While the capitalists in the various spheres of production recover the value of the capital consumed in the production of their commodities through the sale of these, they do not secure the surplus-value, and consequently the profit, created Formation of Average Rate of Profit. 187 in their own sphere by the production of these commodities, but only as much surplus-value, and profit, as falls to the share of every aliquot part of the total social capital out of the total social surjolus-value, or social profit produced by the total capital of society in all spheres of production. Every 100 of any invested capital, whatever may be its organic compo- sition, draws as much profit during one year, or any other period of time, as falls to the share of every 100 of tlie total social capital during the same period. The various capital- ists, so far as profits are concerned, are so many stockholders in a stock company in which the shares of profit are uniformly divided for every 100 shares of capital, so that profits differ in the case of the individual capitalists only according to the amount of capital invested by each one of them in the social enterprise, according to his investment in social production as a whole, according to his shares. That portion of the price of commodities which buys back the elements of capital con- sumed in the production of these commodities, in other words, their cost-price, depends on the investment of capital required in each particular sphere of production. But the other element of the price of commodities, the percentage of profit added to this cost-price, does not depend on the mass of profit produced by a certain capital during a definite time in its own sphere of production, but on the mass of profit allotted for any period to each individual capital in its capacity as an aliquot part of the total social capital invested in social production. ^^ A capitalist selling his commodities at their price of pro- duction recovers money in proportion, to the value of the capi- tal consumed in their production and secures profits in pro- portion to the aliquot part which his capital represents in the total social capital. His cost-prices are specific. But the profit added to his cost-prices is independent of his particular sphere of production, for it is a simple average per 100 of in- vested capital.
Let us assume that the five different investments of capi- tal named I to V in the foregoing illustrations belong to one ^ Cherbuliez.
1 88 Capitalist Production.
man. The quantity of variable and constant capital con- sumed for each 100 of the invested capitals in the production of commodities would be known, and these portions of the value of the commodities of I to V would make up a part of their price, since at least this price is required to recover the consumed portions of the invested capital. These cost-prices would be different for each class of the commodities I to V, and the owner would therefore mark them differently. But the different masses of surplus-value, or profit, produced by capitals I to V might easily be regarded by the capitalist a? profits of his aggregate capital, so that each 100 would get its proportional quota. The cost-prices of the commodities produced in the various deiDartments I to V would be differ- ent; but that portion of their selling price which comes from the addition of the profit for each 100 of capital would be the same for all these commodities. The aggregate price of the commodities of I to V vvould be equal to their aggregate value, that is to say, it would be equal to the sum of the cost- prices of I to V plus the sum of the surplus-values, or profits, produced in I to V. It would actually be the money-expres- sion of the total quantity of past and present labor incorporated in the commodities of I to V. And in the same way the sum of all the prices of production of all commodities in so- ciety, comprising the totality of all lines of production, is equal to the sum of all their values.
This statement seems to be contradicted by the fact that under capitalist production the elements of productive cap- ital are, as a rule, bought on the market, so that their prices include profits which have already been realised. Accord- ingly, the price of production of one line of production passes, with the profit contained in it, over into the cost-price of an- other line of production. But if we place the sum of the cost-prices of the whole country on one side, and the sum of its surplus-values, or profits, on the other, it is evident that the calculation must come out right. For instance, take a certain commodity A. Its cost-price may contain the profits of B, C, D, etc., or the cost-prices of B, C, D, etc., may con- tain the profits of A. Now, if we make our calculation, the Formation of Average Rate of Profit 189 profits of A will not be included in its cost-price, nor will the profits of B, C, D, etc., be figured in with their own cost- prices. No one figures his own profit in his own cost-price. If there are n spheres of production, and every one of them makes a profit of p, then the aggregate cost-price of all of them is equal to k — np. Taking the calculation as a whole we see that the profits of one sphere which pass into the cost- prices of another have been placed on one side of the account showing the total price of the ultimate product, and so cannot be placed a second time on the profit side. If any do appear on this side, it can be only because this particular commodity was itself the ultimate product, so that its price of produc- tion did not pass into the cost-price of some other commodity.
