Schmidt was misled into straying into this bypath when being quite close to the solution, because he believed that he would have to find as mathematical a formula as possible, by which the agreement of the average price of every individual commodity with the law of value could be demonstrated. But while he has followed a wrong path in this instance, close to the real goal, he shows by the rest of his booklet that he has very understandingly drawn other conclusions from the first two volumes of Capital. His is the honor of having found by independent effort the correct answer given by Marx in the third part of the third volume of his work for the hitherto inexplicable sinking tendency of the rate of profit; and of having furthermore correctly shown the genesis of commercial profit out of industrial surplus-value, and of having made a series of statements concerning interest and ground rent, by which he has anticipated things developed by Marx in the fourth and fifth part of the third volume of his work.
In a subsequent article (Neue Zeit, 1892-93, ISTos. 4 and 5), Schmidt tries another way to solve the problem. It amounts to the statement that competition brings about an average rate of profit by causing the emigration of capital from lines of production with profit below the average to 24 Preface.
lines with profit above the average. There is nothing new in the statement that competition is the great equalizer of profits. But Schmidt tries to prove that this leveling of profits is identical with a reduction of the selling price of commodi- ties produced in excess to a measure in keeping with a price which society can pay for it according to the law of value. The analyses of Marx in this work show sufficiently why this way could not lead to any solution.
After Schmidt, it was P. Fireman who attempted a solu- tion of the problem (Conrad's Jalirhucher, dritte Folge, III, page 793). I shall not discuss his remarks on some of the other aspects of the Marxian analyses. He starts out from the mistaken assumption that Marx wishes to define where he is only analyzing, or that one may look in Marx's work at all for fixed and universally applicable definitions. It is a matter of course that when things and their mutual interrela- tions are conceived, not as fixed, but as changing, that their mental images, the ideas concerning them, are likewise sub- ject to change and transformation; that they cannot be sealed up in rigid definitions, but must be developed in the histor- ical or logical process of their formation. From this it will be understood why Marx starts out in the beginning of his first volume, where he makes the simple production of commodities his historical premise and then proceeds from this basis to capital, from a simple commodity instead of its ideologically and historically secondary form, a capitalistically modified commodity. Fireman cannot understand that at all. I pre- fer to pass over these and other side-issues and proceed at once to the gist of the matter. While the author is taught by the theory that surplus-value is proportional to the labor- powers employed, provided a certain rate of surplus-value is given, he learns from experience that profit is proportional to the magnitude of the total capital employed, provided a Preface. 25 certain average rate of profit is given. Fireman explains this by saying that profit is merely a conventional phenomenon (which means, in his language, that it belongs to a definite social formation with which it stands and falls). Its exist- ence is simply dependent on capital. If this is strong enough to secure a profit for itself, it is also compelled by competition to bring about the same rate of profit for all capitals. In other words, capitalist production is impracticable without an equal rate of profit. Assuming this to be the mode of pro- duction, the quantity of profit for the individual capitalist can depend only on the magnitude of his capital, if the rate of profit is given. On the other hand, profit consists of surplus- value, of unpaid labor. And how is the transformation of surplus-value, determined in quantity by the degree of labor exploitation, into profit, determined in quantity by the mag- nitude of the employed capital, accomplished? " Simply by selling commodities above their value in all lines of production in which the ratio between...constant and variable capital is greatest, and this implies on the other hand that the commodities are sold below their value in all lines of produc- tion in which the ratio between constant and variable capital is smallest, so that commodities are sold at their true value only in lines of production in which the ratio of c:v repre- sents a definite medium magnitude...Is this discrep- ancy between the prices and values of commodities a refuta- tion of the principle of value? By no means. For since the prices of some commodities rise above value to the same extent that the prices of others fall below it, the total sum of prices remains equal to the total sum of values...the incon- gruity disappears in the last instance." This incongruity is a " disturbance "; and " in the exact sciences it is not the custom to regard a calculable disturbance as a refutation of a certain law."
