CHAPTER XLVIII.: THE TRINITARIAN FORMULA.

CHAPTER XLIX.: A CONTRIBUTION TO THE ANALYSIS OF THE PROCESS OF PRODUCTION.

FOR the purposes of the following analysis we may leave out of consideration the distinction between the price of production and the value, since this distinction falls altogether to the ground, when, as is the case here, the value of the total annual product of labor is under discussion, in other words, the value of the product of the total social capital.

Profit (profit of enterprise plus interest) and rent are nothing but peculiar forms assumed by particular parts of the surplus-value of commodities. The magnitude of the surplus-value is the limit of the sum of parts, into which it may be divided. The average profit plus the rent are, therefore, equal to the surplus-value. It is possible that a part of the surplus labor contained in the commodities, and thus of the surplus-value, does not take part directly in the equalization tending toward an average rate of profit, so that a part of the value of commodities is not expressed at all in their price. But in the first place, this is balanced either by the fact that the rate of profit increases, when the commodities sold below their value form an element of the constant capital, or by the fact that profit and rent are represented by a larger product, when the commodities sold below their value pass over into that portion of the value which is consumed as revenue in the shape of articles for individual consumption. In the second place, the average movement strikes the balance. At any rate, even if a portion of the surplus-value is not expressed in the price and is lost so far as the formation of prices is concerned, the sum of average profit plus rent in their normal form can never be larger than the total surplus-value, although it may be smaller. Their normal form is conditioned upon wages corresponding to the value of labor-power. Even monopoly rent, to the extent that it is not a deduction from wages, and does not constitute a special category, must be indirectly always a part of the surplus-value. If it is not a part of the surplus price above the cost of production of the commodity itself, of which it is a constituent part, as in the case of differential rent, or a spare portion of the surplus-value of the commodity itself, of which it is a constituent part, above that portion of its own surplus-value which is measured by the average profit (as in the case of absolute rent), it is at least a part of the surplus-value of other commodities, that is, of commodities which are exchanged for this commodity, which has a monopoly price.

The sum of average profit plus ground-rent can never be greater than the magnitude of which they are the parts and which exists before they are so partitioned. It is, therefore, immaterial for our discussion, whether the entire surplus-value of the commodities, that is, all the surplus labor materialized in the commodities, is realized in their price or not. The surplus labor is not entirely realized for the simple reason that, owing to the continual change in the amount of socially necessary labor for the production of a certain commodity, a change arising out of the continual change in the productive power of labor, one portion of the commodities is always produced under abnormal conditions and must, therefore, be sold below its individual value. At any rate, profit plus rent equal the total realized surplus-value (surplus-labor), and for the purposes of the present discussion the realized surplus-value may be assumed as equal to all surplus-value; for profit and rent are realized surplus-value, or generally speaking the surplus-value which passes into the prices of commodities, which is practically all the surplus-value forming a constituent part of this price.

On the other hand, the wages, which are the third significant form of revenue, are always equal to the variable portion of capital, which is the portion invested, not in means of production, but in the purchase of living labor-power, in the payment of laborers. (The labor paid in the expenditure of revenue is itself paid in wages, profit, or rent, and therefore does not form any portion of the value of commodities by which it is paid. Hence it is not considered in the analysis of the value of commodities and of the component parts into which it is divided.) Wages are the materialization of that portion of the total working day of the laborer, in which the value of the variable capital and thus the price of labor is reproduced. It is that portion of the value of commodities, in which the laborer reproduces the value of his own labor-power, or the price of his labor. The total working day of the laborer is divided into two parts. One portion is that in which he performs the amount of labor necessary to reproduce the value of his own means of subsistence. It is the paid portion of his total labor, that portion which is necessary for his own maintenance and reproduction. The entire remaining portion of the working day, the entire surplus quantity of labor performed above the value of the labor realized in his wages, is surplus labor, unpaid labor, represented by the surplus-value of his entire product in commodities (and thus by a surplus quantity of commodities), surplus-value, which in its turn is divided into differently named parts, into profit (profit of enterprise plus interest) and rent.

The entire portion of the value of commodities, then, in which the total labor of the laborers added during one day, or one year, is realized, is divided into the value of wages, into profit and into rent. For this total labor is divided into necessary labor, by which the laborer creates that portion of the value of his product, with which he is himself paid, that is, his wages, and into unpaid surplus labor, by which he creates that portion of the value of the product, which represents surplus-value and which is later divided into profit and rent. Aside from this labor the laborer does not perform any labor, and he does not create any value outside of the total value of the product, which assumes the forms of wages, profit and rent. The value of the annual product, in which the new labor added by the laborer during the year is incorporated, is equal to the wages, or the value of the variable capital, plus the surplus-value, which in its turn is divided into profit and rent.

The entire portion of the value of the annual product, then, which the laborer creates in the course of the year, is expressed in the annual sum of the values of the three revenues, the values of wages, profit, and rent. Evidently, therefore, the value of the constant portion of capital is not reproduced in the value of the annually created product, for the wages are only equal to the value of the variable portion of capital advanced in production, and rent and profit are only equal to the surplus-value, the produced excess of value above the total value of the advanced capital, which is equal to the value of the constant plus the value of the variable capital.

It is immaterial for the difficulty to be solved here that a portion of the surplus-value converted into the form of profit and rent is not consumed as revenue, but is accumulated. That portion, which is saved up as a fund for accumulation, serves for the formation of new, additional, capital, but not for the reproduction of the old capital, neither of that portion of the old capital which is invested in wages nor of that which is invested in means of production. We may, therefore, assume here for the sake of simplicity that the revenues pass wholly into individual consumption. The difficulty has a twofold aspect. On the one hand, the value of the annual product, in which these revenues, wages, profit and rent, are consumed, contains a portion of value, which is equal to the portion of value of the constant part of capital used up in it. It contains this portion of value in addition to the other portion, which resolves itself into wages and that which resolves itself into profit and rent. Its value is therefore equal to wages plus profit plus rent plus C (its constant portion of value). How can an annually produced value, which equals only wages plus profit plus rent, buy a product which has a value of wages plus profit plus rent plus C?

How can the annually produced value buy a product, which has a higher value than its own?

On the other hand, if we leave aside that portion of the constant capital which did not pass over into the product, and which, therefore, continues to exist after the annual production of commodities as it did before it; in other words, if we leave aside the employed, but not consumed fixed capital, we find that the constant portion of the advanced capital has been wholly transferred to the new product in the shape of raw and auxiliary materials, whereas a part of the instruments of labor has been wholly consumed and another part of them only partially, so that only a part of its value has been consumed in production. This entire portion of the constant capital, which has been consumed in production, must be reproduced in its natural form. Assuming all other circumstances, particularly the productive power of labor, to remain unchanged, this portion requires for its reproduction the same amount of labor as before, that is, it must be replaced by its equivalent in value. If it is not, then reproduction itself cannot take place on the old scale. But who is going to perform this labor, and who performs it?

In the first question, to-wit, Who is going to pay for the constant portion of value, and with what? it is assumed that the value of the constant capital consumed in production reappears as a part of the value of the product. This does not contradict the assumptions of the second difficulty. For we have demonstrated already in Volume I, Chapter VII (The Labor Process and the Process of Producing Surplus-Value), that the mere addition of new labor, although it does not reproduce the old value, but creates merely an addition to it, creates only additional value, still preserves at the same time the old value in the product; that this is done, however, by labor, not to the extent that it is a labor producing value, labor in general, but in its function as a definite productive labor. Therefore no additional labor was necessary for the purpose of preserving the value of the constant portion in the product, in which the revenue, that is, the entire value created during the year, is expended. On the other hand, it requires new additional labor to replace the value and use-value of the constant capital consumed during the past year, for unless this is replaced no reproduction is possible at all.

All newly added labor is represented in the value newly created during the year, and this is divided into the three revenues, that is, into wages, profit and rent. On the one hand, then, no spare social labor remains for the reproduction of the consumed constant capital, which must partially be replaced in its natural form and its value, and partially merely in its value (for the mere wear and tear of fixed capital). On the other hand, the value annually created by labor, divided into wages, profit and rent, and to be spent in these forms, does not suffice to pay for, or buy, the constant portion of capital, which must be contained in the annual product outside of itself.

We see, then, that the problem presented here has already been solved in the discussion of the reproduction of the total social capital, Volume II, Part III. We return to it here, in the first place, for the reason that the surplus-value had not been developed in that volume into its revenue forms, profit (profit of enterprise plus interest) and rent and, therefore, could not be treated in these forms; in the second place, because the formula of wages, profit and rent is connected with an incredible aberration of the analysis, which pervades the entire political economy since Adam Smith.

In Volume II we divided all capital into two great classes: Class I, producing means of production, and Class II, producing articles of individual consumption. The fact that certain products may serve as well for personal consumption as for means of production (a horse, cereals, etc.), does not invalidate the absolute correctness of this division in any way. It is, in fact, no hypothesis, but merely the expression of a fact.

Take the annual product of a certain country. One portion of the product, whatever may be its ability to serve as means of production, passes over into individual consumption. It is the product for which wages, profit and rent are spent. This product is the product of a definite section of the social capital. It is possible that this same capital may also produce products belonging to Class I. To the extent that it does that, it is not the portion of capital consumed in the shape of the product of Class II, a product belonging actually to individual consumption, which supplies the productively consumed products passing into Class I. This entire product II, which passes into individual consumption, and for which the revenue is spent, is the material form of the capital consumed in it plus the produced surplus. It is also the product of a capital invested in the mere production of articles of consumption. And in the same way section I of the annual product, which serves as means of reproduction and consists of raw materials and instruments of labor, is the product of a capital invested in the mere production of means of production. By far the greater part of the products forming the constant capital exists also materially in a form, in which it cannot pass into individual consumption. To the extent that it might be so used, for instance, to the extent that a farmer might eat his seed corn, butcher his teaming cattle, etc., the economic barrier puts him into the same position in which he would be if this portion did not have a consumable form.

We have already said that we leave out of consideration, in both classes, the fixed part of the constant capital, which continues to exist so far as its material substance and value are concerned, independently of the annual product of both classes.

In Class II, consisting of products for which wages, profit and rent are spent and the revenues thus consumed, the product consists of three parts, so far as its value is concerned. One part is equal to the value of the constant portion of capital consumed in production; a second part is equal to the value of the variable capital invested in wages; finally, a third part is equal to the value of the produced surplus-value, that is, equal to profit plus rent. The first part of the product of Class II, the value of the constant portion of capital, cannot be consumed either by the capitalists of Class II, or by the laborers of this class, or by the landlords. It does not form any part of their revenues, but must be replaced in its natural form, and must be sold in order that this may be done. On the other hand, the other two parts of this product are equal to the value of the revenues created in this class, equal to wages plus profit plus rent.

In Class I the product consists of the same parts, so far as its form is concerned. But that part, which here forms revenue, wages plus profit plus rent, in short, the variable portion of capital plus the surplus-value, is not consumed here in the natural form of the products of this Class I, but in products of the Class II. The value of the revenues of Class I must, therefore, be consumed in the shape of that portion of the products of Class II, which forms the constant capital of II, that must be reproduced. That portion of the product of Class II, which must reproduce its constant capital, is consumed in its natural form by the laborers, the capitalists and the landlords of Class I. They spend their revenues for this product of II. On the other hand, the product of I, to the extent that it represents a revenue of Class I, is productively consumed in its natural form by Class II, whose constant capital it replaces in its natural form. Finally, the consumed constant portion of the capital of Class I is replaced out of the products of this class itself, which consist of instruments of labor, raw and auxiliary materials, either by an exchange of the capitalists of I among themselves, or in such a way that a portion of these capitalists can use their own product once more as means of production.

