value incorporated in a commodity is not realized by its sale, but arises out of the sale itself. We have thrown more light on this illusion in volume I, chapter V, under the head of " Con- tradictions in the General Formula of Capital." We merely revert at this point to that form in which it was reaffirmed by Torrens, among others, as an advance of political economy beyond Ricardo.
" The natural price consisting of the cost of production, or in otl>er words, of the expenditure of capital in the production or manufacture of a commodity, cannot possibly include any profit...If a farmer advances 100 quarters of com in the cultivation of his fields, and receives in return 120 quarters, the 20 quarters, being a surplus of the product above the investment, form his profit; but it would be absurd to call this surplus, or profit, a part of his expenditure. The manufacturer advances a certain quantity of raw ma- terials, tools, and subsistence for labor, and receives in re- turn a quantity of finished products. This finished product must contain a greater exchange-value than the raw materials, tools, and means of subsistence, by whose advance it was ac- quired." Torrens concludes, therefore, that the excess of the selling price over the cost-price, or the profit, is due to the fact that the consumers, " by a direct or circuitous exchange yield a certain larger portion of all ingredients of capital than it cost to produce them." ^ In fact, the excess over a certain magnitude cannot form a part of this magnitude. Therefore the profit, the excess of the value of a commodity over the expenditure of the capi- talist, cannot form a part of this expenditure. Hence, if no other element than the advance of the capitalist enters into the formation of the value of a commodity, it is inexplicable that more value should come out of production than went into it, for something cannot come out of nothing. Torrens, how- ever, dodges this creation out of nothing only by transferring it from the sphere of commodity-production to that of commod- ity-circulation. Profit cannot come out of the production ' R. Torrens, An Essay on the Production of Wealth. London, 1821, pages 52 Capitalist Production.
of commodities, says Torrens, for otherwise it would already be contained in the cost of production, and that would not be a surplus over this cost. Profit cannot come out of the ex- changes of commodities, replies Eamsay, unless it existed be- fore this exchange. The sum of their values of the ex- changed products is evidently not altered by their exclian2,e. It remains the same as before this exchange. Incidentally we remark at this point, that Malthus invokes expressly the authority of Torrens,'^ although he himself explains the sale of commodities above their value differently, or rather does not explain it, since all arguments of this sort ultimately amount to the same thing as the one-time famous negative weight of phlogiston.
In a society ruled by capitalist production, even the non- capitalist producer is dominated by capitalist conceptions. In his last novel, Les Paysans, Balzac, who is generally re- markable for his profound grasp of actual conditions, aptly describes how the little peasant, in order to retain the good will of his usurer, performs many small tasks gratuitously for him and fancies that he does not give him anything for noth- ing, because his own labor does not cost him any cash outlay. The usurer, on the other hand, thereby kills two flies at one stroke. He saves a cash outlay for wages and gets the farmer more and more tangled in the net of the spider of usury, by gradually ruining him through the deviation of his labor from his own fields.
The thoughtless conception that the cost-price of a commod- ity constitutes its actual value, and that surplus- value arises by selling the product above its value, so that commod- ities would be sold at their value, if their selling price were equal to their cost-price, that is to say, equal to the price of the means of production plus wages incorporated in them, has been heralded to the world as a newly discovered secret of socialism by Proudhon with his customary charlatanry in the guise of science. In fact, this reduction of the value of commodities to their cost-price constitutes the basis of his People's Bank. We have demonstrated in a preceding chap- ' Malthus, Definitions in Political Economy. London, 1853, pages 70, 71, 1 Cost Price and Profit. 53 ter that the various elements of the value of the product may be materialized in proportional parts of the product it- self. (Volume I, chapter IX, 2.) For instance, if the value of 20 lbs. of yarn is 30 shillings, containing 24 shil- lings of means of production, 3 shillings of labor-power, and 3 shillings of surplus-value, then this surplus-value may be represented by -i-^oi the product, or 2 lbs. of yam. Now, if these 20 lbs. of yarn are sold at their cost-price, at 27 shillings, then the purchaser receives 2 lbs. of yarn for noth- ing, or the article is sold -po below its value. But the laborer has performed the same amount of surplus-labor, only in this case it accrues to the benefit of the purchaser of the yarn, not to its capitalist producer. It would be a mistake to assume that if all commodities were sold at their cost-price the result would be the same as if they had all been sold above their cost-price, at their real value. For even if the value of labor- power, the lengtli of the working day, and the degree of ex- ploitation of labcr were the same everywhere, the quantities of surplus-value contained in the values of the various kinds of commodities would be unequal, according to the different organic composition of the capitals advanced for their pro- duction.* OHAPTEE II.
