To say that the price of the individual commodities falls, which together make up the total product of the capital, is simply to say that a certain cjiiantity of labor is realised in a larger quantity of commodities, so that each individual com- modity contains less labor than before. This is the case even if the price of one of the parts of constant capital, such as raw material, etc., should rise. With the exception of a few cases (for instance, if the productive power of labor cheapens all the elements of constant and variable capital uniformly) the rate of profit will fall in spite of the increased rate of sur- plus-value, 1), because even a larger unpaid portion of the smaller total amount of newly added labor is smaller than a smaller aliquot portion of unpaid labor was in the former large amount of total labor, and 2), because the higher com- position of the capital is expressed through the individual commodity by the fact that that portion of its value, in which newly added labor is materialised, decreases as compared to that portion of its value, which represents raw material, aux- 266 Capitalist Production.
iliary material^ and wear and tear of fixed capital. This change in the proportions of the various component parts of the price of the individual commodities, the decrease of that portion of their price, in which newly added labor is materi- alised, and the increase of that portion, in which formerly ma- terialised labor is represented, is that form which expresses through the price of the individual commodities the de- crease of the variable capital as compared to the constant cap- ital. To the extent that this decrease is absolute for a cer- tain amount of capital, for instance 100, it is also absolute for every individual commodity as an aliquot part of the re- produced capital. However, the rate of profit, if calculated merely on the elements of the price of the individual com- modity, would be different from what it actually is. The reason for this is as follows: [The rate of profit is calculated on the total capital in- vested, but only for a definite time, in fact, for one year. The rate of profit is the proportion of the surplus-value, or profit, made and realised on the total capital and calculated in percentages. It is, therefore, not necessarily equal to a rate of profit, whose jcalculation was not based on one year, but on the period of turn-over of the invested capital. These two things do not coincide, unless the capital is turned over ex- actly in one year.
On the other hand, the profit made in the course of one year is merely the sum of the profits on the commodities pro- duced and sold during the same year. ISTow, if we calculate the profit on the cost-price of the commodities, we obtain a rate of profit = -^, in which p stands for the profit realised during one year, and k for the sum of the cost-prices of the commodities produced and sold during that year. It is e^d- dent that this rate of profit -^ will not coincide with the actual rate of profit —, or mass of profit divided by the total capital, unless k = C, that is, unless the capital is turned over in exactly one year.
Let us take three different conditions of some industrial capital.
The Theory of the Law. '^67 I. — A capital of 8,000 p.st. produces and sells annually 5,000 pieces of commodities, at 30 sh, per piece, making an annual turn-over of 7,500 p.st. It makes a profit of 10 sh. on each piece, or 2,500 p.st. per year. Every piece, then, contains 20 sh. of capital advance, and 10 sh. of profit, so that the rate of profit per piece is 5-^ = 50%. The turned- over sum of 7,500 p.st. contains 5,000 p.st. of advanced capi- tal and 2,500 p.st. of profits. Eate of profit for one turn- over, -^, likewise 50%. But the rate of profit calculated on the total capital is the rate of profit -J- =|f|^ = 31|%.
II. — Let the capital increase to 10,000 p.st. Owing to an increased productivity of labor, let it be enabled to produce an- nually 10,000 pieces of commodities at a cost-price of 20 sh. per piece. Let these commodities be sold at a profit of 4 sh., in other words, at 24 sh. per piece. In that case the price of the annual product is 12,000 p.st., of which 10,000 p.st. is advanced capital and 2,000 p.st. profits. The rate of profit "k" is T7 per piece and "if^ooo" ^^^ ^^^^ annual turn-over, or in both cases =20%. And since the total capital is equal to the sum of the cost-prices, namely 10,000 p.st., it follows that -^, the actual rate of profit, is in this case also 20%.
III. — Let the capital increase to 15,000 p.st., owing to a further gTowth of the productive i')ower of labor, and let it produce annually 30,000 pieces of commodities at a cost- price of 13 sh. per piece, each piece being sold at a profit of 2 sh., or at 15 sh. per piece. The annual turn-over amounts in that case to 30,000 X 15 sh. =, 22,500 p.st., of which 19,500 are advanced capital and 3,000 p.st. profits. The rate of profit ^ is then y^ = -J^^ = 15y%%. But the actual We see, then, that only in case II, where the turned-over capital-value is equal to the total capital, is the rate of profit per piece, or per total amount turn-over, the same as the rate of profit calculated on the total capital. In case I, where the amount of the turn-over is smaller than the total capital, the rate of profit calculated on the cost-price of the commodi- ties is higher. In case III, w^here the total capital is smaller 268 Capitalist Production.
than the amount of the turn-over, the rate of profit calculated on the cost-price of commodities is smaller than the actual rate calculated on the total capital. This is a general rule.
