Profit (profit of enterprise plus interest) and rent are noth- ing but peculiar forms assumed by particular parts of the surplus-value of commodities. The magnitude of the sur- plus-value is tlie limit of the sum of parts, into which it may be divided. The average profit plus the rent are, therefore, equal to the surplus-value. It is possible that a part of the surplus labor contained in the commodities, and thus of the surplus-value, does not take part directly in the equalization tending toward an average rate of profit, so that a part of the value of commodities is not expressed at all in their price. But in the first place, this is balanced either by the fact that the rate of profit increases, when the commodities sold below their value form an element of the constant capital, or by the fact that profit and rent are represented by a larger product, when the commodities sold below their value pass over into that portion of the value which is consumed as revenue in the shape of articles for individual consumption. In the second place, the average movement strikes the balance. At any rate, even if a portion of the surplus-value is not expressed in the price and is lost so far as the formation of prices is concerned, tlie sum of average profit plus rent in their normal form can never be larger than the total surplus-value, al- though it may be smaller. Their normal form is conditioned upon wages corresponding to the value of labor-power. Even monopoly rent, to the extent that it is not a deduction from wages, and does not constitute a special categorv', must be in- directly always a part of the surplus-value. If it is not a part of the surplus price above the cost of production of the commodity itself, of which it is a constituent part, as in the case of differential rent, or a spare portion of the surplus- value of the commodity itself, of which it is a constituent part, above that portion of its o^^^^ surplus-value which is measured by the average profit (as in the case of absolute rent), it is 970 Capitalist Production.
at least a part of the surplus-value of other commodities, that is, of commodities which are exchanged for this commodity, which has a monopoly price.
The sum of average profit plus gTOund-rent can never be greater than the magnitude of Avhich they are the parts and which exists before they are so partitioned. It is, therefore, immaterial for our discussion, whether the entire surplus- value of the commodities, that is, all the surplus labor mate- rialized in the commodities, is realized in their price or not. The surplus labor is not entirely realized for the simple rea- son that, owing to the continual change in the amount of so- cially necessary labor for the production of a certain com- modity'', a change arising out of the continual change in the productive power of labor, one portion of the commodities is always produced under abnormal conditions and must, there- fore, be sold below its individual value. At any rate, profit plus rent equal the total realized surplus-value (surplus-la- bor), and for the purposes of the present discussion the real- ized surplus-value may be assumed as equal to all surplus- value; for profit and rent are realized surplus-value, or gen- erally speaking the surplus-value which passes into the prices of connnodities, wliich is practically all the surplus-value forming a constituent part of this price.
On the other hand, the wages, which are the third signifi- cant form of revenue, are always equal to the variable portion of capital, which is the portion invested, not in means of pro- duction, but in the purchase of living labor-power, in the pay- ment of laborers. (The labor paid in the expenditure of rev- enue is itself paid in wages, profit, or rent, and therefore does not form any portion of the value of commodities by which it is paid. Hence it is not considered in the analysis of the value of commodities and of the component parts into which it is divided.) Wages are the materialization of that portion of the total working day of the laborer, in which the value of the variable' capital and thus tlie price of labor is reproduced. It is that portion of the value of commodities, in which the laborer reproduces the value of his own labor-power, or the price of his labor. The total working day of the laborer is Analysis of Production. gyi divided into two parts. One portion is that in which he per- forms the amount of labor necessary to reproduce the value of his own means of subsistence. It is the paid portion of his total labor, that portion which is necessary for his own maintenance and reproduction. The entire remaining por- tion of the working day, the entire surplus quantity of labor performed above the value of the labor realized in his wages, is surplus labor, unpaid labor, represented by the surplus- value of his entire product in commodities (and thus by a sur- plus quantity of commodities), surj^lus-value, which in its turn is divided into differently named parts, into profit (profit of enterprise plus interest) and rent.