Let us take the diagram used in Volume II, Chapter XX, II, for simple reproduction:

According to this, the producers and landlords of II consume 500 v + 500 s = 1,000 as revenue; 2,000 c remain to be reproduced. This is consumed by the laborers, capitalists and rent owners of I, whose income is 1,000 v + 1,000 s = 2,000. The consumed product of II is consumed as a revenue by I, and that portion of the revenue of I, which represents an unconsumable product, is consumed as a constant capital by II. It remains to account for the 4,000 c of I. This is replaced out of the product of I itself, which is 6,000, or rather 6,000 minus 2,000, for these last 2,000 have already been converted into constant capital of II. It should be noted that these numbers have been chosen at random, and so the proportion between the value of the revenues of I and the value of the constant capital of II also appears arbitrary. But it is evident that so far as the process of reproduction is normal and takes place under otherwise unchanged circumstances, leaving aside the question of accumulation, the sum of the values of wages, profit and rent in Class I must be equal to the value of the constant portion of the capital of Class II. Otherwise Class II will not be able to reproduce its constant capital, or Class I will not be able to convert its revenue from unconsumable into consumable articles.

The value of the annual product in commodities, just like the value of the commodities produced by some particular investment of capital, and like the value of any individual commodity, resolves itself into two parts: Part A, which replaces the value of the advanced constant capital, and Part B, which presents itself in the form of wages, profit and rent. This last part of value, B, stands in opposition to the Part A to the extent that this Part A, under otherwise equal circumstances, in the first place never assumes the form of revenue, and in the second place always flows back in the form of capital, and of constant capital at that. The other portion, B, however, carries within itself an antagonism. Profit and rent have this in common with wages that all three of them are forms of revenue. Nevertheless they differ essentially from each other in that profit and rent are surplus-value, unpaid labor, whereas wages are paid labor. That portion of the value of the product, which represents spent wages and reproduces wages, and must be reconverted into wages under the conditions assumed by us, flows back first in the shape of variable capital, as a portion of the capital that once more must be advanced for the purposes of reproduction. This portion has a double function. It exists first in the form of capital and is exchanged as such for labor-power. In the hands of the laborer it is converted into revenue, which he draws out of the sale of his labor-power, and as revenue it is spent for means of subsistence and consumed. This double process is revealed through the intervention of money circulation. The variable capital is advanced in money, paid out as wages. This is its first function as capital. It is converted into labor-power and transformed into the expression of labor-power, into labor. This is the capitalist's side of the process. In the second place, the laborers buy with this money a part of the commodities produced by them, which part is measured by this money, and is consumed by them as revenue. If we imagine the circulation of money to be eliminated, then a part of the product of the laborer is in the hands of the capitalist in the form of existing capital. He advances this part as capital, hands it over to the laborer for new labor-power, while the laborer consumes it directly or indirectly by means of exchange for other commodities, as his revenue. That portion of the value of the product, then, which is destined in the course of reproduction to be converted into wages, into revenue for the laborers, flows back at first into the hands of the capitalist in the form of capital, more accurately of variable capital. That it should flow back in this form is an essential requirement, in order that labor as wage labor, the means of production as capital, and the process of production itself as a capitalist process may always be reproduced.

In order to avoid useless difficulties, it is necessary to distinguish the gross output and the net output from the gross income and the net income.

The gross output, or the gross product, is the total reproduced product. With the exception of the employed but not consumed portion of the fixed capital, the value of the gross output, or of the gross product, is equal to the value of the capital advanced and consumed in production, that is, the constant and variable capital plus the surplus-value, which resolves itself into profit and rent. Or, if we consider the product of the total social capital instead of that of some individual capital, the gross output is equal to the material elements forming the constant plus variable capital, plus the material elements of the surplus product, in which profit and rent are materialized.

The gross income is that portion of value and that portion of the gross product measured by it, which remains after deducting that portion of value and that portion of the total product measured by it, which replaces the constant capital advanced and consumed in production. The gross income, then, is equal to the wages (or to that portion of the product which is to become once more the income of the laborer) plus the profit plus the rent. On the other hand, the net income is the surplus-value, and thus the surplus product, which remains after the deduction of the wages, and which, in fact, represents the surplus-value realized by capital and to be divided with the landlords, and the surplus product measured by it.

Now we have seen that the value of each individual commodity and the value of the total commodities produced by each individual capital is divided into two parts, one of which replaces only constant capital, and the other of which, although a part of it flows back as variable capital, that is, also in the form of capital, nevertheless is destined to be wholly transformed into a gross income, and to assume the form of wages, profit and rent, the sum of which makes up the gross income. We have also seen that the same is true of the value of the annual total product of a certain society. There is only this difference between the product of the individual capitalist and that of society: From the point of view of the individual capitalist the net income differs from the gross income, for this last includes the wages, whereas the first excludes them. Viewing the income of the whole society, the national income consists of wages plus profit plus rent, that is, of the gross income. But even this is an abstraction to the extent that the entire society, on the basis of capitalist production, places itself upon the capitalist standpoint and considers only the income divided into profit and rent as the net income.

On the other hand, the dream of men like Say, to the effect that the entire output, the entire gross output, resolves itself into the net income of the nation and cannot be distinguished from it, so that this distinction disappears from the national point of view, is but the necessary and ultimate expression of the absurd dogma pervading political economy since Adam Smith, that the value of commodities resolves itself in the last analysis into an income, into wages, profit and rent. 147

Of course, it is very easy to understand, in the case of each individual capitalist, that a portion of his product must be reconverted into capital (even aside from an expansion of reproduction, or accumulation), not only into variable capital, which is destined to become in its turn an income for the laborers, a form of revenue, but also into constant capital, which can never be converted into revenue. The simplest observation of the process of production shows this clearly. The difficulty does not begin, until the process of production is studied as a whole. The fact has to be faced that the value of the entire portion of the product, which is consumed in the form of wages, profit and rent (immaterial whether the consumption is individual or productive), resolves itself under analysis wholly into a sum of values formed by wages plus profit plus rent, that is, into the total value of the three revenues, although the value of this portion of the product quite as well as that which does not pass over into the revenues contains a portion of value, equal to C, equal to the value of the constant capital contained in it, which on its very face cannot be limited by the value of the revenue. On the one hand we have the practically irrefutable fact, on the other hand the equally undeniable theoretical contradiction. This difficulty is most easily circumvented by the assertion that the value of commodities contains another portion of value, differing only seemingly, from the one existing in the form of revenue only from the point of view of the individual capitalist. The phrase that a thing is revenue for one man and capital for another saves all further thought. But then it remains an insoluble riddle, how the old capital is to be replaced, when the value of the entire product can be consumed as revenue; and how it is that the value of the product of each individual capital can be equal to the sum of the values of the three revenues plus C, the constant capital, whereas the sum of the values of the products of all capitals can be equal to the sum of the values of the three revenues plus zero. And the riddle must be solved by declaring that any analysis is incapable of finding out the simple elements of price, and must be satisfied with the faulty cycle and the progress into infinity. So that the thing which appears as constant capital may be resolved into wages, profit and rent, whereas the values of the commodities, in which wages, profit and rent are materialized, are determined in their turn by wages, profit and rent, and so forth to infinity. 148

The entirely false dogma to the effect that the value of commodities resolves itself in the last analysis into wages plus profits plus rent expresses itself in the assertion that the consumer must ultimately pay for the total value of the total product, or that the money circulation between producers and consumers must ultimately be equal to the money circulation between the producers themselves (Tooke). All these assertions are as false as the axiom upon which they are founded.

The difficulties, which lead to this false and prima facie absurd analysis, are briefly the following:

1) The first difficulty is that the fundamental relationship of constant and variable capital, hence also the nature of surplus-value, and with them the entire basis of the capitalist mode of production, are not understood. The value of each portion of any product of capital contains a certain portion of value equal to the constant capital, another portion of value equal to the variable capital (converted into wages for the laborer), and another portion of value equal to surplus-value (which later on becomes profit and rent). How is it possible that the laborer with his wages, the capitalist with his profit, the landlord with his rent, should be able to buy commodities, each one of which contains not only one of these elements, but all three of them, and how is it possible that the sum of the values of wages, profit and rent, that is, of the three sources of revenue together, should be able to buy the commodities passing over into the total consumption of the recipients of these incomes, since these commodities contain another portion of value, namely constant capital, outside of the other portions of value? How can they buy a value of four with a value of three? 149

We have given our analysis in Volume II, Part III.

2) The second difficulty is that the way, in which labor, by adding a new value, preserves old value in a new form without producing this old value anew, is not understood.

3) The third difficulty is that the connections of the process of reproduction are not understood, as it presents itself, not from the point of view of individual capital, but from that of the total capital. The difficulty is to explain how it is that the product, in which wages and surplus-value, in short the entire value produced by all the labor newly added during the current year, can be converted into money, can reproduce the constant part of its value and yet at the same time resolve itself into a value confined within the limits of the revenues; and how it is that the constant capital consumed in production can be replaced by the substance and value of new capital, although the total sum of the newly added labor is realized only in wages and surplus-value, and is fully represented by the sum of the values of both. It it here where the main difficulty lies, in the analysis of reproduction and of the proportions of its various component parts, both as concerns their material substance and the proportions of their value.

4) To these difficulties is added another one, which is intensified still more as soon as the various component parts of the surplus-value appear in the form of revenues independent of each other. This is the difficulty that the fixed marks of revenue and capital are interchanged and occupy different places, so that they seem to be merely relative determinations from the point of view of the individual capitalist and to disappear as soon as the total process of production is viewed as a whole. For instance, the revenue of the laborers and capitalists of Class I, which produces constant capital, replaces the value and the substance of the constant capital of the capitalists of Class II, which produces articles of consumption. One may, therefore, get around the difficulty by means of the conception that the thing which is revenue for one is capital for another. This promotes the idea that these functions have nothing to do with the actual peculiarities of the component parts of value in the commodities. Furthermore: Commodities which are ultimately intended for the purpose of forming the substantial elements in the expenditure of revenue, in other words, articles of consumption, pass through various stages during the year, such as woolen yarn, cloth. In the one stage they form a portion of the constant capital, in the other they are consumed individually, and thus pass wholly into the revenue. One may, therefore, imagine with Adam Smith that the constant capital is but seemingly an element of the value of commodities, which disappears in the total interrelation. Furthermore, a similar exchange takes place between variable capital and revenue. The laborer buys with his wages that portion of the commodities which form his revenue. In this way he creates at the same time for the capitalist the money form of the variable capital. Finally: One portion of the products, which form constant capital, is replaced in its natural form or by means of exchange by the producers of the constant capital themselves. The consumers have nothing to do with this process. When this is overlooked the impression is created that the revenue of the consumers replaced the entire product, even the constant portion of its value.