In commercial practice the turn-over is generally calcu- lated inaccurately. It is assumed that the capital has been turned over once, as soon as the sum of the realised commod- ity-prices equals the sum of the invested total capital. But the capital can complete one whole turn-over only in tlie case that the sum of the cost-prices of the realised commodities equals the sum of the total capital. — F. E.]
This demonstrates once more how important it is under the capitalist mode of jDroduction that the individual commodities or the commodity-product of a certain period should not be considered as isolated by themselves, as mere commodities, but ^s jDroducts of advanced capital and in their relation to the totaTjeapiEil^^Ji^hieh produces them. "^ Although the rate of profit must be calculated by measuring the mass of the produced and realised surplus-value by the consumed portion of capital reappearing in the commodities as well as by the sum of this portion plus that portion of capital which, though not consumed, is employed and con- tinues to serve in production, the mass of profit cannot be equal to anything but the mass of profit, or surplus-value, contained in the commodities themselves and to be realised by their sale.
If the productivity of industry increases, the prices of the individual commodities fall. There is less paid and unpaid labor contained in them. Let the same labor produce, say, thrice its former product. Then the individual product re- quires two-thirds less labor. And since the profit can con- stitute but a portion of the amount of labor congealed in the individual commodities, the mass of profit in the individual commodities must decrease. And this must hold good, within certain limits, even if the rate of surplus-value should rise. In any case, the mass of profits on the total product does not fall below the original mass of profits so long as the capital employs the same number of laborers at the same degree of exploitation. (This may also take place, if fewer laborers The Theory of the Laiv. 269 are employed at a higher rate of exploitation.) For to the same extent that the mass of profit on the individual product -rtecreaSes^oes the number of products increase. The mass of profits remains the same, only it is distributed differently over the total amount of commodities. ISTor does this alter the division of the amount of value created by newly added labor between the laborers and capitalists. The mass of profit can- not increase^ so long as the same amount of labor is employed, uliless the unpaid surplus-labor increases, or, supposing the iTifensity of exploitation to remain the same, unless the num- ber of laborers grows. Or, both of these causes may, of course, combine to produce this result. In all these cases, which, however, according to our assumption, presuppose an increase of the constant capital as compared to the variable and an increase in the magnitude of the total capital, the in- dividual commodity contains a smaller mass of profit and the rate of profit falls even if it is calculated on the individual commodity. A given quantity of additional labor is ma- terialised in a lai'ger quantity of commodities. The price of the individual commodities falls. Abstractly speaking, the rate of profit may remain the same, even though the price of the individual commodity may fall as a result of an increase in the productivity of labor and a simultaneous increase in the number of these cheaper commodities, for instance, if the increase in the productivity of labor extended its effects uni- formly and simultaneously to all the elements of the commodi- ties, so that the total price of the commodities would fall in the same proportion in which the productivity of labor would increase, while on the other hand the mutual relations of the different elements of the price of commodities would remain the same. The rate of profit might even rise, if a rise in the rate of surplus-value were accompanied by a considerable re- duction in the value of the elements of constant, and par- ticularly of fixed, capital. But in reality, as we have seen, the rate of profit will fall in the long run. In any case, a fall in the price of any individual commodity does not by it^- self give a clue to the rate of profit. Everything depends on the magnitude of the total capital invested in its production.
270 Capitalist Production.
For instance, if the price of one yard of fabric falls from 3 sh. to If sh.; if we know that it contained before this reduc- tion in price Ij sh, worth of constant capital, yam, etc., § sh. wages, and ^ sh. profit, while it contains after this reduction 1 sh. of constant capital, ^ sh. of wages, and ^ sh. of profit, we cannot tell whether the rate of profit has remained the same or not. This depends on the question, whether the ad- vanced total capital has increased, and how much, and how many yards of fabric more it produces in a given time.