If an amount equal to p, expressing the profits of the pro- ducers of means of production, passes into the cost-price of a commodity, and if a profit equal to p' is added to this cost- price, then the aggregate profit P is equal to p -f- p^ The aggregate cost-price of a commodity, after deducting all amounts for profit, is in that case its own cost-price minus P. If this cost-price is called k, then it is evident that k -j- P = k -|- P + p'> We have seen in volume I, chapter IX, 2, that the product of every capital may be treated as though a part of it reproduced only capital, while the other part represented only surplus-value. Applying this mode of calculation to the aggregate product of society, it is necessary to make some rectifications. For, looking upon society as a whole, it would be a mistake to figure, say, the profit contained in the price of flax twice. It should not be counted as a portion of the price of linen and at the same time as the profit of the pro- ducers of flax.
To the extent that the surplus-value of A passes into the constant capital of B, there is no difference between surplus- value and profit. It is quite immaterial for the value of the commodities, Avhether the labor contained in them is paid or unpaid. We see merely that B pays for the surplus-value of A. But the surplus-value of A cannot be counted twice in the total calculation.
The essential difference is this: Aside from the fact that 190 Capitalist Production.
the price of a certain product, for instance the product of cap- ital B, differs from its value, because the surplus-value real- ized in B may be greater or smaller than the profit of others contained in the product of B, the same fact applies also to those commodities which form the constant part of its capital, and which indirectly, as necessities of life for the laborers, form its variable part. So far as the constant part is con- cerned, it is itself equal to the cost-price plus surplus-value, which now means cost-price plus profit, and this profit may again be greater or smaller than the surplus-value in whose phice it stands. And so far as the variable capital is con- cerned, it is tiiie that the average daily wage is equal to the values produced by the laborers in the time which they must work in order to produce their necessities of life. But this time is in its turn modified by the deviation of the prices of production of the necessities of life from their values. How- ever, this always amounts in the end to saying' that one com- modity receives too little of the surplus-value while another receives too much, so that the deviations from the value shown by the prices of production mutually compensate one another.
In short, under capitalist production, the general law of value enforces itself merely as the prevailing tendency, in a very complicated and approximate manner, as a never ascertain- able average of ceaseless fluctuations.
Since the average rate of profit is formed by the average of the various rates of profit for each 100 of the invested capi- tal during a definite period of time, say one 3'ear, it follows that the difference brought about by the various j^eriods of turn-overs of different capitals is also effaced by this means. But these differences play a leading role in the different rates of profit of the various spheres of production whose average forms the average rate of profit.
In the preceding illustration we assumed each capital in every sphere of production helping to make up the average rate of profit to be equal to 100, and we did so in order to show the differences in the rates of profit by percentages and incidentally the difference in the values of commodities pro- duced by equal amounts of capital. But it is understood that 4 Fonmition of Average Rate of Profit 191 the actual masses of surplus-value produced in each sphere of production depend on the magnitude of the invested cap- itals, since the composition of each capital is determined bj each sphere of j)roduction. But the particular rate of profit of any individual sphere of production is not affected by the circumstance that a capital of 100, or m times 100, or xm times 100 may be invested. The rate of profit remains 10%, whether the total profit is as 10 to 100, or 1,000 to 10,000.
However, since the rates of profit differ in the various spheres of production, seeing that considerably different masses of surplus-value, or profit, are produced in them ac- cording to the proportion of the variable to the total capital, it is evident that the average profit per 100 of the social cap- ital, and consequently the average, or general, rate of profit, will differ considerably according to the respective magni- tudes of the capitals invested in the various spheres. Take, for instance, four capitals A^ B^ C, D. Let the rate of sur- plus-value be 100% for all of them. Let the variable capi- tal for each 100 of total capital be 25 in A, 40 in B, 15 in C, and 10 in D. In that case every 100 of the total capital would make a surplus-value, or profit, of 25 in A, 40 in B, 15 in C, and 10 in D. This would make a total of 90, and if these four capitals are of the same magnitude, the average rate of profit would he^-^-y or 22.5%.
iSTow take it that the amounts of the total capitals are as follows: A equals 200, B, 300, C, 1,000, D, 4,000. The profits produced in that case would be 50, 120, 150, and 400. Lumping these four capitals together into one total capital of 5,500, its profit would be 720, and its average rate of profit 13^%.