5) Aside from the confusion created by the transformation of the values into prices of production, another confusion is due to the transformation of surplus-value into different, separate, independent forms of revenue traced back to different elements of production, into profit and rent. It is forgotten that the values of commodities are the basis, and that the division of the values of commodities into separate portions, and the further development of these portions of value into forms of revenue, their transmutation into relations of the various owners of the different agencies in production to these parts of value, their distribution among these owners according to definite categories and titles, does not alter anything in the determination of value or in its law. Neither is the law of value changed by the fact that the equalization of profit, that is, the distribution of the total value among the various capitals, and the obstacles, which private land to some extent puts in the way of this equalization (in absolute rent), makes the regulating average prices different from the individual values of the commodities. This again affects merely the addition of the surplus-value to the different prices of commodities, but does not abolish the surplus-value itself, nor the total value of commodities in its capacity as the source of these different constituents of value.

This is the confusion, which we shall consider in our next chapter, and which is necessarily connected with the illusion that the value arises out of its own component parts. First the various component parts of value receive independent forms in the revenues, and in their capacity as revenues they are referred back to the particular substantial elements of production as their alleged sources instead of to the values of commodities, which are their real source. They are actually referred back to those sources, not as components of value, but as revenues, as components of value falling to the share of definite classes of agents in production, the laborer, the capitalist and the landlord. But one might imagine that these parts of value, instead of arising out of the distribution of the value of commodities, rather form it by their composition, and this leads to that nice and faulty circle, which makes the value of commodities arise out of the sum of the values of wages, profit, rent, and the value of wages, profit and rent, in their turn, is to be determined by the value of commodities, etc. 150

Considering reproduction in its normal condition, only a part of the newly added labor is employed for production and thus for the reproduction of the constant capital. This is precisely the portion which replaces the constant capital used up in the production of articles of consumption, of substantial parts of the revenue. This is balanced by the fact that this constant portion does not require any additional labor on the part of Class II. Looking upon the total process of reproduction as a whole, in which this equalising exchange between Classes I and II is included, this constant capital is not a product of newly added labor, although the product of this labor could not be created without that capital. This constant capital, looking upon it from the point of view of substance, is exposed to certain accidents and dangers in the process of reproduction. (Furthermore, considering it from the point of view of value, it may be depreciated through a change in the productive power of labor; but this refers only to the individual capitalist.) Accordingly a portion of the profit, of surplus-value and of the surplus-product, in which only newly added labor is represented, so far as its value is concerned, serves as an insurance fund. In this case it does not matter, whether this insurance fund is managed by separate insurance companies or not. This is the only part of the revenue which is neither consumed as such nor serves necessarily as a fund for accumulation. Whether it actually serves in the accumulation, or covers merely a shortage in reproduction, depends upon accident. This is also the only portion of the surplus-value and surplus-product, and thus of surplus-labor, which would continue to exist, outside of that portion which serves for accumulation and for the expansion of the process of reproduction, even after the abolition of the capitalist system. This, of course, is conditioned upon the premise that the portion regularly consumed by the direct producers does not remain limited to its present minimum. Outside of the surplus-labor for those, who on account of age can not yet or no longer take part in production, all surplus labor for non-workers would disappear. If we transport ourselves back to the beginnings of society, we find no produced means of production, hence no constant capital, the value of which could pass into the product, and which would have to be replaced in its natural form out of the product in reproduction on the same scale, and to a degree measured by its value. But nature there supplies immediately the means of subsistence, which do not have to be produced. For this reason nature gives to the savage having but few wants the time, not to use non-existing means of production in new production, but to transform, outside of the labor required for the appropriation of naturally existing means of production, other products of nature into means of production, bows, stone knives, boats, etc. This process among savages, considered merely from the side of its substance, corresponds to the reconversion of surplus-labor into new capital. In the process of accumulation, this conversion of the product of surplus labor into capital takes place continually; and the fact that all new capital arises out of profit, rent, or other forms of revenue, that is, out of surplus labor, leads to the mistaken idea that all value of commodities arises from some revenue. On the other hand, this reconversion of profit into capital rather shows on closer analysis, that the additional labor, which is always represented in the form of revenue, does not serve for the conservation, or reproduction, of the old capital, but for the creation of new surplus capital to the extent that it is not consumed as revenue.

The whole difficulty arises from the fact that all newly added labor, to the extent that the value created by it is not dissolved into wages, appears as profit, that is, as a value which does not cost the capitalist anything and therefore cannot make good some capital advanced by him. This value rather exists in the form of available additional wealth, or, from the point of view of the individual capitalist, in the form of his revenue. But this newly created value can just as well be consumed productively as individually, equally well as capital and as revenue. In view of its natural form, some of it must be productively consumed. It is, therefore, evident that the annually added labor creates capital as well as revenue; this becomes evident in the process of accumulation. That portion of the labor-power, which is employed in the creation of new capital (analagous to that portion of the working day of a savage employed, not for the appropriation of subsistence, but for the manufacture of tools by which to appropriate subsistence), becomes evident in the fact that the entire product of surplus labor presents itself at first in the shape of profit; this use of it has indeed nothing to do with this surplus-product itself, but refers merely to the private relation of the capitalist to the surplus-value pocketed by him. In fact, the surplus-value created by the capitalist is divided into revenue and capital, that is, into articles of consumption and additional means of production. But the old constant capital, which was handed over from last year (outside of the portion that was injured and to that extent destroyed, in short, the old constant capital that does not have to be reproduced, and so far as there is any break in the process of reproduction, the insurance covers that), so far as its value is concerned, is not reproduced by the newly added labor.

We see, furthermore, that a portion of the newly added labor is continually absorbed in the reproduction and replacement of consumed constant capital, although this newly added labor resolves itself altogether in revenues, in wages, profit and rent. But it is always overlooked, 1) that one portion of the value of this new labor is not a product of this new labor, but previously existing and consumed constant capital; that the portion of the product, in which this part of value presents itself, cannot be converted into revenue, but replaces the means of production of this constant capital in their natural form. 2) It is overlooked that the portion of value, in which this newly added labor is actually represented, is not consumed as revenue in its natural form, but replaces the constant capital in another sphere, where it is moulded into a natural form, in which it may be consumed as revenue, but which in its turn is not wholly a product of newly added labor.

To the extent that reproduction takes place on the same scale, every consumed element of the constant capital must be replaced by a new natural specimen of the same kind, if not in quantity and form, then at least in natural effectiveness. If the productive power of labor remains the same, then this natural replacement implies the reproduction of the same value, which the constant capital had in its old form. But if the productive power of labor is increased, so that the same substantial elements may be reproduced with less labor, then a smaller portion of value of this product can completely replace the constant part in its natural shape. The surplus may then be employed in the formation of additional capital, or a larger portion of the product may be given the form of articles of consumption, or the surplus labor may be reduced. On the other hand, if the productive power of labor decreases, then a larger portion of the product must be used for the replacement of the old capital; the surplus product decreases.

The reconversion of profit, or of any form of surplus-value, into capital shows—without considering the historically defined economic form and looking upon it merely as a simple formation of new means of production—that the condition still continues, in which the laborer performs surplus labor for the purpose of producing means of production, outside of the labor by which he acquires his means of subsistence. Transformation of profit into capital signifies merely the employment of a portion of the surplus labor in the formation of new, additional, means of production. That this takes place in the shape of a conversion of profit into capital, signifies merely that not the laborer, but the capitalist has control of the surplus labor. That this surplus labor must first pass though a stage, in which it appears as revenue (whereas in the case of a savage it appears as surplus labor aiming directly at the manufacture of means of production), means simply that this labor, or its product, is appropriated by the non-laborer. But what is actually converted into capital, is not the profit as such. Transformation of surplus-value into capital signifies merely that the surplus-value and the surplus-product are not consumed individually as revenue of the capitalist. What is actually so converted is the value, the materialized labor, that is, the product in which this value directly presents itself, or for which it is exchanged after having been converted into money. Even when the profit is reconverted into capital, it is not this definite form of surplus-value, not the profit, which is the source of the new capital. The surplus-value is merely changed from one form into another. But it is not this change of form which gives it the character of capital. It is the commodity and its value, which now perform the function of capital. But that the value of the commodity is not paid for—and only by this means does it become surplus-value—is quite immaterial for the materialization of labor, for value itself.

The misunderstanding expresses itself in various forms. For instance, it is said that the commodities, of which the constant capital consists, also contain elements of wages, profit and rent. Or, that the thing, which is revenue for the one, is capital for some one else, and that these are but subjective relations. Thus the yarn of the spinner contains a portion of value representing profit for him. If the weaver buys the yarn, he realizes the profit of the spinner, but for himself this yarn is merely a part of his constant capital.

Aside from the remarks made on this score concerning the relations between revenue and capital, we add the following observations: The value which passes with the yarn as a constituting element into the capital of the weaver, is the value of the yarn. In what manner the parts of this value have resolved themselves for the spinner into capital and revenue, or, in other words, into paid and unpaid labor, is immaterial for the determination of the value of the commodity itself (aside from modifications by the average profit). Back of this lurks the idea that the profit, or the surplus-value in general, is a surplus above the value of the commodity, which can be made only by raising the price, by mutual cheating, by making a gain through sale. When the price of production is paid, or the value of the commodity, this pays, naturally, also for those portions of the value of commodities, which present themselves to the seller in the shape of revenue. Of course, we are not speaking of monopoly prices here.

In the second place, it is quite correct to say that the component parts of a commodity which make up the constant capital, like any other value of commodities, may be reduced to parts of value, which resolve themselves for the producers and the owners of the means of production into wages, profit and rent. This is merely a capitalist form of expression for the fact that all value of commodities is but the measure of the socially necessary labor contained in the commodities. But we have already shown in Volume I, that this does not prevent a separation of the produced commodities of any capital into separate parts, of which the one represents exclusively the constant portion of capital, another the variable portion of capital, and a third one only surplus-value.

Storch expresses the opinion of many others, when he says: "The salable products, which make up the national revenue, must be considered in political economy in two ways. They must be considered in their relations to individuals as values and in their relations to the nation as goods. For the revenue of a nation is not appreciated like that of an individual, by its value, but by its utility or by the wants which it can satisfy." ( Considerations sur le revenu national, p. 19.)

In the first place, it is a false abstraction to regard a nation, whose mode of production is based upon value and otherwise capitalistically organized, as an aggregate body working merely for the satisfaction of the national wants.

In the second place, after the abolition of the capitalist mode of production, but with social production still in vogue, the determination of value continues to prevail in such a way that the regulation of the labor time and the distribution of the social labor among the various groups of production, also the keeping of accounts in connection with this, become more essential than ever

CHAPTER L.: THE SEMBLANCE OF COMPETITION.

WE have shown, that the value of commodities, or the price of production regulated by their total value, resolves itself into:

1) One portion of value replacing constant capital, or representing past labor, used up in the form of means of production in the making of the commodity. This, in brief, is the value, or price, which these means of production carried into the process of production of the commodities. We never speak of individual commodities in this case, but of commodity-capital, that is, of that form, in which the product of capital during a certain period of time, say of one year, presents itself, and of which the individual commodity forms one element, which, moreover, so far as its value is concerned, resolves itself into the same analogous constituents.

2) One portion of value representing variable capital, which measures the income of the laborer and converts itself into wages for him. The laborer has produced these wages in this variable portion of value. This, briefly, is that portion of value, which represents the paid portion of the new labor added to the above constant portion in the production of commodities.