The entire portion of the value of commodities, then, in which the total labor of the laborers added during one day, or one year, is realized, is divided into the value of wages, into profit and into rent. For this total labor is divided into necessary labor, by which the laborer creates that portion of the value of his product, wdth which he is himself paid, that is, his wages, and into unpaid surplus labor, by which he cre- ates that portion of the value of the product, which represents surplus-value and which is later divided into profit and rent. Aside from this labor the laborer does not perfonn any labor, and he does not create any value outside of the total value of the product, which assumes the forms of wages, profit and rent. The value of the annual product, in which the new labor added by the laborer during the year is incorporated, is equal to the Avages, or the value of the variable capital, plus the surplus-value, which in its turn is divided into profit and rent.
The entire portion of the value of the annual product, then, which the laborer creates in the course of the year, is expressed in the annual sum of the values of the three revenues, the values of wages, profit, and rent. Evidently, therefore, the value of the constant portion of capital is not reproduced in the value of the annually created product, for the wages are only equal to the value of the variable portion of capital ad- vanced in production, and rent and profit are only equal to the surplus-value, the produced excess of value above the total 972 Capitalist Production.
value of the advanced capital, which is equal to the value of the constant plus the value of the variable capital.
It is immaterial for the difficulty to be solved here that a portion of the surplus-value converted into the foiiu of profit and rent is not consumed as revenue, but is accumulated. That portion, which is saved up as a fund for accumulation, serves for the fonuation of new, additional, capital, but not for the reproduction of the old capital, neither of that portion of the old capital which is invested in wages nor of that which is invested in means of production. We may, therefore, as- sume here for the sake of simplicity that the revenues pass wdiolly into individual consumption. The difficulty has a twofold aspect. On the one hand, the value of the annual product, in which these revenues, wages, profit and rent, are consumed, contains a portion of value, which is equal to the portion of value of the constant part of capital used up in it. It contains this portion of value in addition to the other por- tion, which resolves itself into w^ages and that which resolves itself into profit and rent. Its value is therefore equal to wages plus profit plus rent plus C (its constant portion of value). How can an annually produced value, which equals only wages plus profit plus rent, buy a product wdiich has a value of wages plus profit plus rent plus C?
How can the annually produced value buy a product, which has a higher value than its o^^tl?
On the other hand, if we leave aside that portion of the constant capital w^hich did not pass over into the product, and which, therefore, continues to exist after the annual produc- tion of commodities as it did before it; in other words, if we leave aside the employed, but not consumed fixed capital, we find that the constant portion of the advanced capital has been wholly transferred to the new product in the shape of raw and auxiliary materials, whereas a part of the instruments of labor has been wholly consumed and another part of them only partially, so that only a part of its value has been consumed in production. This entire portion of the constant capital, which has been consumed in production, must be reproduced Analysis of Production. 973 in its natural form. Assuming all other circumstances, par- ticularly the productive power of labor, to remain unchanged, this portion requires for its reproduction the same amount of labor as before, that is, it must be replaced by its equivalent in value. If it is not, then reproduction itself cannot take place on the old scale. But who is going to perform this labor, and who performs it?
In the first question, to-wit. Who is going to pay for the constant portion of value, and with what? it is assumed that the value of the constant capital consumed in production re- appears as a part of the value of the product. This does not contradict the assumptions of the second difficulty. For we have demonstrated already in Volume I, Chapter VII (The Labor Process and the Process of Producing Surplus-Value), that the mere addition of new labor, although it does not re- produce the old value, but creates merely an addition to it, creates only additional value, still preserves at the same time the old value in the product; that this is done, however, by labor, not to the extent that it is a labor producing value, labor in general, but in its function as a definite pro- ductive labor. Therefore no additional labor was necessary for the purpose of preserving the value of the constant por- tion in the product, in which the revenue, that is, the entire value created during the year, is expended. On the other hand, it requires new additional labor to replace the value and use-value of the constant capital consumed during the past year, for unless this is replaced no reproduction is pos- sible at all.
