Capitals invested in foreign trade are in a position to yield a higher rate of profit, because, in the first place, they come in competition with commodities produced in other countries with lesser facilities of production, so that an advanced coun- try is enabled to sell its goods above their value even when it sells them cheaper than the competing countries. To the Counteracting Causes. 279 extent that the labor of the advanced countries is here ex- ploited as a labor of a higher specific weight, the rate of profit rises, because labor which has not been paid as being of a higher quality is sold as such. The same condition may ob- tain in the relations with a certain country, into which com- modities are exported and from which commodities are iui- ported. This country may offer more materialised labor in goods than it receives, and yet it may receive in return com- modities cheaper than it could produce them. In the same way a manufacturer, who exploits a new invention before it has become general, undersells his competitors and yet sells his commodities above their individual values, that is to say, he exploits the sp)ecifically higher productive power of the labor employed by him as surplus-value. By this means he secures a surplus-profit. On the other hand, capitals invested in colonies, etc., may yield a higher rate of profit for tlie sim- ple reason that the rate of profit is higher there on account of the backward development, and for the added reason, that slaves, coolies, etc., permit a better exploitation of labor. We see no reason, why these higher rates of profit realised by capitals invested in certain lines and sent home by them should not enter as elements into the average rate of profit and tend to keep it up to that extent.^^ We see so much less reason for the contrary opinion, when it is assumed that such favored lines of investment are subject to the laws of free competition. What Ricardo has in mind as objections, is mainly this: With the higher prices realised in foreign trade, commodities are bought abroad and sent home. These com- modities are sold on the home market, and this can constitute at best but a temporary advantage of the favored spheres of production over others. This aspect of the matter is changed, when we no longer look upon it from the point of view of money. The favored country recovers more labor in exchange for less labor, although this difference, this surplus, is pock- .eted by a certain class, as it is in any exchange between labor ^° Adam Smith was right in this respect, contrary to Ricardo, who said: "They contend the equality of profits will be brought about by the general rise of profits; and I am of opinion that the profits of the favoured trade will speedily submit to the general level. (Works, MacCulIoch ed., p. 73.)
28o Capitalist Production. \ and capital. So far as the rate of profit is higher, because it is generally higher in the colonial country, it may go hand in hand with a low level of prices, if the natural conditions are favorable. It is trne that a compensation takes place, but it is not a compensation on the old level, as Ricardo thinks.
However, this same foreign trade develops the capitalist mode of production in the home country. And this implies the relative decrease of the variable as compared to the con- stant caj^ital, Avhile it produces, on the other hand, an over- production for the foreign market, so that it has once more the opposite effect in its further course.
And so we have seen in a general way, that the same causes, which produce a falling tendency in the rate of profit, also call forth counter-effects, which check and partly paralyse this fall. This law is not suspended, but its effect is weakened. Otherwise it Avould not be the fall of the average rate of profit, which wovild be unintelligible, but rather the relative slowness of this fall. The law therefore shows itself only as a tendency, whose effects become clearly marked only under certain conditions and in the course of long periods.
Before passing on to something new, we will, for the sake of preventing misunderstanding, repeat two statements, which we have substantiated at different times.
1) The same process, which brings about a cheapening of commodities in the course of development of the capitalist mode of production, also causes a change in the organic com- position of the social capital invested in the production of commodities, and thereby lowers the rate of profit. We must be careful, then, not to confound the reduction in the relative cost of an individual commodity, including that portion of its cost which represents wear and tear of machinery, with the relative rise in the value of the constant as compared to the variable capital, although vice versa every reduction in the relative cost of the constant capital, whose material elements retain the same volume or increase in volume, tends to raise the rate of profit, in other words, tends to reduce the value of the constant capital to that extent as compared with the shrink- ing proportions of the employed variable capital.