The masses of the total value produced differ according to the magnitudes of the total capitals invested in A, B, C, D, respectively. The question of the formation of an average rate of profit is therefore not merely a matter of drawing simply the average of the different rates of profit in the va- rious spheres of production, but quite as much one of the rela- tive weight which these different rates of profit carry in the formation of the average. This depends on the relative mag- 192 Capitalist Production.
nitiide of the capital invested in each particular sphere, or on the aliquot part which the capital invested in each particular sphere fonus in the aggregate social capital. There will nat- urally be a very great difference according to whether a large or a small part of the total capital yields more or less of a rate of profit. And this, again, depends on the fact whether much or little capital is invested in those spheres in which the variable capital is relatively small or large compared to the total capital. It is the same Avith the average interest which a usurer draws who lends different amounts of capital at different rates of interest; for instance at 4, 5, 6, 7%, etc. The average rate of his interest will depend entirely on the relative magnitudes of the various capitals put out by him at different rates of interest.
We see, then, that the average rate of profit is determined by two factors: 1) By the organic composition of the capitals in the differ- ent spheres of production, and consequently by the different rates of profit of the individual spheres.
2) By the allotment of the social total capital to these different spheres, in other words, by the relative magnitude of the capitals invested in each particular sphere and the special rate of profit.attendant to it; or, to express it still differently, by the relative share of the total social capital ab- sorbed by each sphere of production.
In volumes I and II we were dealing only with the values of the commodities. Now w^e have dissected this value on the one hand into a cost-price, and on the other we have de- veloped out of it another form, that of the price of production of commodities.
Take it that the composition of the average social capital is 80 c -f- 20 v, and that the annual rate of surplus-value, s', is 100%. In that case the average annual profit for a capital of 100 would be 20, and the average annual rate of profit 20%. Whatever may be the cost-price k of the commodities annually produced by a capital of 100, their price of produc- tion will be k -f 20. In those spheres of production, in which the composition of capital would be (80 — x) c + 1 Formation of Average Rote of Profit. 193 (20 + x) V, the actually produced surplus-value, or the an- nual profit produced in this sphere, would be 20 + x, that is to say greater than 20, and the value of the produced commodities k -|- 20 -)- x, that is to say greater than k -f- 20, greater than their price of production. On the other hand, in those spheres, in which the composition of the cajDital would be (80 -f" x) c -|- (20 — x) v, the anrmally produced surplus-value, or profit, would be 20 — x, or smaller than 20, and consequently the value of the commodities k + 20 — X, smaller than the price of production, which is k -|-20. Aside from eventual differences in the periods of turn-over, the price of production of the commodities would be equal with their value only in those spheres, in which the composi- tion would happen to be 80 c + 20 v.
The specific development of the social productivity of labor varies more or less in each particular sphere of production in proportion as the quantity of means of production set in mo- tion in a given working day by a given number of laborers is large, and consequently the quantity of labor required for a definite quantity of means of production small. Hence we call capitals of higher composition such capitals as contain a larger percentage of constant and a smaller percentage of vari- able capital than the average social capital; and vice versa, capitals of lower composition those capitals which give rela- tively more room to the variable, and relatively less to the con- stant capital, than the average social capital. Finally, we call capitals of average composition those capitals which have the same composition as the average social capital. If the average social capital is composed of 80 c -(- 20 v, then a cap- ital of 90 c 4" 10 V stands above, and a capital of 70 c -f- 30 v below the social average. Generally speaking, if the compo- sition of the average social capital is mc -\- nv, m and n be- ing constant magnitudes and m -[- n being equal to 100, the formula (ra -f~ x) c -|- (n — x) v represents the higher composition, and (m — x) c -j- (n -(- x) v the lower composition, of some individual capital or group of capitals. The follow- ing tabulation shows the way in which these capitals per. form their functions after an average rate of profit has been 194 Capitalist Production.
established, assuming one tnrn-over per year. In this tabula- tion, I shows the average composition, in which the average rate of profit is 20%.
The value of the oommodities produced by capital 11 would, therefore, be smaller than their i^rice of production, while the price of production of the commodities of III would be smaller than their value. Value and price of pro- duction would be equal only in the case of capital I and others like it in the various lines of production. By the way, in applying these terms to any particular cases it must be borne in mind whether a deviation of the proportion between c and v is not due simply to a change in the value of the elements of constant capital, instead of a difference in the technical com- position.
