—C—M'. In other words, a certain quantity of values is thrown into circulation for the purpose of drawing a larger quantity out of it. The process by which this larger quantity is produced is capitalist production. The process by which this larger quantity is realized is the circulation of capital. The capitalist does not produce a commodity on its own account, he does not care for its use-value, nor does he consume it personally. The product in which the capitalist is really interested is not the tangible product itself, but the excess of the value of the product over the value of the capital assimilated by it. The capitalist advances the total capital without regard to the different roles played by its components in the production of surplus-value. He advances all these components uniformly, not merely for the purpose of reproducing the advanced capital, but rather with a view to producing a surplus-value in excess of it. He cannot convert the value of the variable capital advanced by him into a greater value except by its exchange for living labor and by the exploitation of this labor. But he cannot exploit this labor unless he advances at the same time the material requirements for the incorporation of this labor, namely instruments and materials of labor, machinery and raw materials. This he can do only by converting a certain amount of value in his possession into requirements of production. He could not be a capitalist at all, nor undertake to exploit labor, unless he enjoyed the privilege of owning the material requirements of production and finding at hand a laborer who owns nothing but his labor-power. We have already shown in the first volume that it is precisely the ownership of means of production by idlers which converts laborers into wage-workers and idlers into capitalists.
It is immaterial for the capitalist whether he is supposed to advance constant capital in order to make a profit out of his variable capital, or whether he advances variable capital in order to make a profit out of the constant capital; whether he invests money in wages in order to make his machinery and raw materials more valuable, or whether he invests money in machinery and raw materials in order to be able to exploit labor. Although it is only the variable portion of capital which creates surplus-value, it does so only on condition that the other portions, the material requirements of production, are likewise advanced. Seeing that the capitalist can exploit labor only by advancing constant capital, and that he can utilize his constant capital only by advancing variable capital, he lumps them all together in his imagination, and he is all the more apt to do so as the actual rate of his gain is not calculated on its proportion to the variable, but on its proportion to the total capital, in other words, that it is calculated on the rate of profit, not on the rate of surplus-value. And we shall see that the rate of profit may remain unchanged and yet may express different rates of surplus-value.
The cost of the product includes all those elements of its value which the capitalist has paid, or for which he has thrown an equivalent into circulation. This cost must be made good in order that the capital may merely be preserved, or reproduced in its original magnitude.
The value contained in a certain commodity is equal to the labor-time required for its production, and the sum of this labor consists of paid and unpaid portions. But the expenses of the capitalist consist only of that portion of materialized labor which he paid for the production of the commodity. The surplus-value contained in this commodity does not cost the capitalist anything, while it cost the laborer his labor just as well as that portion for which he is paid, and although it creates value and is embodied in the value of the commodity quite as well as the paid labor. The profit of the capitalist is due to the fact that he offers something for sale for which he has not paid anything. The surplus-value, or the profit, consists precisely of the excess of the value of the commodity over its cost-price, in other words, it consists of the excess of the total amount of labor embodied in the commodity over the paid labor contained in it. The surplus-value, whatever be its genesis, is a surplus above the advanced total capital. The proportion of this surplus to the total capital is expressed by the fraction s/C, in which C stands for the total capital. Thus we obtain the rate of profit s/C = s/(c+v), as distinguished from the rate of surplus-value s/V.
The rate of surplus-value measured by the variable capital is called rate of surplus-value. The rate of surplus-value measured by the total capital is called rate of profit. These two modes of measuring the same magnitude express different conditions or relations of this magnitude, owing to the difference of the two standards of measurement.
The transformation of surplus-value into profit must be deduced from the transformation of the rate of surplus-value into the rate of profit, not vice versa. And the rate of profit is indeed that from which historical research takes its departure. The surplus-value and the rate of surplus-value are, relatively, the invisible and unknown essence, while the rate of profit and the resulting appearance of surplus-value in the form of profit are phenomena which show themselves on the surface.
So far as the individual capitalist is concerned, it is evident that the only thing which interests him is the relation of surplus-value, of the excess of value at which he sells his articles, to the total capital advanced for the production of commodities. On the other hand, the definite relation of this surplus, and its internal connection, with the various components of capital does not interest him, for it is rather to his interest to indulge in vague notions relative to this definite relation and this internal connection.
Although the excess in the value of a commodity over its cost-price is created in the process of production, strictly so called, it is realized in the process of circulation. And it assumes so much more easily the semblance of arising from the process of circulation, as it depends in reality on the market conditions under competition whether any surplus is realized or not, or how much of it. It is not necessary to lose any words at this point about the fact that it is merely a different way of dividing the surplus-value, when a commodity is sold above or below its value, and that this different division, this change of proportions in which different persons share in the surplus-value, does not alter in the least the magnitude or the nature of that value. It is not alone the metamorphoses discussed by us in volume II which take place in the process of circulation, but they are accompanied by actual competition, the sale and purchase of commodities above or below their value, so that the surplus-value realized by the individual capitalist depends as much on the outcome of the mutual endeavor to outwit one another as on the direct exploitation of labor.
Aside from the working time, the time of circulation exerts its influence in the process of circulation and limits the amount of surplus-value realizable within a certain period. Still other elements arise in the process of circulation and influence the strict process of production. Both the strict process of production and the process of circulation continually intermingle, interpenetrate one another, and thereby incessantly falsify their characteristic marks of distinction. The production of surplus-value, and of value in general, receives new directions in the process of circulation, as we have previously shown. Capital passes through the cycle of its metamorphoses. Finally it steps, so to say, forth out of the internal organism of its life and enters into external conditions of existence, into conditions in which the opposites are not capital and labor, but capital and capital in one case, and individual buyers and sellers in another. The time of circulation and the working time cross one another's paths and seem to determine equally the amount of surplus-value. The original form in which capital and wage-labor meet one another is disguised by the interference of conditions which seem to be independent of them. The surplus-value itself does not appear to be the result of the appropriation of labor-time, but an excess of the selling price of commodities over their cost-price, so that this last named price is easily regarded as their intrinsic value, while profit appears as an excess of the selling price of commodities over their immanent value.
It is true, that the nature of the surplus-value impresses itself incessantly upon the consciousness of the capitalist during the process of production. This is shown, among other indications, by his greed for the labor-time of others, to which we called attention in the analysis of surplus-value. But in the first place, the strict process of production is but a fleeting stage passing continually into the process of circulation, just as this does into it, so that the more or less vague inkling of the source of the gains made in the process of production, the source of the surplus-value, stands at best on the same ground with the idea that the realized surplus is due to a movement of capital in the process of circulation and independent of the process of production, a movement of capital independent of its relation to labor. These phenomena of circulation are quoted by modern economists like Ramsay, Malthus, Senior, Torrens, etc., as direct proofs of the alleged fact that capital, in its mere material existence, independent of any social relation to labor which makes capital of it, may be a source of surplus-value quite as well as labor itself and without its help. In the second place, under the head of expenses, among which wages are classed the same as the price of raw materials, wear and tear of machinery, etc., the appropriation of unpaid labor figures only as a saving in the payment of an article added to the expense, only as a smaller payment for a certain quantity of labor. A saving is recorded in the same way, whenever raw materials are bought more cheaply, or the wear and tear of machinery decreases. In this way the appropriation of surplus-labor loses its specific character. Its characteristic relation to the surplus-value is obscured. And this is greatly facilitated, as shown in volume I, part VI, by the representation of the value of labor-power in the form of wages.
By posing equally as sources of an excess of value (profit), all elements of capital mystify the nature of the capitalist relation.
The way in which surplus-value is transformed into profit via the rate of profit is but a continued development of the perversion of subject and object taking place in the process of production. We have already seen that all subjective forces of labor in that process appeared as productive forces of capital. On the one hand, the value of past labor, which dominates living labor, is incarnated in the capitalist. On the other hand the laborer appears as materialized labor-power, as a commodity. This perverted relationship necessarily produces even under simple conditions of production certain correspondingly perverted conceptions, which represent a transposition in consciousness, that is further developed by the transformations and modifications of the circulation process proper.
We can see by the example of the Ricardian school that it is a mistake to attempt a development of the laws of the rate of profit directly out of the laws of the rate of surplus-value, or vice versa. In the head of the capitalist they are naturally not distinguished. In the formula s/C the surplus-value is measured by the value of the total capital advanced for its production and partly consumed in it, partly merely invested in it. Indeed, the formula s/C expresses the degree of self-expansion of the total capital advanced, or, to state it in conformity with the conception of the internal organic connection and nature of surplus-value, it indicates the proportion of the variation of the variable capital to the magnitude of the advanced total capital.
