We saw in part I that the mass of profit and surplus-value were identical. But the rate of profit was from the first dis- tinguished from the rate of surplus-value, and this appeared to be due, at first sight, to a mere difference of calculation. But at the same time this way of looking at the question served from the outset to obscure and mystify the actual ori- gin of surplus-value, since the rate of profit could rise or fall, while the rate of surplus-value remained the same, and vice versa, and since the capitalist had a practical interest only in the rate of profit. But there was an actual difference of mag- nitude only between the rates of surplus-value and of profit, not between the masses of surplus-value and of profit. Since the surplus-value was calculated on the total capital in fignir- ing up the rate of profit, and this total capital was regarded as the standard of measurement, the surplus-value itself seemed to have its origin in the total capital and to proceed from all its parts uniformly, so that the organic difference between constant and variable capital was obliterated. In its disguise of profit, the surplus-value had actually con- cealed its origin, lost its character, and become unrecogniza- ble. However, hitherto the distinction between profit and 198 Capitalist Production.
surplus-value referred only to a change of quality, or form and there was no real difference of magnitude between the masses of surplus-value and profit, but only between the rates of surplus-value and profit, in this first stage of their meta- morphosis.
But this is changed, as soon as a general rate of profit, and, by lueans of it, an average mass of profit corresponding to the magnitude of the capitals invested in the various spheres of production, have been established.
After that it is but accidentally that the surplus-value ac- tually produced in any particular sphere of production, and thus the profit, is identical with the profit contained in the selling price of the commodities. It then becomes the rule, that not only the rates of surplus-value and profit are the ex- pression of different magnitudes, but also the masses of sur- plus-value and of profit. Assuming a certain degree of ex- ploitation to exist, the mass of the surplus-value produced in any particular sphere of production is now more important for the average profit of the total social capital, and thus for the capitalist class in general, than for the individual capi- talist in any individual line of production. It has any im- portance for the individual capitalist only to the extent ^^ that the quantity of surplus-value produced in his line plays a determining role in regulating the average profit. But this is a process which takes place behind his back, which he does not see, nor understand, and which indeed does not interest him at all. The actual difference of magnitude between profit and surplus-value — not merely between the rate of profit and of surplus-value — in the various spheres of pro- duction now conceals completely the true nature and origin of profit, not only for the capitalist, who has a special inter- est in deceiving himself on this score, but also for the laborer. By the transformation of values into prices of production, the basis of the determination of value is itself removed from di- rect observation. Finally, seeing that the mere transforma- tion of surplus-value into profit separates that portion of the =*0f course, we leave aside the question of the probability of securing an extra profit by cutting wages, monopoly prices, etc., at least for the moment.
I Formation of Average Rate of Profit. 199 value of commodities which forms the profit from that por- tion which forms the cost-price of commodities, it is natural that the capitalist should lose the meaning of the term value at this juncture. For he is not confronted with the total labor put into the production of the commodities, but only with that portion of the total labor which he has paid in the shape of means of production, whether they be alive or dead, so that his profit appears to him as something outside of the imma- nent value of the commodities. And now this conception is fully endorsed, fortified, and ossified by the fact that, from the point of view of his jjarticular sphere of production, the profit is not determined by the limits drawn for the formation of value within his own circle, but by outside influences.
The fact that the actual state of things is here revealed for the first time; that political economy up to the present time, as we shall see in the following and in volume IV, made either forced abstractions of the distinctions between surplus- value and profit, and their rates, in order to be able to retain the determination of value as a basis, or gave up the deter- mination of value and with it all safeguards of scientific proce- dure, in order to cling to the obvious phenomena of these differ- ences — this confusion of the theoretical economists demon- strates most strikingly the utter incapacity of the capitalist, when blinded by competition, to penetrate through the out- ward disguise into the internal essence and the inner form of the capitalist process of production.