The foregoing statements are indeed a modification of our original assumption concerning the determination of the cost- price of commodities. We had originally assumed that tlr- cost-price of a commodity is equal to the value of the commod- ities consumed in its production. Now, the price of pro- duction of a certain commodity is its cost-price for the buyer, and this price may pass into other commodities and become an element of their prices. | Since the price of production may vary from the value of a commodity, it follows that the cost- price of a commodity containing this price of production may also stand above or below that portion of its total value which is formed by the value of the means of production consumed by it. It is necessary to remember this modified significance of the cost-price, and to bear in mind that there is always the possibility of an error, if we assume that the cost-price of the commodities of any particular sphere is equal to the value of the means of production consumed by it. Our present analysis does not necessitate a closer examination of this Formation of Average Rate of Profit. 195 point. It remains true, nevertheless, that the cost-price of a commodity is always smaller than its value. For no matter how much the cost-price of a commodity may differ from the value of the means of production consumed by it, a previous mistake in this respect is immaterial for the capitalist. The cost-price of a certain commodity has been previously deter- mined, it is a premise independent of the production of our capitalist, while the result of his production is a commodity containing surplus-value, which is an addition to its cost- price. For all other purposes, the statement that the cost- price is smaller than the value of a commodity is now prac- tically changed into the statement that the cost-price is smaller than the price of production. So far as the total social capi- tal is concerned, in the case of which the price of production is equal to the value, this statement is still identical with the former, namely that the cost-price is smaller than the value of a commodity. And while this state of things is modified in the individual spheres of production, still the fundamental fact always remains that, from the point of view of the total social capital, the cost-price of the commodities produced by it is smaller than their value, or smaller than their price of production, which in the case of the total mass of social com- modities is identical with their value. The cost-price of a commodity refers only to the quantity of paid labor contained in it, while its value refers to all the paid and unpaid labor contained in it. The price of production refers to the sum of the paid labor plus a certain quantity of unpaid labor de- teiTnined by conditions which are independent of the individ- ual sphere in which this particular commodity was produced.
The formula that the price of production of a commodity is equal to k + P? equal to its cost-price plus profit, is now more precisely modified by the explanation that p equals kp' (p' meaning the average rate of profit), so that the price of production is equal to k + kp'. If k is 300 and p", 15%, then the price of production, being k -f kp', is 300 + 300 The price of production of the commodities in any particu- lar sphere may alter its magnitude in the following cases: 196 Capitalist Production.
1) If the average rate of profit is changed through con- ditions which are independent of this particular sphere, as- suming the value of commodities to remain the same (so that the same quantities of dead and living labor are consumed in their production as before).
2) If there is a change of value, either in this particular sphere in consequence of technical changes, or in consequence of a change in the value of the commodities which form ele- ments of the constant capital of this sphere, while the average rate of profit remains unchanged.
3) If the two aforementioned eventualities combine their effects.
In spite of the great changes occurring continually, as we shall see, in the rates of profit of the individual spheres of production, there is on the other hand no rapid change in the average rate of profit, unless it is brought about exceptionally by extraordinary economic events. A change in the average rate of profit is as a rule the belated work of a long series of fluctuations extending over very long periods of time, fluctua- tions which require much time before they will consolidate and compensate one another so as to bring about a change in the average rate of profit. In all short periods of time (quite aside from fluctuations of market prices), a change in the prices of production is, therefore, always traceable to ac- tual changes in the value of commodities, that is to say, to changes in the total amount of labor-time required for their production. As a matter of course, mere changes in the money-expression of the same values are not at all considered liere.^^ On the other hand it is evident that, from the point of view of the total social capital, the value of the commodities produced by it (or, expressed in money, their price) is equal to the value of the constant capital plus the value of the vari- able capital plus the surplus-value. Assuming the degree of labor-exploitation to be constant, the rate of profit cannot change so long as the mass of surplus-value remains the same, unless either the value of the constant capital changes, or the Formation of Average Rate of Profit. 197 value of the variable capital, or the value of both, so that C is changed and thereby -^, the general rate of profit. In every event, then, a change in the average rate of profit is conditioned on a change in the value of the commodities which form the elements of the value of the constant, or vari- able capital, or of both.
Or, the average rate of profit may change, if the degree of labor-exploitation changes, while the value of the commodities remains the same.
Or, if the degree of labor-exploitation remains the same, the average rate of profit may change through a relative change in the labor employed in comparison to the constant capital, as a result of technical changes in the labor-process. But such technical changes must always find expression in a change of value of the commodities, and be accompanied by it, since their production will then require either more or less labor than before.