The magnitude of the value of the total capital has no direct internal relation to the magnitude of the surplus-value. So far as its material elements are concerned, the total minus the variable capital, in other words, the constant capital, consists of the material ingredients, the instruments and materials of production, required for the materialization of labor. In order that a certain quantity of labor may be incorporated in commodities and thereby produce value, a certain quantity of instruments and materials of production is required. According to the peculiar character of the incorporated labor, a definite technical relation is established between the quantity of labor and the quantity of means of production in which this labor is to be incorporated. To that extent there is also a definite relation between the quantity of surplus-value, or surplus-labor, and the quantity of means of production. For instance, if the necessary labor for the production of wages amounts to 6 hours daily, then the laborer must work 12 hours in order to perform 6 hours of surplus-labor, or produces a surplus-value of 100%. He uses up twice as many means of production in 12 hours as he does in 6. But nevertheless the surplus-value incorporated by him in 6 hours is not directly related to the value of the means of production used up in those 6, or in those 12 hours. This value is here immaterial. It is only the technically required mass which is important. It does not matter whether the raw materials or instruments of labor are cheap or dear, so long as they have the required use-value and are available in quantities proportioned to the technical demands of the labor to be incorporated in them. Now, if I know that x lbs. of cotton are consumed by one hour's spinning and cost a shillings, then I also know that 12 hours' spinning will consume 12 x lbs. of cotton costing 12 a shillings. And in that case I can calculate the proportion of the surplus-value to the value of the 12 as well as to that of the 6. But the relation of the living labor to the value of the means of production enters here only to the extent that a shillings serve as a name for x lbs. of cotton. For a definite quantity of cotton has a definite price, and therefore a definite price may also serve as an index to a definite quantity of cotton, so long as the price of cotton is not changed. If I know that I must let the laborer work for 12 hours, in order to appropriate for my own 6 hours of surplus-labor, and if I know the price of this quantity of cotton needed for 12 hours, then I have a circuitous means of determining the proportion between the price of cotton (as an index of the required quantity) and the surplus-value. But on the other hand, I can never make any conclusions from the price of the raw material as to the quantity that may be consumed by one hour's spinning, but not by 6 hours'. There is, then, no necessary internal connection between the value of the constant capital, nor the value of the total capital c + v, and the surplus-value.
If the rate of surplus-value is known and its magnitude given, then the rate of profit expresses nothing else but what it actually is, namely a different way of measuring surplus-value, this being measured by the value of the total capital, instead of the value of that portion of capital from which surplus-value directly originates by way of an exchange with labor. But in reality, in the world of phenomena, the conditions are reversed. Surplus-value is given, but only as an excess of the selling price of commodities over their cost-price. And it remains a mystery where this surplus is originated, whether it is due to the exploitation of labor in the process of production, or to overcharging the purchaser in the process of circulation, or to both. There is also given the proportion of the surplus-value to the value of the total capital, or the rate of profit. The calculation of this excess of the selling price over the cost-price of commodities on the value of the advanced total capital is very important and natural, because by its means the ratio is actually determined in which the total capital has been expanded, the ratio of its self-expansion. If the rate of profit is made the point of departure, there is no basis on which to make any conclusions regarding the specific relations between the surplus and the variable capital invested in wages. We shall see in a subsequent chapter what funny somersaults Malthus made in trying to get in this way at the secret of the surplus-value and of its specific relation to the variable capital. What the rate of profit actually shows is a uniform relation of the surplus to equal portions of the total capital, which from this point of view does not show any internal differences at all, unless it be that between fixed and circulating capital. And this difference is shown only because the surplus is calculated in two ways. In the first place it is calculated as a simple magnitude, as an excess of the selling price over the cost-price. In this form, the entire circulating capital enters into the cost-price, while of the fixed capital only the wear and tear enters into it. In the second place, the relation of this excess in value to the total value of the advanced capital is calculated. In this case, the value of the fixed capital is taken into the calculation entirely, the same as that of the circulating capital. In other words, the circulating capital enters both times in the same way, while the fixed capital enters the first time in a different, the second time in the same way as the circulating capital. Under these circumstances, the difference between the fixed and circulating capital is the only one which obtrudes itself.
The excess in value, then, if determined by the rate of profit, appears as a surplus generated annually, or during a definite period of circulation, by the total capital above its own value.
While the rate of profit differs numerically from the rate of surplus-value, the profit and the surplus-value are actually the same thing and numerically equal. However, the profit is a transformed kind of surplus-value, a form in which its origin and the secret of its nature are obscured and extinguished. Profit is, therefore, that disguise of surplus-value which must be removed before the real nature of surplus-value can be discovered. In the surplus-value, the relation between capital and labor is laid bare. But in the relation of capital and profit, that is to say, the relation between capital and that form of surplus-value which appears on one hand as an excess over the cost-price of commodities realized in the process of circulation, and on the other hand as a surplus determined by its relation to the total capital, the capital appears as a relation to itself, a relation in which it, as the original amount of value, is distinguished from a new value generated by itself. It is dimly recognized, that capital generates this new value by its movement in the processes of production and circulation. But the way in which this is done is surrounded by mystery, and thus surplus-value seems to be due to hidden qualities inherent in capital itself.
To the extent that we follow up the process of self-expansion of capital, the nature of the relation of surplus-value to capital becomes more and more mystified, and it becomes increasingly difficult to discover the secret of its internal organism.
In this first part, we shall consider the rate of profit as numerically different from the rate of surplus-value, while profit and surplus-value will be treated as the same numerical magnitude having only a different form. In the second part we shall see that the transformation continues and that profit presents itself as a magnitude differing also numerically from surplus-value.
WE have stated at the conclusion of the preceding chapter, and repeat it here, that we consider in this entire first part the amount of profit made by a certain capital to be equal to the full amount of surplus-value produced by means of this capital during a certain period of circulation. In other words, we leave aside for the present the fact that this surplus-value is split up into various secondary forms, such as interest on capital, ground-rent, taxes, etc., and that surplus-value is not identical, as a rule, with profit as appropriated on the basis of an average rate of profit, which will be discussed in part II.
So far as the quantity of profit is assumed to be equal to that of surplus-value, its magnitude, and that of the rate of profit, is determined by the relations of simple numerical magnitudes given or ascertainable in every individual case. The analysis, therefore, is first carried on purely on the field of mathematics.
We retain the terms used in volumes I and II. The total capital C consists of constant capital c and variable capital v, and produces a surplus-value s. The ratio of this surplus-value to the advanced variable capital, or s/v, is called the rate of surplus-value and designated by s'. Therefore s/v = s', and s = s'v. If this surplus-value is calculated on the total capital instead of the variable capital, it is called profit, p, and the ratio of the surplus-value s to the total capital C, or s/C, is called the rate of profit, p'. Accordingly, p' = s/C = s/(c+v). Now, substituting for s its equivalent s'v, we find p' = S'v/C = S'v/(c+v). And this equation may be expressed by the proportion p' : s' = v : C, or in words, the rate of profit is proportioned to the rate of surplus-value as the variable capital is to the total capital.
This proportion shows that the rate of profit, p', is always smaller than the rate of surplus-value, s', because the variable capital, v, is always smaller than the total capital, C, which is the sum of v + c, the variable plus the constant capital. The only exception to this rule is the practically impossible case, in which v = C, that is to say, in which no constant capital, no means of production, are advanced by the capitalist, but only wages.
However, our analysis must take into account a few other elements, which have a determining influence on the magnitude of c, v, and s. We shall mention them briefly.
There is, first, the value of money. We may assume this to be constant, throughout our analysis.
In the second place, there is the turn-over. We leave this element entirely out of consideration for the present, since its influence on the rate of profit will be treated later on in a special chapter. [We anticipate here only one point, namely that the formula p' = s' v/C is strictly correct only for one period of turn-over of the variable capital. But we may make it correct for an annual turn-over by substituting for s', the simple rate of surplus-value, the factor s'n, meaning the annual rate of surplus-value. The factor n in this term expresses the number of turn-overs of the variable capital during one year. (See chapter XVI, I, volume II.)—F. E.]
In the third place, the productivity of labor must be considered. Its influence on the rate of surplus-value has been thoroughly discussed in volume I, part V. The productivity of labor may also exert a direct influence on the rate of profit, at least of an individual capital. It has been demonstrated in volume I, chapter XII, that an individual capital may realize an extra profit, if it operates with a greater productivity than that of the social average and thereby produces its commodities at a lower value than the social average value of the same commodities. However, this case will not be considered for the present, since our premise in this part of the work is that the commodities are produced under normal social conditions and sold at their values. Hence we assume in each case that the productivity of labor remains constant. Under these circumstances the composition of the values of any capital invested in any line of industry, in other words, the proportion between the variable and constant capital, expresses a definite degree in the productivity of labor. As soon as this proportion is altered by other means than a mere change in the value of the material elements of the constant capital, or a change in the value of wages, it follows that the productivity of labor must likewise undergo a corresponding change. We shall see frequently, for this reason, that alterations affecting the factors c, v, and s imply also changes in the productivity of labor.
The same applies to the three remaining factors. namely the length of the working day, the intensity of labor, and the wages. Their influence on the mass and rate of surplus-value has been discussed in detail in volume I. It will be understood, therefore, that notwithstanding our assumption that these three factors remain constant there may be changes in v and s which may imply changes in the magnitude of these determining elements. In this respect we have but to remember that wages influence the quantity of surplus-value and the degree of the rate of surplus-value inversely from the length of the working day and the intensity of labor; that an increase of wages reduces the surplus-value, while a prolongation of the working day and an increase in the intensity of labor add to it.
Take it that a capital of 100 produces with 20 laborers by a working day of 10 hours and a total weekly wage of 20 a surplus-value of 20. Then we have 80 c + 20 v + 20 s, which implies that s' equal 100% and p' 20%.
Now let the working day be prolonged to 15 hours without an increase of wages. The total value produced by the 20 laborers is thereby increased from 40 to 60, since 10 : 15 = 40: 60. Seeing that v, the wages paid to the laborers, remains the same, the surplus-value rises from 20 to 40, and we have 80 c + 20 v + 40 s, implying that s' equals 200% and p' 40%. If, on the other hand, the working day remains unchanged at 10 hours, while wages fall from 20 to 12, the total value produced amounts to 40, but it is differently distributed. For v falls to 12, leaving a remainder of 28 for s. Then we have 80 c + 12 v + 28 s, whereby s' is raised to 233 1/3%, while the rate of profit, p', is as 28 to 92, or 30 10/23%.