Counteracting Causes. 281 2) The fact that the additional living labor contained in the individual commodities, which together make np the prod- uct of capital, stands in a decreasing proportion to the ma- terials and instruments of labor consumed by them; the fact, that an ever decreasing quantity of additional living labor is materialised in them, because their production requires less labor to the extent that the productive power of society is developed, — this fact does not touch the proportion, accord- ing to which the living labor contained in the commodities is divided into paid and unpaid labor. On the other hand, although the total quantity of additional living labor con- tained in them decreases, the unpaid portion increases over the paid portion, either by an absolute, or by a proportional reduction of the paid portion; for the same mode of produc- tion, which reduces the total quantity of the additional living labor in the commodities, is accompanied by a rise of the ab- solute and relative surplus-value. The falling tendency of the rate of profit is accompanied by a rising tendency of the rate of surplus-value, that is, in the rate of exploitation. Xothing is more absurd, for this reason, than to explain a fall in the rate of profit by a rise in the rate of wages, although there may be exceptional cases where this may apply. Statistics do not become available for actual analyses of the rates of wages in different epochs and countries, until the con- ditions, which shape the rate of profit, are thoroughly un- derstood. The rate of profit does not fall, because labor be- comes less productive, but because it becomes more productive. Both phenomena, the rise in the rate of surplus-value and the fall in the rate of profit, are but specific forms through which the productivity of labor seeks a capitalistic expression, VI. The Increase of Stock Capital. The foregoing five points may be supplemented by the fol- lowing, which, however, cannot be more fully detailed for the present. A portion of capital serves only as interest-bearing capital, and is so calculated, to the extent that capitalist pro- duction makes progress and hastens accumulation. This term interest-bearing capital is not applied here to capital loaned 282 Capitalist Production.
by a capitalist who is satisfied with interest on it, while the industrial capitalist borrowing it pockets the investor's profit. This has no bearing upon the level of the average rate of profit, for this rate is concerned only with profit as composed of interest + profit of all sorts + ground rent, and the pro- portional division into these particular categories is immate- rial for it. We speak here of interest-bearing capital in the sense that these capitals, although invested in large productive enterprises, yield only large or small amounts of interest, so- called dividends, after all costs have been paid. This is typ- ical of railroads, for instance. These dividends do not help to level the average rate of profit, because they represent a lower than the average rate of profit. If they did help in this, then the average rate of profit would fall much lower. The- ' oretically such capitals may be included in the calculation, and in that case the result will be a lower rate of profit than that which actually seems to exist and determine the actions of the capitalists, since the constant capital is the largest as compared to the variable capital precisely in these enterprises.
CHAPTER XV.
UNRAVELING THE INTERNAL CONTRADICTIONS OF THE LAW.
I. General Bemarks. We have seen in the first part of this volume, that the rate of profit expresses the rate of surplus-value always lower than it actually is. We have now seen, that even a rising rate of surplus-value has a tendency to express itself in a falling rate of profit. The rate of profit would be equal to the rate of surplus-value only if c = O, that is, if the entire invested capital were paid out in wages. A falling rate of profit does not express a falling rate of surplus-value, unless the proportion of the value of the constant capital to the quantity of labor-power set in motion by it remains unchanged, or the amount of labor-power has increased relatively over the value of the constant capital.
Internal Cuiitradictions. 283 Ricardo, under pretense of analysing the rate of profit, actually analyses only the rate of surplus-value, and he does so on the assumption that the working day is intensively and extensively a constant magnitude.
A fall in the rate of profit and a hastening of accumulation are in so far only different expressions of the same process as both of them indicate the development of the productive power. Accumulation in its turn hastens' the fall of the rate of profit, inasmuch as it implies the concentration of labor on a large scale and thereby a higher composition of capital. On the other hand, a fall in the rate of profit hastens the concentration of capital and its centralisation through the expropriation of the smaller capitalists, the expropriation of the last survivers of the direct producers who still have any- thing to give up. This accelerates on one hand the accumula- tion, so far as mass is concerned, although the rate of accumu- lation falls with the rate of profit.