3) Surplus-Value, which is that portion of the value of the produced commodities, in which the unpaid, or surplus labor is incorporated. This last portion of the value in its turn assumes the independent forms, which are at the same time forms of revenue, namely the forms of profit on capital (interest on capital as such and profit of enterprise on capital in productive work) and ground-rent, which is claimed by the owner of the land participating in the process of production. The parts mentioned under 2) and 3), that is, that portion of value, which always assumes the revenue forms of wages (but only after having first gone through the form of variable capital), profit and rent, is distinguished from the constant portion mentioned under 1) by the fact that in it that entire portion of value is dissolved, in which the additional labor added to that constant part, to the means of production of the commodities, is materialized. Now, if we leave aside the constant portion, then it is correct to say that the value of a commodity, to the extent that it represents newly added labor, continually resolves itself into three parts, which form three forms of revenue, namely wages, profit and rent, 151 in which the respective magnitudes of value, that is the aliquot portions, which they constitute in the total value, are determined by various peculiar laws, which we have analysed previously. But on the other hand, it would be a mistake to say that the value of wages, the rate of profit, and the rate of rent form independent constituent elements of value, whose composition gives rise to the value of commodities, leaving aside the constant part; in other words, it would be a mistake to say that they are constituent elements of the value of commodities, or of the price of production. 152

The difference is easily seen.

Take it that the value of the product of a capital of 500 is equal to 400 c + 100 v + 150 s = 650; let the 150 s be divided into 75 profit + 75 rent. We will also assume, in order to forestall useless difficulties, that this is a capital of average composition, so that its price of production and its value coincide; this coincidence always takes place, whenever the product of such an individual capital may be considered as the product of some portion of the total capital corresponding to the same magnitude.

Here the wages, measured by the variable capital, form 20% of the advanced capital; the surplus-value, calculated on the total capital, forms 30%, namely 15% profit and 15% rent. The entire portion of value of the commodity representing the newly added labor is equal to 100 v + 150 s = 250. Its magnitude does not depend upon its division into wages, profit and rent. We see by the proportion of these parts to each other that a labor-power, which is paid with 100 in money, say 100 pounds sterling, has supplied a quantity of labor represented by money to the amount of 250 pounds sterling. We see from this that the laborer performed one and a half times as much surplus labor as he did labor for himself. If the working day contained 10 hours, then he worked 4 hours for himself and 6 hours for the capitalist. Therefore the labor of the laborers paid with 100 pounds sterling is expressed in money to the amount of 250 pounds sterling. Outside of this value of 250 pounds sterling there is nothing to divide between laborer and capitalist, between capitalist and landlord. It is the total value newly added to the value of 400, which is the value of the means of production. The value of 250 thus produced and determined by the quantity of labor materialized by it in the commodities forms the limit of the dividend, which the laborer, the capitalist and the landlord will be able to draw out of this value in the shape of the revenues, wages, profit and rent.

Take it that a capital of the same organic composition, that is, of the same proportion between the employed living labor-power and the constant capital set in motion by it, should be compelled to pay 150 pounds sterling instead of 100 pounds sterling for the same labor-power which sets in motion the constant capital of 400. And let us further assume that profit and rent should share the surplus-value in a different proportion. As we have assumed that the variable capital of 150 pounds sterling sets the same quantity of labor in motion as the variable capital of 100 did, the newly added value would be 250 as before, and the total value of the product would be 650, also as before. But the formula would then read: 400 c + 150 v + 100 s, and these 100 s would be divided, say, into 45 profit and 55 rent. The proportion, in which the newly produced total value would now be divided among wages, profit and rent, would now be very different. The magnitude of the advanced total capital would also be very different, although it would set only the same total quantity of labor in motion. The wages would amount to 27 8/11%, the profit to 8 2/11%, and the rent to 10% of the advanced capital. The total surplus-value would, therefore, amount to a little over 18%.

In consequence of the raise in wages the unpaid portion of the total labor would be changed and with it the surplus-value. If the working day contained 10 hours, the laborer would work 6 hours for himself and 4 hours for the capitalist. The proportion of profit and rent would also be changed, the reduced surplus-value would be divided in a different proportion between the capitalist and the landlord. Finally, since the value of the constant capital would have remained the same, while the value of the advanced variable capital would have risen, the reduced surplus-value would express itself in a still more reduced rate of gross profit, by which we mean here the proportion between the total surplus-value and the advanced total capital.

The change in the value of wages, in the rate of profit, and in the rate of rent, whatever might be the effect of the laws regulating the proportion of these parts, could move only within the limits set by the newly produced value of commodities amounting to 250. An exception could take place only, if rent should rest upon a monopoly price. This would not alter the law itself, but merely complicate its analysis. For if we consider only the product itself in this case, then merely the division of the surplus-value would be different. But if we consider its relative value as compared to other commodities, then we should find no other difference but that a portion of the surplus-value had been transferred from them to this particular commodity.

Let us sum up:

In the first place, the surplus-value falls by one-third from its former figure, it falls from 150 to 100. The rate of profit falls by a little more than one-third, from 30% to 18%, because the reduced surplus-value must be calculated on an increased advance of total capital. But it does not fall in the same proportion as the rate of surplus-value. This last falls from 150/100 to 100/150, that is, from 150% to 66 2/3%, whereas the rate of profit falls only from 150/500 to 100/550 or from 30% to 18 2/11%. The rate of profit, then, falls proportionately more than the mass of surplus-value, but less than the rate of surplus-value. We find, furthermore, that the values as well as the masses of products remain the same, so long as the same quantity of labor is employed, although the advanced capital has increased by the augmentation of its variable portion. This increase of the advanced capital would indeed make itself felt for a capitalist who would start out in business. But looking upon reproduction as a whole, the augmentation of the variable capital means merely that a larger portion of the new value added by newly performed labor is converted into wages, and thus at first into variable capital instead of into surplus-value and surplus products. The value of the product thus remains the same, because it is bounded on the one hand by the value of the constant capital, 400, and on the other hand by the figure 250, in which the newly added labor is represented. Both of these values remain unaltered. The product would represent the same amount of use-value in the same quantity of exchange-value, to the extent that it would return into the constant capital, so that the same mass of elements of constant capital would retain the same value. The matter would be different, if the wages should rise, not because the laborer would receive a larger share of his own labor, but if he should receive a larger portion of his own labor, because the productivity of labor would have decreased. In this case, the total value, in which this same labor, paid and unpaid, would be incorporated, would remain the same. But the mass of products, in which this quantity of labor would be incorporated, would be the same, so that the price of each aliquot portion of this product would rise, because each portion would contain more labor. The increased wages of 150 would not represent any more labor than the wages of 100 did before; the reduced surplus-value of 100 would represent merely two-thirds of the product which it did previously, only 66 2/3% of the mass of use-values, which were formerly represented by 100. In this case the constant capital would also become dearer to the extent that this product would go back into it. But this would not be the result of the increase in wages. This increase in wages would rather be a result of the increase in the price of commodities and a result of the diminished productivity of the same quantity of labor. Here the impression is given that the raise in wages made the product dearer; however, this raise is not the cause, but rather a result of a change in the value of the commodities, due to the decreased productivity of labor.

On the other hand, so long as all other circumstances remain the same, so long as the same quantity of employed labor is represented by 250, and the value of the means of production handled by it should then rise or fall, then the value of the same quantity of products would rise or fall by the same magnitude. 450 c + 100 v + 150 s make the value of the product equal to 700. But 350 c + 100 v + 150 s would make the value of the same quantity of products only equal to 600, as against a former 650. Hence, if the advanced capital should increase or decrease, while it sets the same quantity of labor in motion, the value of its product would rise or fall, other circumstances remaining the same, if the increase or decrease of the advanced capital is due to a change in the value of the constant portion of capital. On the other hand, the value of the product remains unchanged, if the increase or decrease of the advanced capital is caused by a change in the value of the variable portion of capital, provided that the productivity of labor remains the same. In the case of the constant capital, the increase or decrease of its value is not balanced by any opposite movement. But in the case of the variable capital, so long as the productivity of labor remains the same, an increase or decrease of its value is balanced by the opposite movement on the part of the surplus-value, so that the value of the variable capital plus the surplus-value, that is, the new value added by new labor to the means of production and newly incorporated in the product, remains the same.

But if the increase or decrease of the value of the variable capital is due to a rise or fall in the price of commodities, that is, to an increase or decrease of the productivity of the labor employed by this investment of capital, then the value of the product is affected. Only, the rise or fall of wages in this case is not a cause, but an effect.

On the other hand, if the constant capital in the above illustration should remain at 400 c, and if the change from 100 v + 150 s to 150 v + 100 s, that is, an increase of the variable capital, should be due to a decrease in the productivity of labor, not in this same particular line of industry, say in cotton spinning, but perhaps in agriculture, so that it would be a result of a rise in the price of foodstuffs, then the value of the product would remain unchanged. The value of 650 would still be represented by the same quantity of cotton yarn.

The foregoing leads furthermore to the following conclusions: If a decrease in the expenditure of constant capital is due to economies, etc., in such lines of production as supply agriculture with their products, then this, like a direct improvement in the productivity of the employed labor itself, may lead to a reduction of wages, because it would lead to a cheapening of the subsistence of the laborer, and this would imply an increase of the surplus-value; so that the rate of profit in this case would grow for two reasons, namely on the one hand, because the value of the constant capital would decrease, and on the other hand, because the surplusvalue would increase. In our analysis of the conversion of surplus-value into profit we assumed that the wages would not fall, but remain constant, because there we had to investigate the fluctuations of the rate of profit, independent of the changes in the rate of surplus-value. Moreover, the laws which we developed in that case are general ones, and apply also to investments of capital, the products of which do not pass over into the consumption of the laborer, and in that case changes in the value of the product are without influence upon the wages.