We see, then, that both a prolongation of the working day (or a corresponding increase in the intensity of labor) and a fall in wages increase the mass, and thus the rate, of surplus-value. On the other hand, a rise in wages, other circumstances remaining the same, would lower the rate of surplus-value. Hence, if v rises through an increase of wages, it does not mean a greater, but only a dearer quantity of labor, and in that case s' and p' do not rise, but fall.
This indicates that a change in the working day, in the intensity of labor, and in wages cannot take place without at the same time altering v and s and their proportion, and therefore also p', which expresses the proportion of s to the total capital c + v. And it is also evident that a change in the proportion of s to v implies a corresponding change in at least one of the three determining elements of labor.
It is precisely this fact which reveals the specific organic relationship of variable capital to the movement of the total capital and its self-expansion, and also its difference from the constant capital. So far as it is a question of the generation of value, the constant capital is significant only for its value. It is immaterial for this question, whether a constant capital of, say, 1,500 p.st. represents 1,500 tons of iron at 1 p.st. each, or 500 tons of iron at 3 p.st. each. The quantity of the actual material, in which the value of the constant capital is incorporated, is immaterial for the question of the formation of value and the rate of profit. This rate varies inversely to the value of the constant capital, no matter what may be the proportion of the increase or decrease of the value of constant capital to the mass of its material elements.
It is different with the variable capital. Not its own value, not the labor incorporated in this capital, are of prime importance, but the fact that its own value implies the setting in motion of a grand total of labor whose quantity it does not express. This grand total of labor differs from the labor expressed in the value of the variable capital and paid by it in that it contains a certain amount of surplus-labor, which is so much greater, the smaller the value of the labor contained in the variable capital. Take it that a working day of 10 hours is equal to 10 shillings. If the necessary labor, which pays for the wages, or makes good the variable capital, is worth 5 shillings, then the surplus-labor amounts to 5 hours, or the surplus-value to 5 shillings. If the necessary labor amounts to 4 hours and is worth 4 shillings, then the surplus-labor is 6 hours and the surplus-value 6 shillings.
Hence, as soon as the value of the variable capital ceases to be an index of the amount of labor actually set in motion by it, as soon as the measure of this index is altered, the rate of surplus-value will vary inversely and at an inverse ratio.
Now let us pass on and apply the previously found equation of the rate of profit, p' = s' v/C, to the various cases possible. We shall change the value of the individual factors of s' v/C one after another and ascertain the effect of these changes on the rate of profit. In this way we obtain a number of different cases, which we may regard either as successively altered determinants of one and the same capital, or as different capitals existing side by side and compared with one another, no matter whether they exist in different lines of industry or different countries. In cases where the conception of some of our examples as successive conditions of the same capitals seems forced or impracticable, this objection is set aside by regarding them as illustrations of independent capitals.
We now separate the product s' v/C into its two factors s' and v/C. In the first place, we treat s' as a constant factor and analyze the effects of the possible variations of v/C. After that we treat the fraction v/C as constant and let s' go through its possible variations. Finally we treat all factors as variable magnitudes and thereby exhaust all cases from which rules concerning the rate of profit may be derived.
We make a general formula for this case, which comprises a number of sub-cases. Take two capitals C and C 1 , with their respective variable proportions v and v 1 , with equal rates of surplus-value s', and the rates of profit p' and p 1 '. Then p' = s' v/C and p 1 ' = s' v 1 /C 1 .
Now let us make a proportion of C and C 1 , and v and v 1 , for instance let the value of the fraction C 1 /C = E, and that of v 1 /v = e. Then C 1 = EC, and v 1 = ev. Substituting in the above equation these values for p 1 ', C 1 and v 1 , we obtain P 1 ' = s' ev/EC. Again, we may deduct a second formula from the above two equations, by transforming them into the equation p' : p 1 ' = s' v/C: S' v 1 /C 1 = v/C : v 1 /C 1 . Since the value of a fraction remains the same, if we multiply or divide its numerator or denominator by the same number, we may reduce v/C and v 1 /C 1 , to percentages, that is to say we may make both C and C 1 equal to 100. Then we have v/C = v/100 and v 1 /C 1 = v 1 /100. We may then drop the denominators in the above proportion and say that p' : p 1 ' = v : v 1 . In other words, with any two capitals operating with the same rate of surplus-value the rates of profit are proportioned to one another as the variable capitals are to one another, calculated in percentages on their respective total capitals.
These two formulæ comprise all cases of variation of v/C.
Before we analyze these various cases, we make another remark. Since C is the sum of c plus v, of the constant and variable capital, and since the rates of surplus-value and of profit are generally expressed in percentages, it is convenient to assume that the sum of c plus v is also equal to 100, that is to say, to express c and v in percentages. It is immaterial for the determination, not of the mass, but of the rate of profit, whether we say that a capital of 15,000, composed of 12,000 of constant and 3,000 of variable capital, produces a surplus-value of 3,000, or whether we reduce this capital to percentages. So we may say that 15,000 C = 12,000 c + 3,000 v + (3,000 s), or that 100 C = 80 c + 20 v + (20 s). In either case the rate of surplus-value, s', equals 100% and the rate of profit, p', 20%.
The same is true in the comparison of two capitals. For instance, if we compare the foregoing capital with another, such as 12,000 C = 10,800 c + 1,200 v + (1,200 s), or 100 C = 90 c + 10 v + (10 s). In the last case, s' is 100% and p', 10%. And its comparison with the foregoing capital is easier by percentages.
On the other hand, if it is a question of changes taking place in the same capital, the expression by percentages is rarely convenient, because these peculiar alterations are almost always obliterated thereby. If a capital, expressed in percentages of 80 c + 20 v + 20 s assumes the percentages of 90 c + 10 v + 10 s, we cannot tell whether the change in the composition of percentages is due to an absolute decrease of v or an absolute increase of c, or to both. In order to ascertain this, we must have the absolute magnitudes in figures. But in the analysis of the following individual cases, everything depends on the question of the way in which the variations have been accomplished. Has 80 c + 20 v been changed into 90 c + 10 v by an increase of the constant capital without any change in the variable capital, for instance by changing 12,000 c + 3,000 v into 27,000 c + 3,000 v? Or has the same result been accomplished by leaving the constant capital untouched and reducing the variable capital, for instance by changing the above capital into 12,000 c + 1,333 1/3; v (corresponding to a percentage of 90 c + 10 v)? Or have both of the original capitals been changed into 13,500 c + 1,500 v (corresponding once more to percentages of 90 c + 10 v)? It is precisely these cases which we shall have to analyze, and in so doing we must dispense with percentages, or at least employ them only in a minor degree.
If v changes its magnitude, then C can remain unaltered only by a change in the opposite direction of c, the other component of C. If C consists originally of 80 c + 20 v, and if v is reduced to 10, then C can remain 100 only by an increase of c to 90; for 90 c + 10 v = 100. Generally speaking, if v is transformed into v ± d, into v increased or decreased by d, then c must be transformed into c + d, into c decreased or increased by the same amount, into c varying in the opposite direction from v, in order that the conditions of the present case be fulfilled.
Again, if the rate of surplus-value, s', remains the same, while the variable capital, v, changes, then the mass of surplus-value must change, since s = s'v, and since one of the factors of s'v, namely v, is invested with a different value.
The assumptions of the present case produce, aside from the original equation p' = s' v/C, still another equation by the variation of v, namely p 1 ' = s' v 1 /C, in which v has become v 1 and p 1 ', the corresponding rate of profit, is to be sought.
It is found by the corresponding proportion:
p' : p 1 ' = s' v/C : s' v 1 /C = v : v 1 .
That is to say, if the rate of surplus-value and the total capital remain the same, then the original rate of profit is proportioned to the new rate of profit produced by a change in the variable capital as the original variable capital is to the changed variable capital.
If the original capital was I) 15,000 C = 12,000 c + 3,000 v + (3,000 s), and if it is now II) 15,000 C = 13,000 c + 2,000 v + (2,000 s), then C is 15,000 and the rate of surplus-value 100% in either case, and the rate of profit of I), 20%, is proportioned to that of II), 13 1/3%, as the variable capital of I), 3,000, is to the variable capital of II), 2,000, that is to say 20% : 13 1/3% = 3,000 : 2,000.
Now, the variable capital may either increase or decrease. Take first an example in which it increases. Let a certain capital be constituted and operated as follows: I) 100 c + 20 v + 10 s. Then C equals 120, s' equals 50%, and p' equals 8 1/3%. Now let the variable capital increase to 30. In that case the constant capital must fall to 90, according to our assumption, which requires that the total should remain unchanged at 120. The amount of surplus-value produced will then rise from 10 to 15, the rate of surplus-value remaining constant at 50%. Our capital then is constituted as follows:
II) 90 c + 30 v + 15 s. C equals 120, s' equals 50%, and p', 12½%.
Now let us start out with the assumption that the wages remain unchanged. Then the other factors of the rate of surplus-value, namely the working day and the intensity of labor, must also be unchanged. Therefore the increase of v from 20 to 30 can signify only that more laborers are employed. In that case the total product in values also increases by one-half, from 30 to 45, and is distributed, the same as before, to 2/3 for wages and 1/3 for surplus-value. Simultaneously with the increase in the number of laborers the constant capital, the value of the means of production, has fallen from 100 to 90. We have before us, then, a case of decreasing productivity of labor combined with a simultaneous decrease of constant capital. Is such a case economically possible?