On the other hand, so far as the rate of self-expansion of the total capital, the rate of profit, is the incentive of capi- talist production (just as this self-expansion of capital is its only purpose, its fall checks the formation of new independent capitals and thus seems to threaten the development of the process of capitalist production. It promotes overproduction, speculation, crises, surplus-capital along with surplus-popula- tion. Those economists who, like Kicardo, regard the capi- talist mode of production as absolute, feel nevertheless, that this mode of production creates its own limits, and therefore they attribute this limit, not to production, but to nature (in itheir theory of rent). But the main point in their horror over the falling rate of profit is the feeling, that capitalist production meets in the development of productive forces a barrier, which has nothing to do with the production of wealth as such; and this peculiar barrier testifies to the finiteness and the historical, merely transitory character of capitalist pro* duction. It demonstrates tliat this is not an absolute mode for the production of wealth, but rather comes in conflict with the further development of wealth at a certain stage.
It is true that Eicardo and his school considered only the 284 Capitalist Production.
industrial profit, which includes interest. But the rate of ground-rent has likewise a tendency to fall, although its abso- lute mass increases, and it may also increase proportionately more than the industrial profit. (See Ed. West, who de- veloped the law of ground-rent before Ricardo.) If we con- sider the total social capital C, and use p" to indicate the in- dustrial profit remaining after the deduction of interest and ground rent, i to indicate interest, and r to indicate ground- rent, then ■§-=-£- =^-^=?+-C+C"- ^^® ^^^^'^ ^^^^ ^^^^*' ^^'^"^^ s, the total amount of surplus-value, is continually increasing in the course of capitalist development, nevertheless -^ is just as steadily declining, because C grows still more rapidly than s. Therefore it is no contradiction, tliat p'', i, and r, should be steadily increasing, each by itself, while -^ = -^ as well as ^j -^, and -^, each by itself, should ever decline, or that p" should increase relatively more than i, or r more than p'', or, perhaps, more than p'' and i. With a rise in the total surplus-value or profit s =, p, but a simultaneous fall in the rate of profit ■^=-^j the proportional magnitude of the parts p'', i, and r, which make up s = p, may change at will within the limits set by the total amount of s, without there- by affecting the magnitude of s or -^.
The mutual variation of p", i and r is but a vary- ing distribution of s among different classes. Consequently ^, ^, and -^j the rate of industrial profit, the rate of interest, and the rate of ground-rent to the total capital, may rise rela- tively to one another, while -^, the average rate of profit, is falling. The only condition is that the sum of all three can- not exceed ■^. If the rate of profit falls from 50% to 25%, because the composition of a certain capital with a rate of surplus-value of 100% has changed from 50 c -|- 50 v to 75 c -|- 25 V, then a capital of 1,000 will yield a profit of 500 in the first case, and a capital of 4,000 will yield a profit of 1,000 in the second case. We see that s or p have doubled, while p' has fallen by one-half. And if that 50% was for- merly divided into 20 profit, 10 interest, 20 rent, then ^ = Internal Contradictions. 285 20 fc, 4- =10%, and -^ = 207©- If conditions remained the same after the change from 50% to 25 7©, then ^ would be 1070, -^ would be 5%, and -^ = lOT?. If, however, £; should fall to S% and -^ to 47o, then -J- would rise to 187o. The proportional magnitude of r would have risen as against p'' and i, but nevertheless p', the rate of profit, would have remained the same. Under both assumptions, the sum of p''', i, and r would have increased, because it would have been produced by a capital of four times the size of the former. By the way, Ricardo's assumption that the industrial profit (plus interest) originally pockets the entire profit, is his- torically and logically false. It is rather the progress of cap- italist production which, 1), places the Avhole profit at first hand at the disposal of the industrial and commercial capi- talists for further distribution, and, 2), reduces rent to the excess over the profit. On this capitalist basis, rent further increases, so far as it is a portion of profit (that is, of the surplus-value produced by the total capital), while the specific portion of the product, which the capitalist pockets, does not. The creation of surplus-value, assuming the necessary means of production, or sufficient accumulation of capital, to be existing, finds no other limit but the laboring population, when the rate of surplus-value, that is, the intensity of ex- ploitation, is given; and no other limit but the intensity of exploitation, when the laboring population is given. And the capitalist process of production consists essentially of the production of surplus-value, materialised in the surplus-prod- uct, which is that aliquot portion of the produced commodi- ties, in which unpaid labor is materialised. It must never be forgotten, that the production of this surplus-value — and the reconversion of a portion of it into capital, or accumula- tion, forms an indispensable part of this production of sur- plus-value — is the immediate purpose and the compelling motive of capitalist production. It will not do to represent capitalist production as something which it is not, that is to say, as a production having for its immediate purpose the consumption of goods, or the production of means of enjoy- 286 Capitalist Production.
ment for capitalists. This would Le overlooking the specific character of capitalist production, which reveals itself in its innermost essence.
