We find, then, that with capitals with equal percentages of composition, equal rates of surplus-value, and equal working days, the rates of profit are proportioned inversely as their periods of turn-over. If either the composition, or the rates of surplus-value, or the working day, or the wages, are un- equal in the two compared cases, then other differences are naturally produced in the rates of profit. But these are not directly dependent on the turn-over, and do not concern us at this point. They have already been discussed in chapter III.
The direct effect of a reduced period of turn-over on the production of surplus-value, and consequently of profit, con- sists in the increased effectiveness given thereby to the vari- able portion of capital, as shown in volume II, chapter XVI, The Turn-Over of Variable Capital. It was demonstrated in that chapter that a variable capital of 500, which is turned over ten times per year, produces during this time as much surplus-value as a variable capital of 5,000 with the same 88 Capitalist Production.
rate of surplus-value aud the same wages, turned over once a, '; year.
Take a capital (I) consisting of 10,000 fixed capital, with an annual wear and tear of 10%, or 1,000, furthermore of: 500 circulating constant and 500 variable capital. Let the rate of surplus-value be 100%, and let the variable capital be turned over ten times per year. For the sake of simplicity we assume in all following examples that the circulating con- stant capital is turned over in the same time as the variable, which is generally the case in practice. Then the product of one such period of turn-over will be Now let us take another capital (II), composed of 9,000 fixed capital, with an annual wear and tear of 1,000, circu- lating constant capital 1,000, variable capital 1,000, rate of surplus-value 100%, number of annual turn-overs of variable capital 5. Then the product of each one of these turn-overs ' of the variable capital will be Take furthermore a third capital (III) with no fixed capi- tal, 6,000 circulating constant capital, and 5,000 variable cap- ital. Let the rate of surplus-value be 100%. jind let there be one turn-over per year. Then the total product )f one year is In other words, we have in all three of these cases the same annual mass of surplus-value, namely 5,000, and since the total capital is likewise the same in all three cases, namely 11,000, the rate of profit is also the same, namely 45yy%.
But now let us assume that capital (I) has only 5 instead Effect of Turn-Over on Rate of Profit. 89 of 10 turn-overs of its variable capital per year. In that case the outcome is different. The product of one turn-over is then 200 c (wear) + 500 c + 500 v + 500 s = 1,700. And the product of one year is The amount of surplus-value appropriated during one year is therefore equal to the mass of surplus-value appropriated during one turn-over of the variable capital multiplied by the number of such turn-overs per year. If we call the surplus- value, or profit, appropriated during one year S, the surplus- value approjjriated during one period of turn-over of the vari- able capital s, the number of turn-overs of the variable capi- tal in one year n, then S = sn, and the annual rate of sur- plus-value S' = s'n, as demonstrated in Volume II, chapter XVI, I.
It is understood that the foraiula p' = s' -^ = s' ^ is cor- rect only so long as the v of the numerator is the same as that of the denominator. In the denominator v stands for the en- tire portion of the total capital used on an average as variable capital for the payment of wages. In the numerator, v is de- termined in the first place by the fact that a certain amount of surplus-value s is produced and appropriated by it. The proportion of this surplus-value to the variable capital, -^, constitutes the rate of surplus-value. It is only in this way that the formula p' = ^ is transformed into p' = s' ^. Now the V of the numerator is more definitely described by stating that it must be equal to the v of the denominator, that is to say equal to the entire variable capital of C. In other words, the equation p' = -^ can be transformed into the equa- tion p' = s' ^ only in the case that s stands for the surplus- value produced in one turn-over of the variable capital. If s stands for only a portion of this surplus-value, then s = sV is still correct, but this v is then smaller than the v in C ^ c -|- V, because less than the entire variable capital has been 90 Capitalist Production.
employed in the payment of wages. On the other hand, if s stands for more than the surplus-value of one turn-over of V, then a portion of this v, or perhaps the whole, serves twice, namely in the first and in the second turn-over, and even- tually it may serve in the subsequent turn-overs. The v which produces the surplus-value, and which represents the sum of all paid wages, is then greater than the v in c -f- v and the calculation becomes wrong.
In order that the formula for the annual rate of profit may be exact, we must substitute the annual rate of surplus-value for the simple rate of surplus-value, we must substitute S' or s'n for s'. In other words, we must multiply the rate of surplus-value, s', or, what amounts to the same, the variable capital v contained in C, with n, the number of turn-overs of this variable capital in one year. Thus we obtain p' = s'n-^, which is the formula for the calculation of the annual rate of profit.