All newly added labor is represented in the value newly created during the year, and this is divided into the three revenues, that is, into wages, profit and rent. On the one hand, then, no spare social labor remains for the reproduc- tion of the consumed constant capital, which must partially be replaced in its natural form and its value, and partially merely in its value (for the mere wear and tear of fixed cap- ital). On the other hand, the value annually created by la- bor, divided into wages, profit and rent, and to be spent in 974 Capitalist Production.
these forms, does not suffice to pay for, or buy, the constant portion of capital, which must be contained in the annual product outside of itself.
We see, then, that the problem presented here has already been solved in the discussion of the reproduction of the total social capital. Volume II, Part III. We return to it here, in the first place, for the reason that the surplus-value had not been developed in that volume into its revenue forms, profit (profit of enterprise plus interest) and rent and, therefore, could not be treated in these forms; in the second place, be- cause the formula of wages, profit and rent is connected with an incredible aberration of the analysis, which pervades the entire political economy since Adam Smith.
In Volume II we divided all capital into two great classes: Class I, producing means of production, and Class 11, pro- ducing articles of individual consumption. The fact that certain products may serve as well for personal consumption as for means of production (a horse, cereals, etc.), does not in- validate the absolute correctness of this division in any way. It is, in fact, no hypothesis, but merely the expression of a fact.
Take the annual product of a certain country. One por- tion of the product, whatever may be its ability to serve as means of production, passes over into individual consump- tion. It is the product for which wages, profit and rent are spent. This product is the product of a definite section of the social capital. It is possible that this same capital may also produce products belonging to Class I. To the extent that it does that, it is not the portion of capital consumed in the shape of the product of Class II, a product belonging ac- tually to individual consumption, which supplies the produc- tively consumed products passing into Class I. This entire product II, which passes into individual consumption, and for which the revenue is spent, is the material form of the capital consumed in it plus the produced surplus. It is also the product of a capital invested in the mere production of articles of consumption. And in the same way section I of the annual product, which serves as means of reproduction Analysis of Production. 975 and consists of raw materials and instruments of labor, is the product of a capital invested in the mere j^roduction of means of production. By far the greater part of the products form- ing the constant capital exists also materially in a form, in which it cannot pass into individual consumption. To the extent that it might be so used, for instance, to the extent that a farmer might eat his seed corn, butcher his teaming cattle, etc., the economic barrier puts him into the same position in which he would be if this portion did not have a consumable form.
We have already said that we leave out of consideration, in both classes, the fixed part of the constant capital, which con- tinues to exist so far as its material substance and value are concerned, independently of the annual product of both classes.
In Class II, consisting of products for which wages, profit and rent are spent and the revenues thus consumed, the prod- uct consists of three parts, so far as its value is concerned. One part is equal to the value of the constant portion of cap- ital consumed in production; a second part is equal to the value of the variable capital invested in wages; finally, a third part is equal to the value of the produced surplus-value, that is, equal to profit plus rent. The first part of the product of Class II, the value of the constant portion of capital, cannot be consumed either by the capitalists of Class II, or by the laborers of this class, or by the landlords. It does not form any part of their revenues, but must be replaced in its natural form, and must be sold in order that this may be done. On the other hand, the other two parts of this product are equal to the value of the revenues created in this class, equal to wages plus profit plus rent.
In Class I the product consists of the same parts, so far as its form is concerned. But that part, which here forms rev- enue, wages plus profit plus rent, in short, the variable por- tion of capital plus the surplus-value, is not consumed here in the natural form of the products of this Class I, but in products of the Class II. The value of the revenues of Class I must, therefore, be consumed in the shape of that portion 976 Capitalist Production.
of the products of Class II, which forms the constant capital of II, that must be reproduced. That portion of the product of Class II, which must reproduce its constant capital, is con- sumed in its natural form by the laborers, the capitalists and the landlords of Class I. They spend their revenues for this product of II. On the other hand, the product of I, to the extent that it represents a revenue of Class I, is productively consumed in its natural form by Class II, whose constant caj>- ital it replaces in its natural form. Finally, the consumed constant portion of the capital of Class I is replaced out of the products of this class itself, wdiich consist of instruments of labor, raw and auxiliary materials, either by an exchange of the capitalists of I among themselves, or in such a w^ay tliat a portion of these capitalists can use their own product once more as means of production.
