Different Composition of Capitals. 175 If the capital invested in A were not 700, but 7,000 p.st., while that invested in B were only 700 p.st., and the organic composition of both were to remain the same, then the capi- tal in A would expend 1,000 p.st. of the 7,000 as variable capital, that is to say, it would employ 1,000 laborers per week at 60,000 hours of living labor, of which 30,000 would be surplus-labor. But yet each 700 p.st. of the capital in A w'ould continue to set in motion only one-sixth of the surplus- labor of the capital in B, and produce only one-sixth of the profit of this capital. If we consider the rate of profit, then tI"¥0'> 01* TTT? o^^' l^f%7 would be the rate of the capital in A, compared with f-g-^, or 85f %, of the capital in B. Taking equal amounts of capital for comparison, the rates of profit difl^er here, because the masses of surplus-vakie, and thus of profits, differ, although the rates of surplus-value are the same, owing to the different masses of living labor set in mo- tion.
The same result follows, if the technical conditions are the same in both spheres of production, while the value of the elements of constant capital is greater or smaller in the one than in the other. Let us assume that both invest 100 p.st. in variable capital and employ 100 laborers per week, which set in motion the same quantity of machinery and raw ma- terials. But let the last-named elements of production be more expensive in B than in A. For instance, let the 100 p.st. of variable capital in A set in motion 200 p.st. of constant capital, and in B 400 p.st. of constant cap- ital. With tlie same rate of surplus-value, 100%, the sur- plus-value produced is in either case 100 p.st. Hence the profit is also 100 p.st. But the rate of profit in A is 2ooc°?oov>OJ^i or 33^%, while in B U is^ m^y, ^Y \, or 20%. In fact, if we select a certain aliquot part of the total capital from either side, we find that every 100 p.st. in B sets aside only 20 p.st., or one-fifth, for variable capital, while every 100 p.st. in A sets aside 33g% p.st., or one-third, for this purpose. B produces less profit to each 100 p.st., because it sets in motion less living labor than A. The differ- \j6 Capitalist Production.
ence in the rates of profits resolves itself once more, in this case, into a difference of the masses of surplus-value, and thus masses of profit, produced per each 100 of capital invested.
The difference of this second example from the first is just this: The compensation between A and B, in the second case, would require only a change in the value of the constant capital of either A or B, provided the technical basis re- mained the same. But in the first case, the technical basis itself is different, and would have to be revolutionised in order to consummate a compensation.
The different organic composition of various capitals, then, is independent of their absolute magnitude. It is always but a question of what part of every 100 is variable and wh.:t part constant.
Capitals of different magnitude, calculated in percentages, or, what amounts to the same in this case, capitals of the same magnitude, working with the same working time and the same degree of exploitation, may produce considerably different amounts of surplus-value, and thus of profit, for the reason that a difference in the organic composition of cap- ital in different spheres of production implies a difference in their variable parts, and thus a difference in the quantities of living labor set in motion by them, which implies a differ- ence in the quantities of surplus-labor appropriated by them. And this surplus-labor is the substance of surplus-value and of profit. Equal portions of the total capital in the various spheres of production comprise the sources of unequal por- tions of surplus-value, and the only source of surplus-value is living labor. With the same degree of labor-exploitatinn the mass of labor set in motion by a capital of 100, and con- sequently the mass of surplus-value appropriated by it, de- pend on the magnitude of its variable component. If a cap- ital, consisting of percentages of 90 c -|- 10 v, produced as much surplus-value, or profit, wath the same degree of exploi- tation, as a capital consisting of percentages of 10 c -|- 90 v, then it would be as plain as da;y light that the surplus-value, and value in general, must have an entirely different source than labor, and that political economy would then be without Different Composition of Capitals. 