26 Preface.
On comparing the relevant passages of chapter IX with these statements, it will be seen that Fireman has indeed placed his finger on the salient point. But the undeservedly cool reception given to his able article proves that Fireman still needed many interconnecting links, even after this dis- covery of his, before he would have been enabled to work out a full and comprehensible solution. Although many were in- terested in this problem, they were all afraid of burning their fingers with it. And this is due not only to the incomplete form in which Fireman left his discovery, but also to the un- deniable faultiness of his conception of the Marxian analyses and his critique of them based on his misconception.
Whenever there is an opportunity to make himself ridicu- lous by attempting a difficult feat, professor Julius Wolf of Ziirich never fails to exhibit himself. He tells us (Conrad's JaJirhucher, neue Folge, II, pages 352 and following) that the entire problem is solved by the relative surplus-value. The production of relative surplus-value rests on the increase of the constant capital as compared to the variable capital. " A plus in constant capital has for its premise a plus in the productive power of the laborers. Since this plus in produc- tive power (by way of cheapening the necessities of life) pro- duces a plus in surplus-value, the direct relation between an increase of surplus-value and an increasing share of the con- stant capital in the total capital is revealed. A plus in con- stant capital indicates a plus in the productive power of labor. Therefore, if the variable capital remains the same and the constant capital increases, surplus-value must also increase, and we are in agreement with Marx. This was the problem which we were to solve."
Now Marx says the direct opposite in a hundred passages of the first volume. Furthermore, the assertion that, accord- ing to Marx, relative surplus-value increases in proportion ' Preface. 27 as the constant capital is augmented while the variable capi- tal decreases, is so astounding that it defies all parliamentarian language. And finally Mr. Julius Wolf demonstrates in every line that he has neither relatively nor absolutely the least understanding of relative or absolute surplus-value. Truly he says that " at first glance one seems to be in a nest of in- congruities," which, by the way, is the only true statement in his whole article. But what does that matter? Mr. Julius Wolf is so proud of his brilliant discovery that he cannot refrain from bestowing posthumous praise on Marx for it and advertising his own fathomless nonsense as a " renewed proof of the acuteness and farsightedness with which Marx has drawn up his critical system of capitalist economy."
But that is not the worst. Mr. Wolf says: " Ricardo like- wise claimed that an equal investment of capital yielded equal surplus-values (profit), and that the same expenditure of labor created the same amount of surplus-value. And the question was: How does the one agree with the other? But Marx did not acknowledge this form of the problem. He has doubt- less shown (in the third volume), that the second statement is not necessarily a consequence of the law of value, or that it even contradicts his law of value and must, therefore,...be directly repudiated." And thereupon Wolf seeks to find out whether Marx or I made a mistake. Of course, it does not occur to him that he is the one who is wandering in darkness.
It would be an insult to my readers, and a total disregard for the humor of the situation, were I to lose one word about this gem of a passage. I merely wish to add this: With the same boldness, which enabled him to foretell even then what Marx *' has doubtless shown " in the third volume, he avails himself of this opportunity to report an alleged gossip among the professors to the effect that Konrad Schmidt's above- 28 Preface.
28 Preface.
named work was " directly inspired by Engels." Mr. Julius Wolf! In the world in wliicli you live it may be customary for a man to challenge others publicly for the solution of some problem and to acquaint his private friends clandestinely with this solution. That you are capable of such a thing is not hard to believe. But that a man need not stoop to such mean tricks in the world in which I live, is shown by the present preface.
Marx had hardly died, when Mr. Achille T^oria hastily published an article about him in the Nuova Antologia (April, 1883). He starts out with a biography of Marx full of mis- information, and follows it up with a critique of Marx's public, political and literary activity. He misrepresents the mate- rialist conception of history of Marx and twists it with an assurance which indicates a great purpose. And this purpose was later accomplished. In 188G, the same Mr. Loria pub- lished a book entitled La teoria economica delta costituzione politica (The Economic Foundations of Society), in which he announced to his admiring contemporaries that the ma- terialist conception of history, so completely and purposely misrepresented by him in 1883, was his own discovery. True, the Marxian theory is reduced to a rather Philistine level in this book. And the historical illustrations and proofs abound in mistakes which would not be pardoned in a high school boy. But what does that matter? He thinks he has estab- lished his claim that the discovery that always and every- where the political conditions and events are explained by cor- responding economic conditions was not made by Marx in 1845, but by Mr. Loria in 1886. At least this is what he has tried to make his countrymen believe, and also some French- men, for his book has been translated into French. And now he can pose in Italy as the author of a new and epoch-making Preface. 29 theory of history, until the Italian socialists will find time to strip the illustre Loria of his stolen peacock feathers.