In fact, all the laws concerning the rise and fall of the rate of profit, as analysed in part I, have the following double meaning: 1) On the one hand, they are the laws of the average rate of profit. In view of the many different causes which bring about a rise or a fall in the rate of profit, one would think that the average rate of profit would change every day. But a certain movement in one sphere will counterbalance that of another, their effects cross and paralyze one another. We shall examine later on toward which side these fluctuations gravitate ultimately. But they are slow. The suddenness, multiplicity, and different duration of the fluctuations in the 200 Capitalist Production.
individual spheres of production tend to compensate them mutually in the order of their succession in time, so that a fall in prices follows after a rise, and vice versa, limiting these fluctuations to local, individual, spheres. As a result, the various local fluctuations ultimately neutralise one an- other. Changes take place within each individual sphere of production, deviations from the average rate of profit, which on the one hand, balance one another after a certain time and thus do not react upon the average rate of profit, and whicli, on the other hand, do not react upon it, because they are bal- anced by other simultaneous fluctuations in other local spheres. Since the average rate of profit is determined, not only by the average profits of each sphere, but also by the allotment of the total social capital to the different individual spheres, and since this allotment is continually changing, this is another continuous cause of changes in the average rate of profit. But it is a cause of changes which largely paralyzes itself, owing to its interrupted and many sided nature.
2) Within each sphere, there is a certain playroom for a space of time in which the local rate of profit may fluctuate, before this fluctuation of rise and fall consolidates suflficiently to gain time for exerting an influence on the average rate of profit and assuming more than a local importance. Within these limits of space and time, the laws of the rate of profit, jm as developed in Part I of this volume, likewise remain ap- *" ' plicable.
The theoretical conception, referring to the first transfor- mation of surplus-value into profit, according to wdiich every part of the capital yields uniformly the same profit,^^ ex- presses a practical fact. Whatever may be the composition of the industrial capital, whether it sets in motion one quar- ter of dead labor and three quarters of living labor, or three quarters of dead labor and one quarter of living labor, whether it absorbs three times as much surplus-labor, or pro- duces three times as much surplus-value, in one case than in another, it yields the same profit in either case, always as- suming the degree of labor-exploitation to be the same, and » Malthus, Formation of Average Rate of Profit 201 leaving aside individual differences, which disappear for the reason that we are dealing in either case with the average composition of the entire sphere of production. The indi- vidual capitalist, whose outlook is limited, or even all the capitalists in each individual sphere of production, justly believe that their profits are not derived solely from the labor employed in their own individual sphere. This is quite true so far as their average profit is concerned. To what ex- tent this profit is due to the universal exploitation of labor by means of the total social capital, that is to say, by all his capitalist colleagues, this connection of things is a complete mystery for the individual capitalist. And it is all the more so, since no bourgeois economist has so far cleared it up for him, A saving of labor — not only of labor necessary for the production of a certain product, but also of the number of la- borers employed — and tlie employment of more dead labor (constant capital), appear as very correct operations from an economic point of view, and do not seem to exert the least in- fluence on the average rate of profit and the average profit. How, then, could living labor be the exclusive source of profit, seeing that a reduction in the quantity of labor required for production does not only seem to exert no injurious influence on profit, but even seems, under certain circumstances, to be the first cause for an increase of profits, at least for the in- dividual capitalist?
If there is a rise or fall, in any particular sphere of pro- duction, in that portion of the cost-price which represents the value of the constant capital, it is a portion coming out of the circulation and passes from the outset into the process of pro- duction of the commodities in its enlarged or reduced state. If, on the other hand, the same number of laborers produces more or less in the same time, so that the quantity of labor required for the production of a definite quantity of com- modities varies Avhile the number of laborers remains the same, it may be that that portion of the cost-price, which rep- resents the value of the variable capital, may remain the same and contribute the same amount to the cost-price of the total product. But every individual commodity, whose sum makes 202 Capitalist Production.