177 a rational basis. If we assume continuallj that one pound sterling stands for the weekly wages of a laborer working 60 hours, and that tlie rate of surplus-value is 100%, then it is evident that the total product in values which one laborer can supply in one week, is 2 p.st. Then 10 laborers cannot supply more than 20 p.st. And since 10 p.st. of the 20 re- produce the wages, those 10 laborers cannot produce any more surplus-value than 10 p.st. On the other hand the 90 labor- ers, whose total product is 180 p.st., and whose wages amount to 90 p.st., produce a surplus-value of 90 p.st. The rate of profit in the one case would be 10%, in the other 90%. If matters were different, then value and suri^lus-value would be something else than materialised labor. Seeing, then, that capitals in different spheres of production, calculated in per- centages — or capitals of equal magnitude — are differently divided into variable and constant capital, so that they set in motion unequal quantities of living labor and produce differ- ent surplus-values, and profits, it follows that the rate of profit, which consists precisely of the calculation of the per- centage of surplus-value on the total capital, must also differ. ISTow, if capitals in different spheres of production, calculated in percentages, in other words, caj^itals of equal magni- tude, produce unequal profits in different spheres of produc- tion, in consequence of their different organic composition, then it follows that the profits of unequal capitals in different spheres of production cannot be proportional to the magni- tude of tlieir respective capitals, or, in slightly different words, profits in different spheres of production are not pro- portional to the magnitude of the respective capitals invested in them. For if profits were to grow at the rate of the invest- ment of capital, it would mean that the percentage of profits was the same, so that capitals of equal magnitude in different spheres of production would have equal rates of profit, in spite of their different organic composition. Only within the same sphere of production, in which the organic composition of capital is known, or in different spheres of production with the same organic composition of capitals, do the masses of profits stand in direct ratio to the masses of capitals invested.
178 Capitalist Production.
To say that the profits of capitals of different magnitude are proportional to their magnitudes is only another way of say- ing that capitals of equal magnitude yield equal profits, or that the rate of profits is the same for all capitals, whatever may be their organic composition and their magiiitude.
These statements hold good on the assumption that the com- modities are sold at their values. The value of a commodity is equal to the value of the constant capital contained in it, plus the value of the variable capital reproduced in it, plus the increment of this variable capital, which increment is the surplus-value. With the same rate of surplus-value, its mass evidently depends on the mass of the variable capital. The value of the product of a capital of 100 is in the one case 90 c + 10 V + 10 s, or 110, in the other 10 c -f 90 v -f 90 s, or 190. If the commodities are sold at their values, then the first product is sold at 110, of which 10 represent surplus- value, or unpaid labor; the second product is sold at 190, of which 90 represent surplus-value, or unpaid labor.
This is especially important when international rates of profit are compared with one another. Let us assume that the rate of surplus-value in some European country is 100%, so that the laborer works one-half of the working day for himself and the other half for his employer. Let us assume, furthermore, that the rate of p.^^ in some Asiatic country is 25%, so that the laborer works four-fifths of the working day for himself, and one-fifth for his employer. Let the compo- sition of the national capital in the European country be 8-1 c -|- 16 V, that of the national capital of the Asiatic coun- try, where little machinery, etc., is used, and a given quantity of labor-power consumes relatively little raw material produc- tively in a given time, 16 c -j- 84 v. Then we have the fol- lowing calculation: In the European country: Value of product 84 c + IC v + 16 s, or 116; rate of profit tVu". or 16%.
In the Asiatic country: Value of product 16 c + 84 v -j- 21s, or 121; rate of profit ^V. or 21%.
The rate of profit in the Asiatic country is higher by more than 25% than in the European country, although the rate Different Composition of Capitals. 179 of surplus-value is four times smaller in the former than in the latter. Men like Carej, Bastiat, and others, would come to the opposite conclusion.
Bj the way, different national rates of profit will generally be based on different national' rates of surplus-value. But we compare in this chapter unequal rates of profit resting on the same rate of surplus-value.
Aside from differences of organic composition of capitals, which imply different masses of labor, and consequently, other circumstances remaining the same, of surplus-labor, which set in motion capitals of the same magnitude in differ- ent spheres of production, there is still another source for the inequality of rates of profit. This is the different length of the time of turn-over of capital in different spheres of pro- duction. We have seen in chapter IV that, other circum- stances being the same, the rates of profits of capitals of the same organic composition are proportioned inversely as their times of turn-over. We have also seen that the same variable capital, if turned over in different periods of time, produces unequal masses of annual surplus-value. The difference of the times of turn-over, then, is another reason why capitals of the same magnitude in different spheres of production do not produce equal profits in equal times, and why the rates of profit in these different spheres differ.