But this is only an insignificant sample of Mr. Loria's style of doing things. He assures us that all of Marx's theories rest on conscious sophistry (un consapido sofisma); that Marx was not above using false logic, even though he knew it to be so (sapendolitali), etc. And after thus biasing his readers by a whole series of such contemptible insinuations, in order that they may regard Marx as just such an unprincipled up- start as Loria, accomplishing his effects by the same shameless and foul means as this professor from Padua, he has a very important secret for the readers, and incidentally he touches upon the rate of profit.
Mr. Loria says: According to Marx, the amount of sur- plus-value (which Mr. Loria here mistakes for profit) pro- duced in an industrial establishment under capitalism de- pends on the variable capital employed in it, since the con- stant capital does not yield any profit. But this is contrary to fact. Lor in practice the profit is not measured by the vari- able, but by the total capital. And Marx himself recognizes this (Vol. I, chapter XI) and admits that the facts seem to contradict his theory. But how does he get over this contradic- tion? He refers his readers to a subsequent volume which has not yet been published. Loria had previously told his readers with reference to this unpublished volume, that he did not believe that Marx had ever thought for a moment of writing it. And now he exclaims triumphantly: " Not without good reason did I contend that this second volume, which Marx always flings into the teeth of his adversaries without ever publishing it, might very well be a shrewd ex- pedient, to which Marx always resorted whenever scientific arguments failed him (un ingegnoso spediente ideato dal 30 Preface.
30 Preface.
Marx a sostituzione degli argomenti scientifid). And who- ever is not convinced after this that Marx stood on the same level of scientific swindle with the illustre Loria, is past all redemption.
We have at least learned this much: According to Mr. Loria, the Marxian theory of surplus-value is absolutely ir- reconcilable with the fact of a general and equal rate of profit. But at last the second volume of Capital appeared. It contained my public challenge referring to this point. If Mr. Loria had been one of us diffident Germans, he would have felt a certain embarrassment. But he is a bold south- erner, he comes from a hot climate and can claim that a cool nerve is a natural requirement for him. The question con- cerning the rate of profit has been publicly put. Mr. Loria has publicly declared that it is insoluble. And for this very reason he is now going to outshine himself by publicly solv- ing it.
This miracle is accomplished in Conrad's Jahrhucher, N. F., vol. XX, pages 272 and following, in an article dealing with Konrad Schmidt's above-cited pamphlet. After Loria has learned from Schmidt how the commercial profit is made, he sees everything clearly. " Since a determination of value by means of labor-time gives an advantage to those capitalists who invest a greater portion of their capital in wages, the unproductive " (he means commercial) " capital can extort from these privileged capitalists a higher interest " (he means profit) " and thus bring about an equalization between the individual industrial capitalists.,.. For instance, if each of the industrial capitalists A, B, C, use 100 working days and 0, 100^ and 200 constant capital respectively in production, and if the wages for 100 working days amount to 50 working days, then every capitalist receives a surplus- value of 50 working days, and the rate of profit is 100% Preface. 3 1 Preface. 3 1 for the first 33.3% for the second, and 20% for the third capitalist. But if a fourth capitalist D accumulates an un- productive capital of 300, which extorts an interest " (profit) " equal in value to 40 working days from A, and an interest of 20 working days from B, then the rate of profit of the capitalists A and B will sink to 20% the same as that of C, and D with his capital of 300 will receive a profit of 60, or a rate of profit of 20%, the same as the other cap- italists."