In agriculture and industries engaged in the extraction of substances, where a decrease in the productivity of labor and, therefore, an increase in the number of laborers are readily understood, this process is accompanied on the basis and within the scope of capitalist production, by an increase of constant capital, not by a decrease. Even if our assumed decrease of c were due merely to a fall in prices, an individual capital would be able to accomplish the transition from I) to II) only under very exceptional circumstances. But in the case of two independent capitals invested in different countries, or in different lines of agriculture or extractive industry, it would not be strange if more laborers (and therefore more variable capital) were employed on less valuable or fewer means of production in the case of one than in the other.
But let us have done with the assumption that the wages remain the same, and let us explain the rise of the variable capital from 20 to 30 by a rise of wages by one-half. Then we have another case. The same number of laborers continue to work with the same or slightly reduced means of production. If the working day remains unchanged, say at 10 hours, then the total product also remains unchanged. It was and remains 30. But this amount of 30 is now required to make good the consumed variable capital. The surplus-value would have disappeared. But we had assumed that the rate of surplus-value should remain constant at 50%, the same as in I). This is possible only if the working day is prolonged by one-half, increased to 15 hours. In that case 20 laborers produce in 15 hours a total value of 45, and all conditions would be fulfilled. We should have
II). 90 c + 30 v + 15 s. C would be 120, s', 50% and p', 12½%.
Under these circumstances the 20 laborers do not require any more instruments, tools, machines, etc., than in the case of I). Only the raw materials or auxiliary substances would have to be increased by one-half. If there were a fall in the prices of these materials, then the transition from I) to II) under the conditions of our assumed case might very well be accomplished even by an individual capital. And the capitalist would be somewhat compensated by increased profits for any loss incurred through the depreciation of his constant capital.
Now let us assume that the variable capital were to be reduced instead of increased. Then we have but to reverse our example. We have but to assume that II) is the original capital and to pass from II) to I). Then II), or 90 c + 30 v + 15 s changes into I), or 100 c + 20 v + 10 s, and it is evident that this transposition does not alter any of the conditions which regulate the respective rates of profit and their mutual relations.
If v falls from 30 to 20 because the number of laborers is reduced by one-third while the constant capital increases, then we have before us the normal case of modern industry, namely an increasing productivity of labor, an operation of a larger mass of means of production by fewer laborers. That this process is necessarily connected with a simultaneous fall of the rate of profit, will be demonstrated in the third part of this volume.
On the other hand, if v falls from 30 to 20 because the same number of laborers are employed at lower wages, while the working day remains the same, then the total product in values would remain 30 v + 15 s, or 45. Since wages have fallen to 20, the surplus-value would rise to 25, the rate of surplus-value from 50% to 125%, contrary to our assumption. In order to comply with the conditions of our case, the surplus-value, with its rate at 50%, must fall to 10. The total product must, therefore, fall from 45 to 30, and this is possible only by a reduction of the working day by one-third. Then we have, the same as before, 100 c + 20 v + 10 s. C equals 120, s', 50%, and p', 8 1/3%.
It need hardly be mentioned that this reduction of the working time with a fall in wages would not occur in practice. But this is immaterial. The rate of profit is a function of several variable magnitudes, and if we wish to know in what manner these variable magnitudes influence the rate of profit, we must analyze the individual effect of each seriatim, regardless of whether such an isolated effect is practicable with one and the same capital or not.
This case differs from the preceding one only in degree. Instead of c decreasing or increasing by as much as v increases or decreases, c remains constant. Under the modern conditions of great industry and agriculture the variable capital is but a relatively small part of the total capital. For this reason, the increase or decrease of the total capital, so far as either is due to variations of the variable capital, are likewise relatively small.
Let us start out again with a capital I) of 100 c + 20 v + 10 s. C equals 120, s' 50%, and p' 8 1/3%. This will then be transformed into II) 100 c + 30 v + 15 s, with C at 130, s' at 50%, and p' at 11 7/13%. The opposite case, in which the variable capital would decrease, would be symbolized by the transition from II) to I).
The economic conditions would be essentially the same as in the preceding case, and therefore require no reiteration. The transition from I) to II) implies a decrease in the productivity of labor by one-half. The assimilation of 100 c requires an increase of labor in II) by one-half over that of I). This case may occur in agriculture. 9
While in the preceding case the total capital remained constant, owing to the conversion of constant capital into variable, or vice versa, there is in this case a tie-up of additional capital, if the variable capital is increased, and a release of previously employed capital, if the variable capital decreases.
In this case, the equation p' = s' v/C is changed into p 1 ' = s' v/C 1 . After eliminating the same factors on both sides, we have p 1 ': p' = C: C 1 . In other words, if the rates of surplus-value are the same and the variable capitals equal, the rates of profit are inversely proportioned to the total capitals.
Take it that we have three different capitals, or three different conditions of the same capital, for instance
I) 80 c + 20 v + 20 s; C = 100, s' = 100%, p' = 20%
II) 100 c + 20 v + 20 s; C = 120, s' = 100%, p' = 16 2/3%
III) 60 c + 20 v + 20 s; C = 80, s' = 100%, p' = 25%
Then we obtain the proportions:
20% : 16 2/3% = 120 : 100, and 20% : 25% = 80 : 100.
The general formula previously given for variations of v/C when s' remained constant was p 1 ' = s' ev/EC. Now it becomes p' = s' v/EC. For since v remains unchanged, the factor e, or v 1 /v, becomes equal to 1.
Since s'v equals s, the mass of surplus-value, and since both s' and v remain constant, it follows that s is not affected by any variation of C. The mass of surplus-value is the same after the change that it was before.
If c were to fall to zero, p' would be equal to s', that is to say, the rate of profit equal to the rate of surplus-value.
The alteration of c may be due either to a mere change in the value of the material elements of constant capital, or to a change in the technical composition of the total capital, that is to say a change in the productivity of labor in that line of industry. In the last named case, the increase in the productivity of social labor due to the development of industry and agriculture on a large scale would bring about a transition, in the above illustration, from III to I and from I to II. A quantity of labor paid with 20 and producing a value of 40 would first work up means of production valued at 60. With a further increase in the productivity, and the same value, the means of production would be worked up to the amount of 80, and later on of 100. A reversion of this succession would imply a decrease in productivity. The same quantity of labor would work up a smaller quantity of means of production, the business would be cut down. This may occur in agriculture, mining, etc.
A saving in constant capital increases on the one hand the rate of profit, and on the other sets free some capital. It is, therefore, of great importance for the capitalist. We shall analyze this point later on, and likewise the influence of a change of prices of the elements of constant capital, particularly of raw materials.
We see once more, by this illustration, that a variation of the constant capital uniformly affects the rate of profit, no matter whether this variation is due to an increase or decrease of the material elements of c, or merely to a change in their value.
In this case, the general formula indicated at the outset, namely p' = s' ev/EC, remains in force. It follows from this, assuming the rate of surplus-value to remain the same, that
a) the rate of profit falls, if E is greater than e, that is to say, if the constant capital increases to such an extent that the total capital grows at a faster rate than the variable capital. If a capital of 80 c + 20 v + 20 s is transformed so that it becomes 170 c + 30 v + 30 s, then s' remains at 100%, but v/C falls from 20/100 to 30/200, in spite of the fact that both v and C have augmented, and the rate of profit falls correspondingly from 20% to 15%.
b) The rate of profit remains unchanged only in the case that e equals E, that is to say, if the fraction v/C retain the same value even if the fraction is apparently changed, in other words, if its numerator and denominator are multiplied or divided by the same number. It is evident that the capital 80 c + 20 v + 20 s and the capital 160 c + 40 v + 40 s have the same rate of profit, namely 20%, because s' remains at 100% and v/C represents the same value, whether we write it 20/100 or 40/200.
c) The rate of profit arises, when e is greater than E, that is to say, when the variable capital grows at a faster rate than the total capital. If 80 c + 20 v + 20 s becomes 120 c + 40 v + 40 s, then the rate of profit rises from 20% to 25%, because s' has remained the same and v/C has risen from 20/100 to 40/160, or from 1/5; to ¼.
If the variation of v and C follows the same direction, we may look upon this change of magnitude up to a certain degree as though both of them varied in the same proportion, so that v/C would be regarded as unchanged to that extent. Beyond this point only one of them would then vary, and by this means we should reduce this complicated case to one of the preceding simpler ones.
For instance, if 80 c + 20 v + 20 s becomes 100 c + 30 v + 30 s, then the proportion of v to c, and also to C, remains the same up to the point of 100 c + 25 v + 25 s. Up to that point, the rate of profit remains likewise unchanged. We may then take our departure from 100 c + 25 v + 25 s. We find that later increased by 5 and became 30, so that C rose from 125 to 130. This is identical with the second case, that of the simple variation of v and the consequent variation of C. The rate of profit, which was originally 20%, rises by this addition of 5 v to 23 1/13, always assuming the rate of surplus-value to remain the same.
The same reduction to a simpler case can take place, whenever v and C change their magnitudes in opposite directions. For instance, let us start out once more from 80 c + 20 v + 20 s, and let this become 110 c + 10 v + 10 s. In that case, the rate of profit would have remained the same, if the variation had proceeded to the point of 40 c + 10 v + 10 s. It would still have been 20%. By adding 70 c to this intermediate form, the rate of profit is lowered to 8 1/3%. Thus we have reduced this case to a case of variation of one magnitude, namely of c.
Simultaneous variations of v, c, and C, do not, then, offer any new points of analysis. For they may be reduced in the last resort to cases in which only one factor is variable.
Even the only remaining case has actually been covered, namely that in which v and C are numerically unchanged, while their material elements experience a change of value, so that v stands for a changed quantity of assimilated labor and c for a changed quantity of assimilated means of production.