In most cases the capitalist himself does not know the amount of variable capital invested in his business. We have seen in chapter VIII of volume II, and shall see further along, that the only distinction which forces itself upon the capi- talist within his capital is that of fixed and circulating capi- tal. From the cash-box containing the money-part of the cir- culating capital in his hands, so far as it is not deposited in a bank, he takes the money to pay wages, and from the same cash-box he takes the money for raw and auxiliary materials. And he credits both expenditures to the same cash account. And even if he should keep a separate account for wages, it would show at the end of the year the amounts paid out for wages, that is vn, but not the variable capital v itself. In order to ascertain this, he would have to make a special cal- culation, of which we propose to give an illustration.
We select for this purpose the cotton spinnery of 10,000 mule spindles described in volume I. We assume that the data there given for one week of April, 1871, are in force during the whole year. The fixed capital incorporated in the machinery was valued at 10,000 p.st. The circulating capi- tal was not given. We assume it to have been 2,500 p.st.
Effect of Turn-Over on Rate of Profit. 91 This is a rather high estimate, but it is justified by the as- sumption, which we must always make in this discussion, that no credit was in force, in other words, no permanent or tem- porary employment of other people's capital. The value of the weekly product was composed of 20 p.st. for wear of ma- chinery, 358 p.st. of circulating constant capital (rent 6 p.st., cotton 342 p.st., coal, gas, oil, 10 p.st.), 52 p.st. of variable capital paid out for wages, and 80 p.st. of surplus-value. The formula was, therefore The weekly advance of circulating capital consisted there- fore of 358 c + 52 V = 410, and its percentages of composi- tion were 87.3 c + 12.7 v. Calculating the entire circulating capital of 2,500 p.st., on this basis, we obtain 2,182 p.st. of constant and 318 p.st. of variable capital. Since the total ex- penditure for wages in one year was 52 times 52 p.st., or 2,704 p.st., it follows that the variable capital of 318 p.st. was turned over almost exactly 83^ times in one year. The rate of surplus-value was ^, or 153|^%. We calculate the rate of profit from these elements by inserting the above values in the formula p' = s'n-^. Since s' is 153i^, n is 83^, v is 318, and We test this result by means of the simple formula p' = ■%. The total surplus-value or profit, of one year amounts to 52 times 80 p.st., or 4,160 p.st. Dividing this by the total capi- tal of 12,500, we obtain 33.28%, or almost the identical re- sult. This is an abnormally high rate of profit, due to the extraordinarily favorable conditions of the moment (very low prices of cotton and very high prices of yarn). In reality this rate was certainly not maintained throughout the year.
The term s'n in the formula p' = s'n ^ stands for the same thing which was called the annual rate of surplus-value in vol- ume II. In the above case it is 153i|% multiplied by 83^, or in exact figures 1,307^3%. A certain brave soul was shocked to the point of speechlessness over the abnormity of an annual rate of profit of 1,000%, which had been used as 92 Capitalist Production.
ail illustration in that volume. Perhaps he will now settle down peacefully and contemplate this annual rate of surplus- value of more tlian 1,300% taken from the practical life of Manchester. In times of greatest prosperity, such as we have not seen for a long time, a similar rate is by no means rare.
By the way, this is an illustration of the actual composi- tion of caj)ital in modern great industry. The total capital is divided into 12,182 p.st. of constant and 318 p.st. of vari- able capital, a total of 12,500 p.st. In percentages this is 97| c + 2| V = 100 C. Only one-fortieth of the total capital serves for the payment of wages, but it is turned over eight times during the year.
Since very few capitalists take the trouble of making simi- lar calculations with reference to their own business, the sci- ence of statistics is almost completely silent regarding the proportion of the constant portion of the total social capital to its variable portion. Only the American Census gives what is possible under modem conditions, namely the amount of wages paid in each line of business and the profits realized. These data are, of course, very doubtful, because they are based on uncontrollable statements of the capitalists, but they are nevertheless very valuable, and the only records available on this subject. In Europe we are far too delicate to expect such revelations from our great capitalists. — F. E.]
CHAPTER V.
ECONOMIES IN THE EMPI-OYMENT OF CONSTANT CAPITAL.