We know, then, that the separation and distribution of the new value added by new labor annually to the means of production, or to the constant part of capital, among the various forms of revenue, namely wages, profit and rent, do not alter the limits of this value itself, do not alter the sum of value to be so distributed; neither can a change in the proportions of these different parts alter their sum, which makes up this given magnitude of value. A given figure of 100 always remains the same, whether it is divided into 50 + 50, or into 20 + 70 + 10, or into 40 + 30 + 30. That portion of the value of the product, which is divided into these revenues, is determined, like the constant portion of the value of capital, by the value of commodities, that is, by the quantity of the labor incorporated in them from case to case. In the first place, then, the quantity of value of the commodities to be distributed among wages, profit and rent is given; in other words, the absolute limit of the sum of the portions of value of these commodities. In the second place, as concerns the individual categories themselves, their average and regulating limits are likewise given. The wages form the basis in this limitation. The wages are regulated on the one side by a natural law; their minimum is determined by the physical minimum required by the laborer for the conservation of his labor-power and for its reproduction; this means a minimum quantity of commodities. The value of these commodities is determined by the labor time required for their reproduction; it is determined by that portion of the new labor added to the means of production, or by that portion of each working day, which the laborer must have for the production and reproduction of an equivalent for the value of these necessary means of subsistence. For instance, if his average daily food requirements have the value of six hours of average labor, then he must work on an average six hours per day for himself. The actual value of his laborpower differs from this physical minimum; it differs according to climate and condition of social development; it depends not merely upon the physical, but also upon the historically developed social needs, which become second nature. But in every country and at any given period this regulating average wage is a given magnitude. The value of all other revenues thus has its limit. It is always equal to the value, in which the total working day (which coincides in the present case with the average working day, since it comprises the total quantity of labor set in motion by the total social capital) is incorporated, minus that portion of this working day, which is incorporated in wages. Its limit is therefore determined by the limit of that value, in which the unpaid labor is expressed, that is, by the quantity of this unpaid labor. While that portion of the working day, which is required by the laborer for the reproduction of the value of his wages, finds its ultimate limit in the physical minimum of wages, the other portion of the working day, in which surplus labor is incorporated, and with it that portion of value which stands for surplus-value, finds its limit in the physical maximum of the working day, that is, in the total quantity of daily labor time, during which the laborer can be active altogether and still preserve and reproduce his labor-power. As we are here concerned in the distribution of that value, which represents the total labor newly added per year, the working day may here be regarded as a constant magnitude, and is taken for granted as such, no matter how much or how little it may differ from its physical maximum. The absolute limit of that portion of value, which forms surplus-value, and which resolves itself into profit and ground-rent, is thus given. It is determined by the excess of the unpaid portion of the working day over its paid portion, which means by that portion of the value of the total product, in which this surplus labor is realized. If we call the surplus-value thus limited and calculated on the advanced total capital the profit, as I have done, then this profit, so far as its absolute magnitude is concerned, is equal to the surplus-value and, therefore, determined in its boundaries by the same laws as it. On the other hand, the level of the rate of profit is likewise a magnitude inclosed within certain limits by the value of commodities. This rate is the proportion of the total surplus-value to the total social capital advanced in production. If this capital is equal to 500 (say millions) and the surplus-value equal to 100, then 20% form the absolute limit of the rate of profit. The distribution of the social profit at this rate among the various capitals invested in the different spheres of production creates prices of production, which swerve from the values of commodities, and these prices of production are the real regulating average market prices. But this deviation of prices of production from values abolishes neither the determination of prices by values nor the lawful limits of profit. Instead of the value of a commodity being equal to the capital consumed in it plus the surplus-value contained in it, its price of production is then equal to the capital, k, consumed in it plus the surplus-value falling to its share as a result of the average rate of profit, for instance 20% of the capital advanced in its production, counting both the consumed and the merely employed capital. But this addition of 20% is itself determined by the surplus-value created by the total social capital, and by its proportion to the value of this capital; and for this reason it is 20% and not 10% or 100%. The transformation of the values into prices of production, then, does not abolish the limits of profit, but merely alters its distribution among the various particular capitals, which make up the total social capital, distributes it uniformly among them in the proportion in which they form parts of the value of this total capital. The market prices fall below or rise above these regulating prices of production, but these fluctuations balance each other. If one studies price lists during a certain long period, and if one subtracts the cases, in which the real value of commodities is altered by a change in the productivity of labor, and likewise the cases, in which the process of production has been previously disturbed by natural or social accidents, one will be surprised, in the first place, by the relatively narrow limits of the fluctuations, and, in the second place, by the regularity of their mutual compensation. The same domination of the regulating averages will be found here, which Quételet pointed out in the case of social phenomena. If the equalization of the values of commodities into prices of production does not meet any obstacles, then the rent resolves itself into differential rent, that is, it is limited to the equalization of the surplus-profits, which would be given to some of the capitalists by the regulating prices of production, but which are then appropriated by the landlords. Here, then, the rent has its definite limit of value in the fluctuations of the individual rates of profit, which are caused by the regulation of the prices of production through the general rate of profit. If private ownership of land places obstacles in the way of the equalization of the values of commodities into prices of production, and appropriates absolute rent, then this absolute rent is limited by the excess of the value of the products of the soil over their prices of production, that is, by the excess of the surplus-value in them over the rate of profit assigned to the capitals by the average rate of profit. This difference then forms the limit of the rent, which is always but a certain portion of surplus-value produced and existing in the commodities.

Finally, if the equalization of the surplus-value into average profit meets with obstacles in the various spheres of production in the shape of artificial or natural monopolies, particularly of monopoly in land, so that a monopoly price would be possible, which would rise above the price of production and above the value of the commodities affected by such a monopoly, still the limits imposed by the value of commodities would not be abolished thereby. The monopoly price of certain commodities would merely transfer a portion of the profit of the other producers of commodities to the commodities with a monopoly price. A local disturbance in the distribution of the surplus-value among the various spheres of production would take place indirectly, but they would leave the boundaries of the surplus-value itself unaltered. If a commodity with a monopoly price should enter into the necessary consumption of the laborer, it would increase the wages and thereby reduce the surplus-value, if the laborer would receive the value of his labor-power, the same as before. But such a commodity might also depress wages below the value of labor-power, of course only to the extent that wages would be higher than the physical minimum of subsistence. In this case the monopoly price would be paid by a deduction from the real wages (that is, from the quantity of use-values received by the laborer for the same quantity of labor) and from the profit of the other capitalists. The limits, within which the monopoly price would affect the normal regulation of the prices of commodities, would be accurately fixed and could be closely calculated.

Just as the division of the newly added value of commodities into necessary and surplus labor, wages and surplus-value, and its general division between revenues, finds its given and regulating limits, so the division of the surplus-value itself into profit and ground-rent finds its limit in the laws regulating the equalization of the rate of profit. In the division into interest and profits of enterprise the average profit itself forms the limit for both of them. It furnishes the given magnitude of value, which they may divide among themselves and which is the only one that they can so divide. The definite proportion of this division is here accidental, that is, it is determined exclusively by conditions of competition. Whereas in other cases the balancing of supply and demand implies the cessation of the deviation of market prices from their regulating average prices, that is, the cessation of the influence of competition, it is here the only determinant. But why? Because the same factor in production, the capital, has to divide its share of the surplus-value between two owners of the same factor in production. But the fact that no definite, lawful, limit for the division of the average profit is found, does not do away with its limit as a part of the value of commodities, any more than the fact that two partners in a certain business, being under the influence of different circumstances, divide their profit unequally, affects the limits of this profit in any way.

Hence, although that portion of the value of commodities, in which the value of the new labor added to the means of production is incorporated, is divided into different parts, which assume independent forms as revenues, this is no reason why wages, profit and ground-rent should be considered as constituting elements, whose addition, or sum, would be the source of the regulating price of commodities (natural price, prix nécessaire); it is no reason to think that not the value of commodities, after the subtraction of the constant portion of value, is the original unit separated into these three parts, but rather the price of each one of these three parts is independently determined, and that the price of commodities is then formed by an addition of these three independent magnitudes. In reality the value of commodities is the magnitude which exists first, and it comprises the sum of the total values of wages, profit and rent, whatever may be their relative magnitudes. In the wrong conception, wages, profit and rent are three independent magnitudes of value, whose total magnitude is supposed to produce the magnitude of the value of a commodity, to limit and to determine it.

In the first place it is evident that, if wages, profit and rent constitute the price of commodities, this would apply as much to the constant portion of the value of commodities as to the other portion, in which variable capital and surplus-value are incorporated. This constant portion may here be left entirely out of consideration, since the value of the commodities of which it is made up would likewise resolve itself into wages, profit and rent. We have already shown that this conception denies the existence of such a constant portion of value.

It is furthermore evident that all meaning of value is here eliminated. Only the conception of price remains, in the sense that a certain amount of money is paid to the owners of labor-power, capital and land. But what is money? Money is not a thing, but a definite form of value, hence it is again conditioned upon value. Let us say, then, that a definite amount of gold or silver is paid for those elements of production, or that they are equalled in our minds to this amount. But gold and silver (and the enlightened economist is proud of this understanding) are themselves commodities, like all others. The price of gold and silver is therefore likewise determined by wages, profit and rent. Hence we cannot determine what wages, profit and rent are, by making them equal to a certain amount of gold or silver, for the value of this gold and silver, by which they are supposed to be estimated as equivalents, is precisely supposed to be determined by them, independently of gold and silver, that is, independently of the value of any commodity, for this value is supposed to be the product of those three. To say that the value of wages, profit and rent consist in their being equivalent to a certain quantity of gold and silver, would merely be the same as saying that they are equal to a certain quantity of wages, profit and rent.

Take wages first. For it is necessary to make labor the point of departure, even in this view of the matter. How, then, is the regulating price of wages determined, the price around which its market prices oscillate?

Let us reply that it is determined by the demand and supply of labor-power. But what sort of a demand is this? It is a demand made by capital. The demand for labor is therefore at the same time a supply of capital. In order to speak of a supply of capital, we should know above all what capital is. What is capital made of? If we select its simplest forms, it consists of money and commodities. But money is merely a form of commodities. Capital, then, consists of commodities. But the value of commodities, according to our assumption, is first determined by the price of the labor producing them, by wages. The existence of wages is here a prerequisite and is considered as a constituting element of the price of commodities. Now this price is to be determined by the proportion of the supplied labor to capital. The price of the capital itself is equal to the price of the commodities of which it is composed. The demand of capital for labor is equal to the supply of capital. And the supply of capital is equal to the supply of a quantity of commodities of a given price, and this price is regulated in the first place by the price of labor, and the price of labor in its turn is equal to that portion of the price of commodities, which makes up the variable capital, which is transferred to the laborer in exchange for his labor; and the price of the commodities, of which this variable capital is composed, is in its turn primarily determined by the price of labor; for it is determined by the prices of wages, profit and rent. In order to determine wages, we cannot, therefore, assume the previous existence of capital, for the value of the capital is itself determined in part by wages.

Besides, the dragging of competition into this problem does not help any. Competition makes the market prices of labor rise and fall. But suppose that the demand and supply of labor are balanced. What determines wages in that case? Competition. But we have just assumed that competition ceases to act as a determinant, that it abolishes its effects by the equilibrium of its two opposing forces. We are precisely trying to find the natural price of wages, that is, the price of labor not regulated by competition, but which, on the contrary, regulates it.

Nothing remains but to determine the necessary price of labor by the necessary subsistence of the laborer. But these articles of food are commodities, which have a price. The price of labor is therefore determined by the price of the necessary means of existence, and the price of the means of existence, like that of all other commodities, is determined primarily by the price of labor. Therefore the price of labor determined by the price of the means of existence is determined by the price of labor. The price of labor is determined by itself. In other words, we do not know by what the price of labor is determined. Labor in this case has any price at all, because it is considered as a commodity. In order, therefore, to speak of the price of labor, we must know what price itself means. But what price itself is, we do not learn in this way at all.

But let us assume, that the necessary price of labor had been determined in this agreeable manner. Then how is the average profit determined, the profit of every capital in normal conditions, which forms the second element of the price of commodities? The average profit must be determined by an average rate of profit; how is this rate determined? By the competition between the capitalists? But this competition itself is conditioned upon the existence of profit. It presupposes the existence of different rates of profit, and thus of different profits, either in the same, or in different spheres of production. Competition can influence the rate of profit only to the extent that it affects the prices of commodities. Competition can merely make the producers within the same sphere of production sell their commodities at the same prices, and make them sell their commodities in different spheres of production at prices which will give them the same profit, will give them the same proportional addition to the price of commodities, which has already been partially determined by wages. Hence competition cannot balance anything but inequalities in the rate of profit. In order to balance unequal rates of profit, the profit as an element in the price of commodities must already exist. Competition does not create it. It lowers or raises its level, but it does not create this level, which appears whenever the balance has been struck. And when we speak of a necessary rate of profit, we wish precisely to know the rate of profit which is independent of the movements of competition, and which rather regulates these movements. The average rate of profit appears, when the forces of the competing capitalists balance each other. Competition may bring about this balance, but cannot create the rate of profit which appears whenever this balance is found. As soon as the equilibrium is reached, why is the rate of profit 10, or 20, or 100%? On account of competition? No, on the contrary, competition has done away with the causes, which produced deviations from the rate of 10, or 20, or 100%. It has brought about a price of commodities, by which every capital yields the same profit in proportion to its magnitude. The magnitude of this profit itself is independent of it. It merely reduces all deviations to this magnitude. One man competes with another, and competition compels him to sell his commodities at the same price as the other. But why is this price 10 or 20 or 100%?