On the other hand, the proportional composition of capitals as to fixed and circulating capital does not in itself affect the rate of profit. It can affect this rate only in the case that this difference in composition either coincides Avith a different proportion of the variable and constant parts so that the differ- ence in the rate of profit is due to this difference in organic composition, and not to the different proportions between fixed and circulating capital; or, if the difference in the pro- portion of fixed and circulating capital is responsible for a difference in the time of turn-over, during which a certain profit is realised. If capitals are divided into fixed and cir- culating capital in different proportions, it will, of course, al- ways have an influence on the time of turn-over and cause differences in it. But this does not imply that the time of i8o Capitalist Production.
turn-over, in which the same capitals realise certain profits, is different. For instance, A may have to convert the greater part of its product continually into raw materials, etc., while B may use the same machinery, etc., for a longer time, and need less raw material, but both A and B have a part of their capital engaged so long as they are producing; the one in raw materials, that is to say circulating capital, the other in ma- chinery, etc., or fixed capital. The capitalist in A contin- ually converts a portion of his capital from commodities into money, and this into raw materials, while the capitalist in B employs a portion of his capital for a longer time as an instrument of labor without any such conversions. If b th of them employ the same amount of labor, they will sl'11 masses of products of unequal value during the year, but both masses of products will contain the same amount of surplus- value, and their rates of profit, calculated on the entire capi- tal invested, will be the same, although their proportional composition of fixed and circulating capital, and their times of turn-over, are different. Both capitals realise equal profits in equal times, although they are turned over in different pe- riods of time.^^ The difference in the time of turn-over has in itself no importance except so far as it affects the mass of surplus-value which may be appropriated and realized by the same capital in a certain time. Seeing that a different distribution of the fixed and circulating capital of A and B does not necessarily imply a different time of turn-over, which would in its turn imply a different rate of profit, it is evi- dent, if there is such a difference in the rates of profit of A and B, that it is not due to a difference in the proportions of ^^ It follows from chapter IV that the above statement is correct only in the case that the capitals of A and B are differently composed so far as their values are concerned, but that the percentages of their variable capitals are proportioned -as their times of turn-over, or inversely as their numbers of turn-over. Let capital A have the following percentages of composition: 20c fixed and 70 c cir- culating, a total of 90 c, so that the total capital is 90 c -j- 10 v, or 100. At a rate or surplus value of 100% the 10 v produce in one turn-over 10 s, making the rate of profit for one turn-over 10%. Let capital B have the composition 60 C fixed and 20c circulating, so that we have 80 c -|- 20 v, or 100. The 20 v produce in one turn-over, at the above rate of surplus-Talue, 20 s, making the rate of profit for one turn-over 20%, which is double that of A. But if A is turned over twice 5»er year, and B only once, then 2 X 10 also make 20 per year, and the annual rate of profit is the same for both, namely 20%. — F. E.
Different Composition of Capitals. t.8i fixed and circulating capital as such, but rather to the fact that these different proportions indicate an inequality in the times of turn-over affecting the rates of profit.
It follo^vs, then, that a difference in the composition of capitals in various lines of production, referring to their fixed and circulating portions, has in itself no bearing on the rate of profit, since it is the proportion between the constant and variable capital which decides this question, and since the value of the constant capital, and its relative magnitude as compared to that of the variable, is quite independent of the fixed or circulating nature of its components. But it will be found — and this is one of the causes of wrong conclusions — that whenever fixed capital is considerably developed, it is but an expression of the fact that production is carried on at a large scale, so that the constant capital far outweighs the variable, or the living labor-power employed is trifling com- pared to the mass of the means of production set in motion by it.
We have demonstrated, that different lines of industry may have different rates of profit, corresponding to differences in the organic composition of capitals, and, within the limits in- dicated, also corresponding to different times of turn-over; the law (as a general tendency) that profits are proportioned as the magnitudes of the capitals, or that capitals of equal magnitude yield equal profits in equal times, applies only to capitals of the same organic composition, with the same rate of surplus-value, and the same time of turn-over. And these statements hold good on the assumption, which has been the basis of all our analyses so far, namely that the commodi- ties are sold at their values. On the other hand there is no doubt that, aside from unessential, accidental, and mutually compensating distinctions, a difference in the average rate of profit of the various lines of industry does not exist in real- ity, and could not exist without abolishing the entire system of capitalist production. It would seem, then, as though the theory of value were irreconcilable at this point with the actual process, irreconcilable with the real phenomena of proi82 Capitalist Production.
duction, so that we should have to give up the attempt to understand these j^henomena.