I. General Economies.
The increase of absolute surplus-value, or the prolongation of surj3lus-labor and thus of the working day, while the vari- able capital remains the same and employs the same number of laborers at the same nominal wages, no matter whether overtime is paid for or not, reduces relatively the value of the constant capital as compared to the total and the varia- Economies in Employment of Constant Capital. 93 ble capital, and thereby increases the rate of profit even aside from the growth and mass of surplus-value and a possibly rising rate of surplus-value. The volume of the fixed portion of constant capital, such as factory buildings, machinery, etc., remains the same, no matter whether they serve for 16 or for 12 hours in the labor-process. A prolongation of the working day does not require any new expenditures for this most ex- pensive portion of the constant capital. Furthermore, the value of the fixed capital is thereby reproduced in a smaller number of periods of turn-over, so that the time for which it must be advanced in order to make a certain profit is abbre- viated. A prolongation of the working day therefore increases the profit, even if overtime is paid, or even if it is paid bet- ter, up to a certain limit, than the normal hours of labor. The ever more pressing necessity for the increase of fixed capital in modern industry was therefore one of the main reasons which induced profit-loving capitalists to prolong the working day.^^ The same conditions do not obtain if the working day is constant. In that case it is necessary either to increase the number of laborers and with them to a certain extent the mass of fixed capital (buildings, machinery, etc.), in order to ex- ploit a greater quantity of labor (for we leave aside the ques- tion of deductions from wages or depression of wages below their normal level), or, if the intensity of labor and the pro- ductivity of labor are to be augmented and more relative sur- plus-value produced, the quantity of the circulating portion of constant capital increases in those lines which use raw ma- terials, since more raw material is worked up within a certain time. And in the second place, the mass of machinery set in motion by the same number of laborers also increases, in other words, both portions of constant capital increase. An in- crease in surplus-value, then, is accompanied by a growth of the constant capital, the growing exploitation of labor goes hand in hand with a heightened expenditure of the means of " Since in all factories a very large amount of fixed capital is invested in buildings and machinery, the gains will be so much larger the greater the number of hours during which this machinery can be kept employed." (Reports of Fac- tory Inspectors, October 31, 1858, p. 8.)
94 Capitalist Production.
production by which labor is exploited, in other words, a greater investment of capital. The rate of profit is therefore reduced on one side while it increases on the other.
Quite a number of running expenses remain almost or en- tirely the same, whether the working day is long or short. The cost of supervision is smaller for 500 working men during 18 working hours than for 750 working men during 12 work- ing hours. "The running expenditures of a factory at ten hours of labor are almost as high as at twelve hours." (Report of Factory Inspectors, October, 1848, page 37.) State and mu- nicipal taxes, fire insurance, wages of various permanent em- ployes, depreciation of machinery, and various other expenses of a factory, run on just the same, whether the working time is long or short. To the extent that production decreases, these expenses rise as compared to the profit. (Reports of Factory Inspectors, October, 1862, page 19.)
The period in which the value of machinery and of other components of fixed capital is reproduced is practically de- termined, not by the mere duration of time, but by the dura- tion of the entire labor-process during which it serves and wears out. If the laborers must work 18 hours instead of 12, it makes a difference of three days per week, so that one week is stretched into one and a half, and two years into three. If this overtime is not paid for, then the laborers supply the capitalists not only with the normal surplus-labor without re- ceiving an equivalent, but also give one week out of every three, and one year out of every three, for nothing. In this way the reproduction of the value of the machinery is speeded up by 50% and accomplished in two-thirds of the time which would be ordinarily required.
We start in this analysis, and in that of the fluctuations of i the prices of raw materials (chapter VI), from the assump- tion that the mass and rate of surplus-value are given quan- tities, in order to avoid useless complications.
We have already shown in our presentation of co-operation, of division of labor and machinery, that economies in the con- ditions of production, such as are found in production on a. large scale, are mainly due to the fact that these conditions | I Economies in Employment of Constant Capital. 95 are social ones growing out of the combination of labor-proc- esses. The means of production are worked up by the aggre- gate laborer, a co-operation of many laborers on an immense scale, instead of by laborers operating in a disconnected way or co-operating at best on a small scale. In a large factory with one or two central motors the cost of these motors does not increase at the same rate as their horse-powers and their resulting extension of activity. The cost of transmission of power does not grow at the same rate as the number of work- ing machines set in motion by it. The frame of any indi- vidual machine does not become dearer at the same rate as the number of tools which it employs as its organs. And so forth. The concentration of means of production furthermore saves buildings of various sorts, not only for actual working rooms, but also for storage sheds, etc. It is the same with expenses for fuel, light, etc. Other conditions of production remain the same, whether used by many or by few.