Let us take the diagram used in Volume II, Chapter XX, II, for simple reproduction: According to this, the producers and landlords of II con- .sume 500 v -f- 500 s =, 1,000 as revenue; 2,000 c remain to be reproduced. This is consumed by the laborers, capitalists and rent owners of I, whose income is 1,000 v -|- 1,000 s:= 2,000. The consumed product of II is consumed as a rev- enue by I, and that portion of the revenue of I, which repre- sents an unconsumable product, is consumed as a constant cap- ital by II. It remains to account for the 4,000 c of I. This is replaced out of the product of I itself, which is 6,000, or rather 6,000 minus 2,000, for these last 2,000 have already been converted into constant capital of II. It should be noted that these numbers have been chosen at random, and so the proportion between the value of the revenues of I and the value of the constant capital of II also appears arbitrarv. But it is evident that so far as the process of reproduction is normal and takes place under otherwise unchanged circum- stances, leaving aside the question of accumulation, the sum of the values of wages, profit and rent in Class I must b° equal to the value of the constant portion of the capital of Analysis of Production. 977 Class II, Otherwise Class II will not be able to reproduce its constant capital, or Class I will not be able to convert its rev- enue from unconsumable into consumable articles.
The value of the annual product in commodities, just like the value of the commodities produced by some particular in- vestment of capital, and like the value of any individual com- modity, resolves itself into two parts: Part A, which re- places the value of the advanced constant capital, and Part B, which presents itself in the form of wages, profit and rent. This last part of value, B, stands in opposition to the Part A to the extent that this Part A, under otherwise equal circum- stances, in the first place never assumes the form of reve- nue, and in the second place always flows back in the form of capital, and of constant capital at that. The other por- tion, B, however, carries within itself an antagonism. Profit and rent have this in common with wages that all three of them are forms of revenue. Nevertheless they differ es- sentially from each other in that profit and rent are surplus- value, unpaid labor, whereas wages are paid labor. That portion of the value of the product, which represents spent wages and reproduces wages, and must be reconverted into wages under the conditions assumed by us, flows back first in the shape of variable capital, as a portion of the capital that once more must be advanced for the purposes of reproduction.
This portion has a double function. It exists first in the form of capital and is exchanged as such for labor-power. In the hands of the laborer it is converted into revenue, which he draws out of the sale of his labor-power, and as revenue it is spent for means of subsistence and consumed. This double process is revealed through the intervention of money circulation. The variable capital is advanced in money, paid out as wages. This is its first function as cap- ital. It is converted into labor-power and transformed into the expression of labor-power, into labor. This is the capi- talist's side of the process. In the second place, the laborers buy with this money a part of the commodities produced by them, which part is measured by this money, and is con- sumed by them as revenue. If we imagine the circulation 3J 978 Capitalist Production.
of iioney to be eliminated, then a part of the product of the laborer is in the hands of the capitalist in the form of existing capital. He advances this part as capital, hands it over to the laborer for new labor-power, while the laborer consumes it directly or indirectly by means of exchange for other commodities, as his revenue. That portion of the value of the product, tlien, which is destined in the course of reproduction to be converted into wages, into revenue for the laborers, flows back at first into the hands of the capi- talist in the form of capital, more accurately of variable capital. That it should flow back in this form is an es- sential requirement, in order that labor as wage labor, the means of production as capital, and the process of produc- tion itself as a capitalist process may always be reproduced.
In order to avoid useless difficulties, it is necessary to dis- tinguish the gross output and the net output from the gross income and the net income.
The gross output, or the gross product, is the total repro- duced product. With the exception of the employed but not consumed portion of the fixed capital, the value of the gross output, or of the gross product, is equal to the value of the capital advanced and consumed in production, that is, the constant and variable capital plus the surplus-value, which resolves itself into profit and rent. Or, if we con- sider the product of the total social capital instead of that of some individual capital, the gross output is equal to the material elements forming the constant plus variable capital, plus the material elements of the surplus product, in which profit and rent are materialized.