up the total product, shares in more or less labor (paid and unpaid), and shares therefore in the greater or smaller outlay for this labor, a larger or smaller portion of the wages. The total wages paid bv the capitalist remain the same, but the calculation for each individiial commodity is different. To that extent there would be a change in the cost-price of the commodities. But no matter whether the cost-price of the individual commodities rises or falls, either as a result of such changes of value in this same commodity, or of changes of value in its elements (or, perhaps, the cost-price of the total amount of commodities produced by a capital of a given mag- nitude), if the average profit is, say, 10%, it remains 10%. Still, 10%, from the point of view of the individual com- modity, may represent very different amounts, according to the change of magnitude in the cost-price of the individual commodities called forth by such changes of value as we have assumed.^^ So far as the variable capital is concerned — and this is the more important, because it is the source of surplus-value, and because anything which conceals its relation to the accu- mulation of wealth by the capitalist serves to mystify the en- tire system — the matter assumes a coarser form. It appears to the capitalist in this light: A variable capital of 100 p.st. employs, perhaps, 100 laborers per w^eek. If these 100 la- borers produce 200 pieces of commodities or 200 C, per week in a given working time, then 1 C — leaving aside the ques- tion of that portion of its cost-price which is added by the constant capital, costs 10 shillings, for 100 p.st. pay for 200 c, and therefore 1 C costs \^^ p.st. Xow take it that a change takes place in the productive power of labor. Perhaps it is doubled, so that the same number of laborers now produces twice 200 C in the same time in which they used to produce once 200 C. In that case 1 C costs 5 shillings (always speaking only of that portion of the cost-price which consists of wages), for since 100 p.st. now pay for 400 C, 1 C costs \^^ p.st. On the other hand, if the productive power were to decrease by one-half, then the same labor would produce » Corbett.
Market Prices and Market Values.. 203 only ^^-C. And since 100 p.st. pay for ^ C, 1 C would cost YW^ p.st., or 1 p.st. The changes in the labor-time re- quired for the production of the commodities, and thus the changes in their values, thus appear with reference to the cost-price and the price of production as different allotments of the same wages to more or fewer commodities, according to the greater or smaller quantity of commodities produced in the same working time for the same wages. The capi- talist, and consequently his political economist, see that the aliquot part of the paid labor falling to the share of each individual commodity changes with the productivity of labor, and that the value of these commodities also changes accord- ingly. But they do not see that the same is true of the un- paid labor contained in every individual connnodity, and they see it so much less since the average profit is but accidentally determined by the unpaid labor absorbed in the sphere of the individual capitalist. Only in this vagiie and meaning- less form are we still reminded of the fact that the value of the commodities is determined bv the labor contained in them.
CHAPTEE X.
CHAPTEE X.
COMPENSATION OF THE AVERAGE RATE OF PROFIT BY COM- PETITION. MARKET PRICES AND MARKET VALUES. SUR- PLUS-PROFIT.
One portion of the spheres of production has an average com- position of their capitals, that is to say, their capitals have exactly or approximately the composition of the average so- cial capital.
In these spheres of production, the price of production of the produced commodities coincides exactly or approximately with their values as expressed in money. If there is no other way of reaching a mathematical limit, this would be the one. Competition distributes the social capital in such a way be- tween the various spheres of production that the prices of production of each sphere are formed aft^r the model of the 204 Capitalist Production.