This entire line of economies arising from the concentra- tion of means of production and their use on a large scale has for its fundamental basis the accumulation and co-operation of working people, the social combination of labor. Hence it has its source quite as much in the social nature of labor as the surplus-value considered individually has its source in the surplus-labor of the individual laborer. Even the con- tinual improvements possible and necessary in this line are due solely to the social experiences and observations made in pro- duction on a large scale through the combination of social labor.
The same is true of the second great branch of economies in the conditions of production. We refer to the reconversion of the excrements of production, the so-called offal, into new elements of production, either of the same, or of some other line of industry; the processes by which these so-called excre- ments are thrown back into the cycle of production and con- sequently of consumption, whether productive or individual. This line of economies, which we shall examine more closely later on, is likewise the result of social labor on a large scale. It is the abundance of these excrements due to large scale pro- 96 Capitalist Production.
duction which renders them available for commerce and turns them into new elements of production. It is only as excre- ments of combined production on a large scale that they be- come valuable for the jDroductive process as bearers of new exchange-values. These excrements, aside from the services which they perform as new elements of production, reduce the cost of raw material to the extent that they are saleable. For a normal loss is always calculated as a part of the cost of raw material, namely the quantity ordinarily wasted in its con- sumption. The reduction of the cost of this portion of con- stant capital increases to that extent the rate of profit, assum- ing the amount of the variable capital and the rate of surplus- value to be given quantities.
If the surplus-value is given, then the rate of profit can be increased only by a reduction of the value of the constant cap- ital required for the production of commodities. To the ex- tent that the constant capital enters into the production of commodities, it is not its exchange-value, but its use-value, which is taken into consideration. The quantity of labor which the flax can absorb in a spinnery does not depend on its exchange-value, but on its quantity, assuming the degree of productivity of labor, that is to say, the stage of technical development, to be given. In like manner the assistance ren- dered by a machine to, say, three laborers does not depend on its exchange-value, but on its use-value as a machine. In one stage of technical development a bad machine may be expen- sive, in another a good machine may be cheap.
The increased profit gathered by a capitalist through the cheapening of such things as cotton, spinning machinery, etc., is the result of a heightened productivity of labor. Of course, this improvement was not introduced in the spinnery, but in the cultivation of cotton and the building of machinery. There it required a smaller expense for the fundamentals of production in order to materialize a certain quantity of labor and secure possession of a certain amount of surplus-labor. This means a reduction of the expense required for the appro- priation of a certain quantity of surplus^labor.
We mentioned in the foregoing the savings realized in the Economies in Employment of Constant Capital. 97 process of production by the co-operative use of the means of production by socially combined laborers. Other economies, resulting in the expenditure of constant capital from the shortening of the time of circulation (a result brought about largely by the development of the means of communication) will be discussed later on. At this point we shall mention the economies due to progressive improvements of machinery, namely 1) of its substance, such as iron for wood; 2) the cheapening of machinery by the improvement of methods of manufacture, so that the value of the fixed portion of constant capital, while continually increasing with the development of labor on a large scale, does not grow at the same rate; ^^ 3) the special improvements enabling the existing machinery to work more cheaply and effectively, for instance, improvements of steam boilers, etc., which will be further discussed later on; 4) the reduction of waste through better machinery.
Whatever reduces the wear of machinery, and of the fixed capital in general, for any given period of production, cheapens not only the individual commodity, seeing that every indi- vidual commodity reproduces in its price its share of this wear and tear, but reduces also the aliquot portion of the invested capital for this period. Repair work, etc., to the extent that it becomes necessary, is figured in with the original cost of the machinery. A reduction of the expense for repairs, due to a greater durability of the machinery, reduces the price of this machinery correspondingly.
It may be said also of these economies, at least of most of them, that they are possible only through the combination of labor and are often not realized until production is carried forward on a still larger scale, so that they are due to an even greater combination of laborers in the direct process of pro- duction.
On the other hand, the development of the productive power of labor in any one line of production, for instance in the production of iron, coal, machinery, buildings, etc., which may be in part connected with improvements on the field of in- tellectual production, especially in natural science and its '- See Ure on the progress in factory construction. Q 98 Capitalist Production.
practical applicatiou, appears to be the premise for a reduo- tion of the value, and consequently of the cost, of means of production in other lines of industry, for instance in the tex- tile business or in agriculture. This follows naturally fronj the fact that a commodity, which issues as a product from a certain line of production, enters into another as a means of production. Its deamess or cheapness depends on the pro- ductivity of labor in that line of production from which iti issues as a product. Thus it is at the same time a basic con- dition, not only for the cheapening of commodities into whose production it enters as- a means of production, but also for the reduction of the value of constant capital, whose element it becomes, and thereby for the increase of the rate of profit.