For instance, in the capital 80 c + 20 v + 20 s, let 20 v indicate originally the wages of 20 laborers working 10 hours daily. Then let the wages of each laborer increase from 1 to 1¼. In that case 20 v pay only 16 laborers instead of 20. Now, if 20 laborers produce in 200 working hours a value of 40, then 16 laborers will produce in 160 working hours a value of only 32. After deducting 20 v for wages, only 12 would remain for surplus-value. The rate of surplus-value would have fallen from 100% to 60%. But since our assumption is that the rate of surplus-value shall remain constant, the working day would have to be prolonged by one-quarter, from 10 hours to 12½ hours. If 20 laborers, working 10 hours daily, or 200 hours, produce a value of 40, then 16 laborers, working 12½ hours daily, or 200 hours, will produce the same value, and the capital of 80 c + 20 v produces the same surplus-value of 20.
Vice versa, if wages fall to such an extent that 20 v indicates the wages of 30 laborers, then s' can remain unchanged only in the case that the working day is reduced from 10 to 6 2/3 hours. For 20 × 10 = 30 × 6 2/3 = 200 working hours.
We have discussed previously in these diverging assumptions, to what extent c may express the same value in money, and yet represent different quantities of means of production corresponding to different conditions. In reality this case will very rarely be practicable in its purely theoretical form.
As for the change of value of the elements of c, by which their mass is increased or decreased, it touches neither the rate of surplus-value nor the rate of profit, so long as it does not imply a change of magnitude in v.
We have now exhausted all possible cases of variation of v, c, and C in our equation. We have seen that the rate of profit may fall, rise, or remain unchanged, while the rate of surplus-value remains the same, for the least variation in the proportion of v to c, or to C, is sufficient to change the rate of profit.
We have seen, furthermore, that there is everywhere a certain limit in the variation of v where the constancy of s' becomes economically impossible. Since every one-sided variation of c must also arrive at a certain limit where v can no longer remain unchanged, we find that every possible variation of v/C has certain limits, beyond which s' must likewise become variable. In the variations of s', which we shall now discuss, this interaction of the different variable magnitudes of our equation will become still plainer.
We obtain a general formula for the rates of profit with variable rates of surplus-value, no matter whether v/C remains constant or not, by converting the equation p' = s' v/C into p 1 ' = s 1 ' v 1 /C 1 . Here p 1 ', s 1 ', C 1 , and v 1 indicate the changed values of p', s', C, and v. Then we have p': p 1 ' = s'v/C: s 1 ' v 1 /C 1 . This may be manipulated into
p 1 ' = s 1 '/s' × v 1 /v × c/c 1 × p'.
In this case we have the equations p' = s' v/C and p 1 ' = S 1 ' v/C. In both of them v/C is equal. Therefore p': p 1 ' = s': s 1 . That is to say, the rates of profit of two capitals of the same composition are proportioned as the corresponding two rates of surplus-value. Since it is not a question, in the fraction v/C, of the absolute magnitude of v and C, but only of their proportion to one another, this applies to all capitals of equal composition, whatever may be their absolute magnitude.
80 c + 20 v + 20 s; C = 100, s' = 100% p' = 20%.
160 c + 40 v + 20 s; C = 200, s' = 50%, p' = 10%.
100% : 50% = 20% : 10%.
If the absolute magnitudes of v and C are the same in both cases, then the rates of profit are also proportioned to one another as the masses of surplus-value: p': p 1 ' = s'v: s 1 'v = s: s 1 . For instance:
80 c + 20 v + 20 s; s' = 100%, p' = 20%.
80 c + 20 v + 10 s; s' = 50%, p' = 10%.
20%: 10% = 100 × 20: 50 × 20 = 20 s: 10 s.
Now, it is evident that with capitals of equal absolute composition, or equal percentages of composition, the rates of surplus-value can differ only when either the wages, or the length of the working day, or the intensity of labor are different. Take the following three cases:
I. 80 c + 20 v + 10 s; s' = 50%, p' = 10%.
II. 80 c + 20 v + 20 s; s' = 100%, p' = 20%.
III. 80 c + 20 v + 40 s; s' = 200%, p' = 40%.
In the case of I, the total product in values is 30, namely 20 v + 10 s, in II it is 40, in III it is 60. This may come about in three different ways.
First, if the wages are different, so that 20 v expresses in every individual case a different number of laborers. Take it that capital I employs 15 laborers for 10 hours per day at a wage of 1 1/3 p.st. and that these laborers produce a value of 30 p.st, of which 20 p.st. make good the wages and 10 p.st. are surplus-value. If wages fall to 1 p.st., then 20 laborers may be employed for 10 hours, and they will produce a value of 40 p.st., of which 20 p.st. make good wages and 20 p.st. are surplus-value. If wages fall still more, for instance to 2/3 p.st., then 30 laborers may be employed for 10 hours, and they will produce a value of 60 p.st., 40 p.st. of which will represent surplus-value after deducting 20 p.st. for wages.
This case, in which the percentages of composition of the capital, the working day, the intensity of labor, are constant, while the rate of surplus-value varies on account of the variation of wages, is the only one in which Ricardo's assumption is correct, to-wit, that "profits would be high or low, exactly in proportion as wages would be low or high." (Principles, chapter I, section III, page 18 of the "Works of D. Ricardo," edited by MacCulloch, 1852.)
Secondly, if the intensity of labor varies. In that case 20 laborers produce with the same means of production in 10 hours of daily labor 30 pieces of a certain commodity in I, 40 pieces in II, and 60 pieces in III. Every piece represents, aside from the value of the means of production incorporated in it, a new value of 1 p.st. Since every 20 pieces make good the wages of 20 p.st., there remain 10 pieces at 10 p.st. for surplus-value in I, 20 pieces at 20 p.st. in II, and 40 pieces at 40 p.st. in III.
Thirdly, the working day may vary in length. If 20 laborers work with the same intensity for 9 hours in I, 12 hours in II, and 18 hours in III, then their total products, 30:40: 60 vary in the proportions 9: 12: 18. And since wages are 20 in every case, the surplus-value is 10, or 20, or 40 respectively.
An increase or decrease in wages, then, influences the rate of surplus-value, and, since v/C was assumed as constant, also the rate of profit, inversely, while an increase or decrease in the intensity of labor, a lengthening or shortening of the working day, influence them in the same direction.
In this case the following proportion applies: p': p 1 ' = s' v/C: s 1 ' v 1 /C = s'v: s 1 'v 1 = s: s 1 .
The rates of profit are proportioned to one another as the corresponding masses of surplus-value.
A variation of the rate of surplus-value, while the variable capital remains constant, signifies a change in the magnitude and distribution of the product in values. A simultaneous variation of v and s' also implies always a change in the distribution, but not always a change in the magnitude of the product in values. Three cases are possible.
a) The variation of v and s' takes place in opposite directions, but by the same amount, for instance:
80 c + 20 v + 10 s; s' = 50%, p' = 10%.
90 c + 10 v + 20 s; s' = 200%, p' = 20%.
The product in values is equal in both cases, hence the quantity of labor performed likewise: 20 v + 10 s = 10 v + 20 s = 30. The difference is only that in the first case 20 are paid for wages and 10 remain for surplus-value, while in the second case wages are 10 and surplus-value 20. This is the only case in which the number of laborers, the intensity of labor, and the length of the working day remain unchanged, while v and s' vary.
b) The variation of s' and v takes place in opposite directions, but not by the same amount. In that case the variation of either v or s' is the greater.
I. 80 c + 20 v + 20 s; s' = 100%, p' = 20%.
II. 72 c + 28 v + 20 s; s' = 71 3/7%, p' = 20%.
III. 84 c + 16 v + 20 s; s' = 125%, p' = 20%.
Capital I pays for a product in values amounting to 40 with 20 v, II a value of 48 with 28, and III a value of 36 with 16. Both the product in values and the wages have changed. But a change in the product in values means a change in the amount of labor performed, and this implies a change either in the number of laborers, the hours of labor, or the intensity of labor, or in more than one of these.
c) The variation of s' and v takes place in the same direction. In that case it intensifies the effect of either.
90 c + 10 v + 10 s; s' = 100%, p' = 10%.
80 c + 20 v + 30 s; s' = 150%, p' = 30%.
92 c + 8 v + 6s; s' = 75%, p' = 6%.
In these cases the three products in value are also different namely 20, 50, and 14. And this difference in the magnitude of the respective quantities of labor reduces itself once more to a difference in the number of laborers, the hours of labor, and the intensity of labor, or of several or all of these factors.
This case offers no new points of view and is solved by the general formula given under II, in which s' is variable.
The effect of a change in the magnitude of the rate of surplus-value on the rate of profit is summed up, according to the foregoing, by the following cases:
1) p' increases or decreases in the same proportion as s', if v/C remains constant.
80 c + 20 v + 20 s; s' = 100%, p' = 20%.
80 c + 20 v + 10 s; s' = 50%, p' = 10%.
100%: 50% = 20%: 10%.
2) p' rises or falls at a greater rate than s', if v/C moves in the same direction as s', that is to say, if v/C increases or decreases when s' increases or decreases.
80 c + 20 v + 10 s; s' = 50%, p' = 10%.
70 c + 30 v + 20 s; s' = 66 2/3%, p' = 20%.
50%: 66 2/3% 8lt; 10%: 20%.
3) p' rises or falls at a smaller rate than s', if v/C changes in the opposite direction from s', but at a smaller rate.
80 c + 20 v + 10 s; s' = 50%, p' = 10%.
90 c + 10 v + 15 s; s' = 150%, p' = 15%.
50%: 150% > 10%: 15%.
4) p' rises, while s' falls, or falls while s' rises, if changes in the opposite direction and at a greater rate than s'.