Nothing remains under these circumstances but to declare that the rate of profit, and with it the profit itself arises in some unaccountable manner by a certain addition to the price of commodities, which to that extent was determined by the wages. The only thing which competition tells us is that this rate of profit must have a certain figure. But we knew that before, when we spoke of an average rate of profit and of a "necessary price" of profit.

It is quite unnecessary to thrash this absurd process over in the case of ground-rent. It is evident, even so, that it, logically pursued, makes profit and rent appear as additions made by unaccountable laws to the price of commodities, which is primarily determined by wages. In short, competition has to shoulder the duty of explaining all inexplicable ideas of the economists, whereas the economists should rather explain competition.

Now, if we leave aside the illusion of a profit and rent created by the circulation, that is of parts of price arising through sale—for circulation can never give what it did not first receive—the matter simply amounts to this:

Let the price of a commodity determined by wages be 100; let the rate of profit be 10% of the wages, and the rent 15% of the wages. Then the price of the commodity determined by wages, profit and rent is 125. These added 25 cannot come from the sale of this commodity. For all sellers sell to each other at 125 what has actually cost only 100 in wages, and the result is the same as though they had all sold at 100. The operation must rather be studied independently of the process of circulation.

If the three revenues share the commodity itself, which now costs 125—and it does not alter the matter, if the capitalist should first sell at 125, then pay 100 to the laborer, 10 to himself, and 15 to the landlord—then the laborer receives 4/5, equal to 100, of the value and of the product. The capitalist receives 2/25 of the value and of the product, and the landlord 3/25. When the capitalist sells at 125, instead of at 100, he merely gives to the laborer 4/5 of the product, in which his labor is incorporated. This would be the same, if he had given 80 to the laborer and kept back 20, of which he would share 8 and the landlord 12. In this case he would have sold the commodity at its value, since in fact the additions to the price of the commodity are made independently of the value of the commodity, which is assumed to be determined here by the value of labor-power. This amounts in a roundabout way to saying that in this conception the term wages, here 100, is equal to the value of the product, that is, equal to that sum of money, in which the same definite quantity of labor is represented; but that this value again differs from the real wages and therefore leaves a surplus. Only, in the present case, this is obtained nominally by an addition to the price. Hence, if the wages were 110 instead of 100, the profit would have to be 11 and the ground-rent 16½, so that the price of the commodity would be 137½. This would leave the proportion unaltered. But as the division would always be obtained by a nominal addition of definite percentages to the wages, the price would rise and fall with the wages. The wages are here first assumed as equal to the value of the commodity, and then again separated from it. In fact, however, the matter amounts in a roundabout and meaningless way to this, that the value of the commodity is determined by the quantity of labor contained in it, whereas the value of wages is determined by the price of the necessities of life, and the surplus of value above the wages forms profit and rent.

The separation of the value of commodities, after the subtraction of the value of the means of production consumed in their creation, this separation of this given quantity of value determined by the quantity of labor incorporated in the produced commodities into three parts, namely into wages, profit and rent, which assume the shape of independent and mutually unrelated revenues, this same separation appears on the surface of capitalist production, and consequently in the minds of the agents bounded by it, in an inverted form.

Let the total value of a certain commodity be 300, of which 200 may be the value of the means of production, or elements of constant capital, consumed in its production. This leaves 100 as the amount of the new value added to this commodity in its process of production. This new value of 100 is all that is available for division among these three forms of revenue. Let us place the figure for wages at x, for profit at y, for ground-rent at z, then the sum of x + y + z will always be 100 in our present case. In the conception of the industrials, merchants and bankers, as in that of the vulgar economists, matters are supposed to pass in an entirely different way. According to them it is not the value of the commodity, which equals 100 after subtracting the value of the means of production consumed in it, nor is it this 100 which is divided into x, y and z. According to them it is rather the price of the commodity, which is composed of wages, profit and rent, whose figures of value are determined independently of the value of this commodity and independently of each other, so that x, y and z exist independently, each by itself and is so determined, while the sum of these magnitudes, which may be larger or smaller than 100, makes up the value of the commodity by adding these three different values together. This case of mistaken identity is necessary:

1) Because the component parts of value in the commodities face each other as independent revenues, which are referred back as such to three very dissimilar agencies in production, namely to labor, capital and land, and which then seem to arise out of these. The ownership of labor-power, of capital, of land, is the cause, which assigns these different parts of the value of commodities to these respective owners, and transforms these parts into revenue for them. But the value does not arise from a transformation of its parts into revenue, it must rather exist before it can be converted into revenue, before it can assume this form. The appearance of the reverse must fortify itself so much the more, as the determination of the relative magnitude of these three parts follows different laws, whose connection with and limitation by the value of commodities themselves does not show itself on the surface by any means.

2) We have seen that a general rise or fall of wages, by causing a movement in the opposite direction on the part of the average rate of profit, so long as other circumstances remain the same, changes the prices of production of the different commodities, raises some and lowers others, according to the average composition of the capital in the respective spheres of production. There is no doubt that at least in some spheres of production the experience is made, that the average price of a commodity rises, because wages have risen, and falls, because wages have fallen. What is not "experienced" is the secret regulation of this change by the value of commodities, which is independent of wages. But if the rise of wages is local, if it takes place only in particular spheres of production in consequence of peculiar circumstances, then a corresponding nominal raise of prices may occur in the case of these commodities. The rise of the relative value of one kind of commodities as against others, which have been produced with an unchanged scale of wages, is then merely a reaction against the local disturbance of a uniform distribution of surplus-value among the various spheres of production, a means of leveling particular rates of profit into an average rate. The "experience," which is met in that case, is once more the determination of the price by the wages. In both these cases, the same experience shows that the wages determine the prices of commodities. What is not "experienced," is the hidden cause of this interrelation. Furthermore: The average price of labor, that is, the value of labor-power, is determined by the price of production of the necessary articles of subsistence. If the price of these falls, so does that of those. What is once more experienced here, is the existence of a connection between wages and the price of commodities. But the cause may seem to be an effect, and the effect a cause, as is also the case in the movements of market prices, where a rise of wages above its average corresponds to the rise of the market prices above the prices of production during periods of prosperity, and subsequent fall of wages below their average corresponds to a fall of market prices below the prices of production. Owing to the dependence of prices of production upon the values of commodities, the primary experience, aside from the oscillating movements of the market prices, should always be that the rate of profit falls whenever wages rise, and vice versa. But we have seen that the rate of profit may be determined by the movements of the value of constant capital, independently of the movements of wages; so that wages and the rate of profit, instead of moving in opposite directions, move in the same direction, and may rise or fall together. If the rate of surplus-value were directly identical with the rate of profit, then this could not happen. Even if wages should rise as a result of a rise in the prices of foodstuffs, the rate of profit may remain the same, or may even rise, owing to a greater intensity of labor or a prolongation of the working day. All these experiences corroborate the illusion created by the apparently independent and reversed form of the parts of value, as though either the wages alone, or wages and profit together determined the value of commodities. As soon as this seems to be the case with reference to wages, so that the price of labor and the value created by labor seem to coincide, the same applies as a matter of course to profit and rent. Their prices, that is, their expression in money, must then seem to be regulated independently of labor and of the value produced by it.

3) Let us assume that the values of commodities, or the apparently independent prices of production, coincide seemingly directly and continually with the market prices of commodities, instead of merely enforcing themselves as the regulating average prices by the continual balancing of the fluctuations of market prices. Let us assume, furthermore, that reproduction always takes place under the same unaltered conditions, so that the productivity of labor remains constant in all elements of capital. Finally, let us assume that that portion of the value of the produced commodities, which is formed in every sphere of production by the addition of a new quantity of labor, or by the addition of a newly produced value to the value of the means of production, is always divided according to the same unaltered proportion into wages, profit and rent, so that the actually paid wages, the actually realized profit, and the actual rent always directly coincides with the value of labor-power, with that portion of the total surplus-value which falls to the share of every active part of total capital by means of the average rate of profit, and with the limits, in which ground-rent is normally held upon this basis. In one word, let us assume that the division of the produced social values and the regulation of the prices of production takes place on a capitalist basis, but that competition is abolished.

Under these assumptions, then, under which the value of commodities would be constant and would appear so, under which that part of the value of commodities which resolves itself into revenues would remain a constant magnitude and would always present itself as such, and under which, finally, this given and constant part of value would always be divided according to constant proportions into wages, profit and rent, even under these assumptions would the real movement necessarily appear in an inverted form: not as a division of a previously given quantity of value into three parts, which assume mutually independent forms of revenue, but on the contrary, as the formation of this quantity of value by the sum of the independent and selfdetermined elements of wages, profit and rent, of which it is composed. This illusion would necessarily arise, because in the actual movement of the individual capitals and of the commodities produced by them not the value of the commodities would seem to precede their division, but vice versa, the parts into which it is divided would seem to exist before the value of the commodities. In the first place we have seen that to every capitalist the cost price of his commodities appears as a given magnitude and continually presents itself as such in the actual price of production. But the cost price is equal to the value of the constant capital, the advanced means of production, plus the value of labor-power, which, however, presents itself to the agent in production in the irrational shape of a price of labor, so that the wages appear at the same time as a revenue for the laborer. The average price of labor is a given magnitude, because the value of labor-power, like that of any other commodity, is determined by the labor time required for its reproduction. But as concerns that portion of the value of commodities, which resolves itself into wages, it does not arise from the fact that it assumes this form of wages, nor from the fact that the capitalist advances to the laborer his share of his own product in the shape of wages, but from the fact that the laborer produces an equivalent for his wages, that is, that a portion of his daily or annual labor produces the value contained in the price of his labor-power. But the wages are stipulated by contract, before the value equivalent to them has been produced. As an element of price, whose magnitude is given before the commodity and its value have been produced, as a constituent part of the cost price, wages do not appear as a part which detaches itself in an independent form from the total value of the commodity, but rather as a given magnitude, which predetermines this value, a creator of price or value. A role similar to that of wages in the cost price of commodities is played by the average profit in their price of production, for the price of production is equal to the cost price plus the average profit on the advanced capital. This average profit figures practically, in the conception and in the calculation of the capitalist himself, as a regulating element, not merely to the extent that it determines the transfer of the capitals from one sphere of investment into another, but also in all sales and contracts, which embrace a process of reproduction extending over long epochs. But whenever it figures in this way, it is a previously existing magnitude, which is in fact independent of the value and surplus-value produced in any particular sphere of production, and still more independent of the value and surplus-value produced by any individual investment of capital in any sphere of production. It does not present itself as a result of a division of value, but rather as a magnitude independent of the value of the produced commodities, as existing from the start and determining the average price of the commodities, that is, as a creator of value. Indeed, the surplus-value, owing to its separation into various and mutually unrelated parts, appears in a still more concrete form as a prerequisite for the creation of the value of commodities. A part of the average profit, in the form of interest, faces the capitalist independently as an element preceding the production of commodities and of their value. Although the fluctuations of the amount of interest are considerable, yet at any specific moment it is a given magnitude for every capitalist, and it enters into the cost price of the commodities produced by any individual capitalist. So does also the ground-rent in the form of lease money fixed by contract in the case of the agricultural capitalist, and in the form of rent for business rooms in the case of other business men. These parts, into which surplus-value is divided, being given as elements of cost price for the individual capitalist, appear for this reason inversely as creators of surplus-value; they appear as creators of a portion of the price of commodities, just as wages appear as the creator of the other portion. The secret of the continual reappearance of these divided parts of commodity value in the role of prerequisites for the formation of value itself is simply this, that the capitalist mode of production, like any other, does not merely always reproduce the material product, but also the economic conditions, the definite economic forms of its creation. Its result, therefore, appears as continually as its prerequisites, as its prerequisites appear in the role of its results. And it is this continual reproduction of the same conditions, which the individual capital anticipates in a matter of fact way as an indubitable fact. So long as the capitalist mode of production persists as such, a portion of the newly added labor resolves itself continually into wages, another into profit (interest and profit of enterprise), and a third into rent. In the contracts between the owners of the various agencies of production this is always assumed, and this assumption is correct, no matter how much the relative proportions may fluctuate in individual cases. The definite shape, in which the parts of value face each other, is assumed as pre-existing, because it is continually reproduced, and it is continually reproduced, because it is continually taken for granted.