This phenomenon arising from the nature of the capitalist mode of production, namely, that an increase in the produc- tivity of labor implies a fall in the price of the individual commodity, or of a certain mass of commodities, an increase in the number of commodities, a reduction of the mass of profit in the individual commodity and of the rate of profit on the aggTegate of commodities, an increase of the mass of profit in the total quantity of commodities, this phenomenon shows itself on the surface only in a reduction of the mass of profit in the individual commodities, in a fall of their prices, in an increase of the mass of profits in the augmented number of commodities as a whole, which have been produced by the total capital of society or by that of the individual capitalist. It is then imagined that the capitalist adds less profits to the price of the individual commodities on his own free volition and makes up for it by the returns on a greater number of commodities produced by him. This conception rests upon the idea of profit upon alienation, which in its turn is deduced from the ideas of merchant's capital.
We have seen previously, in parts four and seven of Book I, that the growth in the mass of commodities resulting from the productivity of labor and the consequent cheapening of the commodities as such (unless these commodities become de- termining elements in the price of labor-power) do not affect the proportion between paid and unpaid labor in the indi- vidual commodities, in spite of the fall in price.
Since everything appears inverted under competition, the individual capitalist may imagine: 1) That he is reducing his profit on the individual commodity by cutting its price, The Theory of the Law. 271 but still making a greater profit on account of the larger quan- tity of commodities which he is selling; 2) that he is fixing the price of the individual commodities and determining the price of the total product by multiplication, while the original process is really one of division (see Book I, chapter XII) and the multiplication is correct only in a secondary way, being based on that division. The vulgar economist does practically no more than to translate the queer concepts of the capitalists, who are in the thralls of competition, into a more theoretical and generalising language and to attempt a vindication of the correctness of those conceptions.
Practically, a fall in the prices of commodities and a rise in the mass of profits contained in the augmented mass of these cheapened commodities is but another expression for the law of the falling rate of profit with a simultaneous increase in the mass of profits.
The analysis of the extent to which a falling rate of profit may coincide with rising prices does not belong in this chap- ter any more than that of the point previously discussed in volume I, chapter XII, concerning relative surplus-value. A capitalist working with improved methods of production that have not yet become general sells below the market-price, but above his individual price of production. In tliis way his rate of profit rises until competition levels it down. During this leveling period the second requisite puts in its appear- ance, namely the expansion of the invested capital. Accord- ing to the degree of this expansion the capitalist will be en- abled to employ a part of his former laborers under the new conditions, and eventually all of them or more, in other words, he will be enabled to produce the same or a greater mass of profits.
272 Capitalist Production.
CHAPTER XIV.
COrifTERACTIlSrG CAUSES.
If we consider the enormous development of the productive powers of labor, even comparing but the last 30 years with all former periods; if we consider in particular the enormous mass of fixed capital, aside from machinery in the strict mean- ing of the term, passing into the process of social production as a whole, then the difficulty, which has liitherto troubled the vulgar economists, namely that of finding an explanation for the falling rate of profit, gives way to its opposite, namely to the question; How is it that this fall is not gi'eater and more rapid? There must be some counteracting influences at work, which thwart and annul the effects of this general law, leav- ing to it merely the character of a tendency. For this reason we have referred to the fall of the average rate of profit as a tendency to fall.
The following are the general counterbalancing causes: I. Raising the Intensify of Exploitation. The rate at which labor is exploited, the appropriation of surplus-labor and surplus-value, is raised by a. prolonga- tion of the working day and an intensification of labor. These two points have been fully discussed in volume I as incidents to the production of absolute and relative surplus- value. There are many ways of intensifying labor, which imply an increase of the constant capital as compared to the variable, and consequently a fall in the rate of profit, for in- stance setting a laborer to watch a larger number of ma- chines. In such cases — and in the majority of manipula- tions serving to produce relative surplus-value — the same causes, which bring about an increase in the rate of surplus- value, may also imply a fall in the mass of surplus- value, looking upon the matter from the point of view of the I Counteracting Causes. 273 total quantities of invested capital. But there are other means of intensification, such as increasing the speed of ma- chinery, which, although consuming more raw material, and, so far as the fixed capital is concerned, w^earing out the ma- chinery so much faster, nevertheless do not affect the relation of its value to the price of labor set in motion by it. It is particularly the prolongation of the working day, this inven- tion of modern industry, which increases the mass of appro- priated surplus-labor without essentially altering the propor- tion of the employed labor-power to the constant capital set in motion by it, and which tends to reduce this capital relatively, if anything. For the rest, we have already dem- onstrated — what constitutes the real secret of the tendency of the rate of profit to fall — that the manipulations made for the purpose of producing relative surplus-value amount on the whole to this: That on one side as much as possible of a certain quantity of labor is transformed into surjilus- value, and that on the other hand as little labor as possible is employed in proportion to the invested capital, so that the same causes, which permit the raising of the intensity of exploitation, forbid the exploitation of the same quantity of labor by the same capital as before. These are the warring tendencies, which, while aiming at a raise in the rate of sur- plus-value, have at the same time a tendency to bring about a fall in the mass of surplus-value, and therefore of the rate of surplus-value produced by a certain capital. It is fur- thermore appropriate to mention at this point the extensive introduction of female and child labor, in so far as the whole family must produce a larger quantity of surplus-value for a certain capital than before, even in case the total amount of their wages should increase, which is by no means general.