prices of production in these spheres of average composition, which is k -|- kjD', cost-price plus the average rate of profit multij)lied by the cost-price, l^ow, this average rate of profit is nothing else but the percentage of profit in that sphere of average composition, in which the profit is identical with the surplus-value. Hence the rate of profit is the same in all spheres of production, for it is apportioned according to that one of the average spheres of production in which the average composition of capitals prevails. Consequently the sum of the profits of all spheres of production must be equal to the sum of surplus-values, and the sum of the prices of produc- tion of the total social product equal to the sum of its values. But it is evident that the balance between the spheres of pro- duction of different composition must tend to equalise them with the spheres of average composition, no matter Avhether this average composition is exact or only approximate. Again, there are tendencies toward equalisation between the more or less similar sjDheres, and these tendencies seek to bring about the ideal average, which does not really exist, so that there is a trend toward crystallisation around the ideal. In this way the tendency necessarily prevails to make of the prices of production merely changed forms of value, or to make of profits but mere portions of surplus-value, which are assigned, however, not in proportion to the surplus-value pro- duced in each special sphere of production, but in proportion to the mass of capital employed in each sphere of production, so that equal masses of capital, whatever may be their com- position, receive equal aliquot shares of the total surplus- value produced by the total social capital.
In the case of capitals of average, or approximately aver- age, composition, the price of production coincides exactly, or approximately with the value, and the profit with the surplus- value produced by them. All other capitals, of whatever com- position, tend toward this average under the pressure of com- petition. • But since the capitals of average composition are of the same, or approximately the same, structure as the average social capital, all capitals have the tendency, regardless of the surplus-value produced by them, to realise in the prices of I Market Prices and Market Values. 205 their coiimiodities the average profit, instead of their own sur- plus-value, in other words, to realise the prices of production.
On the other hand it may be said that whenever an average profit, and a general rate of profit, are brought about, no mat- ter by what means, such an average profit cannot be anj^thing else but the profit on the average social capital, the sum of these average profits being equal to the sum of surplus-values produced by the average social capitals, and that the prices brought about by adding this average profit to the cost-prices cannot be anything else but the values transformed into prices of j^roduction. It would not alter matters, if certain capitals in certain spheres of production would not submit to the process of equalisation for some reason or other. In that case the average profit would be computed on that portion of the social capital which takes part in the process of equalisa- tion. It is evident that the average profit cannot bo anything else but the total mass of surplus-values allotted to the various masses of capital in the different spheres of production in proportion to their magnitudes. The average profit is the total amount of realised unpaid labor, and this total mass of unpaid labor, the same as the paid, dead or living, labor, is materialised in the total mass of commodities and money fall- ing to the share of the capitalists.
The real difficulty lies in the question: How is this equal- isation of profits into an average rate of profit brought about, seeing that it is evidently a result, not a point of departure?
It is obvious that an estimate of the values of the com- modities, for instance in money, can not be made until they have been exchanged. If we assume such an estimate, we must regard it as the outcome of an actual exchange of com- modity-value for commodity-value. But how should such an exchange of commodities at their real values have come about?
Let us assume that all commodities in the different lines of production are sold at their real values. What would be the outcome? According to our foregoing analyses, the rates of profit in the various spheres of production would differ considerably. It is quite obvious that we are dealing with two different things, whether on the one hand commodities 2o6 Capitalist Production.
are sold at their values (that is to say, sold in proportion to the value contained in them, or exchanged with one another at the price of their values), or -whether, on the other hand, they are sold at such prices that their sale yields equal amounts cf profits on equal masses of the respective capitals advanced for their production.
Tf capitals employing unequal amounts of living labor are to produce unequal amounts of surplus-value, it must be assumed, at least to a certain degree, that the intensity of ex- ploitation, or the rate of surplus-value, are the same, or that any existing differences in them are balanced by real or imag- inary (conventional) elements of compensation. This would presuppose a competition among the laborers and an equilibra- tion by means of their continual emigration from one sphere of production to another. Such a general rate of surplus- value — as a tendency, like all other economic laws — has been assumed by us for the sake of theoretical simplification. But in reality it is an actual premise of the capitalist mode of production, although it is more or less obstructed by prac- tical frictions causing more or less considerable differences locally, such as the settlement laws for English farm laborers. But in theory it is the custom to assume that the laws of cap- italist production evolve in their pure form. In reality, how- ever, there is always but an approximation. Still, this ap- proximation is so much greater to the extent that the capitalist mode of production is normally developed, and to the extent that its adulteration and amalgamation with remains of former economic conditions is outgrown.