It follows from the first part of tliis volume that the cost- piyces are the same for the products of different spheres of production, in which equal portions of capital have been in- vested for purposes of i^roduction, regardless of the organic composition of such capitals. The cost-price does not show the distinction between variable and constant capital to the capitalist. A commodity for which he must advance 100 p.st. in production cost him the same amount, whether he invests 90 c + 10 V, or 10 c + 90 v. He always spends 100 p.st. for it, no more, no less. The cost-prices are the same for invest- ments of the same amounts of capital in different spheres, no matter how much the produced values and surplus-values may differ. The equality of cost-prices is the basis for the compe- tition of the invested capitals, by which an average rate of profit is brought about.
CHAPTER IX.
FORMATION OF A GENERAL RATE OF PROFIT (AVERAGE RATE OF profit) and TRANSFORMATION OF THE VALUES OF COM- MODITIES INTO PRICES OF PRODUCTION The organic composition of capital depends at each stage on two circumstances: First, on the technical relation of the employed labor-power to the mass of the employed means of production; secondly, on the price of these means of produc- tion. We have seen that this composition must be considered according to its percentages. We express the organic compo- sition of a certain capital, consisting of four-fifths of con- stant, and one-fifth of variable capital, by the formula 80 c -{- 20 V. We furthermore assume in this comparison that the rate of surplus-value is unchangeable. Let it be, for in- stance, 100%. The capital of 80 c + 20 v then produces a surplus-value of 20 s, and this is equal to a rate of profit of 20% on the total capital. The magnitude of the actual value Formation of Average Rate of Profit.
of the product of this capital depends on the magnitude of the fixed part of the constant capital, and on the amount of it passing by wear and tear over to the product. But as this circumstance is immaterial so far as the rate of profit and the present analysis are concerned, we assume for the sake of simplicity that the constant capital is transferred everywhere uniformly and entirely to the annual product of the capitals named. It is further assumed that these capitals realise equal, quantities of surplus-value in the different spheres of pro- duction, proportional to the magnitude of their variable parts. In other words, we disregard for the present the difference which may be produced in this respect by the different lengths of the periods of turn-over. This point will be discussed later.
Let us compare five different spheres of production, and let the capital in each one have a different organic composi- tion, as follows: Capitals Rate of Surplus Value Surplus Value Value of Product Rate of Profit 20 30 40 15 5 5% Here we have considerably different rates of profit in different spheres of production with the same degree of ex- ploitation, corresponding to the different organic composition of these capitals.
The grand total of the capitals invested in these five spheres of production is 500; the grand total of the surplus- value produced by them is 110; the total value of all com- modities produced by them is 610. If we consider the amount of.500 as one single capital, and capitals I to V as its component parts (about analogous to the different depart- ments of a cotton mill which has different proportions of con- stant and variable capital in its carding, preparatory spin- ning, spinning, and weaving rooms, on the basis of which the average proportion for the whole factory is calculated), then we should put down the average composition of this capital of 184 Capitalist Production.
500 as 390c-|-110v, or, in percentages, as 78 c + 22 v. In other words, if we regard each one of the capitals of 100 as one-fifth of the total capital, its average composition would be T8 c -f- 22 V; and every 100 would make an average sur- plus-value of 22. The average rate of profit would, there- fore, be 22%, and, finally, the price of every fifth of the total product produced by the capital of 500 would be 122. The jiroduct of each 100 of the advanced total capital would have to be sold, then, at 122.