The creation of this surplus-value is the object of the direct process of production, and this process has no other limits but those mentioned above. As soon as the available quantity of surplus-value has been materialised in commodities, surplus- value has been produced. But this production of surplus- value is but the first act of the capitalist process of produc- tion, it merely terminates the act of direct production. Capi- tal has absorbed so much unpaid labor. With the develop- ment of the process, which expresses itself through a falling tendency of the rate of profit, the mass of surplus-value thus produced is swelled to immense dimensions. ISTow comes the second act of the process. The entire mass of commodities, the total product, which contains a portion which is to re- produce the constant and variable capital as well as a portion representing surplus-value, must be sold. If this is not done, or only partly accomplished, or only at prices which are be- low the prices of production, the laborer has been none the less exploited, but his exploitation does not realise as much for the capitalist. It may yield no surplus-value at all for him, or only realise a portion of the produced surplus-value, or it may even mean a partial or complete loss of his capital.
The conditions of direct exploitation and those of the realisa- tion of surplus-value are not identical. They are separated logically as well as by time and space. The first are only limited by the productive power of society, the last by the proportional relations of the various lines of production and by the consuming power of society. This last-named power is not determined either by the absolute productive power nor oy the absolute consuming power, but by the consuming power jased on antagonistic conditions of distribution, which re- iuces the consumption of the great mass of the population to a variable minimum within more or less narrow limits. The consuming power is furthermore restricted by the tendency to accumulate, the greed for an expansion of capital and a production of surplus-value on an enlarged scale. This is a Internal Contradictions. 287 law of capitalist production imposed by incessant revolutions in the methods of production themselves, the resulting depre- ciation of existing capital, the general competitive struggle and the necessity of improving the product and expanding the scale of production, for the sake of self-preservation and on penalty of failure. The market must, therefore, be contin- ually extended, so that its interrelations and the conditions regulating them assume more and more the form of a natural law independent of the producers and become ever more un- controllable. This internal contradiction seeks to balance it- self by an expansion of the outlying fields of production. But to the extent that the productive power develops, it finds itself at variance with the narrow basis on which the condition of consumption rest. On this self contradictory basis it is no con- tradiction at all that there should be an excess of capital simul- taneously with an excess of population. For while a combina- tion of these two would indeed increase the mass of the pro- duced surplus-value, it would at the same time intensify the contradiction between the conditions under which this surplus- value is produced and those under which it is realised.
If a certain rate of profit is given, the mass of profit de- pends on the magnitude of the advanced capital. Accumula- tion is then determined by that portion of this mass, which is reconverted into capital. This portion, in its turn, being equal to the profit minus the revenue consumed by the capitalists, will depend not merely on the value of this mass, but also on the cheapness of the commodities which the capitalist can buy with it, commodities which pass partly into his individual consumption, partly into his constant caj^ital. (Wages are here assumed to be a given quantity.)
The mass of capital which the laborer sets in motion, whose value he preserves by his labor and reproduces in his product, is quite different from the value which he adds to it. If the mass of the capital equals 1,000, and the added labor 100, then the reproduced capital equals 1,100. If the mass equals 100 and the added labor 20, then the reproduced capital equals 120. In the first case the rate of profit is 10%, in the second 20%. And yet more can be accumulated out of 288 Capitalist Production.
100 tlian out of 20. And thus the river of capital rolls on (aside from its depreciation by an increase of the productive power), or its accumulation does, not in proportion to the level of the rate of profit, but in proportion to the impetus which it already has. A high rate of profit, so far as it is based on a high rate of surplus-value, is possible when the working day is very long, although labor may not be highly productive. This is possible, because the wants of the la- borers are very insignificant, and therefore the average wages very low, although labor itself unproductive. The low level of wages will have for its counterpart a lack of energy among laborers. Capital then accumulates slowly, in spite of the high rate of profits. Population stagnates and the working time, which the product costs, is long, while the wages paid to the laborer are small.