With such astonishing dexterity I'illustre Loria solves sleight of hand fashion the same question which he had de- clared insoluble ten years previously. Unfortunately he did not betray to us the secret of the way in which the owners of the '^ unproductive capital " obtain the power to extort from those industrials their extra-profit exceeding the aver- age rate of profit and to keep it in their own pockets in the same way in which the land owner pockets the surplus-profit of the capitalist farmer as ground rent. For according to this the commercial capitalists would be levying upon the industrials a tribute analogous to ground rent and thereby bring about an equalization of the rate of profit. I^ow, tbe commercial capital is indeed a very essential factor in the equalization of the rate of profit, as nearly everybody knows. But only a literary adventurer, who in the bottom of his heart cares naught for political economy, can venture the as- sertion that commercial capital has the magic power to absorb all profits above the average rate of profit, even before this average rate has become established^ and to convert it into ground-rent for itself without even requiring any real es- tate for this purpose. Nor is the assertion less astonishing that commercial capital has the gift of discovering those industrials, whose surplus-value just covers the average rate of profit, and that it considers it an honor to mitigate the 32 Preface.
fate of those luckless victims of the Marxian law of value by selling its products to them free of charge, without asking as much as a commission for it. What a mountebank a man must be in order to imagine that Marx had to have recourse to such miserable tricks!
But Mr. Loria does not shine in his full glory, until we compare him with his northern competitors, for instance with Mr. Julius Wolf, who was not born yesterday, either. What a small coyote Mr. Wolf seems to be, even in his big volume on Socialism and the Capitalist Order of Society, compared to that Italian! How clumsily, I am almost tempted to say modestly, does he stand forth beside the noble check of the maestro who pretends as a matter of course that Marx is just such a sophist, poor logician, liar and mountebank as ]\Ir. Loria himself, that Marx bamboozles the public with a promise of completing his theory in some future volume which he neither will nor can write, as he very well knows, whenever he gets into a tight place! Unlimited nerve coupled to the smoothness of an eel when slipping through impossible situations, a heroic imperviousness to kicks re- ceived by him, a hasty appropriation of the accomplish- ments of others, an importunate charlatanry of advertising, an organization of fame by the help of a clique of friends — who can equal him in all these?
Italy is the land of classic lore. Since the great time when the morning glow of the modern world rose over it, it produced magnificent characters of unequalled classic per- fection, from Dante to Garibaldi. But the time of its deg- radation under the rule of strangers also bequeathed classic character-masks to it, among them two especially sharply chiseled types, that of Sganarelli and Dulcamara. The classic unity of both is embodied in our illustre Loria.
In conclusion I must take my readers across the Atlantic.
Preface. 33 Dr. (med.) George C. Stiebeling, of Xew York, also found a solution of the problem, and a very simple one at that. It was so simple that no one on either side of the ocean cared to take him seriously. This aroused his ire, and he com- plained about this outrage in an endless number of pamphlets and newspaper articles, on both sides of the great water. He was told in the Neue Zeit that his solution was based en- tirely on an error in his calculation. But this did not dis- turb him in the least. Marx had also made many errors of calculation, and yet he was right. Let us, then, take a closer look at Dr. Stiebeling's solution.
" Take two factories working with equal capitals for an equal length of time, but with different proportions of their constant and variable capitals. The total capital (c -|- v) will be regarded as equal to y, and the difference in the pro- portion of the constant to the variable capital equal to x. In the first factory, y is equal to c + v, in the second y is equal to (c — x) + (^ + x). The rate of surplus-value is therefore in the first factory equal to ^, and in the second factory equal to ^-t^- I designate as profit (p) the total surplus-value (m), by which the total capital y, or q -\- Vy is augmented in the given time, in other words, p is equal to m. Hence the rate of profit in the first fac- tory is equal to y; or ~, and in the second factory like- wise equal to -|-, or ^^_^-^'^^^^^^, that is to say, it is also equal to ~. The...problem solves itself in such a way that, on the basis of the law of value, equal capitals em- ploying unequal quantities of living labor in equal lengths of time, a change in the rate of surplus-value brings about the equalization of an average rate of profit." (G. C. Stiebe- ling, The Law of Value and the Rate of Profit, I^ew York, John Heinrich.)