80 c + 20 v + 20 s; s' = 100%, p' = 20%.
90 c + 10 v + 15 s; s' = 150%, p' = 15%.
s' has risen from 100% to 150%, p' has fallen from 20% to 15%.
5) Finally, p' remains constant, while s' rises or falls, if v/C changes in the opposite direction, but at exactly the same rate, as s'.
It is only this last case which requires some further explanation. We observed in the variations of v/C that the same rate of surplus-value may be an expression of different rates of profit. We see now that the same rate of profit may be based on different rates of surplus-value. So long as s' is constant, any change in the proportion of v to C is sufficient to call forth a difference in the rate of profit. But if s' varies in magnitude, it requires a corresponding inverse change of v/C in order that the rate of profit may remain the same. This happens but exceptionally in the case of one and the same capital, or of two capitals in one and the same country. Take it that we have a capital 80 c + 20 v + 20 s; C = 100, s' = 100%, p' = 20%. And let us assume that wages fall to such an extent that the same number of laborers may be bought for 16 v instead of 20 v. Then we have released 4 v, and other circumstances remaining the same, our capital will have the composition 80 c + 16 v + 24 s; C = 96, s' = 150%, p' = 25%. In order that p' may be 20%, as before, the total capital would have to increase to 120, the constant capital, therefore, to 104, thus, 104 c + 16 v + 24 s; C = 120, s' = 150%, p' = 20%.
This would be possible only if the fall in wages were accompanied by a change in the productivity of labor, which would require such a change in the composition of capital. Or, it might be that the money-value of the constant capital would increase from 80 to 104. In short, it would require an accidental coincidence of conditions such as occurs very rarely. In fact, a variation of s' which does not imply a simultaneous variation of v, and thus of v/C is practicable only under very definite conditions. It may happen in lines of industry in which only fixed capital and labor are employed, while the materials of labor are supplied by nature.
But this is not so in the comparison of the rates of profit of two different countries. For in that case the same rate of profit is based as a rule on different rates of surplus-value.
It follows from all of these five cases that a rising rate of profit may be the companion of a falling or rising rate of surplus-value; a falling rate of profit go hand in hand with a rising or falling rate of surplus-value; a constant rate of profit exist by the side of a rising or falling rate of surplus-value. And we have seen under No. I that a rising, falling, or constant rate of profit may be based on a constant rate of surplus-value.
The rate of profit, then, is determined by two main factors, namely the rate of surplus-value and the composition of the value of capital. The effects of these two factors may be briefly summed up in the manner stated hereafter. We may, in this summing up, express the composition of capital in percentages, for it is immaterial for this point which one of the two portions of capital is the cause of variation.
The rates of profits of two different capitals, or of one and the same capital in two different successive conditions, are equal
1) If the percentages of composition of capital are the same and the rates of surplus-value equal.
2) If the percentages of composition are not the same, and the rates of surplus-value unequal, provided that the products of the multiplication of the rates of surplus-value by the percentages of the variable portions of capital (s' and v) are the same, that is to say, the masses of surplus-value (s = s'v) calculated in percentages on the total capital; in other words, if the factors s' and v are inversely proportioned to one another in both cases.
They are unequal
1) If the percentages of composition are equal and the rates of surplus-value unequal, in which case the rates of profit are proportioned as the rates of surplus-value.
2) If the rates of profit are the same and the percentages of composition unequal, in which case the rates of profit are proportioned as the variable portions of capital.
3) If the rates of profit are unequal and the percentages of composition not the same, in which case the rates of profit are proportioned as the products s'v, that is to say, as the masses of surplus-value calculated in percentages on the total capital. 10
THE effect of the turn-over on the production of surplus-value, and consequently of profit, has been discussed in volume II. It may be briefly summarized in the statement that the entire capital cannot be employed all at once in production, because the turn-over requires a certain lapse of time; for this reason a portion of the capital is always lying fallow, either in the form of money-capital, of a supply of raw materials, of finished but still unsold commodity-capital, or of outstanding bills not yet due; hence the capital active in the production and appropriation of surplus-value is always short by this amount, and the production and appropriation of surplus-value is curtailed to that extent. The shorter the period of turn-over, the smaller is the fallow portion of capital as compared with the whole, and the larger will be the appropriated surplus-value, other conditions remaining the same.
It has been shown explicitly in the second volume to what extent the mass of the produced surplus-value is augmented by the reduction of the period of turn-over, or of one of its two sections, the time of production and the time of circulation. But it is evident that any such reduction increases the rate of profit, since this rate expresses but the mass of surplus-value produced in proportion to the total capital employed in production. Whatever has been said in the second part of the second volume in regard to surplus-value, applies just as well to profit and the rate of profit, and requires no repetition at this place. We shall touch only upon a few of the principal points.
A reduction of the time of production is mainly due to an increase in the productivity of labor, a thing commonly called the progress of industry. If this does not require at once a considerable extra-outlay of capital for expensive machinery, etc., and thus a reduction of the rate of profit, which is calculated on the total capital, this rate must rise. And this is decidedly the case with many of the latest improvements in metallurgy and chemical industry. The recently discovered methods of making iron and steel, such as the processes of Bessemer, Siemens, Gilchrist-Thomas, etc., shorten formerly tedious processes to a minimum with relatively small expense. The making of alizarin, a red coloring substance extracted from coal-tar, produces in a few weeks, by the help of already existing installations for the manufacture of coal-tar colors, the same results which formerly required years. It took at least one year to mature the plants from which this coloring matter was formerly extracted, and it was customary to let them grow a few years before the roots were used for the purpose of making color.
The time of circulation is reduced principally by improved means of communication. In this respect the last fifty years have brought about a revolution, which can be compared only with the industrial revolution of the last half of the eighteenth century. On land the macademized road has been displaced by the railroad, on sea the slow and irregular sailing vessel by the rapid and regular steamboat line, and the entire globe has been circled by telegraph wires. The Suez Canal has fully opened Eastern Asia and Australia for steamer traffic. The time of circulation of a shipment of commodities to Eastern Asia was at least twelve months as late as 1847, and it has now been reduced to almost as many weeks. The two large centers of commercial crises, 1825-1857, America and India, have been brought from 70 to 90 per cent. nearer to Europe by this revolution of the means of communication, and have thereby lost a good deal of their explosive nature. The period of turn-over of the world's commerce has been reduced to the same extent, and the productive capacity of the capital engaged in it has been doubled or trebled. It goes without saying that this has not been without effect on the rate of profit.
In order to view the effect of the turn-over of the total capital on the rate of profit in its purest form, it is necessary to assume all other conditions of two compared capitals as equal. Aside from the rate of surplus-value and the working day it is especially the percentages of composition which we assume to be the same. Now let us select a capital A composed of 80 c + 20 v = 100 C. Let this have a rate of surplus-value of 100%, and let it be turned over twice per year.
The annual product is then 160 c + 40 v + 40 s. But for the purpose of ascertaining the rate of profit we do not calculate the 40 s on the turned-over capital-value of 200. We calculate it on the advanced capital of 100, and we obtain thus a rate of profit of 40%.
Now let us compare this with a capital B composed of 160 c + 40 v = 200 C, which has the same rate of surplus-value, 100%, but which is turned over only once a year.
The annual product of this capital is the same as that of A, namely 160 c + 40 v + 40 s. But the 40 s in this case are to be calculated on an advance of capital amounting to 200, so that the rate of profit of B is only 20%, or one-half that of A.
We find, then, that with capitals with equal percentages of composition, equal rates of surplus-value, and equal working days, the rates of profit are proportioned inversely as their periods of turn-over. If either the composition, or the rates of surplus-value, or the working day, or the wages, are unequal in the two compared cases, then other differences are naturally produced in the rates of profit. But these are not directly dependent on the turn-over, and do not concern us at this point. They have already been discussed in chapter III.
The direct effect of a reduced period of turn-over on the production of surplus-value, and consequently of profit, consists in the increased effectiveness given thereby to the variable portion of capital, as shown in volume II, chapter XVI, The Turn-Over of Variable Capital. It was demonstrated in that chapter that a variable capital of 500, which is turned over ten times per year, produces during this time as much surplus-value as a variable capital of 5,000 with the same rate of surplus-value and the same wages, turned over once a year.
Take a capital (I) consisting of 10,000 fixed capital, with an annual wear and tear of 10%, or 1,000, furthermore of 500 circulating constant and 500 variable capital. Let the rate of surplus-value be 100%, and let the variable capital be turned over ten times per year. For the sake of simplicity we assume in all following examples that the circulating constant capital is turned over in the same time as the variable, which is generally the case in practice. Then the product of one such period of turn-over will be
100 c (wear) + 500 c + 500 v + 500 s = 1,600.
And the product of one entire year, with ten such turn-overs, will be
1,000 c (wear) + 5,000 c + 5,000 v + 5,000 s = 16,000.
Then C is 11,000, s is 5,000, p' is 5000/11000, or 45 5/11%.
Now let us take another capital (II), composed of 9,000 fixed capital, with an annual wear and tear of 1,000, circulating constant capital 1,000, variable capital 1,000, rate of surplus-value 100%, number of annual turn-overs of variable capital 5. Then the product of each one of these turn-overs of the variable capital will be
200 c (wear) + 1,000 c + 1,000 v + 1,000 s = 3,200.
And the annual product (of all five turn-overs) will be
1,000 c (wear) + 5,000 c + 5,000 v + 5,000 s = 16,000.
Then C is 11,000, s is 5,000, and p' is 5000/11000, or 45 5/11%.