The characteristic feature of this kind of economies in the constant capital due to the progressive development of indus- try is that the rise in the rate of profit in one line of industry is the result of the increase of the productive power of labor in another. That which the capitalist appropriates in this case is once more a gain which is the product of social labor, although not a product of the laborers directly exploited by him. Such a development of the productive power is traceable in the last instance to the social nature of the labor engaged in production; to the division of labor in society; to the de- velopment of intellectual labor, especially of the natural sci- ences. The capitalist thus appropriates the advantages of the entire system of the division of social labor. It is the develop- ment of the productive power of labor in its exterior depart- ment, in that department which supplies it with means of production, which relatively lowers tlie value of the con- stant capital employed by the capitalist and consequently raises the rate of profit.
Another raise in the rate of profit is produced, not by econ- omies in the labor creating the constant capital, but by econo- mies in the operation of this capital itself. On one hand, the concentration of laborers, and their co-operation on a large scale, saves constant capital. The same buildings, appliances for fuel and light, etc., cost relatively less for large scale than for small scale production. The same is true of power and Economics in Employment of Constant Capital. 99 working inacliinery. Although their absolute value increases, it falls relatively in comparison to the growing extension of production and the magnitude of the variable capital, or to the mass of labor-power set in motion. The economy realized by a certain capital within its own line of production is first and foremost an economy in labor, that is to say, a reduction of the paid labor of its own laborers. The previously men- tioned economy is distingaiished from this one by the fact that it accomplished the greatest possible appropriation of the un- paid labor in other lines in the most economical way, that is to say, with as little expense as a certain scale of production will pennit. To the extent that this economy does not rest on the previously mentioned exploitation of the productivity of the social labor employed in the production of constant cap- tal, or in an economy arising from the operation of the con- stant capital itself, it is due either directly to the co-operation and social nature of labor within a certain line of production, or to the production of machinery, etc., on a scale in which its value does not grow at the same rate as its use-value.
Two points must be kept in view here: First, if the value of c were zero, then p' would be equal to s', and the rate of profit would be at its maximum. In the second place, the most important thing for the direct exploitation of labor is not the exchange-value of the employed means of exploitation, whether they be iixed capital, raw materials or auxiliary sub- stances. In so far as they serve as means to absorb labor, as media in and by which labor and surplus-labor are material- ized, the exchange-value of buildings, raw materials, etc., is quite immaterial. That which is ultimately essential is on the one hand tlie quantity of them technically required for their combination with a certain quantity of living labor, and on the other hand their fitness; in other words, not only the ma- chinery, but also the raw and auxiliary materials must be good. The good quality of the raw material determines in part the rate of profit. Good material leaves less waste. A smaller mass of raw materials is then needed for the absorption of til- same quantity of labor. The resistance to be overcome by the working machine is also less. This affects in part even 100 Capitalist Production.
the surplus-value and the rate of surplus-value. The laborer consumes more time with bad raw materials than he would with the same quantity of good material. Wages remaining the same, this implies a reduction of the surplus-labor. Fur- thermore this affects materially the reproduction and accumu- lation of capital which depend more on the productivity than on the mass of labor employed, as shown in volume I.
The fanatic hankering of the capitalist after economies in means of production is therefore intelligible. That nothing is lost or wasted, that the means of production are consumed only in the manner required by production itself, depends partly on the skill and intelligence of the laborers, partly on the discipline exerted over them by the capitalist. This dis- cipline will become superfluous under a social system in which the laborers work for their own account, as it has already be- come practically superfluous in piece-work. This fanatic love of the capitalist for profit is expressed, on the other hand, by the adulteration of the elements of production, which is one of the principal means of reducing the value of the constant capital in comparison with the variable capital, and thus of raising the rate of profit. In addition to this, the sale of these elements of production above their value, so far as this value reappears in the product, plays a considerable role in cheating. This practice plays an essential part par- ticularly in German industry, whose maxim seems to be: People will surely appreciate getting first good samples and then inferior goods from us. However, these matters belong in a discussion of competition, and do not further concern us here.