Whatever tends to promote the production of relative sur- plus-value by mere improvements in methods, for instance in agriculture, without altering the magnitude of the invested capital, has the same effect. While the constant capital does not increase relatively to the variable in such cases, taking the variable capital as an index of the amount of labor-power employed, the mass of the product does increase in proportion 274 Capitalist Production.
to the labor-power employed. The same takes place, when the productive power of labor (whether its product passes into the consumption of the laborer or into the elements of con- stant capital) is freed from obstacles of circulation, of arbi- trary or other restrictions which become obstacles in course of time, in short, of fetters of all kinds, without touching di- rectly the proportion between the variable and the constant capital.
It might be asked, whether the causes checking the fall of the rate of profit, but always hastening it in the last analysis, include the temporary raise in surplus-value above the aver- age level, which recur now in this, now in that line of pro- duction for the benefit of those individual capitalists, who make use of inventions, etc., before they are generally intro- duced. This question must be answered in the affirmative.
The mass of surplus-value produced by a capital of a cer- tain magnitude is the product of two factors, namely of the rate of surplus-value multiplied by the number of laborers employed at this rate. Hence it depends on the number of laborers, when the rate of surplus-value is given, and on the rate of surplus-value, when the number of laborers is given. In short, it depends on the composite proportion of the ab- solute magnitudes of the variable capital and the rate of surplus-value. Xow we have seen, that on an average the same causes, which raise the rate of relative sur|3lus-value, lower the mass of the employed labor-power. It is evident, however, that there will be a more or less in this according to the defi- nite proportion, in which the opposite movements exert them- selves, and that the tendency to reduce the rate of profit will be particularly checked by a raise in the rate of absolute sur- plus-value due to a prolongation of the working day.
We saw in the case of the rate of profit, that a fall in the rate was generally accompanied by an increase in the mass of profit, on account of the increasing mass of the total capital employed. From the point of view of the total variable cap' ital of society, the surplus-value produced by it is equal to the profit produced by it. Both the absolute mass and the absolute rate of surplus-value have thus increased. The one Coiintcraciing Causes. 275 has increased, because the quantity of labor-power employed by society has grown, the other, because the intensity of ex- ploitation of this labor-power has increased. But in the case of a capital of a given magnitude, for instance 100, the rate of surplus-value may increase, while the mass may decrease on an average; for the rate is determined by the proportion, in which the variable capital produces value, while its mass is determined by the proportional part which the variable capital constitutes in the total capital.
The rise in the rate of surplus-value is a factor, which de- temiines also the mass of surplus-value and thereby the rate of profit, for it takes place especially under conditions, in which, as we have seen, the constant capital is either not in- creased at all relatively to the variable capital, or not in- creased in proportion. This factor does not suspend the gen- eral law. But it causes that law to become more of a tend- ency, that is, a law whose absolute enforcement is checked, retarded, weakened, by counteracting influences. Since the same causes, which raise the rate of surplus-value (even a prolongation of the working time is a result of large scale industry), also tend to decrease the labor-power employed by a certain capital, it follows that these same causes also tend to reduce the rate of profit and to check the speed of this fall. If one laborer is compelled to perform as much labor as would be rationally performed by two, and if this is done under cir- cumstances, in which this one laborer can replace three, then this one will produce as much surplus-labor as was formerly produced by two, and to that extent the rate of surplus-value will have risen. But this one will not produce as much as foi-merly three, and to that extent the mass of surplus-value will have decreased. But this reduction in mass will be compensated, or limited, by the rise in the rate of surplus- value. If the entire population is employed at a higher rate of surplus-value, the mass of surplus-value will increase, al- though the population may remain the same. It will increase still more, if the population increases at the same time. And although this goes hand in hand with a relative reduction of the number of laborers employed in proportion to the magni- 276 Capitalist Production.
tude of the total capital, yet this reduction is checked or mod- erated by the rise in the rate of surplus-value.