Take furthermore a third capital (III) with no fixed capital, 6,000 circulating constant capital, and 5,000 variable capital. Let the rate of surplus-value be 100%, and let there be one turn-over per year. Then the total product of one year is
6,000 c + 5,000 v + 5,000 s = 16,000.
C is 11,000, s is 5,000, and p' is 5000/11000, or 45 5/11%.
In other words, we have in all three of these cases the same annual mass of surplus-value, namely 5,000, and since the total capital is likewise the same in all three cases, namely 11,000, the rate of profit is also the same, namely 45 5/11%.
But now let us assume that capital (I) has only 5 instead of 10 turn-overs of its variable capital per year. In that case the outcome is different. The product of one turn-over is then 200 c (wear) + 500 c + 500 v + 500 s = 1,700. And the product of one year is
1,000 c (wear) + 2,500 c + 2,500 v + 2,500 s = 8,500.
C is 11,000, s is 2,500, p' is 2500/11000, or 22 8/11%. The rate of profit has fallen by one-half, because the time of turn-over has been doubled.
The amount of surplus-value appropriated during one year is therefore equal to the mass of surplus-value appropriated during one turn-over of the variable capital multiplied by the number of such turn-overs per year. If we call the surplus-value, or profit, appropriated during one year S, the surplus-value appropriated during one period of turn-over of the variable capital s, the number of turn-overs of the variable capital in one year n, then S = sn, and the annual rate of surplus-value S' = s'n, as demonstrated in Volume II, chapter XVI, I.
It is understood that the formula p' = s' v/c = s' v/c+v is correct only so long as the v of the numerator is the same as that of the denominator. In the denominator v stands for the entire portion of the total capital used on an average as variable capital for the payment of wages. In the numerator, v is determined in the first place by the fact that a certain amount of surplus-value s is produced and appropriated by it. The proportion of this surplus-value to the variable capital, s/v, constitutes the rate of surplus-value. It is only in this way that the formula p' = s/c+v is transformed into p' = s' v/c+v. Now the v of the numerator is more definitely described by stating that it must be equal to the v of the denominator, that is to say equal to the entire variable capital of C. In other words, the equation p' = s/C can be transformed into the equation p' = s' v/c+v only in the case that s stands for the surplus-value produced in one turn-over of the variable capital. If s stands for only a portion of this surplus-value, then s = s'v is still correct, but this v is then smaller than the v in C = c + v, because less than the entire variable capital has been employed in the payment of wages. On the other hand, if s stands for more than the surplus-value of one turn-over of v, then a portion of this v, or perhaps the whole, serves twice, namely in the first and in the second turn-over, and eventually it may serve in the subsequent turn-overs. The v which produces the surplus-value, and which represents the sum of all paid wages, is then greater than the v in c + v and the calculation becomes wrong.
In order that the formula for the annual rate of profit may be exact, we must substitute the annual rate of surplus-value for the simple rate of surplus-value, we must substitute S' or s'n for s'. In other words, we must multiply the rate of surplus-value, s', or, what amounts to the same, the variable capital v contained in C, with n, the number of turn-overs of this variable capital in one year. Thus we obtain p' = s'n v/C, which is the formula for the calculation of the annual rate of profit.
In most cases the capitalist himself does not know the amount of variable capital invested in his business. We have seen in chapter VIII of volume II, and shall see further along, that the only distinction which forces itself upon the capitalist within his capital is that of fixed and circulating capital. From the cash-box containing the money-part of the circulating capital in his hands, so far as it is not deposited in a bank, he takes the money to pay wages, and from the same cash-box he takes the money for raw and auxiliary materials. And he credits both expenditures to the same cash account. And even if he should keep a separate account for wages, it would show at the end of the year the amounts paid out for wages, that is vn, but not the variable capital v itself. In order to ascertain this, he would have to make a special calculation, of which we propose to give an illustration.
We select for this purpose the cotton spinnery of 10,000 mule spindles described in volume I. We assume that the data there given for one week of April, 1871, are in force during the whole year. The fixed capital incorporated in the machinery was valued at 10,000 p.st. The circulating capital was not given. We assume it to have been 2,500 p.st. This is a rather high estimate, but it is justified by the assumption, which we must always make in this discussion, that no credit was in force, in other words, no permanent or temporary employment of other people's capital. The value of the weekly product was composed of 20 p.st. for wear of machinery, 358 p.st. of circulating constant capital (rent 6 p.st., cotton 342 p.st., coal, gas, oil, 10 p.st.), 52 p.st. of variable capital paid out for wages, and 80 p.st. of surplus-value. The formula was, therefore
20 c (wear) + 358 c + 52 v + 80 s = 510.
The weekly advance of circulating capital consisted therefore of 358 c + 52 v = 410, and its percentages of composition were 87.3 c + 12.7 v. Calculating the entire circulating capital of 2,500 p.st., on this basis, we obtain 2,182 p.st. of constant and 318 p.st. of variable capital. Since the total expenditure for wages in one year was 52 times 52 p.st., or 2,704 p.st., it follows that the variable capital of 318 p.st. was turned over almost exactly 8½ times in one year. The rate of surplus-value was 80/52, or 153 11/13%. We calculate the rate of profit from these elements by inserting the above values in the formula p' = s'n v/C. Since s' is 153 11/13, n is 8½ v is 318, and C is 12,500, we have
p' = 153 11/13 × 8½ × 818/12,500 = 33.27%.
We test this result by means of the simple formula p' = s/C. The total surplus-value or profit, of one year amounts to 52 times 80 p.st., or 4,160 p.st. Dividing this by the total capital of 12,500, we obtain 33.28%, or almost the identical result. This is an abnormally high rate of profit, due to the extraordinarily favorable conditions of the moment (very low prices of cotton and very high prices of yarn). In reality this rate was certainly not maintained throughout the year.
The term s'n in the formula p' = s'n v/c stands for the same thing which was called the annual rate of surplus-value in volume II. In the above case it is 153 11/13% multiplied by 8½, or in exact figures 1,307 9/13%. A certain brave soul was shocked to the point of speechlessness over the abnormity of an annual rate of profit of 1,000%, which had been used as an illustration in that volume. Perhaps he will now settle down peacefully and contemplate this annual rate of surplus-value of more than 1,300% taken from the practical life of Manchester. In times of greatest prosperity, such as we have not seen for a long time, a similar rate is by no means rare.
By the way, this is an illustration of the actual composition of capital in modern great industry. The total capital is divided into 12,182 p.st. of constant and 318 p.st. of variable capital, a total of 12,500 p.st. In percentages this is 97½ c + 2½ v = 100 C. Only one-fortieth of the total capital serves for the payment of wages, but it is turned over eight times during the year.
Since very few capitalists take the trouble of making similar calculations with reference to their own business, the science of statistics is almost completely silent regarding the proportion of the constant portion of the total social capital to its variable portion. Only the American Census gives what is possible under modern conditions, namely the amount of wages paid in each line of business and the profits realized. These data are, of course, very doubtful, because they are based on uncontrollable statements of the capitalists, but they are nevertheless very valuable, and the only records available on this subject. In Europe we are far too delicate to expect such revelations from our great capitalists.—F. E.]
THE increase of absolute surplus-value, or the prolongation of surplus-labor and thus of the working day, while the variable capital remains the same and employs the same number of laborers at the same nominal wages, no matter whether overtime is paid for or not, reduces relatively the value of the constant capital as compared to the total and the variable capital, and thereby increases the rate of profit even aside from the growth and mass of surplus-value and a possibly rising rate of surplus-value. The volume of the fixed portion of constant capital, such as factory buildings, machinery, etc., remains the same, no matter whether they serve for 16 or for 12 hours in the labor-process. A prolongation of the working day does not require any new expenditures for this most expensive portion of the constant capital. Furthermore, the value of the fixed capital is thereby reproduced in a smaller number of periods of turn-over, so that the time for which it must be advanced in order to make a certain profit is abbreviated. A prolongation of the working day therefore increases the profit, even if overtime is paid, or even if it is paid better, up to a certain limit, than the normal hours of labor. The ever more pressing necessity for the increase of fixed capital in modern industry was therefore one of the main reasons which induced profit-loving capitalists to prolong the working day. 11
The same conditions do not obtain if the working day is constant. In that case it is necessary either to increase the number of laborers and with them to a certain extent the mass of fixed capital (buildings, machinery, etc.), in order to exploit a greater quantity of labor (for we leave aside the question of deductions from wages or depression of wages below their normal level), or, if the intensity of labor and the productivity of labor are to be augmented and more relative surplus-value produced, the quantity of the circulating portion of constant capital increases in those lines which use raw materials, since more raw material is worked up within a certain time. And in the second place, the mass of machinery set in motion by the same number of laborers also increases, in other words, both portions of constant capital increase. An increase in surplus-value, then, is accompanied by a growth of the constant capital, the growing exploitation of labor goes hand in hand with a heightened expenditure of the means of production by which labor is exploited, in other words, a greater investment of capital. The rate of profit is therefore reduced on one side while it increases on the other.
Quite a number of running expenses remain almost or entirely the same, whether the working day is long or short. The cost of supervision is smaller for 500 working men during 18 working hours than for 750 working men during 12 working hours. "The running expenditures of a factory at ten hours of labor are almost as high as at twelve hours." (Report of Factory Inspectors, October, 1848, page 37.) State and municipal taxes, fire insurance, wages of various permanent employes, depreciation of machinery, and various other expenses of a factory, run on just the same, whether the working time is long or short. To the extent that production decreases, these expenses rise as compared to the profit. (Reports of Factory Inspectors, October, 1862, page 19.)