The rate of profit sinks, not because the laborer is less ex- ploited, but because less labor is employed in proportion to the employed capital in general.
If a falling rate of profit goes hand in hand with an increase in the mass of profits, as we have shown, then a larger por- tion of the annual product of labor is appropriated by the capitalist under the name of capital (as a substitute for con- sumed capital) and a relatively smaller portion under the name of profit. Hence the phantastic idea of the priest Chal- mers, that the capitalists pocket so much more profits, the smaller the quantity of the annual product expended by them as capital. The state church then comes to their assistance in order to help them to consume the greater part of tlie surplus-product instead of capitalising it. The preacher con- founds cause with effect. By the way, the mass of profits in- creases also at a small rate with the magnitude of the invested capital. However, this requires at the same time a concentra- tion of capital, since the conditions of production then de- mand the employment of capital on a large scale. It like- wise requires its centralisation, that is, a devouring of small capitalists by the great capitalists and decapitalisation of the former. It is but a second instance of separating the pro- ducers from their requirements of production, for these small Internal Contradictions. 289 capitalists still belong to the producers, since their own labor plajs a role in this problem. Generally speaking, the labor of a capitalist stands in an inverse proportioti to the size cf his capital, that is, to his degree as a capitalist. This divorce of requirements of production here, and producers there, is inseparable from the nature of capital. It begins with the inauguration of primitive accumulation. (Vol. I, chap. XXVI), becomes a permanent process in the accumulation and concentration of capital, and expresses itself finally as a cen- tralisation of already existing capitals in a few hands and a decapitalisation of many (a change in the method of expro- priation). This process would soon bring about the collapse of capitalist production, if it were not for counteracting tend- encies, which continually have a decentralising effect by the side of the centripetal ones.
II. Conflict between the Expansion of Production and the Creation of Values.
The development of the productive power of labor shows itself in two ways: First, in the magnitude of the already produced productive powers, in the volume of values and masses of requirements of production, under which new pro- duction is carried on, and in the absolute magnitude of the already accumulated productive capital: secondly, in the rela- tive smallness of the capital invested in wages as compared to the total capital, that is, in the relatively small quantity of living labor required for the reproduction and self-expansion of a given capital as compared to mass production. It is at the same time conditioned on the concentration of capital.
So far as the employed labor-power is concerned, the de- velopment of the productive powers shows itself once more in two ways: First, in the increase of surplus-labor, that is, the reduction of the necessary labor time required for the re- production of labor-power; secondly, in the decrease of the quantity of labor-power (the number of laborers) employed in general for the purpose of setting in motion a given capital.
Both movements do not only go hand in hand, but are mu- tually conditioned on one another. They are different phejgo Capitalist Production.
nomeiia, through which the same law expresses itself. How- ever, they affect the rate of profit in opposite ways. The total mass of profits is equal to the total mass of surplus-values, the rate of profit = f =advanced'"to7ai'capitrr ^^o^^'. surplus- value, as a totals is determined first by its rate_, secondly by the mass of labor simultaneously employed at this rate, or what amounts to the same, by the magnitude of the variable capital. One of these factors, the rate of surplus-value, rises in one direction, tlie other factor, the number of laborers, falls in the opposite direction (relatively or absolutely). To the extent that the development of the productive power reduces the paid portion of the employed labor, it raises the surplus- value by raising its rate; but to the extent that it reduces the total mass of labor employed by a certain capital, it reduces the factor of numbers with which the rate of surplus-value is mul- tiplied in order to calculate its mass. Two laborers, each work- ing 12 hours daily, cannot produce the same mass of surplus- value as 24: laborers each working only 2 hours, even if they could live on r.lr and did not have to work for themselves at all. In this respect, then, the compensation of the reduction in the number of laborers by means of an intensification of exploita- tion has certain impassible limits. It may, for this reason, check the fall of the rate of profit, but cannot prevent it en- tirely.