It is true, that both experience and the appearance of things demonstrate the fact that the market prices, whose influence seems to the capitalist to be indeed the whole thing in the determination of values, are by no means dependent upon these anticipations, so far as their amount is concerned. They are not governed by any contracts demanding a high or a low rent and interest. But the market prices are constant only in their changes, and their average for a certain long period results in the respective averages of wages, profit and rent as magnitudes dominating the constant ones, such as the market prices, in the last analysis.

On the other hand, it seems like a simple reflection, that if wages, profit and rent are creators of value for the reason that they seem to precede the production of value, and that they are taken for granted by the individual capitalist in his cost price and price of production, then the constant portion of value, whose value enters as a given quantity into the production of every commodity, is also a creator of value. But the constant portion of value is nothing but a quantity of commodities and, therefore, of values of commodities. Thus we should arrive at the absurd tautology that the value of commodities is the creator and cause of the value of commodities.

If the capitalist were interested in reflecting about this—and his reflections as a capitalist are dictated exclusively by his interests and his interested motives—his experience would show him, that the product, which he himself produces, passes over into other spheres of production as a constant part of capital, and that products of these other spheres of production pass over into his own product as constant parts of capital. Owing to the fact that the additional value of his own new production, from his point of view, seems to be formed by means of wages, profit and rent, the same appearance holds good also in the case of the constant portion consisting of products of other capitalists. And so the price of the constant portion of capital, and with it the total value of the commodities, reduces itself in the last resort, although in a somewhat unaccountable manner, to a sum of values resulting from the addition of the independent creators of value, wages, profit and rent, which are regulated by different laws and come from different sources.

4) Whether the commodities are sold, or not sold, at their values, whether their value is determined in one way or another, is quite immaterial for the individual capitalist. This determination of values is from the very outset a process passing behind his back and controlled by conditions independent of himself, because it is not the values, but the divergent prices of production, which form the regulating average prices in every sphere of production. The determination of values as such, interests and influences the individual capitalist and the capital in each sphere of production only to the extent that the reduced or increased quantity of labor required in accordance with the rise or fall of the productive power of labor, enables him in one case to make an extra profit, and compels him in another to raise the price of his commodities, because an additional amount of wages, an additional amount of constant capital, and consequently some more interest, fall upon each individual part of the product, or upon the individual commodities. This determination of values interests him only to the extent that it raises or lowers the cost of production of commodities for himself, in other words, only to the extent that it places him in an exceptional position.

On the other hand, wages, interest and rent appear to him as regulating boundaries, not only of the price at which he can realize the profit of enterprise, that is, the profit falling to his share in his capacity as a producing capitalist, but also of the price at which he must be able to sell his commodities, if he is to keep his reproduction going at all. It is quite immaterial for him, whether he realises the value and surplus-value in his commodities by their sale, provided only that he gets the customary profit or enterprise or more than that, so long as he pockets this surplus over and above the individual cost price determined for him by wages, interest and rent. Aside from the constant portion of capital, wages, interest and rent appear to him, therefore, as the limiting, creating, determining elements of the price of commodities. For instance, if he can succeed in depressing wages below their normal level, below the value of labor-power, if he can obtain capital at a lower rate of interest, if he can pay less than the normal amount for rent, then he does not care, whether he sells his product below its value, or even below its price of production, so that he gives away without any equivalent a portion of the surplus-value contained in the commodities. This applies even to the constant portion of capital. For instance, if an industrial capitalist can buy his raw material below its price of production, then this protects him against loss, even if he sells it in his own finished product under its price of production. His profit of enterprise may remain the same, or may even increase, so long as the excess of the price of commodities over its elements remains the same or increases. But aside from the value of the means of production, which enter into his own production with a given price, it is precisely wages, interest and rent which enter into this production as limiting and regulating amounts of price. Consequently they appear to him as elements determining the price of commodities. The profit of enterprise, from his point of view, seems determined either by the excess of the market prices, dependent upon accidental conditions of competition, over the immanent value of commodities determined by those elements of price. Or, to the extent that this profit itself exerts a determining influence upon market prices, it seems itself dependent upon the competition between buyers and sellers.

In the competition, both of the individual capitalists among themselves and in the competition on the world market, it is the given and presupposed magnitudes of wages, interest and rent which enter into the calculation as constant and regulating magnitudes. They are constant, not in the sense of being unalterable magnitudes, but in the sense that they are given in any individual case and that they form the constant boundary for the continually fluctuating market prices. For instance, in the competition on the world market the question is exclusively as to whether the commodities can be sold at, or below, the existing world market prices with a profit, as to whether, with the existing wages, interest and rent a corresponding profit of enterprise can be realized. If the wages and the price of land are low in a certain country, while the interest on capital is high, because the capitalist mode of production has not been developed in it, whereas in some other country the wage and the price of land are nominally high, while the interest on capital is low, then the capitalist employs in the one country more labor and land, in the other relatively more capital. These factors enter as determining elements into the calculation by which the degree of possible competition between these two countries is estimated. Here, then, experience shows theoretically, and the interested calculation of the capitalist shows practically, that the prices of commodities are determined by wages, interest and rent, by the price of labor, of capital and of land, and that these elements of price are indeed the regulating factors of price.

Of course, this always leaves an element which is not assumed as pre-existing, but which rather results from the market price of commodities, namely the surplus above the cost price formed by the addition of these elements, namely of wages, interest and rent. This fourth element seems to be determined in every individual case by competition, and in the long average of cases by the average profit, which in its turn is regulated by this same competition, only at longer intervals.

5) On the basis of capitalist competition it becomes so much a matter of course to separate the value, in which the newly added labor is represented, into the forms of revenue known as wages, profit and ground-rent, that this method is applied (not to mention past stages of history, of which we gave illustrations under the head of ground-rent) even in cases, in which the conditions required for those forms of revenue are missing. In other words, everything is counted under these heads by analogy.

If an independent laborer—for instance, a small farmer, in whose case all three forms of revenue may be used—works for himself and sells his own product, he is, in the first place, considered as his own employer (capitalist), who employs himself as a laborer, and as his own landlord, who employs himself as his own tenant. To himself as a wage worker he pays his wages, to himself as a capitalist he turns over his profit, and to himself as a landlord he pays his rent. Assuming the capitalist mode of production and the conditions corresponding to it to be the general basis of society, this conception is correct, in so far as he does not owe it to his labor, but to his ownership of means of production—which have here assumed the general form of capital—that he is able to appropriate his own surplus labor. And furthermore, to the extent that he creates his own product in the shape of commodities, and thus depends upon its price (and even if he does not depend upon it, this price can be estimated), the quantity of surplus labor, which he can realize, does not depend upon its own size, but upon the general rate of profit; and in like manner any surplus above the amount of surplus-value allowed by the general rate of profit is not determined by the quantity of labor performed by himself, but can be appropriated by him only because he is the owner of the land. Because a form of production not corresponding to the capitalist mode of production may thus be brought in line with its forms of revenue—and to a certain extent not incorrectly—the illusion is strengthened so much the more that the capitalist conditions are the natural conditions of any mode of production.

On the other hand, if we reduce the wages to their general basis, namely to that portion of the product of the producer's own labor which passes over into the individual consumption of the laborer; if we relieve this portion of its capitalist limitations and extend it to that volume of consumption, which is permitted, on the one hand, by the existing productivity of society (that is the social productivity of his own individual labor in its capacity as a truly social one), and on the other hand, required by the full development of his individuality; if we reduce the surplus labor and the surplus product to that measure, which is required under the existing conditions of social production, on the one hand for the formation of an insurance and reserve fund, and on the other hand for the continuous expansion of reproduction to an extent dictated by social needs; finally, if we include in number one, necessary labor, and number two, surplus labor, that quantity of labor, which must always be performed by the ablebodied for the incapacitated or immature members of society, in other words, if we deprive both wages and surplus-value, both necessary and surplus labor, of their specifically capitalist character, then we have not these forms, but merely their foundations, which are common to all social modes of production.

Moreover, this manner of generalizing was also used in previous modes of production, for instance, in the feudal one. Conditions of production, which did not correspond to it at all, which stood entirely outside of it, were counted in as feudal relations. This was done, for instance, in England, in the case of tenures in common socage (as distinguished from tenures on knight's service), which comprised merely monetary obligations and were feudal in name only.

CHAPTER LI.: CONDITIONS OF DISTRIBUTION AND PRODUCTION.

THE new value added by the annual new labor—and thus also that portion of the annual product, in which this value is represented and may be drawn out of the total fund and separated from it—is divided into three parts, which assume three different forms of revenue. These forms indicate that one portion of this value belongs, or goes to, the owner of labor-power, another portion to the owner of capital, and a third portion to the owner of land. These, then are forms, or conditions, of distribution, for they express conditions, under which the newly produced total value is distributed among the owners of the different agencies of production.

To the ordinary mind these conditions of distribution appear as natural conditions, as conditions arising from the nature of all social production, from the laws of human production in general. While it cannot be denied that precapitalist societies show other modes of distribution, yet those modes are interpreted as undeveloped, imperfect, disguised, differently colored modes of these natural conditions of distribution, which have not reached their purest expression and their highest form.

The only correct thing in this conception is this: Assuming some form of social production to exist (for instance, that of the primitive Indian communes, or that of the more artificially developed communism of the Peruvians), a distinction can always be made between that portion of labor, which supplies products directly for the individual consumption of the producers and their families—aside from the part which is productively consumed—and that portion of labor, which produces surplus products, which always serve for the satisfaction of social needs, no matter what may be the mode of distribution of this surplus product, and whoever may perform the function of a representative of these social needs. The identity of the various modes of distribution amounts merely to this, that they are identical, if we leave out of consideration their differences and specific forms and keep in mind only their common features as distinguished from their differences.

A more advanced, more critical mind, however, admits the historically developed character of the condition of distribution, 153 but clings on the other hand so much more tenaciously to the unaltering character of the conditions of production arising from human nature and thus independent of all historical development.

On the other hand, the scientific analysis of the capitalist mode of production demonstrates that it is a peculiar mode of production, specifically defined by historical development; that it, like any other definite mode of production, is conditioned upon a certain stage of social productivity and upon the historically developed form of the forces of production. This historical prerequisite is itself the historical result and product of a preceding process, from which the new mode of production takes its departure as from its given foundation. The conditions of production corresponding to this specific, historically determined, mode of production have a specific, historical, passing character, and men enter into them as into their process of social life, the process by which they create their social life. The conditions of distribution are essentially identical with these conditions of production, being their reverse side, so that both conditions share the same historical and passing character.