THE. KATE OF PROFIT.
The general formula of capital_is M — C — M'. In other words, a certain quantity of values is thrown into circulation for the purpose of drawing a larger quantity out of it. The process by which this largei' quantity is produced is capitalist production. The process by which this larger quantity is realized is the circulation of capital. The capitalist does not produce a commodity on its ow^n account, he does not '"The masses of value and surplus-value produced by different capitals — the value of labor-power being given and its decree of exploitation being equal — vary- directly as the amounts of the variable consrituents of these capitals, i.e., as their constituents transformed into living labor-power." (Volume I, Chapter IX.)
54 Capitalist Production.
care for its use-value, nor does he consume it personally. The product in which the capitalist is really interested is not the tangible product itself, but the excess of the value of the product over the value of the capital assimilated by it. The capitalist advances the total capital without regard to the different roles played by its components in the production of surplus-value. He advances all these components uniformly, not merely for the purpose of reproducing the advanced capi- tal, but rather with a view to producing a surplus-value in excess of it. He cannot convert the value of the variable capital advanced by him into a greater value except by its ex- change for living labor and by the exploitation of this labor. But he cannot exploit this labor unless he advances at the same time the material requirements for the incorporation of this labor, namely instruments and materials. of labor, ma- chinery and raw materials. This he can do only by convert- ing a certain amount of value in his possession into require- ments of production. He could not be a capitalist at all, nor undertake to exploit labor, unless he enjoyed the privilege of owning the material requirements of production and finding at hand a laborer who owns nothing but his labor-power.
We have already shown in the first volume that it is precisely the ownership of means of production by idlers which con- verts laborers into wage-workers and idlers into capitalists.
It is immaterial for the capitalist whether he is supposed to advance constant capital in order to make a profit out of his variable capital, or whether he advances variable capital in order to make a profit out of the constant capital; whether he invests money in wages in order to make his machinery and raw materials more valuable, or whether he invests money in machinery and raw materials in order to be 3ble to exploit 4abor..Although it is only the variable portion of capital which creates surplus-value, it does so only on condition that the other portions, the material requirements of production, are likewise advanced. Seeing that the capitalist can ex- ploit labor only by advancing constant capital, and that he can utilize his constant capital only by advancing variable The Rate of Profit. 55 capital, he lumps them all together in his imagination, and he is all the more apt to do so as the actual rate of his gain is not calculated on its proportion to the variable, but on its proportion to the total capital, in other words, that it is cal- culated on the rate of profit, not on the rate of surplus-value. And we shall see that the rate of profit may remain unchanged and yet may express different rates of surplus-value.
The cost of the product includes all those elements of its value which the capitalist has paid, or for which he has thrown an equivalent into circulation. This cost must be made good in order that the capital may merely be pre- served, or reproduced in its original magnitude.
.^The value contained in a certain commodity is equal to the labor-time required for its production, and the sum of this labor consists of paid and unpaid portions. But the expenses of the capitalist consist only of that portion of materialized ^labor which he paid for the production of the commodity. The surplus-value contained in this commodity does not cost the capitalist anything, while it cost the laborer his labor just as well as that portion for which he is paid, and although it creates value and is embodied in the value of the commod- ity quite as well as the paid labor. The profit of the capi- talist is due to the fact that he offers something for sale for which he has not paid anything. The surplus-value, or the profit, consists precisely of the excess of the value of the commodity over its cost-price, in other words, it consists of the excess of the total amount of labor embodied in the com- modity over the paid labor contained in it. The surplus- value, whatever be its genesis, is a-surplua above the ad- vanced total capital. The -proportion of this surplus to the total capital is expressed by the fraction -^, in which C stands for the total capital. Thus we obtain the rate of profit -^ = ^, as distinguished from the rate of surplus- value -y-.
The rate of surplus-value measured by the variable capital is called rate of surplus-value. The rate of surplus-value measured by tlie total capital is called ra^te of profit. These 56 Capitalist Production.
two modes of measuring the same magnitude express different conditions or relations of this magnitude, owing to the ditfer- ence of the two standards of measurement.
The transformation of surplus-value into profit must be deduced from the transformation of the rate of surplus-value into the rate of profit, not vice versa. And the rate of profit is indeed that from which historical research takes its de- parture. The surplus-value and the rate of surplus-value are, relatively, the invisible and unknown essence, while the rate of profit and the resulting appearance of surplus-value in the form of profit are phenomena which show themselves on the surface.