The period in which the value of machinery and of other components of fixed capital is reproduced is practically determined, not by the mere duration of time, but by the duration of the entire labor-process during which it serves and wears out. If the laborers must work 18 hours instead of 12, it makes a difference of three days per week, so that one week is stretched into one and a half, and two years into three. If this overtime is not paid for, then the laborers supply the capitalists not only with the normal surplus-labor without receiving an equivalent, but also give one week out of every three, and one year out of every three, for nothing. In this way the reproduction of the value of the machinery is speeded up by 50% and accomplished in two-thirds of the time which would be ordinarily required.
We start in this analysis, and in that of the fluctuations of the prices of raw materials (chapter VI), from the assumption that the mass and rate of surplus-value are given quantities, in order to avoid useless complications.
We have already shown in our presentation of co-operation, of division of labor and machinery, that economies in the conditions of production, such as are found in production on a large scale, are mainly due to the fact that these conditions are social ones growing out of the combination of labor-processes. The means of production are worked up by the aggregate laborer, a co-operation of many laborers on an immense scale, instead of by laborers operating in a disconnected way or co-operating at best on a small scale. In a large factory with one or two central motors the cost of these motors does not increase at the same rate as their horse-powers and their resulting extension of activity. The cost of transmission of power does not grow at the same rate as the number of working machines set in motion by it. The frame of any individual machine does not become dearer at the same rate as the number of tools which it employs as its organs. And so forth. The concentration of means of production furthermore saves buildings of various sorts, not only for actual working rooms, but also for storage sheds, etc. It is the same with expenses for fuel, light, etc. Other conditions of production remain the same, whether used by many or by few.
This entire line of economies arising from the concentration of means of production and their use on a large scale has for its fundamental basis the accumulation and co-operation of working people, the social combination of labor. Hence it has its source quite as much in the social nature of labor as the surplus-value considered individually has its source in the surplus-labor of the individual laborer. Even the continual improvements possible and necessary in this line are due solely to the social experiences and observations made in production on a large scale through the combination of social labor.
The same is true of the second great branch of economies in the conditions of production. We refer to the reconversion of the excrements of production, the so-called offal, into new elements of production, either of the same, or of some other line of industry; the processes by which these so-called excrements are thrown back into the cycle of production and consequently of consumption, whether productive or individual. This line of economies, which we shall examine more closely later on, is likewise the result of social labor on a large scale. It is the abundance of these excrements due to large scale production which renders them available for commerce and turns them into new elements of production. It is only as excrements of combined production on a large scale that they become valuable for the productive process as bearers of new exchange-values. These excrements, aside from the services which they perform as new elements of production, reduce the cost of raw material to the extent that they are saleable. For a normal loss is always calculated as a part of the cost of raw material, namely the quantity ordinarily wasted in its consumption. The reduction of the cost of this portion of constant capital increases to that extent the rate of profit, assuming the amount of the variable capital and the rate of surplus-value to be given quantities.
If the surplus-value is given, then the rate of profit can be increased only by a reduction of the value of the constant capital required for the production of commodities. To the extent that the constant capital enters into the production of commodities, it is not its exchange-value, but its use-value, which is taken into consideration. The quantity of labor which the flax can absorb in a spinnery does not depend on its exchange-value, but on its quantity, assuming the degree of productivity of labor, that is to say, the stage of technical development, to be given. In like manner the assistance rendered by a machine to, say, three laborers does not depend on its exchange-value, but on its use-value as a machine. In one stage of technical development a bad machine may be expensive, in another a good machine may be cheap.
The increased profit gathered by a capitalist through the cheapening of such things as cotton, spinning machinery, etc., is the result of a heightened productivity of labor. Of course, this improvement was not introduced in the spinnery, but in the cultivation of cotton and the building of machinery. There it required a smaller expense for the fundamentals of production in order to materialize a certain quantity of labor and secure possession of a certain amount of surplus-labor. This means a reduction of the expense required for the appropriation of a certain quantity of surplus-labor.
We mentioned in the foregoing the savings realized in the process of production by the co-operative use of the means of production by socially combined laborers. Other economies, resulting in the expenditure of constant capital from the shortening of the time of circulation (a result brought about largely by the development of the means of communication) will be discussed later on. At this point we shall mention the economies due to progressive improvements of machinery, namely 1) of its substance, such as iron for wood; 2) the cheapening of machinery by the improvement of methods of manufacture, so that the value of the fixed portion of constant capital, while continually increasing with the development of labor on a large scale, does not grow at the same rate; 12 3) the special improvements enabling the existing machinery to work more cheaply and effectively, for instance, improvements of steam boilers, etc., which will be further discussed later on; 4) the reduction of waste through better machinery.
Whatever reduces the wear of machinery, and of the fixed capital in general, for any given period of production, cheapens not only the individual commodity, seeing that every individual commodity reproduces in its price its share of this wear and tear, but reduces also the aliquot portion of the invested capital for this period. Repair work, etc., to the extent that it becomes necessary, is figured in with the original cost of the machinery. A reduction of the expense for repairs, due to a greater durability of the machinery, reduces the price of this machinery correspondingly.
It may be said also of these economies, at least of most of them, that they are possible only through the combination of labor and are often not realized until production is carried forward on a still larger scale, so that they are due to an even greater combination of laborers in the direct process of production.
On the other hand, the development of the productive power of labor in any one line of production, for instance in the production of iron, coal, machinery, buildings, etc., which may be in part connected with improvements on the field of intellectual production, especially in natural science and its practical application, appears to be the premise for a reduction of the value, and consequently of the cost, of means of production in other lines of industry, for instance in the textile business or in agriculture. This follows naturally from the fact that a commodity, which issues as a product from a certain line of production, enters into another as a means of production. Its dearness or cheapness depends on the productivity of labor in that line of production from which it issues as a product. Thus it is at the same time a basic condition, not only for the cheapening of commodities into whose production it enters as a means of production, but also for the reduction of the value of constant capital, whose element it becomes, and thereby for the increase of the rate of profit.
The characteristic feature of this kind of economies in the constant capital due to the progressive development of industry is that the rise in the rate of profit in one line of industry is the result of the increase of the productive power of labor in another. That which the capitalist appropriates in this case is once more a gain which is the product of social labor, although not a product of the laborers directly exploited by him. Such a development of the productive power is traceable in the last instance to the social nature of the labor engaged in production; to the division of labor in society; to the development of intellectual labor, especially of the natural sciences. The capitalist thus appropriates the advantages of the entire system of the division of social labor. It is the development of the productive power of labor in its exterior department, in that department which supplies it with means of production, which relatively lowers the value of the constant capital employed by the capitalist and consequently raises the rate of profit.
Another raise in the rate of profit is produced, not by economies in the labor creating the constant capital, but by economies in the operation of this capital itself. On one hand, the concentration of laborers, and their co-operation on a large scale, saves constant capital. The same buildings, appliances for fuel and light, etc., cost relatively less for large scale than for small scale production. The same is true of power and working machinery. Although their absolute value increases, it falls relatively in comparison to the growing extension of production and the magnitude of the variable capital, or to the mass of labor-power set in motion. The economy realized by a certain capital within its own line of production is first and foremost an economy in labor, that is to say, a reduction of the paid labor of its own laborers. The previously mentioned economy is distinguished from this one by the fact that it accomplished the greatest possible appropriation of the unpaid labor in other lines in the most economical way, that is to say, with as little expense as a certain scale of production will permit. To the extent that this economy does not rest on the previously mentioned exploitation of the productivity of the social labor employed in the production of constant capital, or in an economy arising from the operation of the constant capital itself, it is due either directly to the co-operation and social nature of labor within a certain line of production, or to the production of machinery, etc., on a scale in which its value does not grow at the same rate as its use-value.
Two points must be kept in view here: First, if the value of c were zero, then p' would be equal to s', and the rate of profit would be at its maximum. In the second place, the most important thing for the direct exploitation of labor is not the exchange-value of the employed means of exploitation, whether they be fixed capital, raw materials or auxiliary substances. In so far as they serve as means to absorb labor, as media in and by which labor and surplus-labor are materialized, the exchange-value of buildings, raw materials, etc., is quite immaterial. That which is ultimately essential is on the one hand the quantity of them technically required for their combination with a certain quantity of living labor, and on the other hand their fitness; in other words, not only the machinery, but also the raw and auxiliary materials must be good. The good quality of the raw material determines in part the rate of profit. Good material leaves less waste. A smaller mass of raw materials is then needed for the absorption of the same quantity of labor. The resistance to be overcome by the working machine is also less. This affects in part even the surplus-value and the rate of surplus-value. The laborer consumes more time with bad raw materials than he would with the same quantity of good material. Wages remaining the same, this implies a reduction of the surplus-labor. Furthermore this affects materially the reproduction and accumulation of capital which depend more on the productivity than on the mass of labor employed, as shown in volume I.
The fanatic hankering of the capitalist after economies in means of production is therefore intelligible. That nothing is lost or wasted, that the means of production are consumed only in the manner required by production itself, depends partly on the skill and intelligence of the laborers, partly on the discipline exerted over them by the capitalist. This discipline will become superfluous under a social system in which the laborers work for their own account, as it has already become practically superfluous in piece-work. This fanatic love of the capitalist for profit is expressed, on the other hand, by the adulteration of the elements of production, which is one of the principal means of reducing the value of the constant capital in comparison with the variable capital, and thus of raising the rate of profit. In addition to this, the sale of these elements of production above their value, so far as this value reappears in the product, plays a considerable role in cheating. This practice plays an essential part particularly in German industry, whose maxim seems to be: People will surely appreciate getting first good samples and then inferior goods from us. However, these matters belong in a discussion of competition, and do not further concern us here.