In the study of conditions of distribution, the start is made from the alleged fact, that the annual product is distributed among wages, profit and rent. But if so expressed, it is a misstatement. The product is assigned on one side to capital, on the other to revenues. One of these revenues, wages, never assumes the form of a revenue, a revenue of the laborer, until it has first faced this laborer in the form of capital. The meeting of the produced requirement of labor and of the general products of labor as capital, in opposition to the direct producers, includes from the outset a definite social character of the material requirements of labor as compared to the laborers, and with it a definite relation, into which they enter in production itself with the owners of the means of production and among themselves. The transformation of these means of production into capital implies on their part the expropriation of the direct producers from the soil, and thus a definite form of property in land.

If one portion of the product were not transformed into capital, the other would not assume the form of wages, profit and rent.

On the other hand, just as the capitalist mode of production is conditioned upon this definite social form of the conditions of production, so it reproduces them continually. It produces not merely the material products, but reproduces continually the conditions of production, in which the others are produced, and with them the corresponding conditions of distribution.

It may indeed be said that capital (and the ownership of land implied by it) is itself conditioned upon a certain mode of distribution, namely the expropriation of the laborers from the means of production, the concentration of these conditions in the hands of a minority of individuals, the exclusive ownership of land by other individuals, in short, all those conditions, which have been described in the Part dealing with Primitive Accumulation (Volume I. Chapter XXVI). But this distribution differs considerably from the meaning of "conditions of distribution," provided we invest them with a historical character in opposition to conditions of production. By the first kind of distribution is meant the various titles to that portion of the product, which goes into individual consumption. By conditions of distribution, on the other hand, we mean the foundations of specific social functions performed within the conditions of production themselves by special agents in opposition to the direct producers. They imbue the conditions of production themselves and their representatives with a specific social quality. They determine the entire character and the entire movement of production.

Capitalist production is marked from the outset by two peculiar traits.

1) It produces its products as commodities. The fact that it produces commodities does not distinguish it from other modes of production. Its peculiar mark is that the prevailing and determining character of its products is that of being commodities. This implies, in the first place, that the laborer himself acts in the role of a seller of commodities, as a free wage worker, so that wage labor is the typical character of labor. In view of the foregoing analyses it is not necessary to demonstrate again, that the relation between wage labor and capital determines the entire character of the mode of production. The principal agents of this mode of production itself, the capitalist and the wage worker, are to that extent merely personifications of capital and wage labor. They are definite social characters, assigned to individuals by the process of social production. They are products of these definite social conditions of production.

The character, first of the product as a commodity, secondly of the commodity as a product of capital, implies all conditions of circulation, that is, a definite social process through which the products must pass and in which they assume definite social forms. It also implies definite relations of the agents in production, by which the formation of value in the product and its reconversion, either into means of subsistence or into means of production, is determined. But aside from this, the two above-named characters of the product as commodities, and of commodities as products of capital, dominate the entire determination of value and the regulation of the whole production by value. In this specific form of value, labor appears on the one hand only as social labor; on the other hand, the distribution of this social labor and the mutual supplementing and circulation of matter in the products, the subordination under the social activity and the entrance into it, are left to the accidental and mutually nullifying initiative of the individual capitalists. Since these meet one another only as owners of commodities, and every one seeks to sell his commodity as dearly as possible (being apparently guided in the regulation of his production by his own arbitrary will), the internal law enforces itself merely by means of their competition, by their mutual pressure upon each other, by means of which the various deviations are balanced. Only as an internal law, and from the point of view of the individual agents as a blind law, does the law of value exert its influence here and maintain the social equilibrium of production in the turmoil of its accidental fluctuations.

Furthermore, the existence of commodities, and still more of commodities as products of capital, implies the externalization of the conditions of social production and the personification of the material foundations of production, which characterize the entire capitalist mode of production.

2) The other specific mark of the capitalist mode of production is the production of surplus-value as the direct aim and determining incentive of production. Capital produces essentially capital, and does so only to the extent that it produces surplus-value. We have seen in our discussion of relative surplus-value, and in the discussion of the transformation of surplus-value into profit, that a mode of production peculiar to the capitalist period is founded upon this. This is a special form in the development of the productive powers of labor, in such a way that these powers appear as self-dependent powers of capital lording it over labor and standing in direct opposition to the laborer's own development. Production which has for its incentive value and surplus-value implies, as we have shown in the course of our analyses, the perpetually effective tendency to reduce the labor necessary for the production of a commodity, in other words, to reduce its value, below the prevailing social average. The effort to reduce the cost price to its minimum becomes the strongest lever for the raising of the social productivity of labor, which, however, appears under these conditions as a continual increase of the productive power of capital.

The authority assumed by the capitalist by his personification of capital in the direct process of production, the social function performed by him in his capacity as a manager and ruler of production, is essentially different from the authority exercised upon the basis of production by means of slaves, serfs, etc.

Upon the basis of capitalist production, the social character of their production impresses itself upon the mass of direct producers as a strictly regulating authority and as a social mechanism of the labor process graduated into a complete hierarchy. This authority is vested in its bearers only as a personification of the requirements of labor standing above the laborer. It is not vested in them in their capacity as political or theoretical rulers, in the way that it used to be under former modes of production. Among the bearers of this authority, on the other hand, the capitalists themselves, complete anarchy reigns, since they face each other only as owners of commodities, while the social interrelations of production manifest themselves to these capitalists only as an overwhelming natural law, which curbs their individual license.

It is only because labor is presumed as wage labor, and the means of production in the form of capital, only on account of this specific social form of these two essential agencies in production, that a part of the value (product) presents itself as surplus-value and this surplus-value as profit (rent), as a gain of the capitalists, as additional available wealth belonging to the capitalist. But only because they present themselves as his profit, do the additional means of production, which are intended for the expansion of reproduction, and which form a part of this profit, present themselves as new additional capital, and only for this reason does the expansion of the process of reproduction present itself as a process of capitalist accumulation.

Although the form of labor, as wage labor, determines the shape of the entire process and the specific mode of production itself, it is not wage labor which determines value. In the determination of value the question turns around social labor time in general, about that quantity of labor, which society in general has at its disposal, and the relative absorption of which by the various products determines, as it were, their respective social weights. The definite form, in which the social labor time enforces itself in the determination of the value of commodities, is indeed connected with the wage form of labor and with the corresponding form of the means of production as capital, inasmuch as the production of commodities becomes the general form of production only upon this basis.

Now let us consider the so-called conditions of distribution themselves. Wages are conditioned upon wage labor, profit upon capital. These definite forms of distribution have for their prerequisites definite social characters on the part of the conditions of production, and definite social relations of the agents in production. The definite condition of distribution, therefore, is merely the expression of the historically determined condition of production.

And now let us take profit. This definite form of surplus-value is a prerequisite for the new creation of means of production by means of capitalist production. It is a relation which dominates reproduction, although it seems to the individual capitalist as though he could consume his entire profit as his revenue. But he meets barriers which hamper him even in the form of insurance and reserve funds, laws of competition, etc. These demonstrate to him by practice that profit is not a mere category in the distribution of the product for individual consumption. Furthermore, the entire process of capitalist production is regulated by the prices of products. But the regulating prices of production are in their turn regulated by the equalization of the rate of profit and by the distribution of capital among the various social spheres of production in correspondence with this equalization. Profit, then, appears here as the main factor, not of the distribution of products, but of their production itself, as a part in the distribution of capitals and of labor among the various spheres of production. The division of profit into profit of enterprise and interest appears as the distribution of the same revenue. But it arises primarily from the development of capital in its capacity as a self-expanding value, creating surplus-value, it arises from this definite social form of the prevailing process of production. It develops credit and credit institutions out of itself, and with them the shape of production. In interest, etc., the alleged forms of distribution enter as determining elements of production into the price.

Ground-rent might seem to be a mere form of distribution, because private land as such does not perform any, or at least no normal, function in the process of production itself. But the fact that, first, rent is limited to the excess above the average profit, and, secondly, that the landlord is depressed by the ruler and manager of the process of production and of the entire social life's process to the position of a mere holder of land for rent, a usurer in land and collector of rent, is a specific historical result of the capitalist mode of production. The fact that the earth received the form of private property is a historical requirement for this mode of production. The fact that private ownership of land assumes forms, which permit the capitalist mode of production in agriculture, is a product of the specific character of this mode of production. The income of the landlord may be called rent, even under other forms of society. But it differs essentially from the rent as it appears under the capitalist mode of production.

The so-called conditions of distribution, then, correspond to and arise from historically defined and specifically social forms of the process of production and of conditions, into which human beings enter in the process by which they reproduce their lives. The historical character of these conditions of distribution is the same as that of the conditions of production, one side of which they express. Capitalist distribution differs from those forms of distribution, which arise from other modes of production, and every mode of distribution disappears with the peculiar mode of production, from which it arose and to which it belongs.

The conception, which regards only the conditions of distribution historically, but not the conditions of production, is, on the one hand, merely an idea begotten by the incipient, but still handicapped, critique of bourgeois economy. On the other hand it rests upon a misconception, an identification of the process of social production with the simple labor process, such as might be performed by any abnormally situated human being without any social assistance. To the extent that the labor process is a simple process between man and nature, its simple elements remain the same in all social forms of development. But every definite historical form of this process develops more and more its material foundations and social forms. Whenever a certain maturity is reached, one definite social form is discarded and displaced by a higher one. The time for the coming of such a crisis is announced by the depth and breadth of the contradictions and antagonisms, which separate the conditions of distribution, and with them the definite historical form of the corresponding conditions of production, from the productive forces, the productivity, and development of their agencies. A conflict then arises between the material development of production and its social form. 154

CHAPTER LII.: THE CLASSES.

THE owners of mere labor-power, the owners of capital, and the landlords, whose respective sources of income are wages, profit and ground-rent, in other words, wage laborers, capitalists and landlords, form the three great classes of modern society resting upon the capitalist mode of production.

In England, modern society is indisputably developed most highly and classically in its economic structure. Nevertheless the stratification of classes does not appear in its pure form, even there. Middle and transition stages obliterate even here all definite boundaries, although much less in the rural districts than in the cities. However, this is immaterial for our analysis. We have seen that the continual tendency and law of development of capitalist production is to separate the means of production more and more from labor, and to concentrate the scattered means of production more and more in large groups, thereby transforming labor into wage labor and the means of production into capital. In keeping with this tendency we have, on the other hand, the independent separation of private land from capital and labor, 155 or the transformation of all property in land into a form of landed property corresponding to the capitalist mode of production.

The first question to be answered is this: What constitutes a class? And this follows naturally from another question, namely: What constitutes wage laborers, capitalists and landlords into three great social classes?

At first glance it might seem that the identity of their revenues and their sources of revenue does that. They are three great social groups, whose component elements, the individuals forming them, live on wages, profit and ground-rent, or by the utilization of their labor-power, their capital, and their private land.

However, from this point of view physicians and officials would also form two classes, for they belong to the two distinct social groups, and the revenues of their members flow from the same common source. The same would also be true of the infinite dissipation of interests and positions created by the social division of labor among laborers, capitalists and landlords. For instance, the landlords are divided into owners of vineyards, farms, forests, mines, fisheries.