The whole difficulty arises from the fact that commodities are not exchanged simply as commodities, but as products of capitals, which claim equal shares of the total amount of sur- plus-value, if they are of equal magnitude, or shares propor- tional to their different magnitudes. And this claim is to be satisfied by the total price realised by a certain capital on the commodities produced by it within a certain space of time. This total price, again, is but the sum of the prices of the individual commodities produced by this capital.
The essential point will become most visible, when we look Market Prices a ml Market J\ilites\ 207 upon the matter in this way: Let us assume that the laborers themseh^es are in possession of their respective means of pro- duction and exchange their commodities with one another. In that case these commodities would not be products of capi- tal. The value of the various instruments of labor and raw materials would differ according to the technical nature of the labors performed in the different lines of production. Further- more, aside from the unequal value of the means of productirn employed by them, they would require different quantities of means of production for given quantities of labor, according to whether a certain commodity can be finished in one hour, an- other in one day, and so forth. Let us assume, also, that these laborers work on an average equal lengths of time, allowing for compensations due to different intensities of labor. In that case, two laborers, both working one day, would have in the connnodities produced by them, first, an equivalent for their outlay, the cost-prices of the means of production consumed by their labor. These would differ according to the technical nature of their lines of production. In the second place, both of them would have created equal amounts of new value, namely the working day added by them to the means of production. This would comprise their wages plus the sur- plus-value, the last representing surplus-labor exceeding their necessary wants, the product of which would belong to them. If we were to use capitalist terms, we should say that both of them receive the same wages plus the same profit, or the same value exjDressed, say, by the product of a working day of ten hours. But in the first place, the values of their com- modities would differ. The commodities of I, for instance, might contain more value for each portion of the consumed means of production than the commodities of 11. And, to introduce all possible differences, we may assume right now that the commodities of I absorb more living labor, and con- sequently require more labor-time for their production, than the commodities of 11. Then the value of the commodities of I and II, we repeat, differs considerably. So do the sums of the values of their commodities, which represent the prod- uct of the labor performed by laborers I and II in a certain 2o8 Capitalist Production.
time. The rates of profit would also differ considerably for I and II, assinning- that we call rate of profit, in this case, the proportion of the surplus-value to the total value of the in- vested means of production. The means of subsistence daily consumed by I and II during production, which take the i)lace of wages, will form that part of the invested capital which Ave would call variable capital under different circumstances. But the sui'plus-values would be the same for I and II, or, to express it more accurately, since both I and II receive the value of the product of one day's labor, both of them receive equal values after the value of the invested " constant " capi- tal has been deducted, and we may regard one portion of this remaining value as an equivalent for the means of subsistence consumed during production, and the other as surplus-value. If laborer I has higher expenses, they are made good by a greater portion of the value of his commodities replacing this " constant " part, and he has to reconvert a larger portion of the total value of his product into the material elements of this constant part, while laborer II, if he receives less for this purpose, has to reconvert so much less. Under these circumstances a difference in the rates of profit would be of no concern, just as it is immaterial for the wage-laborer to-day what rate of profit may express the amount of surplus-value filched from him, and just as in international commerce the difference in the various national rates of profit is immaterial for the exchange of their commodities.
The exchange of commodities at their values, or approxi- mately at their values, requires, therefore, a much lower stage than their exchange at their prices of production, which re- quires a relatively high development of capitalist produc- tion.
Whatever may be the way in which the prices of the va- rious commodities are first fixed or mutually regulated, the law of value always dominates their movements. If the la- bor time required for the production of these commodities is reduced, prices fall; if it is increased, prices rise, other cir- cumstances remaining the same.
Aside from the fact that prices and their movements are Market Prices and Market Values. 209