So far as the individual capitalist is concerned, it is evi- dent that the only thing which interests him is the relation of sui'plus-value, of the excess of value at which he sells his articles, to the total Capital advanced for the production of -commodities. On ^the other hand, the definite relation of this surplus, and its internal connection, with the various components of capital does not interest him, for it is rather to his interest to indulge in vagaie notions relative to this definite relation and this internal connection.
Although the excess in the value of a commodity over its cost-price is created in the process of production, strictly so called, it is realized in the process of circulation. And it assumes so much more easily the semblance of arising from the process of circulation, as it depends in reality on the mar- ket conditions under competition whether any surplus is real- ized or not, or how much of it. It is not necessary to lose any words at this point about the fact that it is merely a different way of dividing the surplus-value, when a commod- ity is sold above or below its value, and that this different division, this change of proportions in which different per- sons share in the surplus-value, does not alter in the least the magnitude or the nature of that value. It is not alone the metamorphoses discussed by us in volume II which take place in the process of circulation, but they are accompanied by actual competition, the sale and purchase of commodities above or below their value, so that the surplus-value realized The Rate of Profit. 57 by the individual capitalist depends as much on the outcome of the mutual endeavor to outwit one another as on the direct exploitation of labor.
Aside from the working time, the time of circulation exerts its influence in the process of circulation and limits the amount of surplus-value realizable Avithin a certain period. Still other elements arise in the process of circulation and in- fluence the strict process of production. Both the strict process of production and the process of circulation continu- ally intermingle, interpenetrate one another, and thereby in- cessantly falsify their characteristic marks of distinction. The production of surplus-value, and of value in general, re- ceives new directions in the process of circulation, as we have previously shown..Capital passes through the cycle of its metamorphoses. Finally it steps, so to say, forth out of the internal organism of its life and enters into external condi- tions of existence, into conditions in which the opposites are not capital and labor, but capital and capital in one case, and individual buyers and sellers in another. The time of cir- culation and the working time cross one another's paths and seem to determine equally the amount of surplus-value. The original form in which capital and wage-labor meet one an- other is disguised by the interference of conditions which seem to be independent of them., The surplus-value itself does not appear to be the result of the appropriation of labor- time, but an excess of the selling price of commodities over their cost-price, so that this last named price is easily re- garded as their intrinsic value, "\yhile profit appears as an excess of the selling price of commodities over their immanent value.
It is true, that the nature of the surplus-value imprc'^ses itself incessantly upon the consciousness of the capitalist dur- ing the process of production. This is shown, among other indications, by his greed for the labor-time of others, to which we called attention in the analysis of surplus-value. But in the first place, the strict process of production is but a fleeting stage passing continually into the process of circulation, just as this does into it, so that the more or less vague inkling of 58 Capitalist Production.
the source of the gains made in the process of production, the source of the surplus-value, stands at best on the same ground with the idea that the realized surplus is due to a movement of capital in the process of circulation and independent of the process of production, a movement of capital independent of its relation to labor. These phenomena of circulation are quoted bj modern economists like Eamsay, Malthus, Senior, Torrens, etc., as direct proofs of the alleged fact that capital, in its mere material existence, independent of any social re- lation to labor which makes capital of it, may be a source of surplus-value quite as well as labor itself and without its help. In the second place, under the head of expenses, among j which wages are classed the same as the price of raw mate- rials, wear and tear of machinery, etc., the appropriation of unpaid labor figures only as a saving in the payment of an article added to the expense, only as a smaller payment for a certain quantity of. labor. A saving is recorded in the same way, whenever raw materials are bought more cheaply, or the wear and tear of machinery decreases. In this way the ap- propriation of surplus-labor loses its specific character^__ Its characteristic relation to the surplus-value is obscured. And this is greatly facilitated, as shown in volume I, part VI, by the representation of the value of labor-power in the form of wages.
By posing equally as sources of an excess of value (profit), all elements of capital mystify the nature of the capitalist -relation- The way in which surplus-value is transformed into profit via the rate of profit is but a continued development of the perversion of subject and object taking place in the process of production. We have already seen that all subjective forces of labor in that process appeared as productive forces of capital. On the one hand, the value of past labor, which dominates living labor, is incarnated in the capitalist. On the other hand the laborer appears as materialized labor- power, as a commodity. This perverted relationshij^ neces- sarily produces even under simple conditions of production certain correspondingly perverted conceptions, which repre- The Rate of Profit. 59 sent a transposition in consciousness, that is further devel- oped by the transformations and modifications of the circula- tion process proper.