The gross income is that portion of value and that portion of the gross product measured by it, which remains after deducting that portion of value and that portion of the total product measured by it, which replaces the constant capital advanced and consumed in production. The gross income, then, is equal to the wages (or to that portion of the product which is to become once more the income of the laborer) plus the profit plus the rent. On the other hand, the net income is the surplus-value, and thus the surplus product, \ Analysis of Production. qyg u-hicli remains after the deduction of the wages, and which, in fact, represents the surplus-value realized by capital and to be divided with the landlords, and the surplus product measured by it.
Xow we have seen that the value of each individual com- modity and the value of the total commodities produced by each individual capital is divided into two parts, one of which replaces only constant capital, and the other of whicli, although a part of it flows back as variable capital, that,is, also in the form of capital, nevertheless is destined to be wholly transformed into a gross income, and to assume the form of wages, profit and rent, the sum of which makes up the gross income. We have also seen that the same is true of the value of the annual total product of a certain society. There is only this difference between the product of the in- dividual capitalist and that of society: From the point of view of the individual capitalist the net income differs from the gross income, for this last includes the wages, whereas the first excludes them. Viewing the income of the whole society, the national income consists of wages plus profit plus rent, that is, of the gross income. But even this is an^ abstraction to the extent that the entire society, on the basis of capitalist production, places itself upon the capitalist standpoint and considers only the income divided into profit and rent as the net income.
On the other hand, the dream of «nen like Say, to the effect that the entire output, the entire gross output, resolves itself into the net income of the nation and cannot be dis- tinguished from it, so that this distinction disappears from the national point of view, is but the necessary and ultimate expression of the absurd dogma pervading political economy since Adam Smith, that the value of commodities resolves itself in the last analysis into an income, into wages, profit and rent.^"*^ ^*° Ricardo makes the following very apt comment on thoughtless Say: "Of net produce and gross produce, Mr. Say speaks as follows: 'The whole value produced is the gross produce; this value, after deducting from it the cost of production, is the net produce. (Vol. II, p. 491.) There can, then, be no net produce, because the cost of production, according to Mr. Say consists of rent, 980 Capitalist Production.
Of course, it is very easy to understand, in the case of each individual capitalist, that a portion of his product must be reconverted into capital (even aside from an expansion of reproduction, or accumulation), not only into variable capital, which is destined to become in its turn an income for the laborers, a form of revenue, but also into constant capital, which can never be converted into revenue. The simplest observation of the process of production shows this clearly. The difficulty does not begin, until the process of production is studied as a whole. The fact has to be faced tliat the value of the entire portion of the product, which is consumed in the form of wages, profit and rent (imma- terial whether the consumption is individual or productive), resolves itself under analysis wholly into a sum of values formed by wages plus profit plus rent, that is, into the total value of the three revenues, although the value of this por- tion of the product quite as well as that which does not pass over into the revenues contains a portion of value, equal to C, equal to the value of the constant capital contained in it, which on its very face cannot be limited by the value of the revenue. On the one hand we have the practically irrefutable fact, on the other hand the equally undeniable theoretical contradiction. This difficulty is most easily cir- cumvented by the assertion that the value of commodities contains another portion of value, difi^ering only seemingly, from the one existing in the form of revenue only from the point of view of the individual capitalist. The phrase that a thing is revenue for one man and capital for another saves all further thought. But then it remains an insoluble riddle, how the old capital is to be replaced, when the value of the entire product can be consumed as revenue; and how wages and profits. In page 508 he says: 'The value of a product, the value of productive service, the value of the cost of production, are all, then, similar values, whenever things are left to their natural course.' Take a whole from a whole and nothing remains." (Ricardo, Principles, Chapter XXII, p. 512, Note.) — By the way, we shall see later that Ricardo nowhere refuted the false analysis made by Smith of the price of commodities, its reduction to the sum of the values of the revenues. He does not take notice of it, and assumes it to be correct to such an extent that he " abstracts " from the constant portion of the value of commodities. He also falls back now and then into the same conception.
Analysis of Production. 981