But in order not to arrive at entirely wrong conclusions, it is necessary to assume that not all cost-prices are equal to 100, With a composition of 80 c + 20 v, and a rate of surplus- value of 100, the total value of the commodities produced by the first capital of 100 would be 80 c + 20 v + 20 s, or 120, provided that the whole constant capital is tranferred to the product of the year. I^ow, this may happen under certain circumstances in some spheres of production. But it will hardly be the case where the proportion of c to v is that of four to one. We must, therefore, remember in comparing the values produced by each 100 of the different capitals, that they will differ according to i.he different composition of c as to fixed and circulating parts, and that the fixed portions of different capitals will wear out more or less rapidly, thus transferring unequal quantities of value to the product in equal periods of time. But this is immaterial so far as the rate of profit is concerned. Whether the 80 c transfer the value of 80, or 50, or 5, to the annual product, whether the annual product is consequently 80 c -f- 20 v -]- 20 s = 120, or 50 c 4- 20 V + 20 s =. 90, or 5 c -f 20 v + 20 s = 45, in all of these cases the excess of the value of the product over its cost-price is 20, and in every case these 20 are calculated on a capital of 100 in ascertaining the rate of profit. The rate of profit of capital I is, therefore, in every case 20%. In order to make this still plainer, we transfer in the follow- ing table different portions of the constant caj^ital of the same five capitals to the value of their product.
Now, if we consider capitals I to V once more as one single total capital, it will be seen that also in this case the compo- I Formation of Average Rate of Profit.
Capitals Rate of Surplus Value Surplus Value Rate of Profit Used Up c Value of Commod- ities Cost Price 20 30 40 15 5 5% 50 51 51 40 10 90 70 20 70 81 91 55 15 iOo% Total 22 Average sition of the sums of these five capitals amounts to 500, being 390c -|- 110 V, so that the average composition is once more 78 c + 22 V. The average surplus-value also remains 2-2%;. If we allot this surplus-value uniformly to capitals I to V, we arrive at the following prices of the commodities: Capitals Surplus \'alue Value CostPrice of commod- ities Price of Commod- ities Rate of Profit Deviation of Price From Value 20 30 40 15 5 90 70 20 70 81 91 55 15 92 77 37 Summing up, we find that the commodities are sold at 2 + 7 + 17 = 26 above, and 8 + 18 = 26 below their value, so that the deviations of prices from values mutually balance one another by the uniform distribution of the surplus-value, or by the addition of the average profit of 22 per 100 of ad- vanced capital to the respective cost-prices of the commodi- ties of I to V. One portion of the commodities is sold in the same proportion above in which the other is sold below their values. And it is only their sale at such prices which makes it possible that the rate of profit for all five capitals is uni- formly 22%, without regard to the organic composition of these capitals. The prices which arise by drawing the aver- age of the various rates of profit in the different spheres of production and adding this average to the cost-prices of the different spheres of production, are the prices of production. They are conditioned on the existence of an average rate of profit, and this, again, rests on the premise that the rates of profit in every sphere of production, considered by itself, have previously been reduced to so many average rates of profit.
1 86 Capitalist Production.
These special rates of profit are equal to -^ in every sphere of production, and they must be deduced out of the values of the commoditiesj as shown in volume I. Without such a deduction an average rate of profit (and consequently a price of production of commodities), remains a vague and senseless conception. The price of production of a commodity, then, is equal to its cost-price plus a percentage of profit appor- tioned according to the average rate of profit, or in other words, equal to its cost-price plus the average profit.
Since the capitals invested in the various lines of pro- duction are of a difi^erent organic composition, and since the different percentages of the variable portions of these total capitals set in motion very different quantities of labor, it follows that these capitals appropriate very different quanti- ties of surplus-labor, or produce very different quantities of surj-jlus-value. Consequently the rates of profit prevailing in the various lines of production are originally very different. These different rates of profit are equalised by means of com- petition into a general rate of profit, which is the average of all these special rates of profit. The profit allotted according to this average rate of profit to any capital, whatever may be its organic composition, is called the average profit. That price of any commodity which is equal to its cost-price plus that share of average profit on the total capital invested (not merely consumed) in its production which is allotted to it in pro- portion to its conditions of turn-over, is called its price of production. Take, for instance, a capital of 500, of which 100 are fixed capital, and let 10% of this wear out during one turn-over of the circulating capital of 400. Let the average profit for the time of this turn-over be 10%. In that case the cost-price of the product created during this turn-over will be 10 c (wear) -\- 400 (c -j- v), cii^culating capital, or a total of 410, and its price of production will be 410 (cost- price) plus 10% of average profit on 500, or a total of 460.