Before leaving this point, we wish to emphasize once more that, with a capital of a certain magnitude, the rate of sur- plus-value may rise, while its mass is decreasing, and vice versa. The mass of surplus-value is equal to the rate multi- plied by the number of laborers; however, this rate is never calculated on the total, but only on the variable capital, ac- tually only for a day at a time. On the other hand, with a given magnitude of a certain capital, the rate of profit can never fall or rise, without a simultaneous fall or rise in the mass of surplus-value.
II. Depression of Wages Below their Value. This is mentioned only empirically at this place, since it, like many other things, which might be enumerated here, has nothing to do with the general analysis of capital, but belongs in a presentation of competition, which is not given in this work. However, it is one of the most important causes check- ing the tendency of the rate of profit to fall.
III. Cheapening of tlie Elements of Constant Capital. Everything that has been said in the first part of this vol- ume about the causes, which raise the rate of profit while the rate of surplus-value remains the same, or independently of the rate of surplus-value, belongs here. This applies particu- larly to the fact that, from the point of view of the total capital, the value of the constant capital does not increase in the same proportion as its material volume. For instance, the quantity of cotton, which a single European spinning op- erator works up in a modern factory, has grown in a colossal degree compared to the quantity formerly worked up by a European operator with a siDinning wheel. But the value of the worked-up cotton has not grown in proportion to its mass. The same holds good of machinery and other fixed capital. In short, the same development, which increases the mass of the constant capital relatively over that of the vari- able, reduces the value of its elements as a result of the in- Counteracting Causes. 277 creased productivity of labor. In this way the value of the constant capital although continually increasing, is prevented from increasing at the same rate as its material volume, tliat is, the material volume of the means of production set in motion by the same amount of labor-power. In exceptional cases the mass of the elements of constant capital may even increase, while its value remains the same or even falls.
The foregoing bears upon the depreciation of existing cap- ital (that is, of its material elements) which comes with the development of industry. This is another one of the causes which by their constant effects tend to check the fall of the rate of profit, although it may under certain circumstances reduce the mass of profit by reducing the mass of capital yielding a profit. This shows once more that the same causes, which bring about a tendency of the rate of profit to fall, also check the realisation of this tendency.
IV. Relative Overpopulation. The production of a relative surplus-population is insep- arable from the development of the productivity of labor ex- pressed by a fall in the rate of profit, and the two go hand in hand. The relative overpopulation becomes so much more apparent in a certain country, the more the capitalist mode of production is developed in it. This, again, is on the one hand a reason, which explains why the imperfect subordina- tion of labor to capital continues in many lines of production, and continues longer than seems at first glance compatible with the general stage of development. This is due to the cheapness and mass of the disposable or unemployed wage laborers, and to the greater resistance, which some lines of production, by their nature, oppose to a transformation of manufacture into machine production. On the other hand, new lines of production are opened up, especially for the pro- duction of luxuries, and these lines take for their basis this relative overpopulation set free in other lines of production by the increase of their constant capital. These new lines start out with living labor as their predominating element, and go by degrees through the same evolution as the other 278 Capitalist Production.
lines of production. In either case the variable capital con- stitutes a considerable proportion of the total capital and wages are below the average, so that both the rate and mass of surplus-value are exceptionally high. Since the average rate of profit is formed by leveling the rates of profit in the individual lines of production, the same cause, which brings about a falling tendency of the rate of profit, once more pro- duces a counterbalance to this tendency and paralyses its effects more or less.
V. Foreign Trade.
V. Foreign Trade.
To the extent that foreign trade cheapens partly the ele- ments of constant capital, partly the necessities of life for which the variable capital is exchanged, it tends to raise the rate of profit by raising the rate of surplus-value and lower- ing the value of the constant capital. It exerts itself gen- erally in this direction by permitting an expansion of the scale of production. But by this means it hastens on one hand the process of accumulation, on the other the reduction of the variable as compared to the constant capital, and thus a fall in the rate of profit. In the same way the expansion of for- eign trade, which is the basis of the capitalist mode of pro- duction in its stages of infancy, has become its own product in the further progress of capitalist development through its in- nate necessities, through its need of an ever expanding market. Here we see once more the dual nature of these effects. (Ri- cardo entirely overlooked this side of foreign trade.)
Another question, which by its special nature is really be- yond the scope of our analysis, is the following: Is the average rate of profit raised by the higher rate of profit, which capital invested in foreign, and particularly in colonial trade, realises?