We can see by the example of the Ricardian school that it is a mistake to attempt a development of the laws of the rate of profit directly out of the laws of the rate of surplus-value, or vice versa. In the head of the capitalist they are nat- urally not distinguished. In the formula -^ the surplus- value is measured by tlie value of the total capital advanced for its production and partly consumed in it, partly merely invested in it. Indeed, the formula -g- expresses the de- gree of self-expansion of the total capital advanced, or, to state it in conformity with the conception of the internal or- ganic connection and nature of surplus-value, it indicates the proportion of the variation of the variable capital to the mag- nitude of the advanced total ca]3ital.
The magnitude of the value of the total capital has no di- rect internal relation to the magnitude of the surplus-value. So far as its material elements are concerned, the total minus the variable capital, in other words, the constant capital, con- sists of the material ingredients, the instruments and mate- rials of production, required for the materialization of labor. In order that a certain quantity of labor may be incorporated in commodities and thereby produce value, a certain quantity of instruments and materials of production is required. Ac- cording to the peculiar character of the incorporated labor, a definite technical relation is established between the quantity of labor and the quantity of means of production in which this labor is to be incorporated. To that extent there is also a definite relation between the quantity of surplus-value, or surplus-labor, and the quantity of means of production. For instance, if the necessary labor for the production of wages amounts to 6 hours daily, then the laborer must work 12 hours in order to perform 6 hours of surplus-labor, or pro- duces a surplus-value of 100%. He uses up twice as many means of production in 12 hours as he does, in 6. But never- theless the surplus-value incorporated by him in 6 hours is not directly related to the value of the means of production 6o Capitalist Production.
used up in those 6, or in those 12 hours. This value is here immateriah It is only the technically required mass which is important. It does not matter whether the raw materials or instruments of lahor are cheap or dear, so long as they have the required use-value and are available in quantities propor- tioned to the technical demands of the labor to be incor- porated in them. Now, if I know that x lbs. of cotton are consumed by one hour's spinning and cost a shillings, then I also know that 12 hours' spinning will consume 12 a; lbs. of cotton costing 12 a shillings. And in that case I can calcu- late the proportion of the surplus-value to the value of the 12 as well as to that of the 6. But the relation of the living labor to the value of the means of production enters here only to the extent that a shillings serve as a name for a> lbs. of cotton. For a definite quantity of cotton has a definite price, and therefore a definite price may also serve as an index to a definite quantity of cotton, so long as the price of cotton is not changed. If I know that I must let the laborer work for 12 hours, in order to appropriate for my own C hours of surplus-labor, and if I know the price of this quantity of cotton needed for 12 hours, then I have a circuitous means of determining the proportion between the price of cotton (as an index of the required quantity) and the surplus-value. But on the other hand, I can never make any conclusions from, the price of the raw material as to the quantity that may be consumed by one hour's spinning, but not by 6 hours'. There is, then, no necessary internal connection between the value' of the constant ca23ital, nor the value of the total capital c -{- V, and the surplus-value.
If the rate of surplus-value is known and its magnitude! given, then the rate of profit expresses nothing else but what| it actually is, namely a diiferent way of measuring surplus^- value, this being measured by the value of the total capital,, instead of the value of that portion of capital from which^ surplus-value directly originates by way of an exchange withij labor. But in reality, in the world of phenomena, the condi- tions are reversed. Surplus-value is given, but only as an excess of the selling price of commodities over their cost-price.
The Rate of Proiit. 61 And it remains a mystery where this surplus is originated, whether it is due to the exploitation of labor in the process of production, or to overcharging the purchaser in the process of circulation, or to both. There is also given the proportion of the surplus-value to the value of the total capital, or the rate of profit. The calculation of this excess of the selling price over the cost-price of commodities on the value of the advanced total capital is very important and natural, because by its means the ratio is actually determined in which the total capital has been expanded, the ratio of its self-expansion. If the rate of profit is made the point of departure, there is no basis on which to make any conclusions regarding the specific relations between the surplus and the variable capital invested in wages. We shall see in a subsequent chapter what funny somersaults Malthus made in trying to get in this way at the secret of the surplus-value and of its specific re- lation to the variable capital. What the rate of profit ac- tually shows is a uniform relation of the surplus to equal portions of the total capital, which from this point of view does not show any internal differences at all, unless it be that between fixed and circulating capital. And this difference