C 34 Preface.
C 34 Preface.
In spite of the beautiful clearness of the above calculation, we cannot refrain from asking Dr. Stiebeling this question: How does he know that the sum of surplus-values produced by the first factory is exactly equal to the sum of surplus- values produced in the second factory? He states explicitly that c, V, y and x, that is to say, all the other factors in the calculation, are equal in both factories, but not a word about m. It follows by no means that these two quantities of sur- plus-value are equal simply because he designates them both by m. On the contrary, this is precisely what must be proved, especially since Dr. Stiebeling also identifies the profit p without further ceremony with the surplus-value m. Xow, only two possibilities present themselves. Either the m's are equal, both factories produce equal quantities of sur- plus-value, and therefore, since both capitals are equal, also equal quantities of profit. If so, then Dr. Stiebeling has taken for granted at the outset what he was called upon to prove. Or, one factory produces more surplus-value than the other, and in that case his entire calculation falls to the ground.
Mr. Stiebeling spared neither pains nor money in building upon this erroneous calculation of his mountains of other calculations and exhibiting them to the public. I can assure him, for his own peace of mind, that nearly all of his calcula- tions are equally wrong, and whenever they are not, they prove something entirely different from what he set out to prove. He proves, for instance, by a comparison of the U. S. census figures for 1870 and 1880 that the rate of profit has actually fallen, but explains this fact wrongly, assuming that he has to correct Marx for working his theory with a never changing, stable, rate of profit. But the third part of the third volume of Capital shows that this '' stable rate of profit " in Marxian economics is purely a figment of Dr.
Preface. 35 Preface. 35 Stiebeling's brain, and that the falling rate of profit is due to causes which are just the reverse of those indicated by Dr. Stiebeling. ISTo doubt Dr. Stiebeling has the best intentions, but a man who undertakes to discuss scientific questions should learn above all to read the works of the author, whom he wishes to study, just as they have been written, and espe- cially not to find anything in them which they do not contain. The outcome of the entire investigation, also in this ques- tion, shows once more that the Marxian school is the only one which has accomplished something in this line. When Fireman and Konrad Schmidt read this third volume, they will have good reasons for being well satisfied with the work done by each of them.
Fredeeick Engels. London, October 4, 1894.
VOLUME III.
THE PROCESS OF CAPITALIST PRODUCTION AS A WHOLE.
PART I.
THE CONVEESIOJ^ OF SURPLUS-VALUE INTO PROFIT AND OF THE RATE OF SURPLUS- VALUE INTO THE RATE OF PROFIT.
CHAPTER L COST PRICE AND PEOFIT.
IN the first volume we analyzed the phenomena presented hj the process of capUalist production., considered by itself as a mere productive process without regard to any sec- ondary influences of conditions outside of it. But this process of production, in the strict meaning of the term, does not ex- haust the life circle of capital. It is supplemented in the actual world by the process of circulation, which was the object of our analysis in the second volume. We found in the course of this last-named analysis, especially in part III, in which we studied the intervention of the process of circu- lation in the process of social reproduction, that the capitalist process of production, considered as a whole, is a combination of the processes of production and circulation. It cannot be the object of this third volume to indulge in general reflections relative to this combination. We are rather interested in lo 37 38 Capitalist Production.
eating the concrete forms growing out of the movements of capitalist production as a whole and setting them forth. In actual reality the capitals move and meet in such concrete forms that the form of the capital in the process of production and that of the capital in the process of circulation impress one onlv as special aspects of those concrete forms. The conformations of the capitals evolved in this third volume approach step by step that form which they assume on the surface of society, in their mutual interactions, in competi- tion, and in the ordinary consciousness of the human agencies in this process.
The value of every commodity produced by capitalist methods is represented by the formula: C = c -}- ^ + s. If we subtract the surplus-value s from this value of the product, there remains only an equivalent for the value of the capital c + V expended for the elements used in the produc- tion of this commodity.